India rolls out cash transfer scheme for poor

BBC News, 1 January 2013

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The government says that cash
transfers will be a game-changer

India has rolled out an ambitious plan for a cash payout of subsidies to the poor in 20 districts, officials say.

Finance Minister P Chidambaram said the scheme would benefit more than 200,000 people initially, and would cover the entire country by the end of 2013.

Authorities say it will bring the country's poorest citizens "into the mainstream".

But opposition parties have accused the government of "bribing the voters" ahead of the 2014 general elections.

The government plans to disburse 3,200bn rupees ($58bn; £36bn) under the Direct Benefit Transfer (DBT) scheme.

Under the scheme, money meant for recipients of 29 welfare programmes - mainly related to scholarships - will be transferred to bank accounts linked to their unique identification numbers in 20 districts from 1 January. It will be extended to 11 more districts from 1 February and 12 districts from 1 March.

"This is indeed a game-changer for governance, the manner in which we govern," Mr Chidambaram told reporters on Monday, a day before the launch of the scheme.

"This is a game-changer in which we account for money. It is a game-changer in the manner in which the benefit reaches the beneficiary without any intermediation by any human being," he added.

The finance minister said that at this stage the scheme would not cover subsidies for food, fertiliser, diesel and kerosene because the government was proceeding with a "great degree of caution".

"We will look at transferring all subsidies and benefit through this scheme but we have to do it slowly. We are not going to rush into anything and then find that the system cannot cope with it," he said.

Under the scheme, those living below the poverty line will receive between 30,000 rupees ($542; £338) and 40,000 rupees ($723; £450) per year in lieu of nearly 30 welfare programmes, including scholarships and pensions.

Officials say it will reduce waste while ensuring federal welfare money reaches those who need it most.

Analysts, however, say implementing the scheme may not be easy as only 222 million people in India have so far enrolled into a biometric identity scheme, most poor families do not have bank accounts and many villages do not have a bank.

Indian authorities say around 360 million people currently live in poverty. But one estimate suggests around three-quarters of India's 1.21 billion people live below the poverty line.

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