A recent study on the Unconditional Cash Transfer Scheme in Karnataka, initiated in July 2023 after the Congress party's landslide victory in the state elections, has revealed notable trends that may bolster the case for future Direct Benefit Transfer (DBT) programmes.
The cash under the Anna Bhagya Scheme (ABS) was utilised by households for various needs, including education, healthcare, debt repayment, and purchasing quality grains.
However, the study also found that approximately 20% of the funds in both urban and rural areas were misused by men for drinking and smoking, often without the knowledge of the female members of the household.
Under the scheme, rural households receive an average of Rs 576 per month, while urban households get Rs 583. Approximately 77% of the funds in rural areas and 82% in urban areas were spent on purchasing grains. The remaining funds were spent on other purposes, some of which included misuse as highlighted in the study.
In July 2023, Karnataka became the first state in India to implement DBT for food grains by offering an unconditional cash transfer of Rs 34/kg/person/month under the ABS.
According to the National Sample Survey Organisation (2022-23), an average Indian consumes approximately 9 kg of cereals per month.
The Union Government has been providing 5 kg of free food grains per person under the National Food Security Scheme. In its election manifesto, the Karnataka government promised to provide an additional 4 kg/person of rice to the people. However, due to difficulties in procuring extra rice last year, the government opted to transfer cash instead.
The evaluation of the scheme showed that farmers generally preferred receiving cash, while labourers and urban respondents leaned towards receiving grains. Some families used the cash to buy more or higher-quality grains, while others treated it as supplemental income, spending it on education, healthcare, or repaying loans.
The study also highlighted that a significant number of families in rural Karnataka opened bank accounts for the first time due to the scheme. About 43% of rural respondents and 33% of urban respondents opened their first bank accounts after ABS was implemented.
The survey, conducted in two rounds during August and September 2023, covered 1,585 households across six districts in Karnataka.
The evaluation study on DBT for rice in Karnataka was released by Dr Ramesh Chand, a member of NITI Aayog, along with Ramndeep Choudhary, Secretary of Food for the Karnataka government. Former Agriculture Secretary Siraj Hussain also presented findings at the event.
The debate over cash transfer schemes remains contentious. Critics argue that providing cash may lead to it being spent on unintended purposes, exacerbating issues like hunger and malnutrition. The current study suggests that some of the cash is indeed being used for non-essential expenditures.
However, supporters of such schemes maintain that cash flexibility empowers recipients, enabling them to allocate funds according to their needs, whether for food, healthcare, or other necessities. Additionally, they argue that the scheme boosts local economies by increasing household spending and supporting small businesses.