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A magic bullet to reduce poverty?

Monday, 3 December 2012 - 8:30am IST | Agency: dna

The recent attempt to introduce cash transfer scheme, replacing the infamous public distribution system (PDS), has raised serious doubts whether this will really work and help the poor to come out of the poverty trap.

The recent attempt to introduce cash transfer scheme, replacing the infamous public distribution system (PDS), has raised serious doubts whether this will really work and help the poor to come out of the poverty trap. With the existing intra household relations, especially gender relations in a typical poor households in the villages, the local market situation due to present inflationary sign and when the government is finding it difficult to position itself in terms of affordability and financial sustainability of other existing schemes, the fate of another scheme like this looks remote.

Nobody will disagree with the fact that the PDS system is not able to deliver as per the desired expectation; however, there are ways and means to correct this system rather than outrightly throwing it to dustbins. The poor could get at least some benefit, getting the most required daily food items for their survival in a subsidized rate from their nearest locations through this PDS. In the present inflationary state of market condition, where it is even becoming tough for a middle class family to get the minimum food items for all its family members, it would be extremely difficult for the government to transfer a matching amount to a poor person’s account, assessing the market condition and help the family to manage the ration for daily survival.

Take the example of the implementation of the NREGA in the country, where, there are a number of instances coming up on a regular basis, regarding delay in payments, even if beneficiaries have bank account/post office savings account in their nearest locations. So with this kind of instances in hand, the government should introspect whether there is an existing fool-proof mechanism to ensure that money flow to the account of the poor will not be disturbed at any given circumstances. Many development agencies in the country, that have already piloted this cash transfer mechanism in introducing bank account for poor households and transferring amount to their account, have miserably failed to achieve the adequate results in many of their project locations.

The government’s approach of looking at this cash transfer scheme as a less-corrupt poverty alleviation tool is also found to have few takers. This is because, many believe that there is more chance of corruption in this type of approach as the number of facilitators in this type of operation will increase and the real beneficiary will not get the real amount meant for him. Until and unless the government makes any serious effort to have control over the spending choices of the targeted beneficiaries, take necessary steps to help family in deciding on the person who will spend this money, and above all, without putting some form of conditionality and attaching this to incentives, this kind of scheme may not be able to shift a single person to the above poverty line category.

There are also questions in the policy circle, whether this kind of approach can really be called another poverty alleviation programme. Looking at the acute poverty level existing in the most backward regions in the country, where there are neither banks nor any other government facilities, it is very difficult to be convinced that poor people will make use of other government facility, including judiciously using this “transferred peanut amount”, for food items as well. While transacting the money through banks, the poor people will finally end up depending upon the village touts and gain nothing in terms of actual benefits. When there are many areas, in which government intervention is required and people are struggling hard to manage two square meals in a day, how can the government think that the direct cash transfer can help these poor people to have access to other available facilities.

There is also another concern on the bank perspective to roll out this system in the most remote areas. It is found that, supporting the government on cash transfer through opening branches in each nook and cranny of the country may not be cost effective for many banks. With this picture in hand, the government should think more in terms of reaching out to its extreme poor people in the most difficult areas by way of activating its own mechanism as a priority (which is almost dead now) and engaging the communities with a plan to revisit the present PDS system and introducing revolutionary changes in the existing allegedly most corrupt Food Corporation of India (FCI) to get permanent relief from this problem in the country.

The writer works with an International Development Agency and is based in Bangalore

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