Sat, Feb 27 2016. 12 27 AM IST
Report stresses the need for improving business correspondent network to ensure that the exclusion risk is satisfactorily addressed
Remya Nair and Meenal Thakur
New Delhi: The government’s ambitious direct benefit transfer (DBT) plan has run into a digital challenge.
In rural areas, the preparedness levels for the implementation of the so-called JAM trinity (Jan Dhan, Aadhaar and Mobile) for effective delivery of the government’s social security schemes is very low, finds the economic survey 2015-16 released on Friday.
Pointing out that last mile financial inclusion is lagging, the report stressed the need for improving the business correspondent (BC) network to ensure that the exclusion risk is satisfactorily addressed.
“Despite huge improvements in financial inclusion due to Jan Dhan, the JAM preparedness indicators suggest that there is still some way to go before bank-beneficiary linkages are strong enough to pursue DBT without committing exclusion errors. In that sense, the JAM agenda is currently jammed by the last-mile challenge of getting money from banks into beneficiaries’ hands, especially in rural India,” the survey said. “Jan Dhan’s vision must truly succeed before much of India can JAM,” it added.
The survey said that the centre can invest in last-mile financial inclusion by further improving BC networks and promoting the spread of mobile money. The recent licensing of banks will help.
It also pitched for increasing the commission rates for business correspondents to ensure that they are incentivised for remaining active.
The survey said that using JAM in schemes where leakages are high and in transactions controlled by the central government will be very effective.
“If the amount of leakages in a given scheme/area is huge then it can be next target for introduction of JAM as subsidies with higher leakages will have larger returns from introducing JAM. Similarly, control of central government will reduce administrative challenges of coordination and political challenges of opposition by interest groups. Based on these two criteria—leakages and central government control—survey suggests fertiliser subsidies and within-government transfers as two most promising areas for introduction of JAM.”
It cited the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) to illustrate the point 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.
It suggested sharing of fiscal savings from DBT with states to make them stakeholders and encouraging them to invest in first-mile capacity (by improving beneficiary databases).
In states where preparedness levels are too low to implement JAM, it proposed alternative models like biometrically-authenticated physical update or BAPU, which offers the prospect of lower leakages without the risk of exclusion errors.
States such as Gujarat, Madhya Pradesh, Uttar Pradesh and Tamil Nadu have very low levels of JAM preparedness.
The government has been trying to bring in more schemes under DBT, wherein the subsidy amount gets directly transferred to the bank accounts of beneficiaries.
This helps reduce leakages and ensures that the subsidies reach the intended beneficiaries.
The JAM trinity was mentioned in the last economic survey also but in the context of the public distribution system. However, its implementation is not as easy as it is made out to be, said Dipa Sinha, an activist with the Right to Food campaign and a professor of Economics at Ambedkar University, Delhi.
“There are issues in the implementation of JAM in fertiliser subsidies. We have no system of identifying the beneficiaries. One way of identification is through checking land records but how do you verify that a person is doing agriculture and will use this fertiliser? Most people who practise agriculture don’t have pattas (document of ownership) and usually tillers are not land owners. The first step is to set the land records right, which is not an easy task,” she said.
“Without solving these problems, the government will end up keeping out the small farmers. I don’t think we are ready. This is not the solution.”
Remya Nair &Meenal Thakur