Direct cash transfer of subsidies the way forward: Ahluwalia

Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, today strongly endorsed the government's cash transfer scheme to replace indirect subsidies.

Addressing a conference on 'Unconditional Cash Transfers' organised by UNICEF in New Delhi, Ahluwalia said, ''First, cash transfers can be organised. Second, when you give the money (into the beneficiary's bank account), it is not simply wasted or used for the wrong things.''

He was supported by a UNICEF-SEWA study in refuting the argument that direct cash transfers would encourage heads of households to misspend the money, particularly on liquor or gambling.

Ahluwalia called for increasing the scale of such transfers, which remains miniscule as the use of Aadhar ID numbers is still far from becoming general.

'Aap ka paisa aapke haath' (your money in your hands) is the slogan coined by the Congress-led UPA government to promote the direct cash transfer scheme.

"Cash transfers can be organised into banks. Obviously, if the government were to do a cash transfer system, it (should be) a much larger scale. I mean they are doing two villages or three villages; we will have to do many more," said Ahluwalia.

"But the point is that it can be done and I think that's the sort of thing governments can do. So that's a very important thing established," he added.

"The government has done what is the minimum necessary for that. The RBI has introduced a system where banks will open no frill accounts, either themselves or through banking correspondents, providing the individual has an Aadhar number," he added.

According to Ahluwalia, the direct benefit transfer scheme of the government will be a game changer and an important instrument for financial inclusion.

The Self-Employed Women's Association (SEWA), having a membership of around 17 lakh, entered into a partnership with UNICEF to pilot an unconditional cash transfer (UCT), or a basic income grant experiment, in the rural areas of Madhya Pradesh.

The study covering 20 villages revealed that recipients of UCT were significantly more likely to contribute to their households. Besides, the beneficiaries' food basket expanded, with meat, fish, eggs, vegetables and fruits on the table more often, and these families reported low incidence of common illness.

The UCT, entirely funded by the UNICEF, also led to financial inclusion. The beneficiaries also began using their accounts for saving, rather than keeping money at home.