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Cash transfers: govt's rush may lead to its failure

The Business Blog - 17 Dec 15:16 pm IST

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#Sonia Gandhi #UPA #P. Chidambaram #Cash transfers

By R Jagannathan

Rahul Gandhi thinks it will win the Congress not only the 2014 election, but the 2019 one too. Members of his mother's National Advisory Council are miffed about it. P Chidambaram believes it will help him reduce budgetary subsidies.

We are, of course, talking about the direct cash transfers scheme, which the government has been extra-eager to dish out for electoral reasons.

However, thoughtful observers and experts who have even a nodding acquaintance with cash transfers say there is no revolution on the way with adoption of the scheme. And it will work only if it is rolled out slowly, by learning along the way.

Guy Standing, professor of development studies at the University of London, who has worked 25 years with such schemes, says they are not a panacea. "They would merely be a vast improvement on the existing mish-mash of subsidy-based social policies, which, as all economists should know, leads to inefficiency, inequity and corruption," he writes in The Indian Express.

Standing punctures many explicit or implicit assumptions about the scheme - both by its backers and its critics.

Among the points he makes, but in different words, are the following.

One, the presumption that they will replace the public distribution system is not only wrong, but would "be a serious, expensive error." Cash transfers will work only if there is a serious effort to study what works and what doesn't, but, as Standing notes, "There is no evidence this has been done."

Two, targeting will defeat the very purpose of cash transfers - but this is exactly what the scheme intends. The move is to use existing BPL (below poverty line) cards to offer cash transfers, but BPL cards already exclude the really needy. So cash transfer would mean excluding the neediest. Standing says: "In our surveys in Gujarat, Delhi and Madhya Pradesh, we have found that a huge proportion of those in need either do not have the....
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