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Trusting the poor with choices

Why India needs to examine how cash transfers can serve as a safety net for its poor?

Are cash transfers a safety net for inclusion or a recipe for failure? Let me say at the outset that cash transfers are not the silver bullet or the magic mantra to eliminating poverty and corruption. Some argue that cash transfers will replace government services,but,at best,cash transfers can be part of a larger poverty reduction strategy. In her thoughtful piece on cash transfers,recently published in Economic and Political Weekly,Jayati Ghosh makes an important point: “Cash transfers cannot and should not replace the public provision of essential goods and services,but rather supplement them.”

Another question that is being asked is whether transfers to incentivise behaviour change should be in cash or kind. Each has its merits — for instance,in Bihar the scheme to provide bicycles to girls to retain them in school seems to be working. However,cash transfers give the poor the chance to choose their priorities.

Which leads to the question some ask: “Will they use the cash efficiently?” We have evidence to believe that the poor will use the cash efficiently. Given the chance of free choice and voice,by and large,the poor make responsible choices.

Brazil’s Bolsa Familia,the oft-cited example of conditional cash transfers (CCTs) in the ongoing debate in India,was crafted with the aim of alleviating poverty in the short term and of breaking the inter-generational transmission of poverty in the longer term. In Brazil the employed were covered by contributory social insurance and the elderly and disabled poor were paid a pension by the state. However,with rising inequalities a large segment of the poor remained on the margins. Bolsa Familia was introduced at the sub-national level in the mid-90s to protect the marginalised poor,and much like India’s NREGA this scheme focused on the family,not the individual. Cash was transferred on the condition that children attend school or family members regularly visit health clinics — besides getting much needed cash into the hands of the poor in the short term,this would also improve the capabilities of the next generation in the long term. After close to a decade of testing it out at the provincial level Bolsa Familia was adopted nation-wide on a larger scale in 2003 and today 25 per cent of the population is covered by this scheme.

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Other countries in Latin America developed their own CCT models based on different development goals,determining how they are positioned within the social protection system of each country. Chile’s CCT programme,Solidario,has a strong focus on cash transfers to promote social integration,bringing indigent families into the public network of social services. Mexico’s Opportunidades,on the other hand,focuses on cash transfers to incentivise poor families in rural and urban communities to invest in human capital — improving the education,health and nutrition of their children. However,for any of these to work,social infrastructure is an essential prerequisite.

In Brazil and Mexico inequality fell by 21 per cent and in Chile by 15 per cent. And it has had a positive impact on health and education outcomes. In Brazil the school enrolment gap between mainstream groups and marginalised races and indigenous groups has equalised. While the long-term impact of CCTs on gender equity is still to be confirmed,in Latin America there is consensus that money transferred to women has positive effects on their self-esteem and economic autonomy and that conditionalities increase women’s access to social services.

UNDP,present in 134 countries,can share experiences and expertise from Latin America and elsewhere to support the government in its endeavours to develop its own model of cash transfers — a model that fits into its larger development strategy and facilitates access to basic social services and necessities by the poor and marginalised. In recent years,the government of India has also introduced first-generation CCTs such as the Ladli and Dhanalakshmi schemes that offer cash transfer incentives for the girl child. The Planning Commission is also studying the feasibility of this instrument,and has piloted a conditional cash transfer scheme for lactating and pregnant mothers. So there is some merit in the CCT instrument,and its relevance in the Indian context should be informed by the ongoing experiments as well.


The Delhi government,for instance,started a one-year experiment this January with UNDP support to test if cash transfers would help in overcoming the challenges of delivering food grains through a public distribution system that has come in for criticism by the Supreme Court. A recent World Bank report says that the PDS has limited benefits due to “huge leakage and wastage”. Later this year we will have the first report from our implementing partner SEWA Bharat that will be shared with the Delhi government,and,based on the feedback from the 100 families that have volunteered to be part of the experiment,the scheme will be fine-tuned to better serve the needs of the community.

Another social protection pilot is being developed with UNDP support to introduce conditional cash transfers for Delhi state. Targeted CCTs are expected to improve school enrolment,attendance and performance; improve nutritional status and enhance efficiency of social security schemes,especially for women and children. Pilot households are expected to receive cash transfers with the specific purpose of incentivising key milestones such as: minimum attendance of children in school; participation in immunisation campaigns; and pregnant women’s visits to health clinics,among other things.

In conclusion I would like to point out that the government has adopted a very cautious approach to trying out the cash transfer model in India with a particular objective — to improve poor people’s access to basic services and goods. Will this work? Time alone will tell — and to make an honest assessment of this model feedback from the beneficiaries is critical,but equally important is the role of an active and vigilant civil society. While cash transfers — conditional or unconditional — may not be a silver bullet,there is merit in weighing the pros and cons of cash transfers as a complement to other social protection measures for the very poor,and in improving their access to basic services and goods.


The writer is the UN resident coordinator,and UNDP representative,in India

First published on: 27-06-2011 at 02:10 IST
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