Why This?

If you’re gearing up for the UPSC exam, you’ve probably read a lot about cash transfer schemes and their role in welfare. But did you skip over the challenges like financial sustainability or the need for community-driven models? Here’s the deal: UPSC isn’t just about cramming facts, it wants you to dig deeper. It’s not enough to know about PM-Kisan or DBT; understanding the limitations and trade-offs is key. The special part here? The comparison between cash transfer schemes and community-based projects. This insight is crucial for answering those complex GS-2 governance based questions. Don’t miss out!

PYQs Anchoring

GS 2: Electronic cash transfer system for the welfare schemes is an ambitious project to minimize corruption, eliminate wastage and facilitate reforms. Comment. 2013
GS 2: Reforming the government delivery system through the Direct Benefit Transfer Scheme is a progressive step, but it has its limitations too. Comment. 2022

Microthemes: Welfare and Development Schemes

In the Maharashtra and Jharkhand Assembly elections, cash transfer schemes for women became a key focus of political campaigns. In August, the Maharashtra government launched the ‘Mukhyamantri Majhi Ladki Bahin Yojana,’ giving ₹1,500 a month to eligible women in their Aadhaar-linked bank accounts. Similarly, the Jharkhand government introduced the ‘Jharkhand Mukhyamantri Maiya Samman Yojana,’ offering ₹1,000 a month to eligible women.

Reasons for popularity of cash transfer schemes

Direct cash transfer schemes are not a new idea in politics. According to Axis Bank, 14 states in India already have such programs, reaching nearly one-fifth of the country’s adult women. Below are the reasons for rising popularity in cash transfer schemes:

Reason	Description	Example
Increased Voter Turnout	Women’s participation in elections has significantly risen, reflecting their growing political influence.	Women’s voter turnout increased from 47% in 1962 to 66% in 2024, especially in states like Bihar and Uttar Pradesh.
DBT Efficiency	Direct Benefit Transfers (DBT) eliminate middlemen and reduce corruption, ensuring direct delivery of funds to beneficiaries.	The PM-Kisan Scheme directly transfers funds to farmers, cutting delays and middlemen.
Immediate Political Gains	Short-term welfare schemes deliver visible assistance, creating quick political capital compared to long-term projects.	Telangana’s KCR Kit Scheme provides financial aid to mothers immediately after childbirth.
Standardization of Welfare	Successful welfare models inspire replication in other states, showcasing policy learning and adaptation.	Tamil Nadu adopted a maternal welfare scheme modeled after Odisha’s Mamta Scheme.
Fear of Missing Out (FOMO)	States implement similar schemes to remain competitive in garnering electoral support.	Rajasthan’s Guaranteed Income Schemes followed Chhattisgarh’s Nyuntam Aay Yojana.
Addressing Structural Issues	Focused on gender-related challenges like education gaps and child marriage, enhancing targeted social welfare.	Madhya Pradesh’s Ladli Laxmi Scheme promotes girl child education and financial empowerment.

Significance of Bypassing Middlemen

Direct Cash Transfer (DCT) schemes have revolutionized welfare delivery by ensuring funds reach beneficiaries directly, reducing delays and leakage. They empower individuals to make choices about spending, boosting financial inclusion and local economies. For instance, schemes like PM-KISAN or DBT in LPG subsidies have shown how effective they can be. However, bypassing middlemen is crucial to realizing their full potential.

Middlemen often dilute the benefits through corruption or mismanagement. Leveraging technology like Aadhaar-linked accounts and real-time monitoring can eliminate such inefficiencies, ensuring every rupee serves its purpose—uplifting lives without unnecessary hurdles.

Advantage	Description	Example
Reduction of Corruption	Minimizes corruption by eliminating intermediaries in welfare distribution processes.	MGNREGA payments transitioned to DBT, reducing delays and systemic corruption.
Personalized Political Relationships	Direct assistance fosters goodwill and loyalty among beneficiaries, enhancing political relationships.	West Bengal’s Lakshmi Bhandar Scheme provides monthly stipends to women, building goodwill.
Immediate Impact	Offers instant financial relief, addressing urgent needs of economically vulnerable populations.	Delhi’s Widow Pension Scheme provides immediate support to widowed women in financial distress.
Enhanced Accountability	Ensures better tracking and transparency of fund utilization through digital monitoring systems.	PM-KISAN transfers are monitored digitally, ensuring timely and accurate disbursements.
Promotion of Financial Inclusion	Brings unbanked individuals into the formal financial system, empowering them economically.	Jan Dhan-Aadhaar-Mobile (JAM) trinity has enabled access to banking services for millions.

Key Challenges of Cash Transfer Schemes

Lack of Welfare Innovation
- Over-reliance on cash transfers hinders the development of diverse, community-based welfare models.
- Many states replicate cash assistance programs without exploring alternatives such as local empowerment or infrastructure development.
Political Conformity
- Opposition-controlled states often implement cash transfer schemes to align with central government policies, lacking unique or locally adapted welfare strategies.
- Even progressive states like Kerala have adopted cash transfers despite previously having strong, distinct welfare systems.
Efficiency vs. State Capacity
- A focus on cash transfers diverts attention from addressing systemic issues in welfare delivery.
- Critics argue that schemes like PM-Garib Kalyan Yojana address the symptoms of poverty rather than tackling the root causes, such as employment generation and education reform.
Temporary Solutions
- Cash transfers offer short-term relief but fail to address long-term solutions to systemic poverty.
- Programs like Jagananna Ammavodi in Andhra Pradesh provide financial support for education but lack skill-building components necessary for sustainable growth.
Financial Sustainability
- Relying heavily on cash transfers may strain government finances, especially in the long run.
- Without regular budgeting adjustments or innovative financing methods, such schemes may face challenges in maintaining financial sustainability.
Exclusion Errors
- Cash transfer schemes may exclude deserving individuals due to inaccuracies in beneficiary databases or targeting methods.
- Inaccurate beneficiary lists can lead to marginalized groups being left out of crucial assistance programs.

Way Forward

Diversification of Welfare Approaches: Move beyond cash transfers by exploring community-based projects and sustainable welfare models.
Improved Targeting and Inclusivity: Enhance the accuracy of beneficiary identification through better data management systems and regular audits.
Focus on Long-term Solutions: Shift the focus from short-term relief to long-term poverty alleviation strategies. Implement programs that include skill-building, job creation, and education reforms alongside cash transfers to address root causes of poverty.
Financial Sustainability and Innovation: Develop innovative financing mechanisms, such as public-private partnerships, to ensure the long-term sustainability of cash transfer programs.Regularly reassess funding strategies to avoid over-reliance on government budgets and ensure that funds are allocated efficiently and sustainably.

#Back to basics: Cash transfer schemes

Definition: Direct monetary benefits are transferred to beneficiaries’ bank accounts.

What is the difference between cash transfer schemes and community based projects?

Parameter	Cash Transfer Schemes	Example (Cash Transfer)	Community-Based Projects	Example (Community-Based Projects)
Definition	Direct monetary benefits transferred to beneficiaries’ bank accounts.	PM-Kisan: Income support for farmers.	Welfare delivery through community-driven initiatives addressing collective needs.	MGNREGA: Employment for public asset creation.
Focus	Individual financial assistance for immediate relief.	Janani Suraksha Yojana: Promotes institutional deliveries.	Long-term empowerment through community engagement and infrastructure development.	Self-Help Groups (SHGs): Empower rural women to address socio-economic challenges.
Efficiency	Efficient: Reduces bureaucracy and ensures direct fund transfer.	Delhi Widow Pension Scheme: Ensures quick financial relief.	Challenging: Requires robust administration and local participation, which can delay implementation.	Watershed Development Program: Restores ecosystems for better agriculture.
Target Population	Targets specific groups like women, farmers, or low-income households.	Ladli Scheme: Promotes girl child welfare.	Benefits the entire community, fostering inclusiveness.	Amul Cooperative Model: Drives rural economic development through cooperatives.
Sustainability	Limited: Addresses immediate needs but lacks sustained welfare mechanisms.	Rythu Bandhu: Financial aid to farmers for seasonal crops.	High: Builds long-term assets like schools, roads, and water resources.	Watershed Development Program: Supports sustainable agricultural practices.
Economic Impact	Boosts consumer spending in the short term.	Delhi Widow Pension Scheme: Increases immediate consumption.	Improves infrastructure, enhancing productivity and community well-being.	Amul Cooperative Model: Rural milk cooperatives boost the economy.
Accountability	High transparency through DBT but limited public scrutiny of fund utilization.	Ladli Scheme: Ensures transparency in fund distribution.	Accountability is shared by community members but may face inefficiency or misuse.	Sabla Scheme: Empowers adolescent girls through nutrition and education initiatives.