The government’s big push for scaling up Direct Benefit Transfer of subsidies using the JAM trinity (Jan Dhan Yojana, Aadhaar and Mobile number) is unlikely to work in rural India in the short to medium term, said the >Economic Survey 2015-16 tabled in Parliament on Friday.
“The JAM agenda is currently jammed by the last-mile challenge of getting money from banks into beneficiaries’ hands, especially in rural India,” said the survey.
The Survey further added there is still some way to go before bank-beneficiary linkages are strong enough to pursue Direct Benefit Tranfer (DBT) without “committing exclusion errors”, despite the huge improvements seen in financial inclusion due to Jan Dhan Yojna.
It suggests that the Centre invest in last-mile financial inclusion via further improving banking correspondent (BCs) networks and promoting the spread of mobile money.
“The recent licensing of banks will help. Regulations governing the remuneration of BCs may need to be reviewed to ensure that commission rates are sufficient to encourage BCs to remain active,” it added.
To measure states’ preparedness to implement JAM-based DBT, an index has been constructed based on factors such as Aadhar penetration, basic bank account penetration and BC density.
The Urban DBT preparedness index finds there is significant variation across states. Some states like Madhya Pradesh and Chattisgarh show preparedness scores of about 70 per cent, while others such as Bihar and Maharashtra, have scores of only about 25 per cent.
“The binding constraint here is basic bank account penetration-paying beneficiaries is the issue, not identifying them,” the Survey stated.
The DBT rural preparedness scores are “significantly worse” than the urban scores, with an average of 3 per cent and a maximum of 5 per cent.
The Economic Survey suggested incentivising states by sharing fiscal saving from DBT to help fully implement JAM.
It added that policy areas that appear most conducive to JAM are those where the central government has significant control and where leakages are high. “At present, the most promising targets for JAM are fertiliser subsidies and within government fund transfers,” it pointed out.
The example of MGNREGS highlights that delivering within-government transfers via JAM can help other centrally sponsored schemes reduce idle funds, lower corruption and improve the ease of doing business with government, the Survey stated.
While BC network is developed and mobile banking spreads, the Survey recommends use of Biometrically Authenticated Physical Uptake (BAPU), wherein beneficiaries verify their identities through scanning their thumbprint on a POS machine, to reduce leakages.
BAPU preparedness is much better than Rural DBT preparedness with average state preparedness being 12 per cent. “In the meantime models like BAPU offer the prospect of lower leakages without the risk of exclusion errors, and therefore merit serious consideration,” the Survey concluded.
