CHALLENGES AND CONSTRAINTS
- 1. Over-Reliance On Aadhaar Number And Bank Account-According to UIDAI, it is not mandatory for individuals to get an Aadhaar number. However, it does not prevent any service provider from prescribing Aadhaar as a mandatory requirement for availing services. Therefore, beneficiaries may be denied a service if he does not have the Aadhaar number. The new direct cash transfer policy requires beneficiaries to have an Aadhaar number and a bank account. However, many beneficiaries do not yet have either.
2. Problem Of Ghost Beeneficiaries– According to the government, one of the key reasons for changing to DCT system is to ensure better targeting of subsidies. However, the success of Aadhaar in weeding out ghost beneficiaries depends on mandatory enrollment. If enrollment is not mandatory, both authentication systems (identity card based and Aadhaar based) must coexist. In such a scenario, ghost beneficiaries and people with multiple cards will choose to opt out of the Aadhaar system. Furthermore, key schemes such as PDS suffer from large inclusion and exclusion errors. However, Aadhaar cannot address errors in targeting of BPL families. It cannot address problems of MNREGS like incorrect measurement of work and payment
3. Safeguard For Maintaining Privacy– Information collected when issuing Aadhaar may be misused if safeguards to maintain privacy are inadequate. Though the Supreme Court has included privacy as part of the Right to Life, India does not have a specific law governing issues related to privacy. Also, the authority is required to maintain details of every request for authentication and the response provided. Authentication data provides insights into usage patterns of an Aadhaar number holder. Data that has been recorded over a long duration of time may be misused for activities such as profiling an individuals behaviour.
4. No Clarity Reagrding Bank Operation-The decision to operate a bank account is with the banker and we do not seem to have understood what this entire line of transaction does to the operations and bottom lines of banks. The banks are listed, their performance tracked by the markets and the rewards are based upon basic profitability parameters as per the statement of intent that the bankers sign with the government.
5.The Role Of Multiple Agencies- Except the channel through which the money moves, there is no change in the basic architecture. Classifying a family as poor, allotting NREGA work, maintaining musters, identifying beneficiaries for scholarships, pensions, etc, will be done under the extant decision architecture.
6. Last Mile, Statistics And Multiple Scaffolding- Finally, the cash transfers go to the bank. The last mile between the bank and the customer is designed to work through a business correspondent (BC). This is the weakest and the most muddled link. It does not seem to be moving in a solid direction. Fixing petty corruption using Aadhaar needs much more structural scaffolding.
CASH TRANSFER SCHEME:THE BENEFITS IT BRINGS ALONG
Identification through Aadhaar number: Currently, the recipient has to establish his identity and eligibility many times by producing multiple documents for verification. The verification of such documents is done by multiple authorities. An Aadhaar enabled bank account can be used by the beneficiary to receive multiple welfare payments as opposed to the one scheme, one bank approach, followed by a number of state governments.
Elimination of middlemen: The scheme reduces chances of rent-seeking by middlemen who siphon off part of the subsidy. In the new system, the cash shall be transferred directly to individual bank accounts and the beneficiaries shall be identified through Aadhaar.
Reduction in duplicate and ghost beneficiaries: The Aadhaar number is likely to help eliminate duplicate cards and cards for non-existent persons or ghost beneficiaries in schemes such as the PDS and MNREGS.
Enhance Efficiency of Welfare Schemes- The cash transfer scheme will help resources reach families at the right time. Effectively helping the human capital of the nation to progress.
The other Advantages include
Increases choices of poor- Empower poor and freedom to spend the benefits of the according to their choice
Entitlement to regular cash payment increase creditworthiness allowing them increased access to credit facilities. This could facilitate the culture of thrift which is the cornerstone of self help movement
Beneficiaries can also gain by using the cash taransfer in productive activites like farming which will benefit the local econmy
Fundamental shiftf rom current system of patronage where the government exercised complete control and imposed its choices with scant regard to quality and availability
The direct Cash transfer will have the positive multiplier effect on local economy will put a Philip to domestic growth
High transactional cost of intervention of beneficiaries could be taken care by Direct Cash Transfer.
IS DIRECT CASH TRANSFER SCHEME AN ELECTION GIMMICK?
The common opinion is that the Congress wants to cash in on cash transfers. As the UPA government has been under attack on the issue of corruption, the Congress feels that the scheme that seeks to take the benefits of various welfare programmes directly in the hands of their beneficiaries will help it counter the Opposition charge.
Though the announcement date was in September, the UPA waited for two months to unveil details of the scheme. The poll season could have been the cause of the implementation. The BJP had written to the Election Commission saying the government should withdraw the announcement of the plan until the polls were over in Gujarat and Himachal Pradesh in response to which the government said that the Finance Minister in his budget speech made the first announcement about the scheme on March 16, 2012. It added that the first press release from Prime Ministers Office came on September 28 while the election dates were announced on October 3.
On other grounds too, the direct cash transfer scheme is not bereft from political criticism. BSP chief Mayawati lashed out at the Congress-led United Progressive Alliance (UPA) government’s direct cash transfer scheme, describing it as a ploy to hoodwink voters in the 2014 Lok Sabha polls. Calling it an old book with a new cover, she pointed that scholarships for the scheduled castes and the scheduled tribes in the state initiated under her chief ministership was already in place where financial aid was transferred straight to the bank accounts of the beneficiaries. She called direct cash transfer scheme a sham to fool the voters.
Strongly criticizing the UPAs Direct Cash Transfer scheme, the Communist Party of India (Marxist) said that the basic philosophy behind the initiative is to dismantle the governments obligations in the social sector. They opinionated that direct cash transfer scheme is a bribe to voters under the slogan. Mr. Arvind Kejriwal also said that the timing is questionable.
WORLD BANK REPORT: DOES THE IMPLEMENTATION OF DIRECT CASH TRANSFER SCHEMES HAVE AN EFFECT ON THE VOTING PATTERN OF THE CONCERNED CONSTITUENCIES?
According to Studies undertaken by the Princeton University, following the massive success of the Bolsa Familia Programme, the beneficiaries of the programme vote to the party implementing the programme. Also, the Non- Beneficiaries in poorer places voted for the government, which put the plan in place. In contrast, the opposing government did decently in poor places, but not with the poor people and definitely not with the poor people in the richer areas. The conclusion is that with current technology, every plan of the government has a domino and a ripple effect. A good policy is a good gesture. And a good gesture gets you the votes.
The political parties which oppose the Congress on bringing the programme at a time so close to the Indian Annual elections is technically correct. The favorable voting effect is affected by the direct cash transfer scheme.
The possibility of reaping electoral returns by strategically allocating targeted transfers to strengthen political prospects is not only a theoretical prediction but also an issue that has caught the attention in current public debates. Conjectures on possible political rewards linked to participation in CCTs have been reported following presidential elections in Ecuador, Peru, Mexico and Brazil. In the case of Colombia, different media outlets speculated right before the 2010 presidential election that the official government had used the expansion and allocation of Familias en Accion (FA), a large-scale CCT program to increase its votes. More recently, due to current debates on the possible misallocation of program benefits by local politicians, the government of Colombia has passed laws to make of Familias en Accion a formal national poverty reduction program. Also, the law bans enrolling new beneficiaries three months before major elections.
The World Bank study concludes that voters respond to targeted cash transfers and that these transfers can foster support for incumbents, thus making the case for designing political and legislative mechanisms that avoid successful anti-poverty schemes from being captured by political patronage.
Rules and constraints can prevent the Direct Cash Transfer Scheme from becoming a pure vote gain attempt. A good policy is implemented by a political party to stay in power. But a good policy helps the countrys poor and the benefits should not be denied owing to the political structure of the country.
IS INDIA READY FOR DIRECT CASH TRANSFER SCHEME?
Amidst allegations from opposition parties calling direct cash transfer scheme an election gimmick to bribe voters, in this section we look if India is ready for direct cash transfer scheme altogether.
Under the cash transfer scheme, families with Aadhaar card (a 12-digit individual identification number) entitled to subsidies, pension, scholarships et al will get money directly in their bank accounts. For this, they need to give their Aadhaar card number to the service provider, for instance, the gas agency and the bank. But as of today, the stakes do not seem high for a smooth take-off of the cash transfer scheme. Firstly, only around 210 million (out of a population of 1.2 billion) people in India have been registered under Aadhaar. Secondly, most below the poverty line families, toward whom most subsidy schemes are targeted, do not have bank accounts. Also, a major portion of villages in India does not even have bank branches.
While the Unique Identification Authority of India (UIDAI), which issues the Aadhaar cards on behalf of the Indian government has invited applications from approved commercial banks deploying micro ATMs to enable Aadhaar-based payments, it is still not clear whether these ATMs will be operational within the next month. Banks are on an account-opening spree, but it is not clear if they will cover all in time. The question is whether the promise of cash transfers will have people flocking to banks and enrolment centers.
In the 51 districts are concerned, Chidambaram expects Aadhaar penetration to be above 80 percent by December 2013. But it is still not known whether these districts have banks and ATMs. Prime Minister Manmohan Singh has said that the success of the direct transfer system depends on the Aadhaar platform and financial inclusion. He mentioned that the banking system may have to integrate the post office network, especially in rural areas.
The success of cash transfers depends on people having bank accounts, money going into the right account, and people having easy access to those accounts. Right now, it is not clear if India will be ready as per schedule, especially for villagers and the urban poor.
OUR PERSONAL TAKE ON THE DCT
1. Direct cash transfer can reduce leakages – Instead of trying to provide subsidized goods to the needy, the government will provide cash to purchase these goods. This would cut leakages in subsidies, which former Prime Minister Rajiv Gandhi estimated at 85% of outlays. One of the possible explanations of this could be low levels of discretion in the cash transfer process. There is little scope for diverting funds and navigating them from the beneficiaries. In the PDS, a beneficiary has to face the discretionary challenges of signing up and also persuade the shopkeeper to sell the commodity to him/her. The experience with US, Mexico and Brazil showed that the leakages are small in cash transfers provided to the poor by the government.
2. Cash transfers is a step forward but have slow pace- In the last decade, cash transfers have worked well in Brazil, Mexico and Chile. However, these are relatively high-income countries with almost universal literacy and 75-80 % urbanization. Conditions are far less favorable in India, being 70% rural, 30% illiterate, largely unbanked, and with zero or unreliable electricity in most rural areas. Problems of exclusion like insufficient awareness and intimidation by foreign application process will be a hindrance in rural areas. There will also be problems of inclusion where upper-caste sarpanches and their cronies will claim to be the needy and garner benefits. Such problems can be reduced by deploying NGOs as social auditors at the time of the smart card issue, but leakages will remain. Corrupt officials will continue demanding bribes, for issuing smart cards or for opening bank accounts. Fake cards and ghost cards have been used in the past. Biometrics will make the use of fake cards more difficult, but not impossible.
3. . Direct cash transfer can help control inflation and fiscal deficit– According to T.C.A. Anant, Chief Statistician of India and Reserve Bank Deputy Governor K C Chakrabarty, the direct cash transfer scheme will reduce the fiscal deficit, which in turn will facilitate inflation control. By itself, transfers are not inflationary. It is the overall government budgetary position, which determines whether any activity is inflationary, or not. In a good tax system there will always be the presence of direct transfer and taxes. Indirect transfers are more prone to leakages than direct cash transfer and that is why the Government wants to put in place a mechanism of direct cash transfer. Direct cash transfer (DCT) does not mean that there is an injection of liquidity into the system. It is an implicit subsidy replaced by DCT. So, it will not have any net effect on inflation.
3.Cash transfer may hurt girls and kids– Eminent economist and Nobel Prize winner Amartya Sen opinionates that the Union governments cash transfer scheme can be a useful system to supplement other ways of making India a less unequal society, but it is not a magic bullet, and its pros and cons have to be assessed and scrutinized with an open mind. He sounded a note of caution in cash transfer of food subsidies, saying direct access to food often helps reaching nutrition to children and girls. But when the subsidy is given as cash directly it may benefit adults and boys more due to biased social priorities in Indian society. Dr. Sen said the transition delays in cash transfer could cause extreme hardship to people, many of whom lead a hand-to-mouth existence.