Friday, February 18, 2011

The CCT mania

  • This doesn’t mean CCTs are a bad idea. Far from it, and several countries, including developing ones in Asia and Latin America, have successfully experimented with CCTs. Especially in education, there are also experiments with education vouchers in more than one state. However, what is the Nandan Nilekani task force going to examine? Is it a cash transfer or is it a voucher? From the nomenclature of the task force, we are talking about a cash transfer. But let’s think of a voucher first. A voucher offers choice, competition and efficiency. However, exercise of vouchers requires existence of choice on the supply-side. One can’t use food stamps if there is only one PDS shop within a radius of 10 km. Yes, supply-side responses occur, but they don’t occur instantly. 
  • Moving on to cash transfers, if they are conditional, they are de facto not that different from vouchers and there will be universal resistance (on several counts) if we move on to unconditional cash transfers. On CCTs, shouldn’t we learn from what is now acknowledged to be a mistake, making NREGA payments mandatory through banks and post office accounts? That required a level of financial inclusion we don’t have. If we wish to successfully introduce CCTs, those pilots should be in so-called elitist and urban areas, where delivery is less of a problem. 
(From Bibek’s article on Saving a good idea)

The original notification of Task Force for Direct Transfer of Subsidies on Kerosene, LPG and Fertiliser to Individuals/Families Constituted is here.

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