Opinion Once upon a politics, BJP opposed cash transfers

The possibility of implementing welfare schemes through cash transfers gained traction around 2008, as the Aadhaar initiative took shape. This was also the period when the food security bill was being discussed. Many believe the UPA government was heavily influenced by left-leaning economic ideas, but that was not the case. The National Food Security Act (later termed the “Garib Kalyan Yojana”) was the Manmohan Singh government’s flagship welfare programme. But it faced fierce opposition from right-wing economists. That opposition mattered.

The central issue of this debate thus became whether welfare spending should be increased at all. A prominent economist wrote in a national daily that implementing the Food Security Act would sink the economy, costing over 3 per cent of the GDP.

Had that been true, these economists would have urged the Modi government to scrap the scheme after taking office. Instead, they fell silent. The Modi government not only continued the programme but made food grains free — increasing the food subsidy bill.

The UPA government fought an uphill battle to pass the Food Security Act. Critics from the economic right viewed welfare schemes with deep suspicion. Ironically, the Act was designed to expand coverage to more of the poor (who were earlier excluded from the ration system) while reducing per-beneficiary subsidies, thereby keeping costs relatively low.

Around the same time, some began advocating for cash transfers instead of food grains, citing corruption and inefficiency in the PDS. A handful of activists and economists managed to get a pilot provision inserted into the Food Security Act, but they couldn’t get it implemented on the ground.

Sharad Pawar, then Minister of Agriculture and Consumer Affairs, showed initial interest but soon backed off — possibly due to opposition from left parties like the CPM. When the food security bill was being drafted, the idea of cash transfers was presented before Rahul Gandhi. The Aadhaar enrolment drive was in full swing, though rural banking systems for direct transfers remained weak. The proposal was to start with urban areas — mainly major cities — where direct cash transfers could be easily rolled out with political will.

Many left-leaning NGOs saw cash transfers as a Trojan horse—a right-wing ploy to swap food for cash and then cut subsidies. Rahul Gandhi, too, believed in this theory. The idea was not supported politically.

Based on the prevailing food grain prices then, each family would have received about Rs 500 per month. What if Congress had fought the 2014 election promising a Rs 500 note to every family? Had half the urban families received Rs 500 per month, who knows, it could have reshaped political history. That too by merely swapping food grain with cash without raising the subsidy bill.

The BJP opposed cash transfers more strongly than the Left. Sushma Swaraj demanded in the Lok Sabha that the related clause be removed from the Act — perhaps sensing its political potential. This history of cash transfers is not remote. It brings relief to BJP loyalists, regret to Congress supporters, and intrigue to the neutrals. Many critiques of the Food Security Act and the cash-versus-kind debate rested on misconceptions, but what mattered was that there was space for debate — a luxury now fading. One fear expressed then has since come true: Once the machinery for direct cash transfers was built, cash politics would threaten sound development policy. This experiment started in Maharashtra just days before the elections, and Bihar took it to another level. Polarising rhetoric plus cash transfers is a lethal strategy to which the Opposition parties have no answer.

The Lok Sabha elections in 2029 might see an even bigger cash transfer scheme. Serious questions — about which subsidies and investments genuinely drive development — have been pushed aside. What remains is cash politics, with everything else flown away like chaff in the wind.

Murugkar writes on economic and social issues