Introduction:
Conditional
cash transfer (CCT) programs aim to reduce poverty by
making welfare programs conditional upon the receivers' actions. The
government only transfers the money to persons who meet certain criteria. These criteria may include enrolling children into
public schools, getting regular check-ups at the doctor's office,
receiving vaccinations, or the like. CCTs
are unique in seeking to help the current generation in poverty, as well as
breaking the cycle of poverty for
the next through the development of human capital.
Cash Transfer (CT) Schemes
–World View
Cash Transfer
(CT) Schemes more than that Conditional Cash Transfer (CCT) Schemes are
implemented all over the world. It began
in some industrialized nations during the 1960s aimed at workers, unemployed
and the aged. However, the schemes became popular and widespread with their
introduction in the Latin American countries such as Brazil and Mexico in the
1990s.Schemes like Bolsa Escola/ Bolsa Familia,(Brazil1995/2003) and
Progresa/Oportunidades (Mexico 1997) have evolved into a sort of models for
other countries.
Latest
reports suggest that about 35 countries are experimenting with one or the other
form of CTs, spread over Europe, Latin America, Africa and Asia. Countries like
the USA, Germany, France, UK, Norway, Sweden, Japan and Australia are not
excluded.
A CT Scheme
known as ‘Opportunity NYC’, funded by the Rockefeller Foundation was launched
in New York City in April 2007, and ended on August 31, 2010. The program built
on the conceptual framework and success of international conditional cash
transfer (CCT) programs and was the first major CCT initiative implemented in
the United States. The principal objective of Opportunity NYC Family Rewards
was to test the impact of monetary incentives on children’s education, family
health and adults’ workforce outcomes
Some Asian
developed countries like Bangladesh, Combodia and Philippines too have recently
introduced CT programmes of their own.
A number of
bodies of the UNO and the World Bank are playing a role in formulation and implementation
of these schemes and conducted a number
of studies on their implementation and the impact thereof. Almost all of them
are appreciative of the results and advocate similar schemes in countries where
welfare measures, particularly the in-kind subsidies, are given to people.
Benefits from CCT
·
Under the CCT scheme
implemented in most of the countries, money is directly provided to the poor
families after entering into a “social contract” with the beneficiaries —-
for example, the cash is paid on the condition that the beneficiary should send
the children to school regularly or bring them to health centers. The cash
provided is expected to bring in emergency assistance to the poor while the
conditions promote longer-term investments in human capital, in terms of
increased health and education. The cash is generally paid to the female member
of the family.
·
The burden of the
scheme on the exchequer is also not
heavy when compared with the benefits accrued to the society.
The CCT scheme of Brazil, for example, which is treated as the largest single
anti-poverty scheme in the world, covers 11 million, a quarter of the country’s
population, and yet it involves an outlay only equal to 0.8% of the GDP.
Similar is the experience in Mexico where, too, 25% of the people are covered
under the scheme.
·
The
administrative costs under the scheme are also not much. In Mexico, for instance, though $1.34 was spent for
providing one dollar during the initial year, it has now come down to 5 cents
after putting the necessary infrastructure in place.
·
Impressed with
this success of CCTs, the World Bank has decided to lend $2.4 billion in 2009
to support CCT operations in 13 countries.
The Bank, in its recent review at Washington, found the scheme to be addressing
multiple objectives of health, education and nutrition. It was also found that
the scheme’s administrative costs are relatively low; it can better target the
poor than the other schemes; it empowers the women; gives freedom to the
families to priorities their expenditure; and has a positive impact on the
overall welfare of the poor.
·
More importantly,
it helps to boost the demand for goods and services to encourage higher output
and employment. This is seen as greatly
advantageous by governments all over the world to bring the economies out of
recessionary spiral while helping the poor to cope with the situation. In fact,
it is claimed in countries like Brazil that CCT could insulate the poor from
the ongoing world economic crisis.
The Brazil Model - Bolsa
Familia
Brazil's cash
transfer scheme Bolsa Familia is
improving the lives of the poorest and
it is another example of how the emerging economies are increasingly becoming
players in the global debate on aid and development. The biggest and best
known of all the cash transfer schemes in the developing world is the Bolsa
Familia in Brazil. Since 2003, 12 million families have joined the scheme
and receive small amounts of money
(around $12 a month). Inequality has
been cut by 17% in just five years. The poverty rate has fallen from 42.7% to
28.8%. Such is the fascination in this "social technology" that
Brazil is now being sought for advice on cash transfer programmes by countries
across Africa (Ghana, Angola, Mozambique), the Middle East (Egypt, Turkey) and
Asia (including India). Even New York City has implemented a version of the
programme.
"It's
social policy diplomacy," suggested Dr Romulo Paes de Sousa one of the
ministers involved in the Brazilian programme, , He's delighted by the
interest. "Brazil is developing a new model of donor whereby we give
expertise as well as aid. Brazil is already one of the largest donors of food
aid in the world." He is also struck by the paradox that Brazil is
expanding its welfare state just as Europe is cutting back on welfare. There
are some aspects of the programme, he explains, which have attracted particular
interest. The first is conditionality. The payments are dependent on the
family's children staying in school until 17, and attendance must be at least
85% up to 14 years and 75% for the remainder. Another form of conditionality is
that children get the full set of vaccinations in their first five years and
that mothers attend pre and post-natal care."Bolsa Familia has
definitely contributed to the improvement in infant and maternal mortality that
we are seeing in Brazil," said Dr Paes.
One of the
advantages of the conditionality is that the investment in welfare has a real
bang for its buck. For just 1% of GDP, Brazil is simultaneously boosting
education levels, improving dire health indices and reducing poverty. What has been
controversial is the transparency. All the names of recipients are publicly
available on a website. Individual claims can and have been checked. Anyone can
report abuse. But it's working. Independent evaluations found that 80% of the
money is reaching the poor; pretty good in a country in which welfare has been
dogged by corruption.
One clever
aspect of the programme was to put all payments through the banking system. Recipients use a debit card to draw out the money from
their bank accounts at ATMs. The registering of claims is a more complex
process and since the scheme started in 2003, a network of social services centers
has increased from 1,000 to 9,000.
Inevitably,
the programme has led to criticism that it will generate a dependency culture. Unlike another comparable programme in Mexico, it is not
time limited. But Dr Paes points out that the level of support is low so it is
designed to supplement income from a job, never replace it. It helps that
studies of its impact show how the injection of this cash into particularly
poor communities is helping stimulate the local economy. Other studies have
shown that the vast bulk of the money is spent on necessities such as food,
school supplies, clothing and shoes - that helped squash arguments that if you
gave money to the poor, they would simply spend it on alcohol.
Such evaluations
(including publications by the World Bank) have helped the programme win legitimacy, but Dr Paes admits it was very hard at the beginning,
when the Brazilian economy was weak, to persuade middle class voters of this
disproportionate investment in the "bottom of the pyramid".
"It's got easier since then as the Brazilian economy has grown," he
added. It seems as long as everyone's share of the cake is growing, the middle
classes are prepared to tolerate this modest degree of redistribution.
Bolsa Familia
is another example of how the emerging economies – such as Brazil and China –
are increasingly becoming players in the global debate on aid and development.
Dr Paes saw Brazil as now being in the driving seat in helping to forge new
welfare models for export.
The reasons for mooting
an alternative scheme like direct cash transfer (DCT) or conditional cash
transfer (CCT) in India.
·
The reasons for
mooting an alternative scheme like direct cash transfer (DCT) or conditional
cash transfer (CCT) include the failure of the existing myriad schemes of
poverty alleviation or targeted poverty reduction programmes (TPRPs) with ‘top-down’ approach and the many leakages in their
implementation whereby the benefits did not reach the targeted people to the
full extent.
·
It has been
acknowledged that much more than half of the amounts spent on welfare measures are pocketed and
wasted due to leakages, inefficiency, poor infrastructure and other such
problems. Former Prime Minister Rajiv Gandhi once commented famously that
only about 15% of the allocations reached the beneficiaries.
·
Faulty implementation
has resulted in inefficient functioning of the programme, leading to diversion of benefits by intermediaries,
exclusion of the most vulnerable and appropriation by the ineligible groups.
·
It is estimated
that the subsidies on food, fuel and fertilisers aggregate to Rs 200,000 crore,
but only a fraction of it actually benefits the poor people. The leakages are so heavy in certain schemes, such as
the public distribution system, that as per one estimate only 11% of the amount
spent actually reaches the poor.
·
Although there
have been some schemes of DCT in India since the 1960s, like the old age
pensions, they are not in the form now being contemplated, influenced by the
ones in practice in many countries across the globe, particularly in Latin
America.
CCT/ DCT in India
In India too,
the subject of CCT is widely being debated. In India cash transfers are not
a new thing. The aged, students, physically challenged and girl children are
already in receipt of money benefits. Both the Centre and the States have been
implementing such schemes.
The Planning
Commission constituted a working group in December 2008 to consider the
introduction of CCT in India. It has
also earmarked Rs 9,000 crore under XI plan for CCT, mainly in the area of
maternity and child benefits.
Telugu Desam
Party announced in its Election Manifesto for 2009 State Assembly elections,
the Scheme of cash transfer to people’s account to directly attack poverty. The scheme offered by a local Party in
Andhra Pradesh, has the potential to create a similar demand all over the country.
The scheme envisages direct monthly payment of Rs 2,000 to the poorest of the
poor, Rs 1,500 to the poor and Rs 1,000 to middle class families. The cash will
be electronically transferred to the beneficiary’s account in a nationalized
bank, opened with the facilitation of the government. The female member will
draw the money through an electronic cash card or automated teller
machine.
Bihar CM Nitish Kumar said Bihar has already implemented
the cash subsidy payout to beneficiaries in several schemes. Bihar government
has been paying cash subsidy directly to students to buy cycles under a scheme.
The money is directly made available to students for school uniforms to avoid
any leakage.
In his budget speech last
year, then-Finance Minister Pranab Mukherjee had announced that UPA2
was planning to reroute subsidies in kerosene, fertilizers and LPG as cash
transfers to beneficiaries.
On November
26, 2012 Prime Minister Manmohan Singh formally announced the launch of
much-awaited Direct Cash Transfer Scheme. 10 lakh households in 15 states and 3
Union Territories would benefit under 29 welfare schemes that are being
operated by various ministries through Aadhar-enabled accounts. The scheme proposes to transfer subsidy amount that is
given away by various departments of the government for the poor and the
deserving, directly to the bank accounts of beneficiaries.
29 schemes of
the government, including those from the Health Ministry, would be part of this
scheme. The scheme should also
eliminate falsification and duplication with regard to subsidies. The
Indian government provides INR 3.2 trillion (US$57.7 billion) in subsidies
every year.
Every person is
expected to hold a bank account to enable such transfers. Initially, 29 welfare
programmes out of over 150 subsidy schemes operated by different ministries of
the Central Government will be covered. These 29 are largely related to
scholarships and pensions for the old and disabled. It may also include fuel
subsidy. According to government sources, it would consider the feasibility of
cash instead of food (under the Public Distribution System) and fertilizers, at
a later stage.
It will be
implemented from January 1, 2013 covering 51 districts across 15 States and 3
Union Territories. At this time, 29
schemes have been brought under the ambit of the cash transfer programme.
Schemes that would come under the purview of the DCT plan will include those of
the ministries of social justice and empowerment, Human Resources Development,
Minority Welfare, Women and Child Development, Health and Family Welfare and Labor
and Employment. All the districts in 18 states come under the scheme from 1st
April, 2013. More services and all districts in all the
states will follow by April 2014.
All the BPL
families and others who are presently eligible for various governmental subsidy
programmes will come under the DTS scheme.
Families
with Aadhar card, entitled to subsidies, pension, scholarships etc, will get
money directly in their bank accounts. Direct cash transfer of subsidies would
be done through Aadhaar-enabled bank accounts. Under the cash transfer scheme,
families with Aadhaar card (a 12-digit individual identification number)
entitled to subsidies, pension, scholarships, etc, will get money directly in
their bank accounts. For this, they need to give their Aadhaar card number to
the service provider, for instance, the gas agency and the bank.
Aadhaar card is
an ID card with a 12-digit unique number issued to all the citizens of India
(on voluntary basis). It will carry the demographics and biometric information
of the holder. Payments of Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA) wages are being done using this card
The government
plans to inform the district collectors about the program. The US$57.7 billion
cash transfer scheme will be launched in stages and cover the entire country by
the end of 2013.An estimated Rs.3.24 Lakh crore (US dollars 65 Billion, 3.5% of
the GDP) is allocated annually for over 150schemes by the Centre alone. In
addition to this, all the states put together earmark no less than an equal
amount annually.
At present,
beneficiaries of various schemes have to pay intermediaries before they get any
money from the government. The Finance minister said that with the cash
transfer scheme, beneficiaries would not have to pay any money to get the
benefits. Banks would be the distribution point for cash subsidy initially.
The Union
Government promised that the Direct Cash Transfer Scheme arrest the wastage due
to leakages,falcification,duplication, favoritism, inefficiency, poor
infrastructure and other such problems in implementing welfare schemes.
Benefit people
more, achieve targets in a better manner and also save a great deal of money
for itself on spending on infrastructure, man power, transportation, and on administrative expenses. (A financial paper
reveled that nearly about Rs,15000 Crore per year may be saved as there will be
no more diversion of cylinders for commercial use and no diversion of kerosene
to mix with diesel )
A high-power
National Committee on Direct Cash Transfers was constituted by Prime Minister
Manmohan Singh.
DCT Scheme a boon or
bane for the common Man?
·
This system is
aimed at eliminating fraud, middle-men, black-marketing, and bribery in
dispersing of the subsidies.
·
The Prime
Minister Manmohan Singh has welcomed the move and believes the initiative can
make a positive impact on the lives of a large number of people and see the aim
of financial inclusion being achieved.
He also mentioned that the success of the direct transfer system depends on the
Aadhaar platform and financial inclusion. He mentioned that the banking system
may have to integrate the post office network, especially in rural areas.
·
Finance Minister
P.Chidambaram, described government’s ambitious direct cash transfer scheme as
“nothing less than magical”, saying the
move is aimed at plugging the loopholes in the delivery mechanism and ensure
that poor get complete benefits of government schemes He also terms the
scheme as revolutionary and game-changer. Chidambaram said the move is
aimed at ensuring that the benefits of government programmes reach the masses.
He said the scheme will eliminate chances of duplication and help the exchequer
to make considerable saving and make the economic system more efficient. The
infrastructure needed to implement the scheme was already in place and would
ensure that the transfer of money to the Aadhar-enabled accounts take place in
a smooth manner.
·
Union Rural
Development Minister Jairam Ramesh recently said that cash transfer was an
election promise that the Congress had made in 2009. He rejects the "notion" that the direct cash
transfer scheme would abdicate government's commitment to welfare state and
said it is an answer to the "incompetent Army of corrupt delivery
agents". Ramesh also termed as "ludicrous and bogus" Aam Aadmi Party
leader Arvind Kejriwal's argument that this programme is a "bribe
giving" one.
·
Several Congress
ministers are saying that it is not transfer of cash but it is the 'haq' of the
people.
·
Sachin Kumar Jain, a
right to food activist based in Madhya Pradesh, said the World Bank and UN
Development Programme (UNDP) have been backing cash transfer policies in India.
These world bodies believe that people are deprived of their due services
and transfer of cash can be an ideal alternative to address the issue. The
argument goes that the whopping amount that is being spent every year on
fertilizers can be better used if cash is transferred directly to the
beneficiaries or democratic rural bodies and it can also implement schemes for
the betterment of the poor. The UNDP has also funded the Delhi government's
cash-for-food initiative, which is set to replace food from the rationing
system.
·
Prof Sudhanshu Handa, Professor and Chair, Department of Public
Policy, University of North Carolina felt this is an exciting move for India. The CT Programmes are now taking root all over the
developing world. He said I encourage
them and also strongly suggest rigorous impact evaluation of the program
be designed and conducted from the outset, to ensure money is getting to the
right people, and to understand the benefits of the program.
·
The ECONOMIST
magazine in its editorial fully supported the measure and advised making cash
transfers conditional can make welfare payments even more effective.
Criticism
Critics point out to the
practical shortcomings of the scheme.
·
It will generate
a dependency culture and if you gave money to the poor, they would simply spend
it on alcohol.
·
Some Critics say that the real intention of the government in the short run is to garner votes in next
elections and gradually withdraw itself from welfare regime as per the
reform process, in the long run.
·
DCT/ CCT cannot
be treated as a panacea for all ills.
Doling out cash without providing employment opportunities is feared to lead to
a situation of eternal dependence of the poor for external support and
transferring of poverty from one generation to other generation.
·
DCT unlikely to
be a success story in India The cash transfer scheme is actually a worse
alternative to the idea of subsidization,
a concept which has already been proved to be a flawed one.
·
The success of
cash transfers depends on people having bank accounts, money going into the
right account, and people having easy
access to those accounts. Accessibility to banks in remote villages is still a problem.
Most below the poverty line families (toward whom most subsidy schemes are
targeted) don't have bank accounts. And a large chunk of villages in India
don't even have bank branches. Banks are on an account-opening spree, but it is
not clear if they will cover all in time. The question is whether the promise
of cash transfers will have people flocking to banks to open accounts.
·
The Unique
Identification Authority of India (UIDAI) has issued only 21 core Aadhaar cards so far. While the Unique Identification Authority of India
(UIDAI)--which issues the Aadhar cards on behalf of the Indian government--has
invited applications from approved commercial banks deploying micro ATMs to
enable Aadhaar-based payments,
·
The scheme, called by many as political bribe, will face immense
social hurdles and physical infrastructure. The ground realities in this
country are entirely different to allow the cash transfer scheme to succeed.
·
If we take into
account the poor, both urban and rural, surveys have revealed that most
people from these sections prefer kind to cash. A survey conducted by the
National Federation of Indian Women (NFIW) and the Right to Food Campaign in
Delhi observed people prefer kind to cash. They also wanted subsidized food
grains to continue. They want a better rationing system over cash..
The rising prices of food items will soon exhaust the cash stock and these
people will be left to starve. The same thing will occur in other sectors like
health as well. Moreover, in distant rural parts, there is hardly a second shop
besides the government rationing units and cash will not going to get the
targeted beneficiaries any benefit.
·
Besides the economic
challenge, socio-psychological problems will also harm several households if
the DCT scheme comes into play. It has been seen that male members of a
family support the idea of direct cash transfer more than the females. The
reason is that males cherish cash in hand to fulfill their worldly desires,
including liquor consumption and take part in gambling. The women, the
homemakers, will not get to see the cash in most cases and in this way, the
money will get spent without buying food and several poor families will face a
threat to their survival. It is because of these reasons that majority of
people in several states in the country have objected to the cash transfer
scheme.
·
The political
motive behind the Aadhar is also not above doubt. Union Minister Jairam Ramesh recently said that cash
transfer was an election promise that the Congress had made in 2009. Then why
did it suddenly take up an initiative on these three years after coming to
power? If the Congress ministers are saying that it is not transfer of cash but
'haq' of the people, then why isn't the question of 'haq' taken up at other
times? Is the popular interest only a relevant term during the election season?
·
Another concern
is that the Aadhar scheme has not really made any remarkable penetration in
India. Andhra Pradesh and Maharashtra
are the only two states that have some substantial coverage but is it because
these two states are important strongholds for the Congress?
·
Latin American
examples won't work in India. Many have
cited the examples of Brazil, Mexico and Chile where conditional cash transfer
has worked but these countries cannot be equated with India for they have
high-income rates, literacy rates and degree of urbanization. India has a huge
population living below the poverty line, is still largely a rural
economy-based country with a high rate of illiteracy and poor infrastructure,
like the rural banking system.
·
And then there is
the universal problem of corruption.
·
The majority of India's population depends on
state favors for survival and it is
important for our policy-makers to wear a lens of realism and try to
improve the existing system in a shambles instead of trying to destroying
it to make way for a worse alternative.
·
The UNDP in its published paper emphasizes on Conditional
Cash Transfers in India and some felt that the amount Rs.2000 billion
that is spent annually on food, fuel and fertilizer subsidies may be better utilized
by providing Cash directly to the beneficiaries.
·
World Bank Steve
R. Tabor supports cash transfers to in-kind ones but prefers conditional
transfers to unconditional ones.
·
Most of the
Experts say make health care conditional.
·
According to National
Advisory Council member Aruna Roy, the government did not take away any lessons
from NREGA, which has shown that direct cash transfers cannot contain corruption.“There is also the problem of
delayed cash transfer from banks,” she
said. Roy said that while direct cash transfer may have worked in countries
like Brazil, India presents different set of challenges. “Every nation has its
own set of socio-economic issues which need to be taken into account while
designing a scheme of this scale. In this case, that seems to be missing,” said
Roy. In her view the scheme is “ just
a move to control and track people and push the UID PROJECT”.
·
Renowened
Economists like Reetika Khera, Praveen Jha and Ravi Srivastava feel that such
schemes do not suit hugely populous countries like India, with high incidence
of poverty. They think the intention may be to gradually withdraw from welfare
schemes by diluting them and leaving people to the market forces.
·
Lastly, as several voices have already pointed
out, direct cash transfers are effective if they are conditional, and if there
are systems to monitor them properly.
The opposition and Left
have their own share of criticism.
·
Opposition
parties including the BJP complained to the Election Commission against
direct cash subsidy transfer scheme, saying it violates the code of conduct in
view of the Gujarat elections, BJP
spokesperson Ravi Shankar Prasad said two senior Ministers had announced the
scheme at the Congress headquarters on Monday even though Parliament was in session.
Another BJP Spokesperson Prakash Javedekar said, the government deserved no
credit since no additional amounts were going to be transferred to people. Only
the present schemes will turn from kind to cash. And some are in cash anyway.
·
The Communist
Party of India (Marxist), criticized the Congress for the “blatant misuse” of
the party symbol in announcing the scheme.
According to Mr. Yechury the direct cash transfer was being proposed to be
carried out under the ‘Aadhar’ or Unique Identification (UID) card scheme but
the Bill to give UID legal sanctity was yet to be passed by Parliament. Mr.
Yechury said when inflation was high, the cash being transferred would actually
cut subsidies and fetch lesser and lesser amounts of food grains or other
essential items meant under the scheme and dismantle the public distribution
system.
·
Arvind Kejriwal's
AAP have accused the government of trying to buy votes through such scheme
ahead of the various elections coming up over the next one year before the mega
general polls in 2014. Aam Aadmi Party
leader Arvind Kejriwal's argument that this programme is a "bribe
giving" one.
·
Anna Hazare opposed the UPA government's electronic cash transfer policy, alleging it would help Congress party cadres, not
people,"
International
bodies such as the UNO, UNDP, ILO, FAO, ODI and a host of developmental experts
and economists argue that the Cash Transfers are better than transfers in kind.
Significantly they are also unanimous in saying that the monies will yield even
better result by linking them up with social objects which is called
“Conditional Cash Transfer” (CCT). They also recommend making payments to
housewives instead of men, and creating a mechanism to monitor implementation.
This has been the practice in most of the countries
Economists from around the world
have written to top Congress leaders like Manmohan Singh and Sonia Gandhi on
issues like cash transfer and food security.
However,
the UPA government made no mention of any of these arrangements. It also did not explain why. The Indian government has expressed its preference for
the policy of cash transfer replacing subsidies that are given to people under
social welfare schemes like health, education, food, agriculture, etc. The
government in Delhi has also started a cash-for-food pilot programme in two
urban slums, saying the people are free to buy services in social welfare
sector.
One
wonders if the UPA government has conducted any studies of its own on what the
beneficiaries themselves prefer. Transfers in kind or cash, and if in cash want
them to be unconditional or conditional.
While the
above discussed teething problems promise to persist for a long time for the
proposed DCT Scheme and it is not far away to be implemented, one can only hope
that the government will be able to organize things in an efficient manner in
the short time available.
Now t he question arises
is will the government spend more time to deliberate on a better model
to promote welfare of the people or will it just be content with a
hastily-crafted populism.
References:
2. R.Keerthana- Direct Cash
Transfer Scheme.
3. Shubham Ghosh – Cash transfer scheme
4. Madeleine Bunting- La Bolsa Familia
4. Madeleine Bunting- La Bolsa Familia
6. Wikipedia- Conditional Cash
Transfer.
8. Hans India – Have money, shape your
welfare.
9. The Economist Magazine.
10. UNDP Published Report
11. Steven R Tabor – World Bank Comprehensive
Discussion Paper on Conditional Cash Transfers Schemes – A Study.
12. Direct Cash Transfer: the cart before
the horse?-Vandana Kohli
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