Cash transfers are not freebies

India ranks poorly in most global indices of women empowerment. The 2023 Global Gender Gap report by the World Economic Forum ranked India at 129 out of 146 countries. India is among the few countries globally to see decreasing participation of women in the workforce in the first two decades of this century, despite stellar economic growth.

Cash and in-kind transfers to women directly allow them to tackle the multiple barriers they face in accessing education and job opportunities, besides living a life of dignity. The AAP government’s free bus rides scheme for women, launched in 2019, is a testament to the lasting impact of such transfers. An independent 2023 study by researchers from Ashoka University and Shiv Nadar University evaluated Delhi’s free bus rides scheme and found that it led to a 24 per cent increase in paid work and employment for women from marginalised sections of society and therefore most likely to gain from affordable public transport.

Over the past decade, the AAP government in Delhi has introduced multiple subsidies, including free electricity and free water schemes, targeted at the lower and middle classes, that have provided a crucial social safety net to these groups and allowed them to live a life of dignity. It has also boosted their purchasing power, which creates demand and keeps the wheels of the economy running. Fears that such transfers often end up being misspent have been thoroughly disproven. Evidence from 119 developing countries running unconditional cash assistance programs shows that recipients of these transfers increased their spending on nutrition, schooling and health.

So, where does one draw the line? These transfers shouldn’t happen at the cost of making adequate investments into building human capital or providing essential public services to all. Over the past decade, AAP’s Delhi Model of governance stands out for having made unprecedented investments in health and education — around 40 per cent of the annual budget. As a result, Delhi arguably has the best government school system and public healthcare system for any Indian state today. In comparison, most Indian states spend little on their crumbling education and public health systems, even as they have introduced cash transfers.

The AAP government has also made lasting investments in infrastructure and provision of essential public services. In the past decade, the electricity distribution network of Delhi has seen a major overhaul, making it the leading Indian state providing 24×7 electricity. The length of the Delhi Metro has doubled from 200 km to 400 km, even as a record number of nearly 2,000 e-buses were inducted, making Delhi the leader in provision of green mobility. Over 10,000 kms of water pipelines and 4,500 kms of sewer pipelines were laid, bringing these amenities for the first time to Delhi’s unauthorised colonies, which are home to a third of its population.

The other yardstick for determining the limit of direct transfers should be their implications on the state’s finances. The Delhi Model stands out again by ensuring that, even as the AAP government made unprecedented investments in health, education, infrastructure and increasing expenditure on subsidies, Delhi’s budget consistently remained in revenue surplus over the past decade and Delhi’s overall debt-to-GDP ratio reduced from 7 per cent to 4 per cent – among the lowest for any Indian state. Throughout this period, Delhi has shown resilient economic performance with the lowest inflation, among the lowest unemployment rates in India and GDP growth at par with rest of India.

Critics of such transfers rarely blink at the true freebies. Over the last decade, Indian banks have written off nearly Rs 15 lakh crore of bad loans of rich corporates with seemingly few consequences for over 12,000 wilful defaulters. In 2019, the BJP-ruled Centre announced the biggest corporate tax cut in Indian history, wiping off Rs 1 lakh crore in revenues annually and resulting in record profits for Indian corporates, even as real wages (inflation adjusted) for salaried workers in India have declined since 2012. One wonders whether the intensity of debates surrounding cash transfers to the poor are manufactured to shield from scrutiny this far more regressive subsidy that the Indian state offers.

The writer is an AAP leader and the author of the book The Delhi Model