India’s New Direct Cash Transfer Program Is Improvement Over In-Kind Donation System

“Is the solution to poverty as simple as giving a little bit of money to a large number of people? We may be about to find out,” Amanda Glassman, senior fellow and director of global health policy at the Center for Global Development (CGD), and CGD President Nancy Birdsall write in a Foreign Policy opinion piece describing India’s new anti-poverty program, Direct Benefit Transfer (DBT), which “will directly provide cash to poor families — at first more than 200,000 people, then potentially hundreds of millions — via the banking system.” They say the program “comes after decades of hand-wringing about India’s huge and wasteful system of in-kind subsidies,” in which “[t]he government spends roughly $14 billion a year, or nearly one percent of its GDP, to buy food, fertilizer, and petroleum and distribute them to stores, where the eligible poor can purchase them at discounts, or to government offices, where products are handed out.”

“The new system will nonetheless be a huge improvement over the old. The simplest reason: Direct cash transfers work,” Glassman and Birdsall write, noting, “In diverse settings, poverty-targeted cash transfers have been proven to reduce poverty, improve child nutrition, increase school attendance, and increase the purchase of productive assets such as fertilizer and tools.” They continue, “India already has successful conditional cash-transfer programs operating nationwide, the biggest of which is Janani Suraksha Yojana, which means ‘Women Protection Initiative.’ The program provides cash to pregnant women who deliver their babies in health-care facilities.” They cite a 2010 study examining the success of that initiative, which “shows that the best way to let poor people have more money is to give it to them” (1/8).

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