Enabled through digital identity systems, cash transfers are seen as a route to “development” which improves on subsidies. Our field stories from Karnataka, southern India, dispute this view, illuminating the concern of subsidy recipients for a possible transition to cash.
“Not at all”. Adeela, in the periphery of Bengaluru where we meet her, a long-term user of the country’s Public Distribution System (PDS), is adamant in her response to our question. We asked her whether, in the place of the subsidised food rations she receives under the PDS, India’s largest food security programme, she would prefer receiving a cash transfer of the same value. If functioning properly, such a transfer would allow her to buy foodgrains, sugar and other goods in regular shops, avoiding long queues at the local ration shop and the risk to have her households’ rations partially, or even completely, diverted to the private market.
It’s April 2018. Cash transfers – conceived as transfers to bank accounts made for below-poverty-line recipients, designed to afford the same protection of in-kind subsidies – are being trumpeted as a solution to the issues of the PDS, India’s food security system that heavily subsidises basic-need commodities for the poor. The PDS is India’s largest food security system, build to provide rationed quotas of essential goods, whose content varies across states, at heavily subsidised prices. Highly successful in the early phases of its existence, with a foodgrain trade increased from 10 to over 18 million tons in 1965-1990, the PDS has been later criticised for an urban bias and for presumed leakage to the non-poor, due to the universal nature that the system originally held.
Such concerns led India’s central government, in June 1997, to move to a targeted system where subsidy is directed to households classified as below the poverty line (BPL). In a targeted system, leakage to non-poor households should be eliminated by design, with subsidy restricted to households classified as below state-level poverty lines. The measure was taken with in mind the idea to protect access to the PDS for the truly needful: and still, it generated the strong incentive for PDS agents to divert subsidised goods to private markets, so to benefit from the large price surplus available on them.
Basic economic principles tell us that “cash transfers are better” for the overall economy than subsidies. Said in sheer economic terms, they eliminate distortion, i.e. the alteration in optimal market conditions caused by the intervention of the state. It is argued, along the same line, that “leakages seriously undermine the effectiveness of product subsidies”, because incentives to divert goods to the market ultimately lead to scarcity of goods remaining available to entitled beneficiaries. This is why, in conversation with PDS recipients, frustration is common: at the moment of collecting the monthly ration, the seller may just say “everything’s been sold”, with goods gone to market rather than to actual needful recipients.
Much debate exists on where the main problem of food distribution lies, whether in leakage or, effectively, in inaccurate determination of poverty status, resulting in needful households becoming unable to claim benefits accorded to them under social protection schemes. But whatever position is taken in such a debate, a common note remains: what counts, for recipients at the interface between recognition technologies and the goods they are entitled to, is their effective ability to access their entitlements. This is not to say that inclusion errors, which cause non-entitled people to be erroneously supplied services, are not problematic. But it is to say that exclusion errors, where genuinely entitled people do not receive their entitlements, persist with digital identification, which per se does not involve mechanisms to ensure access to basic-need goods where authentication fails.
But would cash transfers, then, not solve it all?
Let’s get into the argument that India’s Economic Survey made in 2016. In a chapter programmatically titled “Wiping Every Tear from Every Eye: the JAM Number Trinity Solution”, the Ministry of Finance sustained the point that, replacing the PDS with a proper cash transfer system, the distortion induced by subsidies would be eliminated. Such a cash transfer system would rely on three major pillars: a zero-balance bank account programme for all – became known as Jan Dhan Yojana, literally “bank account for the people”; the national digital identification system named Aadhaar; and mobile phones, through which bank transactions could be approved and received. Acronymised as JAM – Jan Dhan Yojana, Aadhaar and mobile phones, the basis of the proposed cash transfer infrastructure would do away with the leakage caused by subsidies, erasing the diversion to the private market that characterised the PDS.
But Adeela’s reaction to the cash transfer perspective is a firm “no”. Echoed by the large majority of respondents we interviewed on this matter.
And there is an overarching reason for that. Subsidised rations are, indeed, not always of the expected amount. And can be delayed, diverted, even skip a month or more. But our respondents depict them as a material reality on their tables. It is the ration that people are used to, it is the ration that, differently from a money transfer perceived as risky and uncertain, brings essential goods to the table of below-poverty-line families since decades. And this, not to mention the intra-familial dynamics that enter the cash transfer distribution, as a respondent told us in a district neighbouring Bengaluru: “At least if we get ration, we have something in the house to eat”.
Not only does Adeela say no. But she is scared by the perspective of a shift that would dismantle the PDS in favour of cash transfers. For as much as economic principles can hold in theory, they need to come to terms with the reality lived by people for whom that ration, that materiality of food on the table, is everything that counts. A materiality that a cash transfer system, it is perceived (in a context of uncertain access to banking transactions), would tear to pieces.
In its guise as India’s Aadhaar, digital identity is a direct route for transition from the “suboptimal” subsidy system to the “optimal” alternative constituted by cash transfers. But the optimality of that alternative ends when talking to its very intended recipients. If it is to transform development policy, which it is doing with its entrenchment in food security systems like the PDS, digital identity needs to find safe, rather than feared, ways to do so.