JOIN USHow DBT can do wonders
In the contemporary development lexicon, Direct Benefit Transfer (DBT) has assumed more than predictable significance. Prima facie, it looks like ‘conditional’ DBT – the conditionality being beneficiaries will send their children to school and they will participate in the mass immunisation programme. It is showing its impact in reducing poverty and reforming health service in the country.
Latin America is believed to be the one which introduced of conditional the DBT. In the 1990s, the DBT first began in Mexico and in a decade’s time, it spread to the whole of Brazil. Economists in India are hopeful that if DBT is implemented with all seriousness, it can help reduce poverty.
After the Modi government came to power, the DBT has been set in motion – rather
vigorously – with the three notable schemes: Jan Dhan, Aadhaar and Mobile or JAM as they call. So, will the DBT turn into a sort of revolution in India’s welfare economy? Pro-sayers would say ‘yes’.
If India is the world’s largest democracy, it is also the most poverty-ridden country. Indubitably, a government’s capability is measured on the basis of its providing benefits to the poor. Both the Centre and the state governments offer various kinds of subsidy to the poor so much so that the financial assistance is somewhere around 4.2 per cent of India’s GDP.
But the problem is that this subsidy is hijacked by middlemen and the whole regime smacks of ‘corruption’.
Indeed, 41 per cent of the subsidised kerosene is not accounted for and it sneaks in to the grey market. Still serious is the matter that the black-marketers sell kerosene to unscrupulous dealers who then mix kerosene with diesel and resell it as vehicle fuel. The adverse impact of adulterated fuel on the individual’s health and that on the environment needs no reiteration.
Then there are some subsidies which should not be claimed by the affluent sections of the society, simply because they don’t need it. Take for example, electricity subsidy. It is availed by two-thirds of the population. Oddly, the subsidised populace consists of the richer class whose electricity consumption is much more than the average consumer.
Why then subsidy continues to be the major component of the Centre and the states’ anti-poverty programme? The answer is simple: the governments want to cover up their deficiencies by continuing with subsidy. One more reason is that it is easier to sell food grains and kerosene than managing schools and bringing children to immunisation camps.
According to the government figures, some 12 crore people have so far opened their bank accounts under Jan Dhan Yojana. Likewise, under Aadhaar, some 100 crore biometric cards have been generated. Most important, more than half of India’s population has mobile phones. So, the JAM can work wonders if followed sincerely.
How Jan Dhan, Aadhaar and Mobile can together be beneficial is instructive. Take gas subsidy, for instance. Until the DBT was introduced, there were leakages in the whole LPG subsidy system. After the subsidy began to be paid directly to the consumers with a mobile text message following, fake LPG consumers have been weeded out of the scheme. Earlier, when there was a huge difference between the subsidised gas price and open–market price, black –marketers grew rich by leaps and bounds.
Expanding DBT
Columbia University economist Prabhat Barnwal’s new study says that cash transfer has reduced fraud and according to his estimate, some Rs 200 crore has been saved. So, there is room for expanding this system. Combining all subsidies and transferring them to a single bank account was advocated by noted economist Milton Freidman decades ago which is now being implemented in India through JAM.
In order to make JAM successful, the government has to act on two precise areas. The first challenge is to identify the real beneficiaries and coordination between states and between departments. There has to be a perfect balance between all these agencies. To make the cash transfer more exhaustive, the government has to find out various ways and means.
That includes opening of more bank accounts. Twelve crore bank accounts are paltry given the fact that the number of poor people is four times more. Then there is the issue of striking equilibrium between the criterion and the roster which often is at variance. Also, information technology can play a big role.
Basically, the aim should
be to reach out to the last person because there is the possibility of potential beneficiaries being excluded if they don’t have a bank account. Even if one has, the bank may be a distantly located.
There are only one-twelfth rural bank branches for India’s six lakh villages. To stretch out to the poor living in remote areas, mobile banking can do the job. In sum, JAM can benefit the government, the poorest of the poor and of course the economy.