India To Launch World’s Largest Cash-For-Poor Scheme
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India’s ruling Congress party on Tuesday announced plans to begin transferring cash directly to its poorest citizens starting from January next year, reported the Wall Street Journal, in lieu of current subsidies for food, fuel and fertilisers, which the government believes have failed to reach its intended recipients due to widespread corruption.
India’s ruling Congress party on Tuesday announced plans to begin transferring cash directly to its poorest citizens starting from January next year, reported the Wall Street Journal, in lieu of current subsidies for food, fuel and fertilisers, which the government believes have failed to reach its intended recipients due to widespread corruption.
The “Your Money, In Your Hands” project will reportedly affect at least 720 million people, making it the world’s largest program of giving money directly to the poor. Government welfare spending – roughly 4 trillion rupees ($71.9 billion) a year – is also unlikely to increase, as the cash handouts would replace 29 different welfare programs initially.
[quote]“We think this is a game changer,” said Finance Minister P. Chidambaram, who unveiled the plan alongside Rural Development Minister Jairam Ramesh, as cited by the International Business Times. “We think people will appreciate what the government has done.”[/quote]Related: India To Provide $5.4 Billion In Free Drugs To Citizens
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The government hopes to launch the program from January 1 2013 and cover 18 states by April, before the whole country is involved in the scheme by December.
According to an Indian official, the government expects to transfer up to 40,000 rupees ($720) a year to every poor household. The cash will be reportedly transferred electronically to the recipients’ bank accounts, which are linked to the Aadhaar numerical biometric identification system, which is presently being implemented across the nation.
[quote]“Direct cash transfers, which are now becoming possible through the innovative use of technology and the spread of modern banking across the country, open the doors for eliminating waste, cutting down leakages and targeting beneficiaries better,” said Prime Minister Manmohan Singh earlier this week, during a meeting with ministers to discuss to the program’s implementation.[/quote]Critics however have pointed out that only 210 million of India’s 1.2 billion population have received Aadhar identification thus far, while others claim that the handouts are simply a political manoeuvre to bolster the ruling government’s popularity ahead of a 2014 election.
Jean Dreze, an economist from the Delhi School of Economics and a member of the National Advisory Council, added that cash handouts should never replace public services by forcing the poor to buy health and education from private providers.
Cash transfers were successful in Latin America, Dreze wrote for the Indian Express, because they are “seen as a complement, not a substitute, for public provision of health, education and other basic services.”
“A wholesale transition from India’s PDS (Public Distribution System) to cash transfers in rural India would, in my view, be misguided and at the very least premature.”
“For poor people, food entitlements have several advantages over cash transfers. First, they are inflation-proof, unlike cash transfers that can be eroded by local price increases, even if they are indexed to the general price level. Second, food tends to be consumed more wisely and sparingly; cash, on the other hand, can easily be misused. Third, food is shared equitably within the family, while cash can easily be cornered by selfish individuals. Fourth, the PDS network has a much wider reach than the banking system,” Dreze said.
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Communist Party of India leader D Raja also criticised the scheme for being “anti-poor”, as it would actually cut subsidies due to the high inflation rate and not cover the rising prices of foodgrains.
[quote]”In a country like India, the government has to give subsidy on foodgrain and fertilizers. The poor cannot be left to the mercy of market forces. The government cannot do away with subsidies. Its policies have failed,” Raja said, according to IBNLive.[/quote]The Indian government hopes to reduce subsidies to under 2 percent of the gross domestic product in the fiscal year through March, down from 2.16 percent in 2011-12. The government’s intention is to keep subsidies under 1.75 percent of GDP in the next three years.
