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Why Not Just Transfer Cash To The Poor?

Rahul Gandhi's father had said that out of every rupee of government money spent in the name of poor and on development, only 15 paise reaches the intended target. Rahul Gandhi himself brought the figure down to 10 paise during his election campaigns. Leaving aside the developmental work, the same leakages are present in various anti-poverty programmes. Economists have often argued that instead of schemes that make leakages possible, direct cash transfers might actually be the best way to tackle poverty. Writing in the Indian Express, Bibek Debroy revisits the theme:

Studies by assorted economists show that if subsidies are replaced by direct cash transfers, there shouldn’t be any BPL (below poverty line) households left, an argument that becomes stronger if all anti-poverty expenditure is included, not just subsidies. The transfers are revenue neutral. They are also efficient because they don’t distort market prices. Technology now permits direct electronic transfers to bank accounts and all NREGA beneficiaries now have accounts with post offices or banks. This reduces administrative costs of delivery too, other than making subsidies transparent, more amendable to third-party and public scrutiny.

He goes on to list and counter the strange arguments that are trotted out in response whenever cash-transfers are mentioned and makes a strong case for identifying the non-poor if UPA II is serious about helping the poor:

The problem is elsewhere. Accepting cash transfers is equivalent to recognising the non-poor won’t receive subsidies. It requires pinning down the “aam aadmi”....

...With 300 crorepatis in the Lok Sabha, how about giving them MNICs [multi-purpose national identity cards] and accepting they are non-poor? If we are serious, we begin somewhere. And if we aren’t, we muddle along, with all the fiscal consequences

Read the full article: Who's The Aam Aadmi?

Rahul Gandhi's father had said that out of every rupee of government money spent in the name of poor and on development, only 15 paise reaches the intended target. Rahul Gandhi himself brought the figure down to 10 paise during his election campaigns. Leaving aside the developmental work, the same leakages are present in various anti-poverty programmes. Economists have often argued that instead of schemes that make leakages possible, direct cash transfers might actually be the best way to tackle poverty. Writing in the Indian Express, Bibek Debroy revisits the theme:

Studies by assorted economists show that if subsidies are replaced by direct cash transfers, there shouldn’t be any BPL (below poverty line) households left, an argument that becomes stronger if all anti-poverty expenditure is included, not just subsidies. The transfers are revenue neutral. They are also efficient because they don’t distort market prices. Technology now permits direct electronic transfers to bank accounts and all NREGA beneficiaries now have accounts with post offices or banks. This reduces administrative costs of delivery too, other than making subsidies transparent, more amendable to third-party and public scrutiny.

He goes on to list and counter the strange arguments that are trotted out in response whenever cash-transfers are mentioned and makes a strong case for identifying the non-poor if UPA II is serious about helping the poor:

The problem is elsewhere. Accepting cash transfers is equivalent to recognising the non-poor won’t receive subsidies. It requires pinning down the “aam aadmi”....

...With 300 crorepatis in the Lok Sabha, how about giving them MNICs [multi-purpose national identity cards] and accepting they are non-poor? If we are serious, we begin somewhere. And if we aren’t, we muddle along, with all the fiscal consequences

Read the full article: Who's The Aam Aadmi?

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