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Thursday, June 30, 2022

Another Kind Of Welfare

We need an informed debate on cash transfers, not ideological positioning.

Written by Sarath Davala |
Updated: July 30, 2015 12:00:12 am
cash transfers, conditional cash transfers, unconditional cash transfers, direct benefit transfer, DBT, Chief Economic Advisor Arvind Subramanian, Arvind Subramanian, Sarath Davala column, ie column, indian express column While DBT is aimed at improving the efficiency of the management of subsidies, UCT or UBI is an alternative way of thinking about welfare assistance itself.

In ‘A state only in name’ (The Indian Express, July 13), Rakshita Swamy prima facie dismisses cash transfers as undesirable, and lists out problems without defining what kind of cash transfers she is referring to. This is a position that is difficult to sustain because transfers such as pensions and scholarships have long been part of our welfare system.

There are two types of cash transfers: conditional (CCT) and unconditional (UCT). CCTs require a demonstration of tangible behavioural outcome for the cash transfer to be made. UCTs are not linked to behavioural outcomes. Some criteria may be applied to select the target group. One radical form of the latter, unconditional basic income (UBI), now being discussed widely, is, in fact, universal. There are several pilot projects on UBI across the world, and one such was done in India recently by Sewa. The results of this pilot study have been quite positive.


The term that has been in the news recently is “direct benefit transfer” (DBT). This is meant to make the transfer of some welfare benefits transparent and more efficient. DBT has been successful in the case of LPG subsidy and, in one year, the government has been able to save as much as Rs 12,000 crore.

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While DBT is aimed at improving the efficiency of the management of subsidies, UCT or UBI is an alternative way of thinking about welfare assistance itself. It is an attempt as much to improve delivery as it is to address inclusion and exclusion errors that plague the current targeted social assistance.

Swamy takes none of these nuances into account and asserts that “Cash transfers are now being positioned as a magic solution to achieve development goals in health, education, nutrition and food security…” What type of cash transfers is she referring to? And who is positioning it as a magic solution? Which of the pilot studies say so?

Chief Economic Advisor Arvind Subramanian has said DBT is a “gamechanger”. As far as subsidy management is concerned, this is indeed true. Saving nearly $2 billion  without hurting any of the stakeholders certainly qualifies for a gamechanger. Further, Swamy says “…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.” I don’t see what is ironic about Subramanian aspiring to find mechanisms that legitimise the state. We all want our government to spend our tax money more efficiently, don’t we?

When the national average of pilferage in the PDS system is 48 per cent, is it not something we should all worry about? When the government officially proclaims that India spends Rs 3.65 to deliver welfare subsidy worth Re 1, should we not feel ashamed and search for alternative methods of delivery? Instead, Swamy brushes aside the issue of pilferage and leakage, and vaguely says that there are several “other reasons”, again unsubstantiated, which are responsible for the welfare programmes not reaching the people.

The writer goes on to say that getting money into the bank is not the same as getting money into people’s hands. This is hardly profound. Any cash transfer indeed requires a robust banking infrastructure and complete financial inclusion. Swamy concludes by making yet another sweeping statement: that the motive behind the push for cash transfers is basically a conspiracy to privatise. There is little that one can learn from such unexamined statements.

If subsidy is what is in question, DBT is indeed an efficient method that tackles pilferage and black-marketeering. Coming to UCTs, the pilot studies have clearly shown that they can play a very important role in addressing poverty; that they stimulate the local economy; that they can bring about a certain dynamism into the lives of the poor; that they have a multiplier effect on the household economy. UCTs need not replace the existing welfare system altogether. It can be an important part of the welfare basket. What we really need now is an informed debate on these issues rather than knee-jerk reactions and unformulated ideological positions that get us nowhere.

Davala is co-author, along with Renana Jhabvala, Soumya Kapoor Mehta and Guy Standing, of ‘Basic Income: A Transformative Policy for India’

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