ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Devesh KapurSubscribe to Devesh Kapur

The Shift to Cash Transfers: Running Better But on the Wrong Road?

The Government of India has announced that subsidies on fertilisers, kerosene and liquefied petroleum gas will be replaced by cash transfers to end users. A close examination of the objectives of the subsidies in fertiliser and kerosene and the implications of the shift raises some challenging questions. While there is no doubt that India will have to move to a greater use of cash transfers, it may not necessarily be the best option in all cases. Unless discussions on transfers are part and parcel of a broader strategy, any changes in favour of cash transfers will simply amount to tactical differences and not address longterm challenges.

Rethinking Inequality: Dalits in Uttar Pradesh in the Market Reform Era

In the debates surrounding the consequences of India's shift from a state-led to a market-oriented economic model, the issue of caste and caste practices, particularly for dalits, has been an empirical weak link. We draw on a unique survey designed and implemented by members of the dalit community to capture social practices and conditions important to them which are not featured in the usual household surveys. This survey asked all dalit households in two blocks of Uttar Pradesh (Azamgarh and Bulandshahar districts) both about conditions currently and in 1990. The survey results suggest that placing exclusive focus on measures of material well-being, such as consumption expenditure and its inequality, is misplaced as it misses important changes in socially structured inequalities and hence in individuals' functioning.

Climate Change: India's Options

Climate change poses particularly difficult challenges for India. On the one hand, India does not want any constraints on its development prospects. On the other, it also wants to be seen as an emerging global power that requires a leadership role on key global issues like climate change. It can either approach climate change as a "stand alone" global negotiation, or, weave these negotiations into a "grand bargain" involving linkages with other international negotiations. In order to understand these issues better, a conference on climate change held in New Delhi in March 2009 focused on the different bargains India might have to strike, both domestically and internationally, to respond to these challenges. The papers presented here highlight some of the key issues raised in the conference and also the analysis and interpretation of the main points of discussion.

More on Direct Cash Transfers

Continuing the debate on direct cash transfers, the authors of the article "The Case for Direct Cash Transfers to the Poor" (12 April 2008) respond to Mihir Shah's criticism (23 August 2008). The six points of contestation by Mihir Shah - including those on the public distribution system and the National Rural Employment Guarantee Scheme - are refuted. The argument in essence is that seeing the problems with anti-poverty programmes as faulty design and limited availability of resources does not recognise the culture of immunity in public administration and the weak capabilities of local governments.

The Case for Direct Cash Transfers to the Poor

The total expenditure on central schemes for the poor and on the major subsidies exceeds the states' share of central taxes. These schemes are chronic bad performers due to a culture of immunity in public administration and weakened local governments. Arguing that the poor should be trusted to use these resources better than the state, a radical redirection with substantial direct transfers to individuals and complementary decentralisation to local governments is proposed. The benefits, risks and associated reinforcement of institutions and accountability are outlined.

Beyond the IMF

A consensus has developed that the International Monetary Fund is not fulfilling its role prompting multiple proposals for reform. However, the focus on reform should be complemented with an exploration of alternatives outside the IMF, which hold the potential to give developing countries greater bargaining leverage with the Fund, and by increasing competition so as to spur the institution to better performance. This paper focuses on the insurance role of the Fund and argues that developing countries are turning to alternative insurance mechanisms - from a higher level of reserves, to regional co-insurance facilities, to remittances - as a counter-cyclical source of foreign exchange. The de facto exit of the IMF's clientele driven by the high political costs associated with Fund borrowing, now poses unprecedented challenges, in particular pressures on the Fund's income. In order to maintain its role as an insurance mechanism, the IMF needs to undergo a rapid restructuring and significantly cut its administrative budget, with the budget savings used to lower the interest rates charged to borrowers.

Large Foreign Currency Reserves

This paper, while attempting to explain India's decision to accumulate high foreign currency reserves, also analyses the resulting political-economy consequences. It is argued that the reserves are both a form of insurance against adverse external shocks as well as compensation for the inability to address longstanding domestic economic problems, a relatively unexplored theme.

Indian Diaspora as a Strategic Asset

With one of the largest pools of relatively low wage semi-skilled and skilled labour, India is poised as a critical of global sourcing of labour. How can India take advantage of these future trends, so as not only to maximise the welfare of Indians outside the country, but that of those within the country as well? Can international migration and the diaspora be a strategic asset for the country instead of just depleting its best and brightest?
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