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If India is planning to emulate the Brazilian model it needs to remember one thing - the wide net of cash transfers there is not about reducing subsidies, but increasing the efficiency of aid delivery mechanisms
Bolsa Familia, one of the largest and most successful cash transfer programmes in the world, is credited with reducing poverty by 8 percentage points. That might seem like a good reason to replicate the idea in India. However, in Brazil, cash transfers have not been about the government supplanting public services or even reducing subsidies. If anything, the Brazilian government is enhancing the cash transfer to the poorest families as well as making an effort to further bolster public services such as health, housing, education and social security. While Brazil might be justifiably proud of the achievements of Bolsa Familia, it is not viewed as a single solution to poverty or the high levels of inequality in the country.
It took Brazil almost a decade since the launch of cash transfer programmes in 1995 by local governments to launch Bolsa Familia at the central level in 2003. The Bolsa Familia or family allowance programme put in place a single unified registry of the poorest in Brazil and a working system to transfer the cash efficiently through ATM cards issued by a federal bank that runs social programmes, Caixa Economica Federal.
India has been citing the success of cash transfer programmes such as Bolsa Familia as inspiration for a similar scheme here. It is pertinent to note that India already has several cash transfer systems of its own such as the old age pension scheme. However, they have not worked very well and it is hoped that the latest cash transfer scheme being launched in conjunction with the new unique identification number (UID) and Aadhaar cards will work better.
India does not have a federal bank or any bank the size of Brazil's Caixa Economica Federal which can extend banking facilities through ATMs to all those being offered cash transfer. So, it has to be a patchwork of several banks authorised to do the same through various means such as business correspondents, micro-ATMs and so on. Moreover, in Brazil, 85 per cent of the population is urban, and thus more conveniently placed to receive the benefits. In India, on the other hand, only 30 per cent live in cities.
Bolsa Familia merged four pre-existing cash transfers, one for school-going children, another for subsidised gas and two others for food and nutrition, into one programme. Under the unified programme, families earning less than about $35 per capita per month are given a fixed minimum amount of $35 per capita every month by the government. Families who have an income between $35 and $70 per capita will get only a variable benefit and not this fixed minimum one. The variable benefit is a cash transfer of about $16 for every child aged 0-15 years and about $19 for every child aged 16-17 years of age. But to get this cash transfer, the government has imposed three conditions - all children in the family have to be fully immunised, they have to be in school and pregnant women or young mothers in the family have to complete the ante-natal and postnatal check-ups and nutrition monitoring.
What Bolsa Familia does not do is subsume all subsidies or replace government services with cash. "Bolsa Familia is not a silver bullet. It works in conjunction with a set of government policies and interventions that are meant to address various challenges faced by people living in extreme poverty," explains Bruno Camara Pinto, advisor, National Secretariat of Citizenship Income (SENARC) of the ministry of social development and fight against hunger in Brazil. Pinto has been involved with the implementation of the programme for the last seven years.
He explains how congressmen often tried to bring in bills to fix problems in the health and education programmes by adding more conditions to the Bolsa Familia programme or by giving more money through it. "What they don't seem to realise is that Bolsa Familia is a poverty alleviation programme. It is about having the minimum money required to live and so the rules for identifying poor people is a simple criteria of per capita income per month," says Pinto, who believes that it is the narrow focus that has helped it succeed.
The Cadastro Unico or the single registry in Brazil, similar to the one that India is working on, maintained for the ministry for social development by Caixa, is used by various other ministries to offer subsidies and services to the poorest. The single registry covers about a third of the population of Brazil, while Bolsa Familia families extracted from this registry account for a quarter of the population considered the poorest in the country.
For instance, the programme Todos Luz, or electricity for everyone, which uses the registry to identify the poorest families who get a 65 per cent subsidy on power. There is Mais Education, a programme of the education ministry to have more fulltime schools. The schools with the largest number of students from Bolsa Familia families, that is the poorest students, are identified for being made full time. There are programmes for helping communities build structures for storing water especially in arid areas and the communities are identified through the single registry.
Thus the registry which records details of water source, electricity, housing etc. is again used as the basis for running such programmes. The people whose names are in the single registry also get housing loans at much reduced interest and a scheme of easy installments over several years for paying back. Those over 65 years who are in the single registry have a card which makes travel in public transport buses free for them across the country.
Clearly, none of the problems of electrification, access to water or housing or transport for the elderly is being solved by giving people more money through cash transfers. The registry is merely being used for better targeting and to ensure that the really poor are not deprived of the benefits of government programmes and services.
"To overcome poverty, we must bring the number of excluded families to near zero. The registry is revised every two years. It is possible that in the intervening time, some families will continue to receive Bolsa Familia even after they find a job that pays more than the limit set to be eligible for the allowance. Random sampling has found that about 10 per cent of the families might be making more than the cut-off limit. That is okay. It might be more expensive to try and fix it. It is better to pay till it gets cut in the revision," explains Luis Henrique Paiva, secretary of SENARC. Even while trying to target accurately, the focus is clearly on preventing exclusions and a "leakage" of 10 per cent is considered better than risking some deserving people getting excluded.
In keeping with President Dilma Roussef's aim to go beyond mere reduction of extreme poverty to its complete eradication, the push is to increase Bolsa Familia from 0. 4 per cent of GDP to at least 1 per cent of GDP, displaying the commitment of the government to the vision.
What a study of Bolsa Familia and other similar programmes in Brazil suggests, therefore, is a vision totally different from the one driving the push for cash transfers in India. While here the focus seems to be on ensuring that the government's subsidy bill is kept in check, the target in Brazil evidently is to find the most efficient method of providing subsidies to all those who need it.