The agenda of governance for the new government was clearly laid out by the President’s speech on 4 June. Among the many priorities of the new government is the strengthening of institutional mechanisms for effective public service delivery.
One need not be reminded of Rajiv Gandhi’s adage of only 15 paise out of every rupee reaching the poor to understand the extent of leakage in our public service delivery system. That number may have changed but there is no dispute that only a fraction of subsidies actually reach intended beneficiaries.
This state of affairs has encouraged some policymakers to argue for a direct cash transfer (DCT) scheme, which aims at reaching the subsidies to the poor without any leakage. There cannot be an argument against this. Unfortunately, the promise is based on too many assumptions and an unrealistic understanding of ground realities. These assumptions need careful scrutiny before any argument can be made for or against DCT.
A prerequisite of any targeted anti-poverty programme is the right identification of the beneficiary. Even a DCT scheme needs to identify who the poor are. Unfortunately, the previous three experiments of identifying the poor (1992, 1997, 2002) have turned out to be disasters, with large errors of inclusion and exclusion. There are many problems from the design of the survey to the actual implementation. Hopefully, the new committee established to revise the method to identify the poor would be able to come up with something better.
And, even if DCT does improve the reach of subsidies to the poor, it is neutral to their nature. On the other hand, if the committee does not come with anything better, then even with DCT, there is no guarantee that the subsidies will reach actual beneficiaries.
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But let’s assume the committee comes up with the right formula and it is implemented honestly. The assumption then is that the money will reach the poor so identified without any delay and cuts. True, but only if the network of financial services is already there and these are not corrupt. The reality is far from that.
A large part of our rural areas are not connected to financial services. And even when they are connected, our banks and post offices are not immune to corruption.
The rural employment guarantee experiment of delivering wages directly to bank and post office accounts is one such example. Not only is it costlier to access wages, it has also added a layer of middlemen—postmen and bank clerks—in the circuit.
Let’s assume that even that can be overcome and our financial institutions are made honest. So our poor man gets the DCT from the government of India. One objective achieved and there have not been any leakages, thanks to these assumptions.
Now that he (it is unlikely that the women will ever get to spend the money) has got the money, will he go and buy nutrition and food for his wife and children, will he send his children to school, will he immunize his children? Not likely in many poor households. He may not spend all of it drinking but it is less likely that all of the money will be spent on the listed priorities.
But let’s assume he is a self-righteous man aware of his responsibilities and priorities. Can he send his children to school in the absence of a functioning school system or provide for immunization, necessary medical care and institutional delivery without a functioning healthcare system? In many parts of rural India where primary health centres don’t exist or schools exist only in name, this may be too much to ask.
Nonetheless, even in the absence of basic facilities, one can ensure this by using a conditional cash transfer (CCT). But is it too difficult to show that your child is enrolled even though he may not be going to school? A large number of villagers does so even in the absence of any incentive of cash transfer. Of course, you may need to bribe your schoolteacher.
But what happens when even these basic minimum facilities are not there? You lose out not only on these basic services, but also the cash transfer since it is unlikely that you will be able to meet these conditionalities in the absence of these facilities. So our poor tribal villages, which do not have schools or health centres, will neither get these nor will they ever get cash transfers.
But let’s assume that even these are already in place and functioning. However, if these systems are in place and geared to a pro-poor attitude, is there a need for cash transfers? If the education system and the health system work on their own and are geared to take care of the needs of poor households, is there a need for conditional cash transfer?
Poor people have aspirations and they also want to send children to school and access the best of medical services, provided these are accessible. Haven’t Kerala, Himachal Pradesh, Goa and Tamil Nadu achieved universal education without these monetary incentives just by making sure that the systems run? The idea of DCT or CCT is not new. This is in place in most Latin American countries. The track record is at best mixed. The most well-known example of this is the Bolsa Familia in Brazil. Evaluation studies have not shown any substantial improvement in educational achievement of beneficiary students compared with non-beneficiary students. Nor is there any evidence of it having any impact on child health or immunization.
But what about our own Janani Surakhsa Yojana (a Centrally sponsored scheme aimed at reducing maternal and infant mortality rates)? There is no evidence so far that institutional delivery has improved because of the Rs500 incentive. On the other hand, institutional deliveries improve drastically if there is no incentive but a functioning health centre, as in Tamil Nadu.
Perhaps it is the right time to look at the issue of public service delivery and targeting of anti-poverty programmes. Those arguing for DCT or CCT need to realize that the problem is not of these versus other subsidies. The problem is the right institutional and governance reform for delivering any subsidy to the poor, be it cash or food.
It is also a challenge that has to be met before one can think of the right to food of being of any consequence. And since it is only applicable to the poor, the first requirement is to define and identify who the poor are. But more than that, it is also worth investing in improving our basic institutions and governance. Only then can one ensure that even the minimum of these subsidies reach the poor.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi. Farm Truths looks at issues in agriculture and runs on alternate Wednesdays. Respond to this column at firstname.lastname@example.org