Making a case for direct cash transfers

The state government of Bihar has a scheme that gives out bicycles to girls so they keep going to school. TheMukhyamantri Balika Cycle Yojana is one of the Chief Minister, Nitish Kumar’s pet projects. A five-year old scheme, most media articles have been in praise of this scheme – of both its impact on education status of girls in the state as well as the effective utilisation of government funds.

Also came across an old blog-post by Nitish Kumar. I dont normally follow such blogs, choosing to avoid the political propaganda, but the following reference to the bicycle scheme sounded interesting –

…I held a meeting with senior officials of the Human Resource department asking them to work out a plan for distribution of free bicycles among all high school girls. The department promptly invited tenders from the companies and the lowest quoted price was Rs 1,840 for each bicycle. The officials of the department advocated for bulk purchase of bicycles and their distribution through official machinery…(but) I thought that purchase of bicycles through tenders might give rise to corruption in future. Instead, I was in favour of handing over money through cheques directly to the beneficiaries. I thought it would not only simplify the entire process but also make the scheme transparent. I, therefore, asked the then secretary of the Human Resource department to add Rs 160 to the lowest quoted price for each bicycle and launch the project straightaway…

…It does not exclude anybody on the basis of caste, creed or economic background. The only eligibility criterion is that the beneficiary should be studying in Class VIII and above in a government-run school…

A few points about the scheme stand out, significant also because this comes from a policymaker’s reflections on a state-sponsored scheme –
  • Firstly, drect cash transfers to the beneficiary households (and I assume, trusting households to use this money appropriately) instead of opting for the more bureacratically cumbersome process of procuring bycycles and distributing them
  • Secondly, easy targeting contributing significantly to the success of the first – the scheme is universal – for all girls enrolled in a government school, required to fulfill an easily measurable eligibility critieria
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