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Move towards cash transfers: World Bank

Move towards cash transfers: World Bank

New Delhi: The World Bank has urged India to reform its public distribution system (PDS) by moving towards a cash transfer mechanism, and consolidate various welfare programmes for the poor to make them more effective.

The challenge for the country was to avoid the slowing of economic growth on account of welfare programmes that do not effectively address the needs of the poor, the World Bank said in a report titled ‘Social protection for a changing India’, which was commissioned by the Planning Commission. The report was released on Wednesday.

The government’s Economic Survey 2010-11 also supports a mechanism to transfer cash directly to poor households rather than the option of giving them food coupons with lumpsum entitlements that can be exchanged at a PDS store, as is the case now.

The report suggests various approaches to reform the PDS, such as an incremental approach towards improving its efficiency, an intermediate reform option that would retain a food-based entitlement programme while introducing private sector participation in grain procurement, and a fundamental reform that offers households the choice of grain or the cash equivalent of the grain subsidy.

“The overall position of this report is that fundamental reform options for PDS should be considered and that offering households the option of a cash transfer while retaining the core food security and buffer stock functions of the Food Corporation of India, and ensuring PDS grains in areas where access is a genuine issue-is an attractive option," it said.

Cash transfers could be the most effective public programme, said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy.

“It can reduce leakages and improve efficiency of public policy. It could be used not only as a social security measure for micro management but also to avoid macro risks in the times of economic crisis," Bhanumurthy said.

The World Bank report also advocated what it calls a “3+Block" strategy, which looks at consolidating India’s various social welfare programmes to make them more efficient.

The strategy involves three core centrally sponsored schemes—such as a social assistance programme, a public works programme and a basic social security programme—combined with a social protection block grant scheme through which states can finance and supplement programmes tailored for local needs.

While the social assistance programme will merge a “significantly reformed PDS" with existing social pension programmes, the public works programme will include the existing Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and similar pilot projects for urban areas. MGNREGS promises 100 days of annual work to at least one member of every poor household living in rural areas.

A basic social security package for workers in the unorganized sector will provide life, disability, old age pension and health insurance on the lines of the existing Rashtriya Swasthya Bima Yojana, said the report.


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