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The 'Cash Transfer Scheme' debate
Written By murali772 - 5 December, 2012
Corruption Media Reports Economy India UID PDS UIDAI aadhaar
Of course, cash transfers have advantages too: they have lower transaction costs, more convenient for migrant labour, and might be easier to monitor. Sometime in the future, when the banking system has a wider reach and a more ambitious social security system is developed, with large income transfers that cannot be made in grain (because people can only consume so much of it), a cautious transition to cash transfers may be advisable. But this future is quite distant still, and for the time being, food is the best.
For the full text of the blog by Mr Jean Dreze in 'Down to Earth' magazine, click here
Finally, Mr Dreze has condescended to accept that cash transfer has advantages too, even as all right thinking people, across the country, had foreseen the benefits long ago. It is he and his NAC which had been blocking its implementation all these years, earning poor Manmohan Singh a bad name in the process. Realising that things are heading no-where, Madame Gandhi appears to have released Manmohan Singh from the clutches of Dreze and his lot, and finally, we seem to be headed in the right direction. Perhaps, Mr Dreze's team has continued beyond its sell-by date.
Muralidhar Rao
COMMENTS
murali772 - 5 December, 2012 - 07:27
Many glitches will arise in rolling out such a scheme. Some pilot projects have already tested different transfers in different areas, and corrected the glitches. But more experimentation is needed. The danger is that the scheme will quickly be extended to the whole country in half-baked shape simply to help the election prospects of the Congress. This can mean a flawed CTS that later needs overhaul.
The biggest danger is that CTS will not substitute existing subsidies but add to them. Vested interests will resist winding up any existing delivery mechanism. So instead of substituting subsidized kerosene or LPG with cash, politicians might provide both cash and subsidized fuel. Ditto for subsidized food, electricity, and dozens of other items. Such populist excesses would serious strain already stretched government finances. Provided this is avoided, cash transfers should be a big success.
To access the text of the blog by S R Aiyer in the SToI, click here
A balanced analysis, as generally to be expected from Mr Aiyer
murali772 - 5 December, 2012 - 07:53
In his 2012-13 Budget speech, Finance Minister Pranab Mukherjee said the government would restrict subsidies to “two percent of GDP”. Can it? GDP in 2012-13 is estimated at Rs.101 lakh crore. Two percent of that is just over Rs.2 lakh crore. If the government sticks to the Budget, India’s total subsidy bill should be no more than Rs.2.02 lakh crore.
Let’s do the math. There are four broad categories of subsidies: food, fuel, fertilizer and welfare schemes.
- - - Taken together, food, fuel, fertilizer and welfare subsidies amount to Rs.3,23,000 crore – over 3% of GDP, 50% higher than the government’s budgeted figure. This excludes the proposed food security bill and the controversial formula to measure the number of people living below the poverty line.
- - - In principle, direct cash transfers are a good way to bypass corrupt middlemen. Many countries, notably Brazil, have proved this. But without a strong backend in place, it will not work.
As several development economists, including Jean Dreze, a former member of the National Advisory Council (NAC), have pointed out, a combination of physically-delivered subsidies, with mechanisms to cut out middlemen-fraud, and incremental direct cash transfers is the way to go till Aadhaar develops a robust technological backend.
For the full text of the blog by Minhaz Merchant in the ToI, click here
Hopefully, as Aadhaar rolls out and stabilises, we will be able to get a better grip on the various subsidy schemes, and eventually phase out many of them too.
How Aadhaar will help & more schemes are announced by Govt, then
Sanjeev - 5 December, 2012 - 08:34
If I do't have an Aadhaar, what will happen, maximum I will not get the subsidized LPG, in which case I may have to pay additional say 5K per Year, with my income level & spending on other things, do I need this???
Other wise as Citizen myself who pays tax regularly & does not avail the reservation facility, how Aadhaar is going to deprive me of any facility after having PAN, Voters Card, DL, Passport.
As usual govts keep on announcing the schemes to get votes, so like Rs 2/- per Kg of Rice, Free TV / Laptop / Tablet PC / Solar Lights / Electricity for Pumpsets / Interest waver.
60% Concession for Students & Sr Citizens who travell in Calcutta METRO & not applicable to other places.
Definition of Sr Citizens : 60 Yrs for GOI, 65 Yrs for GOK, some places its 62 Yrs. Some places like Kerala 58 is retirement.
Over and above the wrong concept by our Finance Minister as Taxable Income ( which does not include Agri, Rents, Interest in PPF accounts ) which finally determines the eligibility for Govt schemes.
Even if the amount gets transfered to Bank A/c, what will be the checks if the citizens expiers.
Can not imagine what's going to happen on subsidy bill escalations???
Aadhar Vs Voter ID, Passport, PAN Card?
kbsyed61 - 9 December, 2012 - 23:37
A lot has already been said about Aadhar exercise. As usual there are voices of opposition citing lack of parliament nod, security concerns, usual voices of paranoia and invasion of govt into pvt lives etc. All are not without substance, certainly there are issues that demands satisfying answers
Other wise as Citizen myself who pays tax regularly & does not avail the reservation facility, how Aadhaar is going to deprive me of any facility after having PAN, Voters Card, DL, Passport.
I do not know why reservation is in question here, but each ID facility mentioned here is not meant for everyone. More importantly each one of them has exclusion by its purpose.
Voter ID cards - For population above 18 yrs age
PAN Card - For Tax Filings
Passport - For travel outside India
None of them has the features of universal mode of identification available for 'Every citizen/resident' who desires for. Therefore positioning of Aadhar as universal ID can not be ignored here, moreover none of the exiting ID systems offers the uniqueness that Aadhar offers - 10 Finger prints, 2 Iris etc.
To Sanjeev's question of utility of Aadhar for persons like who doesn't avail govt subsidy's or govt's largesse, answer is, at this moment is 'Nothing'. Reason being Aadhar is still to become the universal ID for all the purposes listed there. But slowly it will become one.
Here is an interesting info from UIDAI:
Hope we look at these things in a perspective not with our personal, social biases and prejudices.
kbsyed61 - 2 February, 2013 - 02:30
Here is a first hand report on Aadhar coverage and direct cash transfer scheme. Per my Father-in-Law who lives in village in Andhra Pradesh, there is almost 90% coverage of Aadhar enrollment. More interesting information was about coverage of bank accounts which is 100% for the Cash transfer beneficiaries. Per initial information all the beneficiaries got the cash transferred to their bank accounts.
Whatever may be the reason, the place is now going to have an ATM soon. Though it already has a SBI branch in addition to a co-operative bank. There is news about 8-10 new bank branches (of different banks including private ones) are being opened in the nearby villages and towns. At least these rural areas would have the benefit of banking services available at a closer location than before.
It is still a long way for anybody to declare a verdict on 'Direct Cash Transfer' scheme, but it has already started creating newer dynamics and could as well be game changer in bringing banking services to hinterlands. Which was kind of unimaginable and mission impossible just a year ago.
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