Direct Cash Transfers: Problem, or Solution!

Cash or currency is a wonderful invention that is quite synonymous with power in the contemporary world.
Direct Cash Transfers: Problem, or Solution!
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'With great power comes great responsibility', a great lesson from one of my favorite movies. Cash or currency is a wonderful invention that is quite synonymous with power in the contemporary world.

The Direct Cash Transfer scheme places this power in the hands of few who are mastering a family and not necessarily responsibly managing it.

In case of a country like India, which has a history of economic under-development and backwardness, which has been ruled or mastered and exploited by a greater economic power and where a large proportion of population still has a very low per capita income, the amount direct cash benefit to an individual is a huge one. Lord Acton has put it correctly, "power corrupts and absolute power corrupts absolutely".

This proverb has more meaning which it comes to the debate of cash transfers to the cash deprived families of India living below poverty line or just above it or even in the lower middle class. Transferring the subsidies directly in the accounts as cash may be a remarkable step economically to reduce the subsidy burden of the government but there are many facets of the picture, which need to be analyzed very keenly before jumping to conclusion about the usefulness of the measure. 

Given the educational and intellectual capacities at the level of masses, in India, plus the kind of social and familial fabric it has, I think the measure will prove more of a problem, than anything else. India mainly has a patriarchal society with the financial matters concentrated in the hands of male heads of the families.

Direct cash transfers will result in the shift of direct subsidies on different household articles like food grains, and LPG to the cash being transferred directly into the accounts of the consumers. This will increase economic deprivation and dependence of women and children.

In case of the subsidy the benefit provided was received equally by all the members of the family but when the subsidy will directly be credited into the bank accounts of the consumers it will be placed in the hands of the male heads of the families who might, and will (as is seen in many cases) divert the funds to other purposes.

This will plunge the poorer families into further vulnerable state and will increase food insecurities among the poorer masses. In a survey conducted by National Federation of Indian Women and Right to Food Campaign in Delhi's slum settlements, 91% of women want food subsidies to continue. In similar surveys and studies conducted in various tribal regions of India it was found that the tribal communities also want food subsidies to continue. 

Many renowned economists from around the world have advocated the universalization of the public distribution system and have also openly opposed the move of direct cash transfers replacing the existing system of food grain rationing. In a study under Professor Jean Dreze and Ritika Khera, covering around 1200 households of different Indian states, it was found that around 85-90% people preferred food grains while as only 10-15% preferred cash.

It was also found that most of the people preferring cash were males. The surveyed people pointed out that through Public Distribution System, the food grains were available and were being equally distributed but with direct cash transfers, there will be no such equity. There will be cash in their hands but there won't be any food grains available for them to buy.

In the debate of direct cash transfer the important role that the PDS plays in maintaining the price stability and ensuring the food security of the country is being overlooked.

India is mainly a rural and agricultural based economy where the usefulness of the direct cash transfers may be questioned on many accounts. Through PDS a sort of protection was provided to the food producers through a minimum support program and the effect of price fluctuations (if any) was offset leaving the farmer unaffected.

Cash transfer schemes may have proven some success in some of the modern and advanced economies but in a country like India where about 70% of population lives in rural areas and which houses about 21% of the world's poor, the usefulness of the act has many question marks. 

It is argued, by the supporters of the direct cash transfer schemes that there are leakages in the system and the huge amount spent on the subsidies (being a huge fiscal burden) does not reach or percolate to the bottom. The administrative cost of the delivery system is very high and also there are substantial leakages due to corruption and black marketing, which adds to the burden that subsidies are on the economy of the country.  

However, with cash coming in the hands, the individual/household consumption preferences and patterns are bound to change. The consumption pattern of the households may shift from the basic necessities to more of luxury items and frivolous pass times, keeping in mind low literacy levels in the rural areas and widespread prevalence of ills like those of alcoholism and gambling.

Till now public has been getting these services directly from the government, which to some extent limits the chances of corruption.

As soon as a direct cash transfer to the accounts of the consumer replaces these, the instances of corruption and fraud will increase rather than decrease as is claimed by the proponents of the scheme. The path to be followed to check the corruption is to make government and the executive accountable rather than to divest its functions and let the people be at the mercy of free markets.

Though there may be great success stories of DCT schemes in many of the countries across the world but there is a great difference in the demographics and the social security infrastructure prevailing in those countries and in the developing countries like India.

In a nation like ours, we should be more concerned about food security, equitable distribution of nation's wealth, social security, health infrastructure rather than colouring ourselves with a paint to be washed off with the lashes of rains of adversity.

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