The government of Delhi and the centre recently announced that they were ready for a partial transition from the public distribution system (PDS) to transferring cash to the poor. This decision once again opened up the debate about whether ‘food’ is better than ‘cash’, and whether this proposed move is simply one more right-wing, neo-liberal reformist measure aimed at dismantling India’s social protection architecture for the poor, which currently hinges critically on rice and wheat transferred through the PDS.

I argue that there is nothing inherently ‘right-wing’ about giving cash to the poor, and this debate merely serves as a justification for persisting with a choked system which does not reach the poor. In fact, a careful examination of the arguments on both sides leads one to conclude that there is agreement on basic, foundational principles on both sides, and both could face similar challenges in implementation arrangements. But the critical difference is that there is nothing inherently rational about arguing that in-kind transfers are a superior way of either the state reaching the poor, or the ultimate goal of poverty alleviation. In fact, transferring cash to the poor through secure technologies is a step towards freeing them from the clutches of middlemen and rent-seekers.

First, the basic principles on which I find agreement: Economist Jean Dreze and the supreme court-appointed commissioners for the Right to Food are prominent among those who argue in favour of continuing with the PDS, and are leading lights of the Right to Food campaign. Perhaps nothing elucidates the convergence of the vision of the two sides than the opening lines of this campaign: “The campaign believes that the primary responsibility for guaranteeing basic entitlements rests with the state” (see www.righttofoodindia.org/index.html). In their fundamental vision, conditional cash transfers (CCTs) in Latin American countries, which have become the model for cash transfer, too accept this basic responsibility of the state, and guarantee not just cash but the entitlement to basic healthcare, nutrition and education. All of these are considered as duties of the state, entirely consistent with the capabilities approach to human development.

So, the underlying vision of the role of the state in the case of the CCTs is not that of a ‘limited or minimal state’ but one that understands the multi-pronged nature of poverty. The ‘conditionality’ is not just an obligation on the citizen to attend schools and health centres, but an obligation on the state to provide these welfare measures in the first place. The transition to cash does not absolve the state of these critical responsibilities in promoting human development.

During my interactions with grass-roots organisations and activist groups while working with the Delhi government on the cash transfer project, I became aware of some genuine concerns too, if food was to be replaced with cash. In times of inflation, money would have less value for the poor, whereas grain would hold some real value, they argued. This fear has a basis as the poor have been the worst sufferers of the rising inflation in our country, and also articulates the poor’s expectation that the state must protect them against income vulnerabilities in difficult times. But I am aware that the design principles of the CCTs allow for inflation-indexed transfers, which are ‘real’ and not a token measure on the part of the state. Besides, the poor are anyway exposed to inflation as the food grains they get through PDS are not enough to meet all the needs of the household. They have to buy food from the market to meet their family needs, over and above what the PDS gives them. So, controlling inflation is a separate and specific policy priority. Giving the poor cash does not make them anymore vulnerable to inflation than they already are.

Moreover, pilferage and high-handedness of ration shop dealers ensure that the poor do not get what is due to them. Studies show that the poor either buy grains diverted from the ration shops from the grey market at prices above government-determined fair prices or from the open market. In answer to the household fears of being abandoned by the state in case of extreme vulnerability, I argue that the state ought to transfer cash as a part of a revamped social protection architecture, where basic entitlements and assistance in case of old-age, widowhood, disability and health risks are enabled by the state – simply as minimum assistance.

Activists who favour of the in-kind transfer also argue that if cash is given to the poor, there is no guarantee it would be spent on food and it would most likely be spent on alcohol instead.

I find this argument flawed on analytical grounds and without any basis in fact. Food and not alcohol would be the first priority of a very hungry person if income vulnerabilities are taken care of. Besides, making the transfers directly to bank accounts of women heads of household is a design-based guarantee in CCTs that it is household priorities rather than skewed demands that would take precedence. The then chief secretary of Delhi government raised this issue (among others) during his interactions with the Inter-American Development Bank (IADB) chief Santiago Levy, who has been the architect of Mexico’s cash transfer programme called Progressa. Levy directed us to many evaluation studies which confirm that the cash transfers have in fact been used for food as a priority.

After this, the poor need to be trusted for their rational judgement. Tethering them to in-kind transfers is premised on a certain kind of paternalism, which is not consistent with the spirit of equality. One strong argument in favour of transferring cash, brought out very well by the Self-Employed Women’s Association (SEWA) study and the United Nations Development Programme (UNDP) experiment, as also in Delhi chief minister Sheila Dikshit’s interactions with beneficiaries was that women preferred cash. They narrated tales of how they faced harassment by ration shop dealers, had to wait up to ten days to get their entitled quota, never got the full amount, and reported rampant adulteration.

One last impediment and a lesson that cash transfers must learn from the Right to Food campaign: cash or even UID-type biometric identification does not guarantee accurate targeting, as they have no answer to the question ‘who are the poor’. More liberal norms for identification of the poor, such as those recommended by the NC Saxena committee, and the Delhi government’s own Vulnerability Survey are useful starting points. Unless a more liberal and trustworthy regime for the identification of the poor is put in place, cash will as much be a tool in the poverty-vote-politics warfare as PDS has been. Cross-learnings from other developing countries such as Brazil and allowing states within the Indian federation greater choice in guaranteeing welfare are some more policy steps that would make for meaningful ways in approaching the daunting challenge of poverty and inequality in our country.