Evaluate India’s Direct Benefits Transfers

This is a joint post with William Savedoff.

Earlier this year, Nancy Birdsall and I laid out why India’s new cash transfer program is superior to current in-kind subsidy programs on which the government spends $26 billion a year with no discernible impact on poverty. While not a panacea, the new program has a lot going for it – cash transfers have been shown to work for poverty reduction in many settings, the program uses a biometrics-based system to identify beneficiaries and process payments, and the country has experience in implementing similar programs like the JSY – a cash transfer conditional on a facility birth.

All that is good news, but the new program will not be influential on India’s broader subsidy policy and its misused budget unless it is rigorously evaluated and –if results are promising- scaled up. The program, known as the Direct Benefits Transfers (DBT), is the subject of extensive debate in the press and public life – where for years the interest groups that benefit from food, fertilizer and kerosene subsidies have resisted major changes. The government has been repeatedly accused of pre-electoral pandering (see here, for example), risking the further politicization or possible cancellation of the program if the party in charge of the national government changes.

If instead, India’s policymakers were armed with independent information on the net impact of the DBT on the conditions that the program seeks to alter –nutrition, consumption, asset accumulation and other aspects of well-being among the poor- and could compare those outcomes to business-as-usual results, there would be a fighting chance for the program (if effective) to subsume ineffective in-kind subsidies and improve the well-being of the poor. Cash transfer programs have been rigorously evaluated all over the world, and these evaluations have played an important role in adjusting implementation strategies to enhance impact, and –in Mexico- had much to do with the survival of the effective Oportunidades conditional cash transfer program during two periods of political transition.

India can do this too. And since DBT is set to be the largest cash transfer program in the world, India would be creating a truly global public good in knowledge.

So far, DBT has been rolled out in 16 states and remains small-scale in Indian terms, though enormous in everyone else’s book –16 million beneficiaries in a country of 350 million eligible poor. The next phase of enrollment is set to start in mid-May, so we ask: is there any chance to randomize the roll-out in districts before then? Or ahead of the next phase of roll-out? Just this would enable the Ministry of Statistics or a university to field a baseline and follow-up survey to assess impact.

This is an enormous opportunity not to be missed. All the methodological issues have been hammered out before. The new enrollment phase is about to begin. A clear answer regarding the program’s impact will either save India huge amounts of money in the future or provide credible evidence to preserve the program if it is good. The Indian Government should seize this opportunity now.