What are the Arguments For and Against the Cash Transfer Policy?
Aspect | Arguments For | Arguments Against |
Fiscal Impact | ● Provides immediate financial relief to vulnerable populations.
● Boosts purchasing power and stimulates local economies. |
● Imposes a significant fiscal burden, diverting funds from long-term investments like infrastructure and healthcare.
● May lead to underfunding of critical public services like education and sanitation. |
Dependency | Acts as a safety net for households without stable incomes. | ● Risks creating a culture of dependency, discouraging employment and entrepreneurial efforts.
● May undermine work ethic and skill development. |
Inflationary Pressures | Increases demand, potentially spurring economic growth. | Could lead to localized inflation and erode the purchasing power of cash transfers. |
Addressing Socio-Economic Issues | ● Directly tackles immediate challenges like poverty and unemployment.
● Promotes social equity by targeting marginalized groups. |
● Offers short-term relief but fails to address structural issues like lack of quality education or job creation.
● May oversimplify complex socio-economic problems requiring deeper policy interventions. |
Risk of Misuse | Empirical evidence shows recipients typically spend transfers on essentials like nutrition and education. | ● Unconditional transfers might be misused on non-essentials or harmful activities (e.g., alcohol, gambling).
● Risk of inefficiency in implementation or beneficiary identification. |
Electoral and Political Impact | ● Demonstrates responsiveness to public needs and fulfills electoral promises.
● Enhances political legitimacy and accountability. |
● Often introduced close to elections, seen as populist measures aimed at securing votes.
● Focus on short-term political gains over long-term stability and growth. |
Equity | ● Helps build financial independence for women, promoting gender equality.
● Supports inclusive growth for marginalized and disadvantaged communities. |
● Unconditional transfers might not be targeted effectively, benefitting non-deserving individuals.
● Universal schemes risk spreading resources too thin to make a substantial impact. |
Economic Opportunity Costs | Provides immediate economic stimulus by boosting consumption. | Diverts resources from alternative investments with higher long-term returns, like skill development. |
Sustainability | ● Leverages existing digital infrastructure for efficient implementation (e.g., DBT).
● Ensures transparency and minimizes leakages by bypassing middlemen. |
● Poses long-term sustainability issues without clear exit strategies or sustainable revenue sources.
● May lead to socio-political backlash if phased out. |