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This debate is also linked to the larger question of whether the economic reforms and the GDP growth generated in the past 15 years have helped reduce poverty at the pace desired. There is now a consensus that poverty has not gone down at the expected rate and inequality has widened as per accepted empirical measures. So it is all the more urgent that the Indian state attempts a more foolproof method to deliver social welfare funds to the real beneficiaries among the poor. The welfare state also needs to reinvent itself to meet the demands of the time.
Of course, this cannot happen overnight. The government needs to build adequate infrastructure to electronically transfer funds into the bank accounts of the poor. To begin with, full banking access will have to be created for about 150 million poor households.
The banking system is key to the cash transfer programme. Since banks cannot penetrate scattered rural households with the existing branches, a system of banking correspondents — individuals who will visit villages on behalf of banks, with a hand-held electronic device — is being put in place. The Reserve Bank of India (RBI) is in the process of fine-tuning this system. The State Bank of India (SBI) has already appointed over 30,000 banking correspondents, who will open accounts and deliver cash on behalf of the government to households verified through the Aadhaar biometric system. As in Brazil, cash withdrawals will be facilitated through rural ATMs. Currently, India has about 85,000 ATMs but 70 per cent of these are in urban centres. Another 60,000 ATMs are being planned by bank and non-bank entities over the next two to three years, largely in rural areas. The government also plans to introduce some half a million mobile micro ATMs, which will be carried by banking correspondents, to cover all villages.
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