By Ibu Sanjeeb Garg

Beating the Rhetoric

The recent years have seen the movement towards the system of direct cash transfer instead of a subsidy based support system on the basis of Direct Benefit Transfer. The moot question is will this system signal a change where benefits of governance will actually reach the poor? To answer this question we must go back to the genesis of the direct cash transfer system. During the late 1990’s champions of neoliberals began to advocate the system of direct cash transfer which meant giving money to the poor. The system has been successfully implemented in various forms in countries like Brazil, Venezuela etc.

Historically the demand for replacing the subsidy based system is based on the fact that the Indian PDS (Public Distribution System) has suffered from myriad problems. Leakage, inefficient reach and logistical failure have gripped the PDS system for so long that it has become an utter failure in the present context. For the last few years there have been repeated demands for a change in the PDS delivery mechanism yet no solutions could be reached. Barring the success of Tamil Nadu, PDS has remained largely failure in India. Thus the ground was laid for a new system to take place a delivery mechanism that had not been able to function to the fullest potential.

The Nandan Nikhleni lead UID had started rolling out Aadhar numbers by 2012.Each Indian citizen will be allotted a unique 12 digit UID number, a process despite the legal hiccups still continues. The next step is linking up individual bank accounts to the UID numbers allotted. In the third step the money will be directly transferred to the bank accounts.

The RBI has already rolled out the ‘Lead Bank’ scheme to introduce baking in unbanked areas. The RBI governor has already stated Financial Inclusion as one of the prime goals of RBI. The DCT scheme will be a mere extension of this goal. The lead bank scheme is already being implemented by various banks across the country. Apart from this the banks can introduce the concept of banking correspondent and mobile banking. The Banking Correspondent model is a very simple model where the bank employee goes from house to house and completes transactions. The person will just need to sign in and receive the required amount. In the same way money can be deposited in their accounts and all this will be credited to their account represented by their UID number. The DBT system is already giving banks a new impetus to aggressively take forward the cause of rural banking since it will give them a chance to increase their own business.

Apart from this mobile banking is another way in which banking can be done with the poor. Mobile banking has been successfully implemented in countries like Nigeria and there is no reason why this can’t be implemented in India. A third way in which this can be achieved is by linking the DCT model with existing infrastructure like the CSC (Common Service Centres), E-kiosks etc. These institutions can serve as extension of the bank financial services acting in lieu of actual physical presence of banks. All this will require stronger grassroot participation which can be brought about by greater integration of the gram Panchayats and Block level committees.

A second major doubt opponents of the system have is that the money reaching the poor will not be properly utilized. This is an extreme assumption since repeated sociological surveys have shown that the idea of finance is strong among the poorer population as well. Yet a proper mechanism can be in place to check the utilisation of the funds. Once again the women committees in rural areas can play a crucial role in ensuring the proper utilisation of funds in each household. For the urban areas implementation officials can be appointed who can ensure efficient delivery of the system in their notified areas. Since the money is directly transferred to the poor there will no instance of corruption in delivery level. Women in the rural areas have known to come forward against social evils like illicit liquor drinking time and again. As such there is little doubt about their capability to ensure that the funds received are utilized in a proper manner. Awareness activities in this regard must be carried out through the medium of media and other innovative forms like street plays etc.

Another major charge that is leveled against DBT will be that it will give rise to inflation since there will be an increase in liquidity. While the relation between inflation and direct cash transfer can’t be denied yet the debate should be looked in the larger context. Inflation will not merely be caused by DBT inflation itself is a complex concept. To combat this, the government must take proper measures, including reforming the delivery mechanism of the supply side. Generally in India inflation stems from the faults of supply side rather than international crude oil prices or genuine market pressures. Thus if proper measures are taken then the government will be able to offset any and all effects of inflation caused by DbT.

The whole system of DBT however must not absolve the government of its responsibilities towards the social sector. In this regard the private sector can be encouraged to ensure development of the nation. For example the private sector generally refuses to implement social sector schemes like building hospital schools etc for fear of little or no returns. This stems from the fact that the poor people are financially discredited. The introduction of DBT poises to change all that, the DBT will ensure assured returns which will act as a motivating factor for the private sector. For example the students will be given study coupons which will take care of their fees and expenses. This will ensure that on the availability side the schools will compete among themselves to ensure better facilities to the students. The private sector too will join in since there will be assured returns. This model will undoubtedly be replicated in other social institutions like hospitals etc. Instead of mulling over a mandatory 2% CSR tax on the private sector through innovative schemes like DBT the government must make the social sector investment friendly and attractive. In this manner if DBT is implemented properly will give impetus to the social sector. Apart from this DBT have other advantages. For example the schools can be integrated with the UID database to ensure attendance of the students. The student coupons issued will be based on their attendance in schools. Thus it will also ensure that the problems like absenteeism of students can be effectively curbed. Thus DBT if properly implemented will give a range of advantages which will work towards strengthening the social sector. In the end DBT poises to give the poor “choices” in terms of what they want and this will be a true landmark in achieving the lofty goal of balanced development in the 21st century.

( Views expressed by the author are personal)

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