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India's direct cash transfer experiment draws a lot from the Brazilian one, which has succeeded in reducing poverty and inequality over the past 15 years. Its success is now officially recorded in independent research by the United Nations Development Programme (UNDP) and the World Bank. The experiment in Brazil, called Bolsa Familia, was responsible for a 21 per cent drop in inequality between 1995 and 2004. This is a sizeable impact, considering Bolsa Familia contributed to less than 0.82 per cent of the total family income, according to a paper published by UNDP.
This shows that cash delivered directly to the bank accounts of the very poor could result in a non-linear improvement in the reduction of inequality. In the Bolsa programme, cash is delivered to a poor household's bank account on the condition that the children will go to school until they are 17 and will have a full set of vaccinations in their first five years. Both economists and practitioners of public policy aver that by spending just 1 per cent of the GDP on this programme, Brazil has managed to improve education levels and health indices, and reduced inequality.
The ex-Brazilian minister Romula Paes de Sousa, who was involved with this programme, has publicly stated that a positive global evaluation of Bolsa Familia has won it widespread legitimacy. India also needs to demonstrate its own version of Bolsa Familia, one which will acquire legitimacy over time and prove the naysayers wrong. The Brazilian minister had admitted it was initially difficult to persuade the middle class to support such a big investment at the bottom of the socio-economic pyramid. This will be a challenge for the Indian political class too, as 70 per cent of the current subsidies, explicit as well as implicit, are cornered by the middle class. Some sacrifices will have to be made by it.
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