For the Love of writing...
Tuesday, November 27, 2012
  This could be the Congress governments redemption for all the wrong that it did

In what could be the single most important reform after the reforms of 1991, the government of India announced that it will roll out the direct cash transfer scheme in all districts in India in 2013. 

Ideally, when the government announces something like this, it hardly provokes excitement because in all probability the government is going to fail to implement it. This case, however, is different.
If the government is indeed able to implement the scheme through the whole of India it will do a great deal to plug corruption in the entire country. Imagine this, of all the billions of dollars that the government spends on subsidies only 2% reaches the intended beneficiary. If not all, but most such leakages will be plugged with the introduction of the direct cash transfer. No more long lines in front of the ration shops, people can buy rice and wheat straight from the nearby grocer and expect to be compensated by cash in their bank accounts.

But will the government be successful in implementing it. The answer is, yes! Because, the Congress lead government now has its back against the wall. At this point of time, there is no chance that the present government wins a third term, a rare achievement for any government in India. Unless however, the government is able to give an incentive to the people and nothing is better than cash.
This will have two major impacts on the situation in the country.

One, you will have a huge amount of food inflation. The cost of products like milk and eggs will increase substantially in almost all states. Analysis published previously indicates how people at the bottom of the pyramid spend their first few hundred rupees. There will be a big demand for soaps, toothpastes, shampoos and beauty creams and that will impact the bottom lines of FMCG companies.
Two, there will be significant labor shortage across the metropolitan cities in India. This population would migrate to the city and perform odd jobs for just a few bucks because of an absolute non-availability of jobs in the villages. They will now be tempted to return back to the villages and this was already witnessed after the implementation of MNREGA.

In spite of all the misdoings of the Congress government, it has to be applauded if it is able to pull this one through. 

I am just hoping that it does!


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