Direct cash transfers do provide political mileage to rulers, says World Bank study
Moneylife Digital Team 03 December 2012

Voters respond to targeted cash transfers and these transfers can foster support for incumbents, thus making the case for designing political and legislative mechanisms that avoid successful anti-poverty schemes from being captured by political patronage, says a study from the World Bank

The Indian government’s ambitious direct cash transfer scheme using the UID or Aadhaar number as a base may provide rich benefits to the United Progressive Alliance (UPA) government in next general elections. At present over 40 countries use conditional cash transfer (CCT) programs to provide money to poor families, mostly through women. However, several of these countries saw the incumbent who has started the CCT programs reaping political mileage in next election, says a study.
According to a policy research working paper prepared by the World Bank , there is a political economy aspect of such conditional cash transfers or CCT programs. “In theory, anti-poverty programs such as CCTs may play a role in influencing individual political participation—in the form of voting—and preferences, strengthening democratic representation but also producing electoral rewards. For instance, by partly changing the economic circumstances of households, transfer receipts could persuade participant households to exercise their right to vote,” the study ‘Conditional Cash Transfers, Political Participation, and Voting Behaviour’, says.
CCT programs, started over 15 years ago in Latin America, are now used in over 40 countries across the world. Even though certain program characteristics vary from country to country, in general, standard CCTs provide money to poor families, through women, contingent upon investments in the human capital of their children, such as regular school attendance, basic preventive healthcare and better nutrition. A large number of CCTs have been subject to rigorous valuations, most of which show that they have fuelled the twin primary objectives of alleviating poverty in the short term and building the human capital of poor children, the study says.
The possibility of reaping electoral returns by strategically allocating targeted transfers to strengthen political prospects is not only a theoretical prediction but also an issue that has caught the attention in current public debates. Conjectures on possible political rewards linked to participation in CCTs have been reported in the media following presidential elections in Ecuador, Peru, Mexico and Brazil. In the specific case of Colombia, different media outlets speculated right before the 2010 presidential election that the official government had used the expansion and allocation of Familias en Accion (FA), a large scale CCT program to systematically increase its votes. More recently, and perhaps due to current debates on the possible misallocation of program benefits by local politicians, the government of Colombia has passed laws to make of Familias en Accion a formal national poverty reduction program. To further avoid political capture of the program, the law bans enrolling new beneficiaries three months before major elections.
The study points out that despite potential interactions between government policies and voter decision making, little evidence is available to assess whether conditional social transfers encourage people to vote and influence their political choices. Rigorous evidence on the subject however, is starting to emerge. Using individual level self-reported data, Manacorda et al (2011) find that beneficiaries of PANES—a large and temporary unconditional Cash Transfer Program in Uruguay—express larger support for the incumbent that implemented the program. The authors attribute that extra support to the inference of beneficiaries on the politicians’ redistributive preferences as well as from reciprocity. Similarly, evidence for Romania shows that incumbents gained political support through a program aimed at helping poor families purchase a computer, the World Bank study says.
The World Bank says it studied the effect of enrolment in FA, a Colombian CCT program, on the intent to vote, turn out and on electoral choice during the 2010 presidential election. “We provide evidence that relative to non-participants, FA beneficiaries of voting age are 1.6-2.5 percentage points more likely to register to vote. A standard deviation increase in the proportion of FA beneficiaries, at each booth, results in a 1.6-1.8 percentage point increase in the probability of casting a ballot and a 1.5 percentage point increase in the probability of voting for the incumbent party under which the program was expanded. This effect is stronger for women, who are the direct recipients of the cash transfer as established by the program rules. The elected candidate won in the run-off election with a large margin (69% of the votes), thus our results are unlikely to explain the final outcome. However, they show that voters respond to targeted transfers and that these transfers can foster support for incumbents, thus making the case for designing political and legislative mechanisms that avoid successful anti-poverty schemes from being captured by political patronage,” the study pointed out.
Back home, the incumbent union government is facing an uphill task due to several allegations over 2G telecom scam, Coalgate and many others. The UPA, under the leadership of Manmohan Singh (Sonia Gandhi, to be precise), was able to retain power at the Centre twice since 2004 and 2009. With the country slated to go for next general election in 2014, the UPA is facing difficulties on several fronts. In this situation opposite parties and several citizens are raising questions on the intention of the union government to roll out its ambitious direct cash transfer (DCT) scheme, using the UID or Aadhaar.
Bharatiya Janata Party (BJP), the main opposition party, has complained to the Election Commission (EC) about the direct cash transfer scheme. Last week BJP leaders met and submitted a memorandum to Chief Election Commissioner VS Sampath. “We request the Election Commission to direct the government to withdraw the announcement and defer it to an appropriate time after the completion of the election process in Gujarat and Himachal Pradesh,” the memorandum says.
Opposing the move, Communist Party of India (Marxist) or CPI(M) has said that the Union Government's direct cash transfer scheme is “anti-poor” as it would actually cut subsidies due to the high inflation rate and not cover the rising prices of foodgrains. Noting that the Congress had dubbed direct cash transfer as a “game changer”, the CPI(M) Politburo said the scheme was “indeed a game changer whose rules are weighted against the poor, in favour of the UPA-II government’s obsessive commitment to cut subsidies to the working people”.
The government has already announced that it will operationalise a phased shift from subsidy-based system to direct cash transfers for its various welfare schemes from next January in 51 districts to start with through the Aadhaar number developed by the Unique Identification Authority of India (UIDAI).
While the DCT scheme is turning controversial, its premise to use UIDAI’s Aadhaar numbering system that has a potential to erupt as a volcano of malpractices, raises many questions.  Already, many voices have been raised against the forceful implementation of the UID project, with most objections focused on concerns over privacy. Moreover, there are issues over the legality of Aadhaar itself. The National Identification Authority of India (NIA) Bill is still pending before Parliament. The Bill seeks to constitute a statutory authority and lay down its powers and functions, besides deciding the framework to issue the UID or Aadhaar numbers. Yet, the Indian government and UIDAI are going ahead implementing the scheme and issuing Aadhaar numbers without any constitutional validity as yet.
According to an expert, the government is the executive not empowered by the Constitution to implement projects spending public money without legislative sanction. “In the case of UIDAI, while the executive may appoint anyone to head it, the government is legally constrained from implementing the project and issuing Aadhaar numbers,” the expert said.
Linking Aadhaar numbers to direct cash transfer is also not without issues. The government is trying to link the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) scheme and Aadhaar, which uses biometric identification, to directly pay money into labourers’ bank account. Experts have repeatedly pointed out that biometric identification for manual workers has a high 20% margin of error as fingerprints of such workers change. The problem is similar with senior citizens.
Despite all the issues with Aadhaar, DCT, the UPA government is forging ahead with its implementation. From next month, the DCT would be implemented in 51 districts. The government aims to roll out the cash transfer scheme in 18 states from 1 April 2013 and remaining 16 states from 1 April 2014. The final roll out coincides with the general election, unless there are mid-term elections, which at this stage are unlikely.
The World Bank study, especially about the presidential elections in Columbia in 2010 concludes that voters respond to targeted cash transfers and that these transfers can foster support for incumbents, thus making the case for designing political and legislative mechanisms that avoid successful anti-poverty schemes from being captured by political patronage. 
Dayananda Kamath k
1 decade ago
it is nothing but buying votes from poor people. govts main job is law and order, justice and security, external affairs for this they have the right to tax the people. but here the money is being squandered to buy votes by a finance ministerwhose election petition is pending and it is completing 4 years.election commission is least bothered . it will give only warnings and leave as it is and they will get all the benefits of their announcements. god save india
Dr Paresh Vaidya
1 decade ago
Many objections have been listed against the Direct Subsidy Transfer like misuse of cash in wrong avenues,likely delay due to Banks' workload, fake beneficiaries etc; but there is one objection which so far no one has mentioned. That is about people migrating out of eligibility when they become Above Poverty line from BPL status. There is no periodic review of one's income , thus once eligible, always eligible. However Currently the social shame keeps people out of taking undue benefit. For example, if I am well to do I will not like to be seen on a ration shop, so get dropped automatically. But in Direct transfer subsidy comes silently to your bank account and thee is no negative incentive to be dishonest. A strict renewal regime should be introduced to avoid permanent membership.
Replied to Dr Paresh Vaidya comment 1 decade ago
With due respect to Dr. Vaidya, the greedy and the unprincipled have no qualms of being seen in a queue in front of a "soup kitchen" in India! When free TV sets were being distributed, many people were indeed seen to be alighting from their cars and carrying TV sets meant for the BPL people (without electricity connection)! Judges are seen in lower courts to be taking money in open court and even haggling over payments. I know of a Metropolitan Magistrate who contacted an accident victim through a middleman (advocate for State) and demanding money and then taking a " very strict view" of the unreasonable demand of a young boy whose sporting career and future have been ruined for NOT paying the demanded sum and even admonishing his mother in an open court, objecting to her " tone" as she was expressing her displeasure over the measly sum! The corrupt and the lowly (in mind) have no sense of dignity to abstain themselves even from taking advantage of BPL benefits as are often reported too.
Sadanand Vinayak Nadkarni
1 decade ago
it is funny. We seem to be opposed to any action by any political party which is likely to enhance their percentage of voting. If "vote-catching" is bad, what is good?EVERY GOOD STEP MUST GIVE THE PARTY MORE VOTES and that is to be appreciated. The discussion strays from the pros and cons of Direct cash transfer which will undoubtedly reduce money being swindled by intermediaries.
Similarly,the objection to ADHAR appears frivolous, because "finger-prints change" ADHAR also takes iris prints and other measures so that the identity of the person is Unique for that person. I hope we will stop being "opposed" to every new idea.--Dr.S.V.Nadkarni
Replied to Sadanand Vinayak Nadkarni comment 1 decade ago
Thanks Dr Nadkarni for posting your comment. We request you to read an article written by David Moss (who is responsible for curtailing UID scheme in UK)
In addition, you may also want to read, "Right to privacy and biometrics of the UID"
Thanks again
1 decade ago
Thank you for the story. As I have already mentioned earlier on response to a recent piece on your site, AADHAAR is NOT recognised by even an Indian mobile service provider as a valid and legal ID proof and, in view of the petition filed by a retired judge and another (already covered by you), it is now clear that the entire scheme is ILLEGAL, not being supported by any law unlike the PAN under the Income Tax Act. In light of the legal position thus emerging from the plea made in the aforesaid petition, the very basis scheme of cash transfers through bank accounts with reference to AADHAAR cards must therefore be unconstitutional too.
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