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India aims for cash transfers in welfare overhaul

Welfare system worth $61 billion will be reviewed as government eyes a more efficient cash-based system

AFP, Friday 28 Sep 2012
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India's prime minister gave the greenlight Friday for a radical overhaul of the country's $61-billion welfare system that would see the government make cash payments direct to the needy.

After several trials of cash transfers in different areas of India, Premier Manmohan Singh approved the idea of implementing the policy nation-wide that would change the way hundreds of millions of poor access entitlement programmes.

No date has been set for implementation -- it could take years -- but committees will be tasked with turning a system already in use in countries such as Brazil and Mexico into a reality for India and its 3.25-trillion-rupee ($61-billion) annual welfare budget.

This is to be done in a fast-track, accelerated mode to be achieved in a time-bound manner," a statement from the prime minister's office said.

"The idea is to move to a completely electronic cash-transfer system for the entire population."

Welfare schemes such as scholarships for education, old-age pensions or unemployment benefits have been identified as the first to be switched over to the new system, an official in the PM's office told reporters.

Scholarship fees, for example, are currently paid by the government to a university and are then accessed by the student.

The main advantages in paying cash directly are that corruption can be reduced by removing government middlemen who often demand bribes to dispense subsidised products or services, while the poor can be better targeted, the official said.

The government also sees cash transfers as making welfare schemes easier to monitor and reform if necessary.

"All the pilots were found to be quite encouraging and that is why this decision has been taken to go ahead," said the official, who asked not to be named.

The move towards cash transfers is linked to another ambitious government programme aimed at giving every citizen a unique biometric identity number which has made steady progress since it started dispensing numbers in 2010.

About 200 million Indians have so far received a Unique ID (UID) number and the organisation in charge of implementation is aiming to cover 600 million in the next 18 months.

Only those with a UID and a bank account will be able to receive direct cash transfers from the government for their entitlements, the official in the PM's office explained.

The latest announcement by Singh comes as the government pushes ahead with a string of long-stalled measures in a bid to revive its own fortunes and the economy, which has been hit by a slump in business confidence.

Singh's cabinet unveiled a reform blitz two weeks ago when it cut diesel subsidies, announced part-privatisations of state firms and opened up to foreign direct investment in retail, aviation and broadcasting.

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