‘Cash transfers can help make India less unequal, but are not a magic bullet’

It is not the modality of cash transfer that is the only issue, but also how much, and for whom, and also, instead of what, asks Amartya Sen.

January 10, 2013 01:35 am | Updated December 04, 2021 11:01 pm IST

A tribal woman in Rayagada, Odisha waits to receive coupons to purchase subsidised rice from a fair price shop.

A tribal woman in Rayagada, Odisha waits to receive coupons to purchase subsidised rice from a fair price shop.

The Union Government has launched the Direct Benefits Transfer (DBT) programme to give benefits like scholarships, pensions, NREGA wages, etc. directly to the bank or post office accounts of beneficiaries. There are also talks of direct transfer of subsidies for food, fertilizer and kerosene at a later stage. Will the scheme work?

Cash transfer can be a good way of helping the poor in many circumstances. Indeed, many schemes that are not directly cash transfer schemes also work mainly through cash transfer, such as the National Rural Employment Guarantee programme, which certainly has helped the poor through creating jobs and generating cash income for a great many poor people in rural India. Cash is easy to handle and can be, in many cases, easily monitored. It cannot be sensible to be generically against cash transfer schemes, in a country with a lot of poverty and a commitment to use public money to make the very poor a bit less poor.

However, the Direct Benefits Transfer (DBT) programme is a particular scheme of cash transfer, and we have to ask what it may be displacing and whether the losers will not be plunged into more poverty. It is not the modality of cash transfer that is the only issue, but also how much, and for whom, and also, instead of what. If, for example, it is instead of subsidised food, we have to make sure that the people who depend on cheaper food will have enough cash to buy the unsubsidised food.

There is also another issue — that of the distributional effects of different kinds of benefits within the family. There is a good deal of empirical evidence to suggest that direct access to food tends to favour children rather than only the adults, and also girls rather than only the boys, working against biased social priorities, common in the subcontinent, favouring adults over children, and boys over girls, which is a long-standing problem in Indian society. If the cash transfer is not additional to food subsidies, and is given “instead of” food subsidies, it would be important to make sure that the money given would be used for nutritional purposes and, equally importantly, that it would be divided within the family in a way that addresses the manifest problems of undernourishment and deprivation of young girls.

Further, even if it is made sure that cash transfers will work in a way that meets these difficulties, there may still be a serious problem of transition, especially if there is a time lag in opening an account in a bank, or in a post office, to receive the cash transferred. If, meanwhile, the subsidised food disappears, the poor who fail to open an account adequately fast, for one reason or another, will lose doubly through not having the cash yet, and through the fact that others will have the cash to buy food which would keep the food prices high. The transition problem need not be impossible to handle, but attention will have to be paid to that, bearing in mind that many of the poorer Indians lead a life of hand-to-mouth existence, and any delay in the period of transition may plunge some people into extreme hardship. All this is in addition to the long-run problems of the modality of cash transfer, including distributional issues, as well as the adequacy of the amounts of cash transferred.

Cash transfer can be a very useful system to supplement other ways of making India a less unequal society, but it is not a magic bullet, and its pros and cons have to be assessed and scrutinised with an open mind.

The Government’s decision to allow FDI in multi-brand retail is being hotly debated in the country. While the Congress favours it saying it would give a much-needed boost to the economy and help farmers, the BJP and its allies are against it saying it would badly hurt small retailers and farmers. What precautions does the government need to take while allowing FDI in multi-brand retail?

The first thing to note is that FDI is neither an evil in itself nor a boon in every form. The case for it depends on its actual impact, and that in turn will depend on the choice of field, the amount of money that might come this way, and how it would influence the priorities of economic policies in India. It is not a question of having some abstract principle of “no FDI” — nor one of “any FDI of any kind, anywhere,” irrespective of the impact of any particular FDI on the lives of the people involved. So the issue absolutely is not one of having a generic attitude of being against FDI or being in favour of FDI. It is not like favouring “motherhood” or opposing “Satanism.” I can see many areas in which FDI has done good work — and can do more — and other areas in which its effect may be far from beneficial.

As far as multi-brand retail is concerned, it is a difficult field, and it is a pity that the broader issue of the attitude to FDI has taken the particular form of asking whether one is in favour of, or against, Walmart and other large foreign retail firms becoming a dominant part of the Indian retail distribution. This change would certainly help marketing many types of products and would tend to be favoured by, I would expect, farmers and others seeking a large retail outlet. On the other hand, it is very likely that many smaller outlets, like local grocer shops will be hit adversely by the large competition from organised — and sometimes predatory — retail giants.

When there are both arguments that are “pro” and some that are “con” about a particular policy change, a good policymaker has to take into account both kinds of effects and evaluate whether the overall impact benefits or harms the Indian people. That is not an easy issue to resolve, but of course all planning and all policymaking involve such evaluation. I don’t have a strong view in favour of some fixed conclusion on this particular subject, but I do have a firm conviction that the subject demands public reasoning and critical scrutiny. The issue cannot be resolved by taking a generally “pro” or “anti” attitude about FDI in general. A really serious scrutiny is needed rather than just saying “I am in favour of FDI in retail distribution” or “I am against it.”

Recent months have seen widespread anti-corruption demonstrations. How should corruption be tackled?

It is wonderful that people are taking the issue of corruption seriously. That is a very positive achievement. The fact that people have been coming out in the streets protesting and recognising this to be a problem is very important because along with that can come a better understanding of how bad things are in India, and out of that can come the search for a better identification of how corruption can be stopped or checked. Corruption need not be an inescapable part of Indian life, and we should not accept it on some fatalistic ground that this is the way things are in our country. If you have to give money in order to get something to which you are really entitled, then that certainly calls for protest and exposure of the crooks, not for any kind of quiet acceptance.

However, street protest is one thing, and street justice is quite another. The punitive system has to work through our judicial system. There couldn’t be someone who is above the law, above the courts — someone whom even the Indian Supreme Court cannot touch. It is a question of how the anti-corruption measures can be integrated into the democratic legal structure of India.

The remedy of corruption must involve, first, making the institutions and decisional practices such that they do not encourage — or tolerate — corruption. There is also a need for making the practical morality of day-to-day work more responsive to the ethical demands of social living — there is no reason why corruption should generate less stigma and less public shame in India than in other countries where such behaviour is far less common. Informational availability is very important to fight corruption, and there is much greater opportunity to make use of Indian democratic means, including the “Right to Information” to bring about the kind of change that would be effective (rather than only satisfy the desire “to punish the guilty”). There is a very strong case for paying much more attention to the possibilities of institutional change and also to steps towards attitudinal reorientation. We need more than just a system of punishment.


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