Direct cash transfers to the poor in preference to government providing services such as healthcare and education could help bring down corruption in the system and prevent the unholy nexus between the crony capitalists and corrupt politicians.
The reliance of the poor on the politician for accessing the services which is anyway their right may be the main cause of corruption spreading across the system making the social and economic fabric weaker.
“The poor and the under-privileged need the politicians to help them get jobs and public services,“ said Raghuram Rajan, governor, Reserve Bank of India, at the 20th Lalit Doshi Memorial Lecture.
“The crooked politician needs the businessman to provide funds that allow him to supply patronage to the poor and fight elections.
The corrupt businessman needs the crooked politician to get public resources and contracts cheaply.
And the politician needs the votes of the poor and the underprivileged. Every constituency is tied to the other in a cycle of dependence, which ensures that the status quo prevails.”
Rajan is pushing for the direct cash transfer of benefits to the poor to downgrade the leakage in the system.
Prime Minister Narendra Modi’s government which was not in favor of the Aadhaar scheme of the previous government has also embraced it now to make the subsidy system regimented.
“I believe it will give the poor the choice and respect as well as the services they had to beg for in the past,” said Rajan. “It can break a link between poor public service, patronage, and corruption that is growing more worrisome over time.”
The governor claptrap the argument that direct cash transfers to poor may lead to drunkenness among men and that it would be a waste of resources in improving the condition of the people.
As an alternative, the administration should experiment with direct transfers and decide the future based on data, he said.
“The vast majority among the poor will seize opportunities, especially for their children, with both hands,” said Rajan.
“Nevertheless, if there is evidence that cash transfers are being misspent ¬ and we should let data rather than pre-conceived notions drive policy -some portion could be given in the form of electronic coupons that can be spent by the specified recipient only on food, education or healthcare.”
However, Rajan also warned that looking at direct cash transfers as universal remedy for the society’s ills may not be the right approach.
“Financial inclusion and direct benefits transfer can be a way of liberating the poor from dependency on indifferently delivered public services, and thus indirectly from the venal but effective politician,” said Rajan.
“It is not a cure-all but will help the poor out of poverty and towards true political independence.”