One of the several problems with replacing subsidies (however inefficient and poorly targeted) with cash transfers is the inflationary impact of such transfers if they are actually significant enough to make a difference to people's lives, rather than just very small amounts going to the very poor. The recent experience of Iran is instructive - the replacement of various subsidies on food and fuel with the monthly income support to all households has been associated with vary rapid inflation that has completely eroded the value of the cash transfers themselves, so much so that the Rouhani government is now attempting (with some difficulty, because the distribution channels were all destroyed in the earlier process) to sacle down the cash payments and bring back subsidised food distribution.
Jayati Ghosh
Professor Jawaharlal Nehru University
New Delhi
Jayati Ghosh
Professor Jawaharlal Nehru University
New Delhi