Tuesday, December 28, 2010

Small and targeted unconditional transfers in India

Dutta, Howes and Murgai argue that unconditional cash transfers for the elderly and widows (pension schemes) in Karnataka and Rajasthan worked due to small size and relatively low level of leakage. Regarding scaling-up of the project, the authors caution that the outcome would depend on the likely impact of increased coverage on both targeting and leakage. They argue that increased coverage would most likely worsen targeting. Currently, leakages are low because levels of discretion are low. As program expands, avenues for leakages (bribes, diversion of funds) will be higher.

If the program is to be expanded, then the authors suggest:

In the short term, the way forward  would be to expand the coverage among widows and the  elderly and to increase the size of the pension. This is a path  the Government of India has already embarked upon. In the  longer term, the policy question is whether it makes a sense to  expand the categories to whom social pensions are given.

Ultimately, one can imagine a situation in which, say, cash pensions are made to every holder of a BPL card, instead of, or as well as, an entitlement to buy subsidised food and/or to a guarantee to a minimum number of days of public employment.  With the National Right to Employment Guarantee Act, and the  decision of the government to support a Right to Food Act such  a scenario is far-fetched today. Moreover, as stressed above, little is known about how cash transfers would perform if scaled  up. Nevertheless, it is reassuring to know that calls for a greater  role in Indian social security policy for cash transfers are at  least not contradicted by the performance of India’s existing  cash transfers.