India ripe for large scale Conditional Cash Transfers

Whether one likes it or not safety nets are at the core of emerging understandings and practices of inclusive growth worldwide. In this context an important instrument of social safety; that is slowly if not systematically gaining in popularity across the world is the instrument of cash transfers by governments to target populations. This owes itself to the fact that world over conditional cash transfer (CCT) programs are increasingly being perceived as effective tools for poverty alleviation; much of it having to do with their highly successful implementation in many Latin American countries. The idea in CCT’s is to transfer cash to the poor “on condition” that the poor will commit to use the money transferred to them for specific pre defined purposes only and subsequently empower themselves. The advantage of such a program lies in the fact that CCT’s can be tailored to have a positive gender bias while also being targeted at achieving specific goals

Where it has been implemented in India the CCT schemes have come in for much criticism from critics who have challenged their effectiveness primarily on the grounds of inability to monitor whether or where utilization is happening and the threat of large scale leakages and delays in transfer as until now the disbursals have been through non technology based platforms and networks. These concerns have consequently prevented the large scale uptake of CCT schemes in India; and in most cases the government continues to subsidize numerous sectors through other means. The result has been the inability to directly monitor the impact the subsidies are having and lack of transparency along the subsidy chain resulting in loss of most of the subsidy money (the 20 paise story). Things are not the same today. Rapid developments over the past few years have seen significant transformations happening in India and made the environment more conducive to implement direct CCT schemes in the country. So what are these developments?

Firstly not only has the MGNREGS significantly tested and fine tuned government’s ability to handle transfers of money to citizens across the country under challenging geographical and socio-economic as well as political conditions, it has, despite its many glitches, and in association with technology based financial inclusion initiatives that have gained in prominence across the country; proven that suitable methods of oversight and control can be exercised to identified and eliminate delays and discrepancies in cash transfers. Also unlike in the past greater and greater numbers of Indians are being brought into the fold of formal financial institutions and services through the use of innovative strategies most of which have to do with the use of modern technology like mobiles and smart cards while also using large scale human networks (Eg being the Bandhu Network operated by FINO across India; even in the most remotest of regions). Conditions have thus been created where disbursal of money can successfully be undertaken in an accountable manner by formal financial institutions with the assistance of innovative technology solutions and partners.

Posted by Vivek John Varghese http://knowaboutvivek.blogspot.com/