As India moves to replace food aid with cash, more evidence is needed on nutritional impacts

July 26, 2016
by Kalyani Raghunathan and Purnima Menon

By Kalyani Raghunathan and Purnima Menon

In May, the Indian government announced a plan to test the use of cash transfers in its Integrated Child Development Services program (ICDS), which provides food aid, preschool education, and some health services to children under six and their mothers. Soon after, the Food Minister urged states to initiate a pilot program to replace public food rations with cash, a move already being tested in India’s federally-run Union Territories.

There is evidence that cash transfers can save money. Officials also hope this approach will do a better job at ensuring people are fed—and ultimately at improving nutrition—than direct food aid. And yet, there is only very limited evidence from nutrition studies done in India to support such large-scale program switch-outs from food to cash. These pilot programs provide the perfect opportunity to expand our knowledge of cash transfer schemes and their impacts.

Since the early 1990s, cash transfer assistance programs of several types—conditional (CCTs) or unconditional (UCTs), income-targeted, selective or universal—have been introduced in many places around the world, with varying degrees of success.

In India, the government has pushed to bring more people into the financial system via use of the Direct Benefit Transfer (DBT), which deposits subsidies to personal bank accounts. And so, cash transfers have become increasingly popular in recent years—they support protection programs for girls, provide maternity benefits, and are used in schemes aimed at improving nutritional outcomes.

The Janani Suraksha Yojana program, begun in 2005, encourages mothers to give birth in hospitals or other medical institutions, and has been credited (not indisputably) with increasing the number of institutional deliveries, while reducing infant mortality and raising rates of breastfeeding. A recent randomized control trial in West Delhi found that replacing public distribution system (PDS) food rations with cash allowed families to switch from cereals to more nutritious food groups while not adversely affecting food security. UNICEF and the Self-Employed Women’s Association (SEWA) tested an unconditional cash transfer program in Madhya Pradesh, and found evidence of a significant improvement in sanitation, access to drinking water, food security and child nutrition.

A handful of other non-food CCTs are undergoing evaluations at the moment. The Indira Gandhi Matritva Sahyog Yojana program (IGMSY), and the Mamata program in Odisha are relatively new maternity benefits schemes, with conditions such as birth registration, pre- and post-natal care visits, and exclusive breastfeeding. The Bihar Child Support Grant (BCSP) is a CCT aimed at improving maternal and child nutrition outcomes. Results of evaluations of these programs are forthcoming.

Officials hope that cash transfers can reduce routine theft and other losses in the ICDS and PDS—an appealing idea. But the lack of evidence on cash transfers’ impact on nutrition in India means we must look elsewhere for guidance. Work by our colleagues in multiple countries and recent synthesis papers (see here for an overview) suggest that the following issues are central to the design of cash transfer programs:

  1. Cash transfer amounts need to be sizeable, and regular. Lump-sum payments distributed at long intervals do not work as well, presumably because they do not achieve the consumption smoothing that smaller, more regular payments do. Lump-sum payments also hamper the ability to support changes in behaviors, especially routine food consumption behaviors, significantly.
  2. Financial inclusion is essential, but difficult to achieve. Bank regulations and requirements pose considerable barriers to participation. It is possible that this will improve rapidly in the coming months and years, but ensuring the poor can qualify for and use these programs, and get easy access to cash once bank accounts are opened, are absolutely essential preconditions for cash transfers intended to support routine spending on nutritious foods.
  3. Assure adherance to program conditions, if any. Hard conditions (which result in penalties if not fulfilled) need to be easy to monitor; many are not. Exclusive breastfeeding for the first six months, for example, is one potential program condition that is almost impossible to verify.
  4. Make sure the services exist in the first place. Requiring mothers to appear for a certain number of pre-natal check-ups only has value if the health services are functional. Similarly, replacing ICDS food with cash will only work where local markets function and recipients can easily convert cash into nutritious food for children.
  5. Target participants accurately. Targeting is a serious concern in India, as errors of wrongful inclusion and exclusion continue to plague several programs. Programs should either rely on participants to target themselves, as with the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which guarantees 100 days of wages a year for unskilled labor, or they should devise more accurate means of identifying the target population. Age-based self-targeting linked to pregnancy registration might be the simplest strategy for cash transfers within the ICDS, for example.
  6. Communicate well. Last, but perhaps most important, cash transfers must be accompanied by high quality information/education campaigns that encourage good nutritional choices. Work by our colleagues in Bangladesh has demonstrated clearly that cash accompanied by high intensity behavior change communication (BCC) had large and significant impacts on calorie consumption, dietary diversity and child nutrition, compared to identical cash transfers without nutrition education.

With the possibility of a new set of pilot cash transfer schemes beginning in the months to come, we cannot overemphasize the need for two things: First, careful attention to design elements that will support the intended outcomes, and second, careful research on the measurable impacts of these programs. Studies in several countries have shown that providing cash is cheaper than providing food of the same monetary value, which might seem reason enough to make the universal switch to cash. But we don’t know enough about the ability of these schemes to affect changes in behavior to justify such a move based on savings alone. Before scaling these programs up to the national level, we must examine these pilots to determine what works, for whom, under what conditions, where, and why.

Kalyani Raghunathan is an Associate Research Fellow and Purnima Menon a Senior Research Fellow in IFPRI’s Poverty, Health and Nutrition Division. They are based at IFPRI’s Asia office in New Delhi. A version of this post originally appeared in The Hindu.