Cash Is a Safety Net, Not Yet a Springboard: Designing Transfers That Lift the Poorest

Source: Original editorial ↗ The Indian Express

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The Lift Line

“They must see social welfare programmes as trampolines ... that not only protect people from poverty but also empower them to thrive.”

Why This Editorial Matters for Your Exam

Saptarishi Dutta, formerly Senior Communications Manager, and Parikrama Chowdhry, Associate Director, Policy, at J-PAL South Asia (the Abdul Latif Jameel Poverty Action Lab), bring evidence from randomised evaluations to one of India’s biggest policy trends: State cash transfers to women. It is directly usable for GS2 questions on welfare design and GS3 questions on poverty and inclusive growth.

GS Paper 2: Welfare schemes for vulnerable sections; issues relating to poverty and hunger; role of self-help groups. GS Paper 3: Inclusive growth; poverty; government budgeting.

Background and Context

The spread of cash transfers. 17 of 28 States and Delhi now send small monthly sums directly to people, often women, according to Crisil Intelligence, the authors write. Examples include Madhya Pradesh’s Ladli Behna (2023) and West Bengal’s Lakshmir Bhandar (2021). The Centre’s PM-KISAN (2019) pays Rs 6,000 a year to landholding farmer families.

The two models.

Feature	Unconditional cash transfer	Graduation Approach
What is given	Money, no strings	A productive asset (livestock, a small shop), consumption support, training, savings and mentoring
Duration	Ongoing, usually monthly	Time-bound, up to two years
Target	Broad (women, farmers, the poor)	The ultra-poor
Strength	Simple, cheap to run, respects choice	A “big push” out of the poverty trap
Limitation	May smooth consumption without building livelihoods	Costly per household; needs skilled field staff

The Indian applications, as the authors describe them.

Programme	Detail
Satat Jeevikoparjan Yojana (SJY), Bihar	Launched 2018 through JEEViKA; has reached 200,000 of the State’s most vulnerable households
Samaveshi Aajeevika Yojana	Launched by the Ministry of Rural Development under DAY-NRLM, inspired by SJY
DAY-NRLM	Began as the National Rural Livelihoods Mission in June 2011; mobilises poor rural women into self-help groups

The Graduation Approach was developed by BRAC in Bangladesh in the early 2000s. A 2015 study in Science by Abhijit Banerjee, Esther Duflo and colleagues across six countries found lasting gains; Banerjee and Duflo shared the 2019 Nobel Prize in Economics with Michael Kremer for their experimental approach to poverty.

The Analysis

1. The evidence for cash is strong. An analysis of more than 115 studies in 32 countries found that unrestricted cash improved food security, income, savings, spending and psychological well-being. Fears of laziness or spending on alcohol and cigarettes are not borne out.

2. But fiscal space is tight. States spend nearly 80 per cent of revenues on salaries, pensions, subsidies and interest. Every rupee of transfer must work harder.

3. Poverty has many dimensions. A person without nutritious food lives in unsanitary conditions, falls sick and cannot hold a job. One instrument cannot fix all of this, so cash should be complemented by livelihood programmes.

4. Graduation beats cash for the poorest. A study in Uganda by Innovations for Poverty Action researchers found the Graduation model outperformed unconditional cash for people in extreme poverty. In Bihar, women supported under SJY started small grocery and food shops, made business decisions independently and reported greater confidence.

5. Design details decide results. Timing, frequency and conditions matter as much as the amount. Transfers in the early years of life yield larger human-capital gains; monthly payments help daily needs, while lump sums can build a stable future.

6. From net to trampoline. With about 20 crore people in multidimensional poverty, the authors write, and a strong digital public infrastructure, India can afford to be creative, borrowing Tharman Shanmugaratnam’s idea of welfare as a trampoline.

Data and Institutions Vault

Prelims-grade facts:

Schemes:

• DAY-NRLM: launched as NRLM in June 2011, Ministry of Rural Development; SHG-based.
• Satat Jeevikoparjan Yojana: Bihar, 2018, through JEEViKA; graduation model for the ultra-poor.
• PM-KISAN: 2019; Rs 6,000 a year in three instalments.
• Direct Benefit Transfer (DBT): launched 1 January 2013; enabled by the JAM trinity.

Evidence and ideas:

• Graduation Approach: pioneered by BRAC, Bangladesh; asset, stipend, training, savings, mentoring.
• J-PAL: founded in 2003 at MIT; Banerjee, Duflo and Kremer: Nobel 2019.
• NITI Aayog MPI: multidimensional poverty fell from 29.17 per cent (2013-14) to 11.28 per cent (2022-23).

⚠️ Watch the trap: the national MPI is published by NITI Aayog; the global MPI by UNDP and OPHI (Oxford); their numbers for India differ because of method and year.

The Debate

For the authors’ view. Tailoring transfers to needs, and adding graduation support for the poorest, gets more poverty reduction per rupee in a fiscally constrained system.

The complications. Graduation is expensive per household and relies on skilled cadres, which limits scale; unconditional cash is simple and dignified; and State schemes often follow electoral calendars, not evidence.

The balanced verdict. Keep cash as the universal floor, target graduation packages at the ultra-poor through SHG networks, fund rigorous evaluation, and align transfers to life stages (early childhood, adolescence, old age).

How to Think About This

Ask what the rupee is meant to do. Is a transfer meant to smooth consumption (a net), build assets (a springboard) or shift behaviour (a nudge)? The right design follows from the goal, and a good answer names it.

Diagram-in-Words

Takeaway Box

• Trend: 17 States and Delhi pay monthly cash, mostly to women.
• Evidence: unrestricted cash improves welfare (115 studies, 32 countries).
• Limit: tight State finances; poverty is multidimensional.
• Model: Graduation Approach (BRAC): SJY in Bihar; Samaveshi Aajeevika Yojana.
• Idea: welfare as a trampoline, not only a net.

Sources: The Indian Express, NITI Aayog, Multidimensional Poverty in India since 2005-06, J-PAL South Asia

Source: Cash Is a Safety Net, Not Yet a Springboard: Designing Transfers That Lift the Poorest — Ujiyari.com | Free UPSC & State PCS Editorial Analysis

Key Arguments at a Glance

Saptarishi Dutta and Parikrama Chowdhry of J-PAL South Asia argue that cash transfers work and should continue, but that India’s limited fiscal space demands smarter design: pairing money with productive assets, training and mentoring on the Graduation Approach model, and tailoring the timing, size and conditions of transfers to what works for whom.

✓ Supporting

• According to Crisil Intelligence, 17 of 28 States and Delhi send small monthly sums directly to people, often women; a review of over 115 studies in 32 countries found unrestricted cash improved food security, income, savings and well-being without raising spending on vices.
• States spend nearly 80 per cent of their revenue on salaries, pensions, subsidies and interest, so programmes must work as springboards, not only safety nets.
• The Rural Development Ministry’s Samaveshi Aajeevika Yojana under DAY-NRLM draws on Bihar’s Satat Jeevikoparjan Yojana, which has reached 200,000 of the most vulnerable households since 2018, using BRAC’s Graduation Approach.
• A study in Uganda found the Graduation model outperformed unconditional cash for the extremely poor; transfers also build more human capital when received early in life, and lump sums can have lasting effects.
• About 20 crore Indians are still multidimensionally poor, and digital public infrastructure makes direct transfers feasible and efficient.

⚠ Counter

Graduation programmes are costly per household and need skilled field staff, which limits scale; unconditional transfers are simpler, cheaper to administer and respect recipients’ choices; and competitive State schemes may be driven by electoral cycles regardless of evidence.

→ Way Forward

Keep cash as the base of social protection, add graduation packages for the ultra-poor, evaluate which designs work for which groups, time transfers to early childhood, and treat welfare as a trampoline rather than a net.