I'm definitely late for commenting on the ambitious Direct Cash Transfer scheme that the UPA is eyeing to implement from January 2013 and that was called a 'Game Changer' by Mr. P. Chidambram, our Finance Minister a few days ago . A lot has already been said in following days. Even the election commission has taken a note of it and asked the govt. why it announced such a populist plan when model code of conduct for Gujarat elections is in place. So, it is certified that the scheme is populist as endorsed by EC, opposition and definitely Congress. It has the capacity to be popular means it will influence life of millions that too in a positive way. Congress is hoping to achieve from this scheme what it achieved form MNREGA in last general election; a reign on anti incumbency and return of power. Honestly speaking, it has the power to do so given that the govt. is able to achieve exceptional administrative efficiency to implement it in enough no. of districts by the time of general elections in 2014 so that it has a shining report card to show. There is nothing wrong with the govt. going the populist way as every ruling party uses the welfare state as a tool to present itself as a welfare oriented party. So, the scheme is a definite game changer as far as electoral landscape for 2014 elections is concerned. Now, the question that remains is if it is a 'Game Changer' for the welfare landscape in India.
Direct Cash Transfer aims at depositing direct cash in beneficiary's Aadhar linked bank account for welfare programs. Initially it will be implemented as a pilot project in 51 districts from January 2013 and around 29 welfare programs will be part of it. DCT aims at eliminating duplication of efforts, fake beneficiaries, commissions that the middle men in the distribution process eat up and a lot of administrative complexities. While elimination of administrative complexities and fake beneficiaries will save money for the govt., elimination of middle men in welfare amounts distribution will reduce corruption and increase the amount that reaches the beneficiaries.
However, a lot needs to be done before DCT can be implemented for all welfare schemes. Even the govt. has accepted that linking food subsidy to DCT will be complex. The biggest problem is identification of beneficiary. In India it is a proven fact that many poor are not part of BPL list and many not so poor influentials are part of the list. If all schemes are delivered in form of DCT the left outs will be completely out of the welfare net. Presently a no. of schemes like education, health care, subsidized electricity, water etc. being universal, they at least have some access to the welfare net.
Then the question arises, it is OK to give direct cash to poor but are we ready to eliminate subsidies completely from education, electricity, water which are merit goods and presently being provided by public sector at rates much lower than cost price. Instead of gradual increase in rates and their alignment to market if subsidies are eliminated at once it will create a definite social unrest. So, these goods also fall out of DCT scheme at present.
Misdirection of the cash by one family member in activities like gambling and liquor is also an issue that needs to be thought. That is why not all welfare services can be replaced by Cash. Instead of having public schools giving money to parents to send children in private schools is not a solution. Public schools are needed, universities are needed and we need to keep them running.
Thus, while DCT is good for all those schemes in which already cash is being paid out as instead of going through a distribution channel of govt. agents it will directly go to beneficiary's account. It can definitely not be one solution fits all and state has to keep on delivering public goods in other forms too. DCT is one way however additional measures need to be chalked out to ensure public goods are delivered efficiently at low cost. Before making DCT the flagship of its welfare schemes and starting to eliminate other welfare schemes govt. must make sure it has a plan in place for targeting beneficiaries and a phase wise approach of linking prices of subsidized goods to the market determined rate.
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