NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, August 12, 2014

MUMBAI: Reserve Bank of India governor Raghuram Rajan made a strong pitch for direct cash transfers to the poor, saying this would help reduce corruption by breaking the “cycle of dependence”. The system involves the payment of subsidies directly into the bank accounts of beneficiaries, cutting out intermediaries.

“The poor and the under-privileged need the politician to help them get jobs and public services,” the governor said at the 20th Lalit Doshi Memorial Lecture on Monday. “The crooked politician needs the businessman to provide the funds that allow him to supply patronage to the poor and fight elections. The corrupt businessman needs the crooked politician to get public resources and contracts cheaply. And the politician needs the votes of the poor and the underprivileged. Every constituency is tied to the other in a cycle of dependence, which ensures that the status quo prevails.”