Direct Benefit transfer and other models

Date: January 04, 2015

DBT; Cash Transfer; Aadhar

 Benefit transfer:Direct or Indirect

Cash in the hands of the poor can transform their lives. With bank accounts and an Aadhaar card for all becoming a reality, it is possible to transfer money directly to the poor and check middlemen who siphon away funds.

Cash transfers (CTs) come in many forms. They may be conditional or unconditional, selective or non-selective, targeted or universal. Some types of CT are as susceptible to misuse as the public distribution system, where, according to the Planning Commission, only 27 per cent of the expenditure actually reaches the beneficiaries.

Unconditional Cash Transfer (UCT) refers to Cash transfer by Government to beneficiaries without checking if he is really in need of the facility for which Cash transfer is made. For ex. Cash transfer for LPG subsidy in a house which uses traditional fuel for cooking or giving Cash transfer for Nutritious food for infant to aged women/family.

This kind of transfer leads to pressure on exchequer, misuse of money, ill-reporting of beneficiaries, corruption etc.

Conditional Cash Transfer(CCT) refers to Cash transfer when beneficiary account is credited money only after checking his/her eligibility.

CCT leads to correct use of money and visible improvement by social scheme.

Conditional cash transfers (CCTs) have become popular internationally. The World Bank has defined them narrowly: “[CCTs] are programmes that transfer cash, generally to poor households, on the condition that those households make pre-specified investments in the human capital of their children.” However, CCTs often have other behavioural conditions, such as the requirement for a pregnant mother to deliver a child in a hospital or to get her child vaccinated. Sometimes, conditions reach ridiculous extremes, as when a mother is supposed to “prove” exclusive breast-feeding before she can apply for a cash benefit. In Mexico, conditions have been associated with a high incidence of exclusion, as people entitled to the cash withdraw when they cannot comply with them.

Conditions are often difficult to implement and monitor. Each condition that requires a certificate becomes a road block and increases opportunities for corruption. Often, conditions beget more conditions, as they are primarily attempts at social engineering, in which a transfer is used as a carrot and stick, to be given or taken away, depending on whether the entitlement criteria are aligned with state-determined norms. This engineering is most often successful when local infrastructure, like schools and hospitals, is available; although in India, where village health clinics often have abysmal hygiene, CTs associated with hospital deliveries have resulted in multiple deaths.

Unconditional cash transfer (UCT) policies rely on people’s own initiative instead of directing them towards particular kinds of behaviour, expecting that people will use cash wisely for their own and their children’s development. A recent book, Basic Income: A Transformative Policy for India, by Sarath Davala, Saumya Kapoor Mehta, Guy Standing and myself, details the results of a survey carried out in 22 villages where UCTs were given to nearly 6,000 men, women and children, sent to their bank accounts and paid individually each month for 18 months. The rigorous study, conducted as a modified randomised control trial, seeks the answers to a number of questions on the effects of such a UCT. The two most commonly asked are: Would unconditional monthly cash payments be an effective tool to reduce economic insecurity and poverty? And would they be likely to lead to wasteful spending on private bads?

A common reaction to the idea of CTs is, “The men will waste all the money in drinking, and will beat their wives to get their money too”. The facts disproved this. There was no increase in drinking among the families who received the transfers, nor was there any anecdotal or qualitative evidence to suggest this. In one tribal village, drinking actually went down. The sarpanch explained, “There is not much employment in these villages so men sit around playing cards and drinking. After the CT, they were able to buy seeds and fertiliser and now they work hard farming their land”.

A heartening finding was that UCTs lead to growth and income-earning opportunities. This was especially true for the poorest tribal families, where 50 per cent said that they had used the transfers to make their lands productive, and the number of livestock in a village increased by over 30 per cent. Overall, more than 20 per cent of the respondents said they had increased their income-earning work. Multivariate analysis suggested that for women, receiving a basic income was strongly associated with diversification into a second income-earning activity combined with a primary one.

Most families in India today, no matter how poor, want better education for their children. The CTs enabled children to go to school, often switching from a non-functional government school to a private one. There was a doubling of enrolment among adolescent girls in secondary schools. Nutrition improved, especially among the poorest tribal and Dalit families, with a substantial increase in food sufficiency. Further, as individuals were able to go to doctors when they got ill and afford regular medicine, serious health incidences in the villages declined.

An emancipatory effect associated with CTs was that, with the increase in liquidity, reliance on usurious debt decreased. It empowered the most vulnerable — Dalits, women, the elderly, the disabled.

UCTs are known as basic income internationally. They give people a choice and rely on individual initiatives to change social conditions. A basic income leads to holistic development and restores people’s dignity. It could be a transformative policy for India.


suggested question for mains- What do you understand by Conditional cash transfers (CCTs) and Unconditional cash transfer (UCT)? Which one suits India better? Examine.