‘Cash Transfers Can Help Make India Less Unequal, but Are Not a Magic Bullet’

‘Cash transfers can help make India less unequal, but are not a magic bullet’
The Union Government has launched the Direct Benefits Transfer (DBT) programme to give benefits like scholarships, pensions, NREGA wages, etc. directly to the bank or post office accounts of beneficiaries. There are also talks of direct transfer of subsidies for food, fertilizer and kerosene at a later stage. Will the scheme work?
Cash transfer can be a good way of helping the poor in many circumstances. Indeed, many schemes that are not directly cash transfer schemes also work mainly through cash transfer, such as the National Rural Employment Guarantee programme, which certainly has helped the poor through creating jobs and generating cash income for a great many poor people in rural India. Cash is easy to handle and can be, in many cases, easily monitored. It cannot be sensible to be generically against cash transfer schemes, in a country with a lot of poverty and a commitment to use public money to make the very poor a bit less poor.
However, the Direct Benefits Transfer (DBT) programme is a particular scheme of cash transfer, and we have to ask what it may be displacing and whether the losers will not be plunged into more poverty. It is not the modality of cash transfer that is the only issue, but also how much, and for whom, and also, instead of what. If, for example, it is instead of subsidised food, we have to make sure that the people who depend on cheaper food will have enough cash to buy the unsubsidised food.
There is also another issue — that of the distributional effects of different kinds of benefits within the family. There is a good deal of empirical evidence to suggest that direct access to food tends to favour children rather than only the adults, and also girls rather than only the boys, working against biased social priorities, common in the subcontinent, favouring adults over children, and boys over girls, which is a long-standing problem in Indian society. If...