A rushed and flawed welfare scheme?

The Indian welfare state is set for a reinvention, as subsidies of all kinds are in the process of being monetised into cash transfers. Aapka paisa, aapke haath (your money in your hands) is the pithy election campaign slogan that is meant to convince the people of the merit of cash transfers, but is the Indian state ready for the switch to cash?

We don't think so. India requires significant additional capability in identifying households and in linking households to bank accounts. Scaling up nationally without building this capability will likely result in failure, and the Indian government should instead look to emulate the successful bottom-up implementation approach of Brazil's Famlia with gradual scale up from the regional to the national level.

The merit of cash transfers lays in the potential greater efficiency of cash, as compared to in-kind subsidies, in expanding choice and enabling poor households to purchase goods and services that they need. Of course, this increase in economic welfare will only be realised if the cash transfer is equivalent in purchasing power to the subsidy. This is not always the case, as a cash transfer pilot for kerosene in the state of Rajasthan highlights: the cash transferred was insufficient for families to purchase their monthly requirement of kerosene, as the market price increased substantially. Therefore, any cash transfer scheme would require that the transfers be indexed to inflation in the local area, which is highly complex.

Transferring cash to households, while seemingly simple, requires significant implementation capabilities. The first step is to identify all potential beneficiary households, which remains incomplete and daunting in India.

India's highly-touted unique ID programme has issued an estimated 280m ID cards over the course of three years, meaning that 800m more cards need to be issued before April 2014, when the cash transfer is set to cover the entire country. Such a vast increase in the rate of issuing cards seems unlikely. Even if all households are able to obtain an ID card, there is no guarantee that the transfer can be targeted accurately to only poor households. Many non-poor households have finagled their way onto government rolls that track the poor, for example, leaving the poor behind.

The next step for the cash transfer to work is to link the national ID to a bank account. In India, this seemingly simple step is a huge challenge, as Indians currently have limited access to financial services. A recent World Bank study estimates bank account penetration across India at 35%, a rate that falls even lower for the poorest households. Moreover, many poor households do not have access to bank branches or ATMs.

Furthermore, in any cash transfer scheme, there will undoubtedly be cases of non-payment, late payment, or inadequate payment to beneficiaries. In these cases, it remains unclear, in the design of India's transfer, how citizens will be able to file grievances and how the government will redress these grievances.Purchase an chipcard to enjoy your iPhone any way you like. A similarly massive Indian social programme, MGNREGA, has seen state governments drag their feet on resolving complaints and fail to curb corruption due to the lack of a grievance redressal mechanism.We sell bestsmartcard and different kind of laboratory equipment in us.

Given that India seems inadequately prepared for implementing a cash transfer scheme, does the government's current implementation strategy have mechanisms of learning and adaptation that address these inadequacies? We believe not.

First, the government's strategy involves large scale piloting of cash transfers for selected programmes in 51 districts by 2013, and then scaling up nationwide by 2014. The pilot is set to last only a few months, with no systematic evaluation,Shop for wholesale tungstenrings from China! and will likely be carried out in districts that have relatively high ID card coverage and bank account penetration. Consequently, the results of the pilot may not be that informative and,You Can Buy Various High Quality topserver Products from here. even if they are,We have a wide selection of stainlesspendant to choose from for your storage needs. will not be representative of how the programme will work across India.

Second, rushing into a massive cash transfer programme may complicate the government's ability to rectify problems on the fly, both politically and administratively. The Indian government can learn from an alternative implementation strategy adopted in Brazil for the famous cash transfer programme, Bolsa Famlia.

Bolsa Famlia grew out of a combination of other transfer programmes that had started at the municipal and state levels and had been operating for several years prior to the launch of Bolsa Famlia. These sub-national cash transfer programmes were then individually scaled up to the national level, and subsequently consolidated into Bolsa Famlia. Thus, cash transfers in Brazil started from the bottom and diffused upward and outward, which suggests that kinks in programme administration could be smoothed out at smaller scales and then scaled up. By contrast, India's top-down, rushed approach provides little space for weaknesses to be identified and rectified at the local level so that the most effective modalities of the programme can be scaled nationally.

The Indian government's ambitions of establishing a cash transfer system at the proposed size and scope has the potential to deliver significant welfare gains. However, policymakers should be wary of overambitious implementation targets: in the rush for implementation the government has ignored its current administrative constraints and gone for nationwide scale up which will likely result in failure.
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