The implementation of cash transfers by a state would necessarily entail: one, the identification of beneficiaries on the basis of predefined eligibility parameters; and two, calculating the exact amount of money, equivalent to the monetary value of the subsidy that beneficiaries were supposed to get, and transferring it into their bank accounts — with the intention that they would then use this to purchase the same services that were earlier being subsidised or provided in kind.
Cash transfers are now being positioned as a magic solution to achieve development goals in health, education, nutrition and food security, which decades of implementation of social-sector programmes apparently have not. This was evident at a recent roundtable on direct benefit transfers at which representatives from government, including the chief economic advisor, went as far as saying that cash transfers could be a means of enhancing the legitimacy of the state. The irony is only too obvious.
There are many problems with cash transfers being projected as a reform. First, they depend on the prior identification of potential beneficiaries, even for those interventions that are based on principles of dynamic self-selection. This is problematic because the list of people in need of basic public services like subsidised foodgrain, affordable healthcare, public education, etc, cannot be treated as final. Given the dynamic nature of poverty, the numbers and kinds of people who want to access a particular public service will keep changing because of changes in their social, economic and physical vulnerabilities. Taking a fixed list of beneficiaries and building a formidable architecture of payments around it leaves little room for flexibility.
Second, by deciding the quantum of money to be transferred to beneficiaries, the state would be taking a view on how much money would be “adequate” for the poor to survive. Decisions such as protecting these endowments from the effects of inflation would be dependant on the ideology and mood of the government of the day.
Third, merely transferring money into bank accounts is not the same as people getting it in their hands. This has been a lesson from nearly all the pilot projects that have been undertaken in India.
Leakage and pilferage plague developmental efforts but there are several other reasons for programmes not achieving their objectives — inadequate financial investment into welfare programmes and their physical architecture, shortage of trained technical personnel and a lack of robust participatory grievance redress mechanisms that enable implementing authorities to identify problems affecting grassroots delivery and devise suitable solutions. The discourse around cash transfers completely ignores these procedural inadequacies, as if not acknowledging them would make them disappear.
If poor people are given money instead of a service/ good in kind, where will they go to access the services they require if public infrastructure remains as inadequate as it is today? Merely replacing physical benefits with cash won’t make all the reasons that people are unable to access basic services suddenly disappear.
One of the intentions of moving to a regime of cash transfers is to steer citizens away from depending on public infrastructure and instead rely on service provision by private entities in the name of aligning with developed economies in principles of fiscal discipline. India spends only 4.7 per cent of its GDP on public health and education and feels apologetic about having to invest further, when the corresponding figures for the OECD countries, the sub-Sahara African region and Latin America are 13.3, 7 and 8.5 per cent, respectively. Unfortunately, the underlying ideology behind pushing for cash transfers is rarely publicly addressed or discussed.
The push for cash transfers seems to take as a given the incapacities of the state. It acknowledges that the state has not been able to, and will not be able to, create a minimum architecture to provide basic services of education, health and food security, which are our rights as citizens, and instead asks us to look elsewhere.
The writer is consultant, UNDP, Delhi. Views are personal.