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Direct Cash Transfer

Aadhar (or the Unique Identi-fication Number) is billed as a panacea for efficient bureaucracy that is expected to deliver. But Aadhar is big business as well and it is likely to create a new set of bureaucrats in place of the old while the idea of eliminating middlemen through Direct Cash Transfer to save the poor beneficiaries of Government disbursement may remain as illusory as ever. This direct cash transfer scheme is no easy job in a country like India where banking facilities, particularly in villages, are too inadequate even by third world standards.

The Centre attempted to eliminate a huge number of bureaucratic middlemen by depositing government pension and scholarship payments directly into the bank accounts of about 245,000 people in twenty of the country’s hundreds of districts, from 01 January 2013. The Union Government of India expects to add hundreds of thousands more people in the next few months. But India has higher number of poor people than any other country in the world. Many of the anti-poverty programmes end up in the pockets of the rich due to corrupt state and local officials. The new measures aim to prevent corruption, but in a country of 1.2 billion people, the numbers so far are ‘modest’, if not insignificant. The direct payments could lift countless millions out of poverty, as the programme is aimed to extend in phases to other parts of India, before the end of 2013. So say the authorities managing Indian Government’s finance. The Direct Cash Transfer to poor families is at best an experiment to change the modalities of existing transfers, based on models in Brazil and Mexico. There is every reason to believe that the programme is intended more to buy vote among the poor, than to overcome poverty.

Hundreds of millions in India have no access to banks, personal bank accounts, and direct electronic money transfers. One of the biggest hurdles is how to distinguish the poor from the rich amongst India’s 1.2 billion citizens. There is another ambitious project to undertake retinal and fingerprint scans of Indians in every village and city in the hope of giving hundreds of millions, who have no official identification a card with a 12-digit number, that would give access to the modern financial world. The programme has issued unique numbers to 220 million people only, even after three years of operation. Only a third of Indian households have bank accounts. India’s expensive and inefficient system for handing out food and subsidised fuel through nearly 50,000 government shops, involves an annual expenditure of almost $14 billion, or the equivalent of nearly 1% of its gross domestic product. Much of the supply of grains is being diverted or replaced with rotten or poor quality grains, before reaching the intended recipients. Only 15% of the money spent on the poor actually reach the hungry. The Direct Cash Transfer payment has a risk in that the men who often receive the cash, may sometimes suqnder the money. Corruption could always enter the decision making process that determines who is eligible for benefits in the first place. But the Centre is likely to pursue the scheme despite huge expenditures as it has an election angle.

Frontier
Vol. 45, No. 33, February 24-Mar 2, 2013

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