India spends close to two percent
of its GDP as subsidies for the poor. Subsidies are seen as a means to provide
basic livelihood security to the poor. Subsidies in form of both cash and kind
are provided under various schemes of government. A common criticism against
these schemes is that it is riddled with inefficiencies and leakages. As a
result a large chunk of subsidies are not reaching the intended beneficiaries.
Government is considering the idea of direct cash transfer as a means to
correct the inefficiencies in existing system.
Direct
cash transfer aims at delivering subsidies directly to beneficiary in form of
cash. Two major pillars of this scheme are Unique identity under UID and
financial inclusion. While UID helps authenticate identity of the beneficiary
,financial inclusion would ensure that regular subsidy payments are made into
beneficiaries bank account,there by acting as a source of insurance. This idea
is largely based on the succesfull cash transfer schemes in Latin America.
There are several inherent advantages in cash transfer schemes vis-à-vis in-kind
subsidies. It is more transparent and simple, provides wider choice to
beneficiary and provides income security to the poor. In this context there
have been demands to replace the leaky public distribution system(PDS) with
direct cash transfer
PDS
has been the mainstay of governments efforts to ensure food security of those
living below the poverty line. Today fair price shops are spread across the
length and breadth of the country. Despite large leakages, many still consider
it a necessity. With such a vast reach,
it would be better to improve efficiency of existing system rather than
replacing it with a new system without adequate infrastructure. The best way
forward is to make use of UID in authenticating beneficiaries availing PDS. This
would help eliminate ghost beneficiaries thereby cutting down leakages.
Automation of processes will aid in real time monitoring of sale of grains.
The
direct cash transfer scheme in current scenario is useful in consolidating
existing cash transfer schemes like pension and scholarship. While expanding
the scope of DCT, government should consider the ground level infrastructure
like bank branches, authentication tools etc. Mere transplantation of cash
transfer model that was successful in a predominantly urban Latin America to Indian
society would have deleterious impact. A
lot of grass root level changes need to be brought in before widening the scope
of cash transfers to include essential goods like food grains.
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