Reducing Poverty by Direct Cash Transfers

A comparative study between the Brazilian Bolsa Familia experience and the possibilities that the Indian scenario may offer as the direct Cash Transfer scheme embarks in the country

The Baigas

T here is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things – Niccolo Machiavelli

The study comes at a time when a different attempt is being made by the central government, to address the issue of poverty alleviation, especially the incidence of rural poverty, which has been on the agenda of every government ever since the independence of India. This time, the plan is to transfer money into the bank/post office accounts of the poor so that it can enhance their access to it. The scheme involves direct transfer of the subsidy amount, usually paid by various departments of the government to the poverty stricken, into the bank accounts of beneficiaries. One of the direct benefits could possibly be that the scholarships for higher education for Dalit students, previously paid to a university, would henceforth be transferred directly to the individual, who would then pay for his or her studies. This scheme may also aspire to replace, in the long run, the prevalent perspective of poverty reduction through government ‘in-kind’ support– widely known as Public Distribution System (PDS). The advantage of the new cash transfer (CT) system is that the government can ensure the delivery of the money to the intended claimant, thereby reducing for them the pitfalls of paying bribes to secure their due or giving officials the option to channelize funds for other purposes.

To address this situation of corruption and malpractices, the central government, headed by a high-powered national committee on direct cash transfer constituted by Dr. Manmohan Singh, the Honourable Prime Minister of India, passed the decision of direct cash transfer to the target population on 26 November 2012, thereby reducing the scope of deep-seated malpractices in several tiers of the subsidy programmes such as fraud, middle-men, black-marketing and bribery when dispersing subsidies (including PDS.). The Minister of Finance, Mr. P. Chidambaram claimed in a press conference on the eve of the declaration of the scheme that “This is a game-changer for governance... this is a game-changer in how we account for money, it is game-changer in how the benefits reach the individual.” Initially 29 welfare programmes such as subsidies, pensions and scholarships will be included in the domain of the scheme. At first, the government had plans to deploy the project in 51 districts across 16 states under which cash subsidy benefit will directly go to the bank account of Aadhar card holders. However, at the implementation time, 4 districts each of Himachal Pradesh and Gujarat were exempted from the roll-out because of the impending assembly elections. The states to be covered in the initial phase are Karnataka, Andhra Pradesh, Delhi, Rajasthan, Madhya Pradesh and Punjab, and the union territories of Puducherry, Chandigarh, and Daman and Diu.