Cash transfers: Hit and miss

Article Published : The Indian Express ( 02/12/2024)

Important for –GS1/GS 2/GS 3/ Social Issues/ Welfare Scheme/economic Impact/ Inclusive growth

Gist/ Summary of the Article:

The article discusses the benefits and drawbacks of women-targeted cash transfer schemes in India, such as West Bengal’s Lakshmir Bhandar and Maharashtra’s Ladki Bahin Yojana, which provide monthly payouts to beneficiaries. While these schemes have eased inflationary pressures and promoted independence among women, leading to political dividends for ruling parties, they also pose challenges:

 Benefits:

• Assured cash transfers reduce economic insecurity and empower women in decision-making.
• They help offset inflation’s impact on vulnerable groups.

Drawbacks:

Limited economic impact: Beneficiaries may reduce their working hours, substituting cash transfers for earned income, which can strain labor availability and raise production costs for farmers and small businesses.

Potential disincentive to work: Payments, if not calibrated, could undermine labor market participation.

Risk of state capacity erosion: Over-reliance on cash transfers may replace long-term investments in public services like education, healthcare, and infrastructure, creating a “freebie culture” that prioritizes short-term political gains over national development goals.

The article concludes that while cash transfers offer short-term relief, they should not undermine labor incentives or displace essential state-building efforts needed for sustainable progress.