Going by the hiccups in implementing the Central government’s direct cash transfers programme in 20 districts in nine states on January 1, 2013, it may seem to be an idea whose time has not yet come: India is simply not ready. The plan was to link the direct cash transfer system to the unique identification cards that beneficiaries would have to register for and get, which would also help them open bank accounts into which the transfers could be paid. As a pilot, the government planned to use education subsidies for making direct cash transfers.
Problems that were anticipated persist; some beneficiaries have Aadhar cards, but no bank accounts, others have bank accounts but no cards, and yet others are supposed to be beneficiaries but have neither. Different states have the same problems in varying degrees. Further, it is not just the first 20 districts. A total of 43 districts (the nation has 629) in 16 states were targeted for the rollout of this Aadhar linked, three-phase pilot programme; 11 districts were in the second phase starting from February 1, and another 12 in the third from March 12. The launch of the direct benefits transfer programme in five districts in Andhra Pradesh in the first phase of the pilot was postponed to April 1, 2013. Analysts, observers and critics of the idea of rolling out the DBT so quickly had identified the issue areas, but the government believed it was ready. It was wrong.
Direct cash transfers have worked in other countries, and with great success; almost all countries in Latin America, the Philippines and Indonesia have used it to reduce poverty. Brazil’s Bolsa Familia, a federal financial assistance programme targeting families with children that they can send to school, is one of the most famous. Some studies estimate that it reduced poverty in Brazil by well over 25 per cent; another nationwide programme of this kind is Mexico’s Oportunidades. One reason to push cash transfers is to prevent leakage in existing education subsidy schemes; another is to reduce bribery and corruption in their implementation. The finance minister, P. Chidambaram, said pilot studies indicated savings of between 20 and 70 per cent of the money allocated to these programmes. Studies of pension programmes in which cash transfers were used have given government officials some sense of the challenges involved. In one sense, the government has shown sense: it has left fuel, food and fertilizer subsidies out of the DBT programme. Those subsidies account for more than Rs 160,000 crore of the government’s total subsidy bill. But the political imperative of the moment — to push through a difficult programme for greater legitimacy in the reform process — seems to be a big driver. The government should listen to its own advice and make haste slowly.