Cash transfer scheme can read Mexico lessons

While direct cash transfer is an imported idea, the question is can India import the same steely resolution to make it a success? A poser throws up bigger queries


Trithesh Nandan | December 3, 2012

Santiago Levy and Jose Gomez de Leon are unfamiliar names in India. But as the country moves towards implementing direct cash transfer (DCT) beginning next year, a look at the work of these Mexican sociologists, architects of the cash transfer programme there, offers us a peek into how the ambitious project was implemented successfully in the Latin American nation— as also how to check the loopholes and fix them.

This becomes more significant in light of reports that a recent experiment on providing direct cash in one of the blocks in Rajasthan has run into payment troubles, putting a question mark on the project.

Over to Mexico, then.

Nearly two decades ago, as the Tequila crisis engulfed Mexico its currency, peso, tanked and the ballooning debt levels raised basic questions about the country’s very survival. With the poor hit severely, the Mexican government swung into action quickly with some innovative ground-level measures. Ernesto Zedillo, the then Mexican president and also an economist, formed a team comprising Levy and Leon to give fillip to the anti-poverty programmes.

Like India, Mexico’s anti-poverty programmes were also affected by massive leakages. In short, a colossal failure that helped neither the poor nor the economy at large.

Levy and Leon, both scholars of high repute with foreign degrees and experience of working in government as well, took over at this point and re-launched anti-poverty programmes with a new idea of providing cash directly to the people. It was known as ‘Progresa’, subsequently rechristened ‘Oportunidades’ in 2002.

And by the time Progresa was implemented in 1997, “the scholars became practitioners of the programmes”, as a study subsequently put it. A demographer with sharp mathematical comprehension, Leon set up a target mechanism for the programme. The pilot project was conducted in three cities of the southern state of Campeche. Residents of these cities were more in favour of cash transfer than the subsidies food (milk and tortilla programmes).

Some questions, some confusion

But did the UPA government conduct any such dedicated pilot project on DCT before implementing it?

Ask policymakers about how cash transfer will change the scenario, and the usual pat, and pet, reply is that it has worked wonders in several Latin American countries. But how?

While Mexico went ahead with conditional cash transfer despite resistance from the media, academics and opposition parties, the government there built a consensus in its favour. Levy and Leon organised several briefings, loaded with relevant data and technical information.

Did Indian policymakers emphasise the need for a similar programme here? And while there has been an equal level of criticism of DCT in India, have the policymakers brought the same clarity before the people as their MNexican counterparts did?

Has a similar kind of consensus-building measures been taken with data and relevant information?

These and many other relevant questions have remained unanswered till date in the Indian context.

Mexico vs India: difference in apporoach

The scheme named Progresa, a Spanish acronym for education, health and nutrition programme, targeted Mexico’s poor on the human capacity-building exercise. Levy and Leon linked cash transfers with school attendance, regular visits to health clinics, and nutrition programmes.

The homework done before launching programme in Mexico proved effective, as within two years the scheme started showing positive results: malnutrition, anaemia and stunting dropped rates significantly. The Mexican government also took strict measures to ensure that beneficiary households do not work less to get the regular incentives.

Did we plan a similar target, or link cash transfer with school attendance and meeting health officials?

In India, 51 district magistrates of areas where the DCT scheme would be rolled out from January 1, 2013 will be sensitised about the programme. While this looks fine on paper, rural development minister Jairam Ramesh threw in a bit of political gimmickry in the soup. As he recently told the media, “The Congress district committee chiefs of the areas being covered would also be called to the national capital shortly. (They) would be addressed by party general secretary Rahul Gandhi and finance minister P Chidambaram.”

The Progresa programme, though, was made in a way that political leaders had no influence, and thus couldn’t use the payments to extort political support. Once family conditions improve in Mexico, the cash transfer scheme ceases.

Have we built a similar mechanism in India and insulate it from populist gimmicks by political parties? Apparently not, given Ramesh’s statement and the Election Commission’s decision to question the timing to announce the programme’s launch.

There were rigorous impact evaluations done on Progresa from time to time, making it one of the most studied programmes in the world. But how many social programmes have gone through such serious evaluation process, leave alone independent evaluation, from external agencies in India? The last evaluation for the public distribution system was done back in 2003, nearly a decade ago.

Mexico and Brazil, which has world’s biggest cash transfer programmes ‘Bolsa Familia’, have brought smiles to many faces. India, with a huge infrastructure deficit to bridge before enjoying same success for the last-mile connectivity through this ‘game changer’ scheme, could do well to take a lesson from Levy-Leon guidebook.



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