Configuring social transfers
July 27, 2009: The Hindu
Protecting the poor and the vulnerable is one of the main challenges for governments in developing countries in the wake of the global economic crisis. The United Nations’ latest progress report on the Millennium Development Goals has expressed concern that the gains made between 1990 and 2005 in reducing global poverty are dissipating after the economic crisis. While the number of people living on less than $1.25 a day decreased from 1.8 billion to 1.4 billion betwe en 1990 and 2005, in 2009 an estimated 55 million to 90 million more people will be living in extreme poverty compared to what was anticipated before the crisis. Urgent steps by governments are called for to protect the poor and prevent the vulnerable from sliding into poverty, which can have inter-generational consequences. However, the policy options available to developing countries in times of such crises, as the Stiglitz Commission points out, are limited by both resource constraints and the lack of “automatic stabilisers due to the embryonic nature of their fiscal and social protection systems.¶
The global economic backdrop strengthens the case for conditional cash transfers (CCTs), the core concepts of which originated in Latin America after the macroeconomic crisis of the 1990. The efficacy of CCTs — where cash is transferred to a poor household subject to its meeting some basic human capital requirements — is evident from their rapid spread across the world between 1997 and 2008. Some of India’s social transfer schemes, particularly those relating to maternal health and primary education, have close similarities with the CCTs. For instance, a study by RAND Corporation on the working of Apni Beti Apna Dhan scheme in Haryana — where, since 1994, poor parents of a girl child are offered an immediate cash grant and a long-term savings bond redeemable on the daughter’s 18th birthday provided she is unmarried, with additional bonuses for education — has found that parents increased their investment in daughters’ human capital and made greater post-natal health investment in girls. Although the CCTs offer much scope for meaningful interventions, they cannot be successful unless supply-side constraints such as infrastructure are addressed. Given the evidence in support of direct cash transfer schemes such as the National Rural Employment Guarantee Scheme, well-designed CCTs that change household behaviour in favour of education and health care can be a useful component of India’s social transfer policies.
