Small but effective: India's targeted unconditional cash transfers

Abstract

India's approach to social security stresses the provision of subsidised food and public works. Targeted, unconditional cash transfers are little used, and have been hardly evaluated. An evaluation of cash transfers for the elderly and widows, based on the national household survey data and surveys on social pension utilisation in two, Karnataka and Rajasthan, reveals that these social pension schemes work reasonably well. Levels of leakage are low, funds flow disproportionately to poorer rather than richer households, and there is strong evidence that the funds reach vulnerable individuals. A comparison with the public distribution system reveals that the main strength of the social pensions scheme is its relatively low level of leakage. This paper hypothesises that social pensions suffer less from corruption than India's other safety net programmes either because of the low levels of discretion involved in their delivery or the small size of the transfers involved. Since we cannot choose between these two hypotheses, the scaling-up of the social pension schemes, currently underway while warranted, should be closely monitored.

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