Subsidies or Cash Transfers?

In the 2011-12, the FM made announcement for replacing some subsidies on goods with cash transfers
Cash transfers can be conditional or unconditional; targeted or universal.
The purpose of cash transfer schemes is to provide poor people with money and give them the freedom to choose what to do with it.
Problems
- Who get the transfers? How much do they get?
- If they are universal, the money is usually spread around rather thinly, so they account for very little
- If they are targeted, then the familiar problems of targeting (unfair exclusion, unjustified inclusion, large administration costs, possibilities of leakage) all become significant.
For cash transfers to be effective, they have to be
- Assured
- Relatively easy to deliver and monitor
- Large enough to affect household income
Progressive redistributive transfers are desirable
The question is not whether or not to oppose cash transfer in general, but rather what specific importance to give them in an overall strategy of development and poverty reduction
Cash transfers should not replace the public provision of essential goods and services but rather supplement them.

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