Cash transfer scheme: Another poll gimmick by the Congress

Has Prime Minister Manmohan Singh, an economist by training, fallen for the political compulsions?

It seems so if one looks closely at the UPA government's direct cash transfer (DCT) scheme whereby 10 lakh households in 16 states would benefit under 29 welfare schemes that are being operated by various ministries through Aadhar-enabled accounts.

The scheme, called by many as political bribe, will face immense social hurdles and physical infrastructural problems.

According to Union Finance Minister P Chidambaram, the DCT scheme will make the economic system more efficient. He said the infrastructure needed to implement the scheme was already in place and would ensure that the transfer of money to the Aadhar-enabled accounts take place in a smooth manner. The implementation programme is set to begin on Jan 1 next year. The initial operation will cover 51 districts while the second roll-out is slated to be launched in April.

Schemes that would come under the purview of the DCT plan will include those of the ministries of social justice and development, human resources development, minority welfare, women and child development, health and family and labour and employment. Chidambaram said the scheme will eliminate chances of duplication and help the exchequer to make considerable savings.

Not surprisingly, the Prime Minister has welcomed the move and believes the initiative can make a positive impact on the lives of a large number of people and see the aim of financial inclusion being achieved.

However, Opposition parties including the BJP and Arvind Kejriwal's AAP have accused the government of trying to buy votes through such scheme ahead of the various elections coming up over the next one year before the mega general polls in 2014. Questions have also been raised about the announcement of the scheme particularly ahead of the crucial Gujarat polls.

DCT unlikely to be a success story in India

The cash transfer scheme is actually a worse alternative to the idea of subsidisation, a concept which has already been proved to be a flawed one. The Indian government has expressed its preference for the policy of cash transfer replacing subsidies that are given to people under social welfare schemes like health, education, food, agriculture, etc. The government in Delhi has also started a cash-for-food pilot programme in two urban slums, saying the people are free to buy services in social welfare sector.

Sachin Kumar Jain, a right to food activist based in Madhya Pradesh, said the World Bank and UN Development Programme (UNDP) have been backing cash transfer policies in India. These world bodies believe that people are deprived of their due services and transfer of cash can be an ideal alternative to address the issue. The argument goes that the whopping amount that is being spent every year on fertilisers can be better used if cash is transferred directly to the beneficiaries or democratic rural bodies and it can also implement schemes for the betterment of the poor. The UNDP has also funded the Delhi government's cash-for-food initiative, which is set to replace food from the rationing system.

Ground reality is different from the theoretical assumptions

But whatever be the viewpoints of the international humanitarian bodies, the ground reality is entirely different in this country to allow the cash transfer scheme to succeed.

If we take into account the poor, both urban and rural, surveys have revealed that most people from these sections prefer kind to cash. They want a better rationing system over cash for the latter will only push them into the clutches of private hands for given the pathetic state of India's public distribution system, there is little option for them to look at. The rising prices of food items will soon exhaust the cash stock and these people will be left to starve. The same thing will occur in other sectors like health as well.

Moreover, in distant rural parts, there is hardly a second shop besides the government rationing units and cash will not going to get the targetted beneficiaries any benefit.

Besides the economic challenge, socio-psychological problems will also harm several households if the DCT scheme comes into play. It has been seen that male members of a family support the idea of direct cash transfer more than the females. The reason is that males cherish cash in hand to fulfill their worldly desires, including liquor consumption and take part in gambling. The women, the homemakers, will not get to see the cash in most cases and in this way, the money will get spent without buying food and several poor families will face a threat to their survival. It is because of these reasons that majority of people in several states in the country have objected to the cash transfer scheme.

The political motive behind the Aadhar is also not above doubt. Union Minister Jairam Ramesh recently said that cash transfer was an election promise that the Congress had made in 2009. Then why did it suddenly take up an initiative on these three years after coming to power? If the Congress ministers are saying that it is not transfer of cash but 'haq' of the people, then why isn't the question of 'haq' taken up at other times? Is the popular interest only a relevant term during the election season? Another concern is that the Aadhar scheme has not really made any remarkable penetration in India. Andhra Pradesh and Maharashtra are the only two states that have some substantial coverage but is it because these two states are important strongholds for the Congress?

Latin American examples won't work in India

Many have cited the examples of Brazil, Mexico and Chile where conditional cash transfer has worked but these countries can not be equated with India for they have high-income rates, literacy rates and degree of urbanisation. India has a huge population living below the poverty line, is still largely a rural economy-based country with a high rate of illiteracy and poor infrastructure, like the rural banking system. And then there is the universal problem of corruption.

The majority of India's population depend on state favours for survival and it is important for our policy-makers to wear a lens of realism and try to improve the existing system in a shambles instead of trying to destroying it to make way for a worse alternative.

Economists from around the world have written to top Congress leaders like Manmohan Singh and Sonia Gandhi on issues like cash transfer and food security. The question is: Will the government spend more time to deliberate on a better model to promote welfare of the people or will it just be content with a hastily-crafted populism?