Authors: Anvi Agarwal, Shagnik Chakravarty
Introduction
Over the past two decades, conditional cash transfers (CCTs) have emerged as a fashionable tool for poverty reduction in India and elsewhere. Their success in Latin America has prompted many policymakers in developing nations to adopt similar models in designing their social welfare programs. In this article, we evaluate the effectiveness and limitations of existing CCT schemes in India, describe the challenges of scaling up such policies on a national level, and finally discuss the lessons that can be derived from successful CCT schemes abroad.
What are CCTs?
CCTs were first conceptualised in Latin America as a response to the macroeconomic crises of the 1990s when demand for social services such as healthcare and education had declined. While the specific structure of CCT programs have varied significantly across countries, all of them share at least three features: (a) a cash-transfer from the government to a recipient is involved (as opposed to in-kind assistance); (b) the recipient is usually very poor and disadvantaged (however defined); (c) it requires that the recipient fulfils the conditions set forth by the policy. Conditional cash transfers represent a shift in the government’s approach from focussing on the supply-side to addressing demand constraints in the short-term. At the same time, these schemes provide incentives to households to invest in building human capital that breaks intergenerational poverty-cycles in the long-term.
Status of CCTs in India
Even though India has the largest count of citizens living under the international poverty line (roughly 22% of the population), the country hasn’t shifted substantially to conditional cash transfers. To this day, a very limited number of pilot schemes have been launched as the topic of cash transfers and their efficacy remain heavily politically charged. While Janani Suraksha Yojana is the only full-fledged CCT scheme so far, there are several central and state programs whose provisions closely resemble CCT schemes as understood globally. The only significant difference is that the Indian schemes are oriented more toward the individual rather than the household which is the focus of CCT schemes elsewhere.
So far in India, CCT programs have been used to delay child marriage, reduce mortality rate, and promote education among the extreme poor, especially female education. The first pilot scheme to be launched in India was Apni Beti Apna Dhan in 1994 in Haryana. It promised Rs. 25,000 to the newly-born girls that could be encashed when they turned 18 only if they were unmarried. Similarly, Balika Samridhi Yojana (1997), Kasturba Gandhi Balika Vidyalay Scheme (2004), Sarva Shiksha Yojana (2003) and Dhanalakshmi (2008) are all national programs which aim to enhance the education level of female students by providing cash transfers to the girl-child till the age of 18 only if they remain enrolled in a school. The Janani Suraksha Yojana (2005) aims to reduce maternal and child mortality by giving a cash benefit of Rs. 500 to a poor woman for every live birth, and an extra Rs. 200 if she delivers in an institution. At the state level, there are several schemes that focus on providing free social services, and many of them use cash transfers as well. In Gujarat under the Chiranjivi Yojana scheme, for instance, cash incentives are given to private providers of delivery care to assist citizens with obstetric complications.
Successes of the existing CCT schemes in India
Improving the Gross Enrollment Ratio (GER) at every stage of schooling has been the primary success of CCTs in India. Following Punjab government’s Bebe Nanki Laadli Beti Kalyan (2012) scheme, GER for female students in primary education increased from nearly 78% in 2010-11 to 102% in 2016-17 (GER can exceed 100% due to early or late entrants, grade repetition, etc.). Similarly, in Madhya Pradesh, the Ladli Laxmi Yojana (2007) increased the GER for girls from 58% to nearly 80% in the same time span.
Janani Suraksha Yojana (JSY), a revamped version of the National Maternity Benefit Scheme (1995) which focused on promoting institutional birth and reducing maternal mortality has caught the attention of public health experts around the world. The outcome of this scheme has been a rise in awareness about the benefits of skilled attendance and institutional births. The previously held assumption of institutional and skilled birth attendance being the same also does not hold anymore, both of which make the likelihood of citizens opting for skilled attendance in institutional deliveries greater thereby reducing maternal mortality.
Limitations of the existing CCT schemes in India
One of the major drawbacks of the CCTs is its inability to meaningfully change the mindset and perception of society. For example, Haryana’s Apni Beti Apna Dhan (1994) scheme, whose aim was to delay the age at which a girl is married, did not result in a significant difference between the marriage rate of beneficiaries and non-beneficiaries (13% and 14% respectively). Instead, according to an ICRW report, many participating families interpreted the cash-transfer as a way to defray their daughters’ marriage costs. As a result, it encouraged marriages at the age of 18 as parents who wanted to marry their daughter did so immediately after receiving the benefit. Thus, instead of discouraging child-marriages and promoting female education, this program inadvertently reinforced the problems they were trying to remedy. Various other child-marriage schemes like Kalyana Lakshmi (2014) and Shadi Mubarak (2014) in Telangana and Chandranna Pelli Kanuka (2018) in Andhra Pradesh have also observed the same.
Source: International Centre for Research on Women (ICRW)
Considering India is a populous country, very intuitively, some limitations have also risen due to the inefficient implementation of schemes. The infamous JSY scheme entails the role of an Accredited Social Health Activist (ASHA), who is responsible for a multitude of tasks: from identifying and registering beneficiaries to assisting women in receiving health check-ups and arranging vaccines for children. Studies show that it has not been administered effectively throughout the whole country, with states such as Bihar having only 20.7% of ASHAs receiving regular payments. This has led to critics proposing a grievance cell to be set up in order to look into complaints related to irregular payment of ASHAs. Another case in point is the beneficiaries of the ABAD scheme not receiving the full amount of the cash (that too without prior notice) promised by the government. This reduces people’s trust in the government and leads to lower participation in such schemes in the future.
Source: International Centre for Research on Women (ICRW)[1]
Another common critique is that even though few schemes have been targeting the under-privileged classes as a whole (poverty, pension etc.), most of them have largely been female-centric, focusing on issues like female education and empowerment, girl child marriage, maternal mortality. Thus, the outreach of CCT schemes in India has been limited to a certain demographic so far.
Challenges that India might encounter while scaling up CCTs in India
The expansion of CCT schemes to a national level presents a formidable capacity challenge for the Indian bureaucracy. As of 2020, there are approximately 88 million Indians living under the poverty line. Owing to centrally sponsored schemes such as MGNREGA, coordination between central financing and local delivery has improved, but the public distribution system has little experience in providing and monitoring income transfers closer to the point of impact. As CCT schemes need to be tailored according to the socioeconomic nuances of a region, it requires state and local governments to play a more active role in financing and monitoring such schemes. This represents a significant capacity challenge as the financing of national programmes is still highly centralised in India.
Further, as CCTs address only demand constraints, their efficacy is limited by infrastructural shortages. In India, this problem is severe. An article in the PLOS Medicine journal states that “due to chronic low government expenditure on health care, there is only one primary health centre (PHC) for 34,641 people, one government doctor for about 20,000 rural residents and most public health facilities do not have adequate medicines.” Further, a large number of Indians do not have accounts in financial institutions. Even amongst those in rural areas who do have accounts, a national survey (2018-19) showed that only 11% have ‘good’ financial literacy.
Building on this information, Kartik Akileswaran and Arvind Nair, two scholars at Harvard Kennedy School, have suggested that India is not yet ready for CCTs. First, they argue that India still requires “significant additional capability in identifying households and linking households to bank accounts”, and secondly, that economic welfare can only increase if the cash benefit of CCTs is greater than the PPP of the previous subsidies. Their calculations suggest that the government’s implementation strategy fails to overcome the aforementioned shortfalls, and so they conclude that India should not yet expand CCT schemes to a national level. Their suggestion is for India to follow Bolsa Familia’s (Brazil) example, and implement CCTs in a ‘bottom-up’ manner i.e. start at the regional level, and gradually scale up.
Lessons for India from different countries
- Although most CCT plans have had substantial leakages of benefits due to inefficient targeting and administration, they have had a significant impact in Latin American countries. The largest CCT scheme in Latin America is Mexico’s Oportunidades (earlier Progresa) which was recognised by the World Bank and became a model for countries all over the world. One commendable operational strategy that India could learn from the program is the communication of co-responsibilities to beneficiaries when they register for the program and the non-fulfilment being reported frequently. This fills the communication gaps that are often observed between the government servants and the target group and helps in an effective administration of the policies.
- In a 2009 World Bank Policy Report, Ariel Fiszbein and Norbert Schady stated: “What really makes Mexico’s program iconic are the successive waves of data collected to evaluate its impact, the placement of those data in the public domain, and the resulting hundreds of papers and thousands of references that such dissemination has generated.” This stresses on the fact that data collection is extremely important to assess the end result of the policy implemented and facilitates the policymakers to point out rooms for further improvement.
- While the government is putting efforts towards financial inclusion by ensuring every citizen features a checking account, about 71% of the Indian population already have a mobile phone connection. This vast network can be potentially leveraged through innovative mobile banking models – where the money is transferred directly to mobile phones in case the beneficiary does not have a bank account. African countries like Kenya and Tanzania have a positive experience in this regard, with the total value of transactions in 2013 made through mobile money being over 50% of the countries’ GDP.
Conclusion
The success of CCTs in Latin America provides a strong case for implementation in India. However, blindly following the Latin American model could lead to serious pitfalls in poverty alleviation in India as the country poses unique socio-economic challenges that need to be overcome. Thus, instead of imitation, customisation and a heuristic approach to policy design should be the focus. Since Akileswaran and Nair’s comment, India has made large strides toward identification and financial inclusion via the Aadhar card and Jan Dhan Yojana. The growth in India’s mobile-phone subscription has added to the ease of connectivity and monitoring, and although accessibility to quality healthcare and education is still an inhibiting factor, there is an opportunity for public-private partnerships to address this problem of infrastructural shortages. It may thus be useful for us to seriously discuss CCTs as not a panacea to poverty, but rather as a complement to a wider social policy that targets various aspects of development such as infrastructure, connectivity, education and employment opportunities.
[1] Based on data from 862 girls who had cashed out and answered the survey. The promised cash benefit was Rs. 25,000. Not a single girl received the full amount.
References
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About Authors: Anvi is an undergraduate student of Economics and Statistics. She is an Associate Editor at The Policy Chronicle and is inordinately inclined towards research in a wide range of areas covering Economics, Policy and Behavioural Economics. An ardent believer of equality, you would often find her volunteering at various NGOs and events. Travelling the world and making knowledge easily accessible is her two-fold goal.
Shagnik is an Economics major currently studying at St. Xaviers College, Mumbai, India where he is an editor for the college’s Economics journal, Arthniti. He is enthusiastic about public policy, which he decided to pursue after being nominated to speak at the New Zealand Parliament as Wellington’s youth representative for the annual Commonwealth Meeting in 2018. As a budding researcher, he has written several papers and articles, some of which have been published in places such as The Wire. In his free time, you will find him either playing the piano or table-tennis.
