Former Chief Economic Advisor to the Indian Government and Chief Economist of the World Bank, Kaushik Basu, on Wednesday said direct cash transfer (instead of subsidies) should be “indexed” to adjust with inflation. 

According to Basu, the reform of direct cash transfer would be “a game changer” for the country. But, it should have an index.

“When you switch over to the direct cash transfer (from subsidies), you index it… so that it does not erode with inflation and you have the same buying power and this is very important,” he told presspersons after addressing the Indian Finance Conference at the IIM Calcutta campus.

The three-day conference is being jointly organised by IIM Ahmedabad, IIM Bangalore and IIM Calcutta.

Basu also pointed out that such a mechanism would not have any impact on inflation.  

“When you reduce the price and try to benefit the poor, there is a subsidy that is implicit in there and it feeds into the fiscal deficit…(and the) subsidy which you were implicitly spending by lowering the price translated into the direct cash transfer. Transfer does not mean that there has to be an injection of liquidity into the system,” he said.