The recent proposal of the Finance Minister to replace the current Public Distribution System (PDS) with Cash Transfer mechanism to the poor to fund entitlements can, in my view, defeat the very purpose of doing it.
It is appreciable to see government’s willingness to thwart heavy diversions (About 66%) in the current PDS, but converting the whole system into a cash transfer mechanism by emulating economies like Brazil, Mexico, Jamaica etc.. is a huge miscalculation. Apart from the challenges of the meagerly inclusive banking system and complexity associated with India, there are few more issues entangled like:
1) The fund provided to the poor might get directed towards unproductive means. (Liquor, Smoking etc…) and poor might start resorting unhygienic sources of basic needs to save the money.
2) Leads to lethargy and hit the productivity of the labour (Repercussions of NREGA)
3) Instead of financial inclusion, we might end up having “Inflation inclusion” (Inflatory pressures due to more disposable income)
4) Disturbance in families due to fund mismanagement.
Why can’t the exchequer create a better reporting and fund flow mechanism in current PDS rather than going for a move that cannot be called back in future due to political pressures.
If government is looking for empowerment of local liquor stores, kirana stores, keep family courts and panchayats busy, then it can go ahead with P-Di-S (Public Disturbance System)
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