Lockdown: Cash transfers on the rise but experts say rural areas need more help

NEW DELHI: The Indian government is trying to pull out all the stops to expedite cash transfers into the rural economy by leveraging the direct benefit transfer (DBT) model amid the nationwide lockdown which has hit the rural poor and the migrant workforce the hardest.

Given the the exodus of millions of labourers from cities to villages, the situation in India’s hinterlands warrants all possible help as farm gate prices have collapsed amid a cash crunch.

Things will only get worse as it is time for the harvest of winter-sown crops and mandis must be readied for the sale of produce - all posing various difficulties given the logistics required and the lockdwon in place.

For its poor, and most vulnerable, India last month rolled out a ₹1.7 trillion relief package under a newly framed Prime Minister Garib Kalyan Yojana, amounting to about 1% of its gross domestic product.

The package had announced a series of cash transfers, including the first instalment of ₹2,000 into accounts of 86.9 million farmers in April under the PM Kisan scheme, increasing wages under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to ₹202 per day from ₹182, and a one-time transfer of ₹500 per month for the next three months to Jan Dhan accounts of 200 million women.

“We have got ₹500 in our bank accounts. The banks in our areas are open. There are a lot of people queuing up to withdraw money,” said Sanjay Choudhary, a resident of Kala Balua village in Bihar’s Purnia district.

It is here that the role of banks and its correspondents is crucial to enable access of funds to the poor. These banking mitras play a key role towards financial inclusion and are mediators between banks and customers, especially in the rural areas, where banking services are limited.

“We have ensured that social distancing is maintained when cash is withdrawn. People in urban areas have primarily used ATMs or have visited bank branches to withdraw the cash transferred by the government,” said an executive at a public sector bank, requesting anonymity.

“In the rural areas, banking correspondents have played a crucial role in the rural areas and disbursal of funds have been smooth,” the executive added.

However, experts believe that the help offered by the union government is too little and comes too late.

“In troubled times like these support of ₹1000 for three months to a woman under the PMJDY (Pradhan Mantri Jan Dhan Yojana) which means ₹500 for one and a half months for an average family of five is nothing,” said Himanshu, associate professor at Jawaharlal Nehru University.

The outbreak comes at a time when India has seen its economic growth losing steam over the last few years, declining from 8.3% in FY17 to 7% and to 6.1% in the subsequent two years.

“I don’t think everyone among the urban poor or the rural poor have bank accounts. And I have my suspicions about how many of the Jan Dhan Accounts are bona fide accounts. So the money may have been transferred but how much of its has reached the poor is a question mark. When I ask people, they say they have not received anything, Some say, they are not aware of any programmes by the government,” said N.C. Saxena, former rural development secretary.

To make matters worse, the unemployment rate in rural India surged from 8.29% for the week ended 22 March to 20.29% on 29 March and 20.21% on 5 April, data by the Centre for Monitoring Indian Economy (CMIE) showed.

“Then additionally I think there is the problem of accessing these accounts especially in rural areas. With social distancing norms in place, are banks in rural areas open? Are they manned properly? What is the guarantee the bank employee will be there when someone approaches them? Would the local police allow them to travel 8-10 kilometres in places like Bihar and Jharkhand and get to the banks?” Saxena added.

Experts also say that the relief announced may be inadequate, given the largest migration, unseen since days immediately after India's independence, is set to stretch to the limit the the country's underfunded and inadequate rural healthcare infrastructure.

“Then there is the problem of people migrating from cities to villages. We don’t know if they will have access to banking. In rural areas, the administration is much more strict, they may not have access to transport to travel to places where there is a bank branch. Due to social distancing demands, we don’t know if banking correspondents are reaching villages,” Himanshu cautioned.

More than 90% of the country’s workforce is estimated to be from the informal sector. The Economic Survey of 2017-2018 had said 87% of the firms in the country, representing 21% of the total turnover, are operating informally and completely outside the tax and social security nets.

The International Labour Organisation has said India, with a high proportion of informal workforce, needs to be on guard as it faces a higher risk of millions of workers falling deeper into poverty.

With the rural economy taking a beating along with the migration of daily wage labourers returning to their villages, state governments are demanding a special package to revive the rural economy. States have also pitched for leveraging MGNREGA by increasing the pay and number of work days under the marquee rural employment scheme.