Direct cash transfer of benefits to individuals, bypassing multiple layers of bureaucracy, is a known remedy to prevent leakages and corruption. On Friday, the Prime Minister set the ball rolling for this much-needed reform. An architecture for cash transfers—with an apex committee headed by the PM—will coordinate the process at the highest level. Intermediate level committees will look at different aspects of the process.
If implemented properly, the new mechanism will make a large layer of officials redundant. At the moment, only “due” benefits, such as pensions and wages under the rural jobs programme, among others, will be transferred. The real test will come when harder-to-measure and targeted benefits such as subsidies become part of the system. For that to happen, large-scale financial inclusion—by using devices such as no-frills bank accounts—will be a prerequisite.