Ramesh says electronic cash transfer no magic bullet

Direct cash transfers only a way of replacing inefficient subsidies, not reducing poverty
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First Published: Fri, Nov 16 2012. 12 59 PM IST
Rural development minister Jairam Ramesh said the delivery of public services can be put in the non-public domain and the state should concentrate on building capacities for economic growth. Photo: Pradeep Gaur/Mint
Rural development minister Jairam Ramesh said the delivery of public services can be put in the non-public domain and the state should concentrate on building capacities for economic growth. Photo: Pradeep Gaur/Mint
Updated: Fri, Nov 16 2012. 11 33 PM IST
New Delhi: Direct cash transfers to beneficiaries of welfare programmes aren’t a magic bullet to reduce poverty, but only a way of replacing inefficient subsidies, rural development minister Jairam Ramesh said on Friday, as the United Progressive Alliance (UPA) government prepares to hand out electronic cash transfers starting in January.
Ramesh, who was addressing the Hindustan Times leadership summit, said the delivery of public services can be put in the non-public domain and the state should concentrate on building capacities for economic growth.
Abhijit Banerjee, a professor of economics at Massachusetts Institute of Technology, who was participating in a discussion along with Ramesh, said by giving out cash instead of subsidies and leaving it to the people to figure out may be an unrealistic view of how a community functions as the poor may not be capable to taking the best decision on the resources when handed out cash. Banerjee also advocated abolition of certain subsidies.
Pointing out that dimensions of poverty have changed, Ramesh said the state has a significant role in poverty alleviation—to build capability for market expansion and economic growth with focus on education and health.
“While the states can provide the resources, the delivery can be in non-public domain as it is highly inefficient,” he said. The second role of the state is to enable connectivity such as mobile and urban-rural, while the third role is to be responsible in creating electoral institutions of participation, he added.
The minister also said it is difficult to end the welfare programmes, but certain sub-critical subsidy schemes can be closed down.
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First Published: Fri, Nov 16 2012. 12 59 PM IST
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