Why in the News?

As per a recent report by the State Bank of India, the Direct Benefit Transfer (DBT) amount to women through various schemes has crossed ₹ 2 trillion mark across multiple states.

More on the  News

• Across eight states an estimated ₹ 2.11 lakh crore is being given under various schemes, amounting to about 3 to 11 per cent of respective state's revenue receipts.
• The report noted the positive aspect of these schemes as it will boost consumption and overall economic spending, particularly of the low-income families. 
• Some of the schemes mentioned in the report are as follows:
  • 'Gruha Lakshmi' of Karnataka gives ₹ 2,000 per month to the female head of the family.
  • 'Mukhya Mantri Majhi Ladki Bahin Yojana' of Maharashtra provides for ₹ 1,500 per month to eligible women aged 21-60 years.
  • 'Mukhyamantri Ladli Behna Yojana' of Madhya Pradesh offers ₹ 1,250 per month to eligible women.
  • ‘Subhadra Yojana’ of Odisha has a provision for ₹ 50,000 over a five-year period to eligible women aged 21-60 years.

About Direct Benefit Transfer (DBT)

• Launched: 2013.
• Objective: Reform the mechanism of transferring cash subsidies and benefits to ensure reduction in leakages, faster delivery and elimination of delays in fund flow.
• Scope of Support:
  • Cash Transfers: Examples include PM-KISAN (farmer income support), pensions (old-aged, widows), and scholarships.
  • In-Kind Support: Fertilizer subsidies, food grain distribution (PDS), and school meals (PM Poshan).

• Mechanism (build on India Stack)
  • Public Financial Management System (PFMS): Originally the Central Plan Scheme Monitoring System (CPSMS), it now performs functions such as beneficiary list preparation, digital signing, and payment processing via the Aadhaar Payment Bridge (APB) of NPCI.
  • JAM Trinity (Jan Dhan-Aadhaar-Mobile): Integrates Aadhaar-seeded Jan Dhan accounts with mobile numbers to enable seamless and direct credit to beneficiaries.
  • Banking Infrastructure: Utilizes Business Correspondents, Payment Banks, and Aadhaar-enabled Payment Systems (AePS) for financial inclusion and delivery of funds.
  • UPI Integration: Expands interoperability, allowing both public and private sector participation in delivering subsidies and benefits.

How DBT ecosystem has transformed social welfare in India?

• Effective implementation of schemes: Since 2016, DBT has delivered over 450 schemes to 900 million people, transferring $450 billion directly to beneficiaries.
  • This accounts for 60% of the welfare and subsidies budget of the Union Government.
• During COVID-19: DBT provided essential relief during the lockdown, transferring ₹27,442 crore to 11.42 crore beneficiaries under schemes like PM-KISAN and MGNREGS between March and April 2020.
  • States disbursed ₹9,217 crore to 4.59 crore beneficiaries under 180 welfare schemes.
• Financial inclusion: To enable DBT, over 53.13 crores  bank accounts have been opened under the PM Jan Dhan Yojana (PMJDY) with 67% of them being in the rural and semi-urban districts, and 56% being owned by women.
• Transparency and accountability: Aadhaar-seeding eliminated over 90 million fake beneficiaries, saving the government $40 billion by reducing leakages, which previously accounted for 2% of GDP annually.
• Socio-economic impact:
  • Promotes social mobility through rehabilitation programs such as Self-Employment for Manual Scavengers.
  • Strengthened agricultural economies by providing direct financial assistance for inputs like fertilizers and insurance schemes to farmers.
  • Enhanced women’s economic independence through cash transfers to Jan Dhan accounts under schemes like PM Garib Kalyan Yojana.
• International recognition: The IMF praised India’s DBT scheme as a “logistical marvel,” benefiting women, the elderly, and farmers.
  • World Bank President also highlighted its success in targeting cash transfers, reaching 85% of rural and 69% of urban households.

Concerns and Criticisms

• Over-reliance on efficiency: 
  • Prioritizing technology-based solutions like DBT may overlook the need to enhance state capacity.
  • Fails to address systemic issues in public services like education and healthcare.
• Nudging the poor towards private alternatives: Cash transfers shift the burden of basic services onto the poor, who are often unable to afford private options.
• Temporary Solutions: Cash transfers act as short-term fixes but fail to address deep-rooted structural poverty and inequality.
• Limited Accessibility:
  • Geographical Barriers: Many remote and rural areas lack adequate banking facilities and digital infrastructure, making it difficult for beneficiaries to access DBT services.
  • Financial Literacy: A significant portion of the population, particularly in rural areas, lacks the necessary financial literacy to navigate the enrollment and benefit collection processes.
• Identification of Beneficiaries: Inclusion and exclusion errors in Enrollment.
  • E.g. In 2022, about 6.65 lakh farmers lost the PM Kisan scheme benefit due to their failure in updating e-KYC norms.
• Other issues: 
  • Transaction Failures, inconsistent Payment Systems (non-standardized), exclusion of marginalized communities such as tenant farmers, etc. undermine the intended goals of DBT programs aimed at supporting low-income populations.
  • Poor communication between banks and government agencies and lack of Grievance Redressal Mechanisms to address complaints and issues faced by beneficiaries.

Way Forward

• Reform Goals:
  • With DBT 2.0, expand coverage and improve technological integration for real-time, citizen-friendly welfare delivery focusing on an online eligibility verification mechanism using Aadhaar.
  • With DBT 3.0, building a national-level social registry and a centralized database, incorporating best practices from state initiatives, such as Karnatka’s Kutumba and Rajasthan’s Jan Aadhar.
• Targeted Outreach: For marginalized groups such as informal workers, who often lack formal identification and registration with tailored awareness campaign.
• Accessibility: Digital literacy among rural populations with targeted initiatives in collaboration with local NGOs and community organizations and easier access to DBT services with expanding the network of well-trained Common Service Centres (CSCs) and business correspondents in rural areas.
• Grievance Redressal Mechanisms: Single-window grievance redressal system (accessible at local gram panchayat level), that allows beneficiaries to easily report issues related to payments or enrollment.
  • Also, systematic collection and analysis of real-time feedback from beneficiaries regarding their experiences with DBT to inform policy adjustments and operational improvements.
• Global Implications: Strengthening India’s leadership in both Global North and Global South as it
  • serves as a scalable model for addressing poverty and promoting financial inclusion worldwide.
  • positions India as a key contributor to global discussions on digital public infrastructure and citizen welfare.