How effective conditional cash transfers are in meeting the objectives of welfare schemes
While cash transfers are widely used by the government to roll out social protection policies and schemes, there has been an ongoing debate among the policy practitioners regarding its efficacy.
Addressing the agenda of inclusive human development, governments at all levels have engaged with the issues of poverty, unemployment, malnutrition, and illiteracy through social protection and welfare policies. These policies have ranged from provisioning of social insurance to that of social assistance, and in many cases, the state has made a point to run its own labour-market programs. Cash transfers are a widely used instrument followed by the government to roll out its social protection policies and schemes.
There has been an ongoing debate among policy practitioners and implementers regarding the efficiency of cash transfer schemes. There is a segment that argues in favour of direct cash transfer schemes vis-à-vis the increased purchasing power it offers to the beneficiary by expanding her opportunity set. There is also a segment of practitioners who reason that unless the cash transfer is made subject to a condition, such as fulfilling a certain attendance percentage in schools towards meeting the outcome of increased enrolments at primary/secondary levels, the intended social outcome cannot be realised.
A parallel proponent of transfers being made in kind (through the modes of Smart Card/Coupons) has also gained prominence among the implementing agencies when it comes to utilisation of the amount disbursed/transferred to the beneficiary. The underlying logic behind these different modes of transfers — be it conditional or unconditional or cash vs kind transfer — is that people tend to display different propensities of consumption subject to their preferences and utility that they draw out of the consumption of certain good (can be education, health, water, electricity, etc.). As long as the utility that a consumer derives from the different combinations of these two goods fall along one curve (read: indifference curve) she can shift to any point on that curve, being indifferent to the combinations. With a certain budget, say β, if a person wants to fix her consumption levels between good X (say, food) and good Y (say, education), it will be a function of the following equation:
aX + bY = β
where 'a' is the price of good X (Food) and 'b' is the price of good Y (Education)
Now, if the government under its role as the welfare state decides to provide assistance to its citizens falling below poverty line towards the consumption of good Y (education), it can do so through direct benefit transfer which sends a fixed amount of cash to the identified person’s account. Identifying that for a marginalised household education may be treated as a priority falling next to consumption. Many Indian states have adopted cash transfer schemes towards subsidising education. However, these cash transfers have been conditional in many cases, which implies that households will be transferred the amount subject to meeting certain criteria of attendance provided by the schools.
Conditional Cash Transfer Programs
Conditional cash transfers (CCT) are a policy instrument designed to attain dual objectives of diminishing poverty directly today and reducing the transmission of poverty to future generations by helping form the human capital of the present generation. This is carried out by transferring an amount to the targeted beneficiary, subject to her meeting of certain conditions like sending children to school or bringing infants to health centres for immunisation.
Brazil’s Bolsa Familia and Mexico’s Oportunidades (formerly PROGRESSA) have been hallmarked as novel examples of CCT because of the huge positive spillover effects they have created in addition to the targeted outcomes. Brazil’s Bolsa Familia that started in 2003, covered those sections of the population where a family’s monthly per capita income was approx. USD 60, and the family had children under 16 years old or a breastfeeding or pregnant woman. 12 million families participated (about 46 million people, which is one-fourth of Brazil’s population) and received Bolsa payments in 2011. The conditions imposed before cash transfers included an updated immunisation card for children between 0-6 years, regular visits of pregnant and breastfeeding women to health centres, enrolment in schools for children between six and 15 years of age and mandatory attendance of at least 75 per cent. These conditions when met, ensured a cash payment into the beneficiary’s account. Eventually, the impacts of the Bolsa Familia Program included a fall in poverty from 12 per cent to 4.8 per cent during 2003 to 2008, improved nutrition for 42 per cent of the families, an overall increase in school attendance between 3.7 per cent and 4.4 per cent for children between six and 17 years of age.
The conditional cash transfers not only met the intended outcomes but also impacted the larger socio-economic development of the marginalised households by providing short term financial support, and inducing inter-temporal behavioural changes.
In India, talking of social sector schemes, in particular, many CCT schemes have been rolled out since the last decade. In the education sector, CCT schemes are aimed at increasing the Gross Enrolment Ratio (GER) of students at all levels of schooling (primary, secondary, higher secondary). Despite the value added to an individual by education, the perceived benefits from education are little understood when it comes to answering the question ‘for how long should children be educated?’ This question becomes more imposing in case of a girl child when a household has to decide between the two distinct bundles of goods — consumption (of food) and education. Based on the classic model that determines the length of schooling, the future returns of additional schooling have to be greater than the short term costs (direct and indirect) incurred in sending a child to school and the opportunity costs of foregoing some economic activity that could have been performed by that child. Notwithstanding, disposable income of the family, societal construct, etc., are also instrumental in shaping a household’s decision on whether to send their children to school or not.
Indian states’ experiences with CCT towards Education
The following sections of this article will highlight a few CCT schemes implemented by some Indian state governments, aimed at increasing the enrolment of the girl child in schools.
It is evident from the above graph that GER for primary education for girls has been decreasing over the years 2010-11 to 2016-17. While GER for girls at upper primary, secondary, and higher secondary levels has shown a considerable increase between 2010-11 and 2016-17, GER primary education for girls remains a challenging issue. Different states have responded to this policy issue by adopting innovative solutions, of which CCT remains at the forefront.
- West Bengal government’s Kanyashree Prakalpa: Launched in 2013, this scheme aims at promoting the girl child’s education and empowerment, and discouraging child marriages. As of today, it has 64.5 lakh unique beneficiaries. This program targets families with an annual income less than Rs 1.2 lakh, girls who are specially-abled or have lost both their parents. It offers an annual scholarship of Rs 750 to the girls who are between the ages of 13 and 18 years, and a one-time grant of Rs 25,000 to the girls who are between the ages of 18 and 19.
- Punjab government’s Bebe Nanki Laadli Beti Kalyan Scheme: Launched in 2012 to improve the sex ratio and provide better education to girls, this scheme offers an amount of Rs 20,000 that will be deposited with the LIC per girl/per beneficiary by the government. LIC will disburse Rs 61,000 to the guardian of the child in different stages up to the age of 18 years. This scheme can be availed by families whose annual income is less than Rs 30,000 (as per the card issued by the Punjab Food and Supply Department). If the girl child drops out of school due to any reason, then no benefit will be given to the beneficiaries or the families after that date.
- Madhya Pradesh government’s Ladli Laxmi Yojna: Launched in the year 2007 by the MP government, the scheme aims at the empowerment of girl child and is applicable to natives of the state. Under this scheme, cash transfers are made to the girl child at different stages. At the time of the girl's admission in the sixth standard, Rs 2,000, and on admission in the ninth standard, Rs 4,000 would be paid to the girl. When she gets admitted to the 11th standard, she would receive Rs 7,500. During her higher secondary education, she would get Rs 200 every month. On completion of 21 years, she would receive the remaining amount, which would be approximately Rs 1 lakh.
A common underlying aspect in each of these three schemes is the program design which directs cash payments to the beneficiaries’ accounts on completing a certain educational requirement. While this encourages the parents of the girl child to educate her by providing monetary assistance, it also induces a behavioural shift in the society towards the educational development of the girls, and hence their empowerment.
Figures 2,3,4, and 5 depict the performance of the states in terms of GER (girls) at primary, upper primary, secondary, and higher secondary levels. In Figure 2, we see that Punjab made a massive stride from nearly 78 per cent GER (girls) in primary education in the year 2010-11, to 102 per cent in 2016-17. Similarly, West Bengal progressed from 93 per cent in 2010-11 to 96 per cent in 2016-17.
Likewise, Figure 4 highlights the performance of Madhya Pradesh over the GER (girls) between 2010-11 and 2010-16 — an improvement from 58 per cent to nearly 80 per cent. And Figure 5 illustrates how all these three states discussed vis-à-vis their conditional cash transfer schemes on education have made progress in higher secondary enrolment between 2010-11 and 2016-17.
While CCT has led to significant positive results in developing countries, they call for a few necessary requisites to be met. Beneficiary selection and program design remain the key aspects of implementing these schemes. Having said this, the clarity on each of the steps that constitute the life-cycle of a cash transfer scheme must exist at each level of governance. These steps are:
Identification of beneficiaries: This stage basically decides on whether the scheme is universal and hence applicable to all, or whether it is targeted and subject to an eligibility criterion for beneficiary selection, or whether the unit of selection is individual or the household. Various studies have indicated that CCT produces better human capital outcomes than Unconditional Cash Transfers (UCT) in the short run. For instance, CCT has outperformed UCT in terms of intermediate participation indicators (like school enrollment or visits to healthcare centres) and human capital outcomes (like learning achievement or health indicators).
Financing of the scheme: It stresses upon whether funds are pooled by both Centre and the state, or either of them. The financing includes payments made to beneficiaries, program administrative and infrastructural costs. For example, the Dhanlakshmi Scheme — which is a CCT scheme for girls — was launched by the Ministry of Women and Child Development in 2008. It covers 11 selected backward blocks of seven Indian states. The scheme provides for cash transfers to the family of the girl (preferably to the mother) on fulfilling certain specific conditions such as birth registration (Rs 5,000), childhood immunisations at specified ages (Rs 1,250), enrolment and completion of primary schooling (Rs 3,500) and enrolment in secondary school and completion of Class 8 (Rs 3,750). Put together, the staggered incentives total an amount of Rs 13,500. While Dhanlakshmi Scheme is an example of the scheme financed by the Centre, ones such as Ladli Laxmi Yojna are state-run and aim at providing monetary assistance to families below the poverty line to finance the educational expenses for eligible girl children.
Delivery and implementation of the scheme: It deals with the operational aspects such as what are the agencies deployed in rolling out of the scheme, what is the process flow for implementing that scheme, and what are the mechanisms used by them for disbursing off the funds to the targeted beneficiaries.
Monitoring and Evaluation: This implies evaluating the performance of the scheme vis-à-vis the key performance indicators at activity, output, and outcome levels. Data on these indicators is collected regularly and evaluated based on a set frequency. Before the scheme rolls out targets, indicators are fixed and benchmarked with reference to which its performance is evaluated.
Coordination: It implies the smooth and streamlined process flow and inter-sectoral coordination in terms of scheme delivery. Often many agencies and line departments are involved in implementing a scheme. For instance, for an education cash transfer scheme targeting the BPL families, state governments would rope in the Education Department as well as the Department of Civil Supplies that will furnish information for beneficiary selection. In the case of Ladli Laxmi Scheme, the Department of Women & Child Welfare has to work in close association with anganwadis where the child has to be enrolled.