How India can fortify public distribution governance
Technical and operational gaps leading to inclusion or exclusion errors must be plugged to ensure the money reaches the intended beneficiaries.
In the 1980s, it was said that out of every rupee spent by the government, only 15 paise reached the intended beneficiary. Though anecdotal, it was a reflection of the massive challenge of leakages in public distribution. Establishing a reliable public distribution was a difficult task, especially in a country as vast and populous as India. The federal structure also introduced varied complexities. However, in the last decade, direct benefit transfer (DBT) and the Jan Dhan-Aadhaar-Mobile (JAM) programmes have achieved great results. A review of performance reports published by Comptroller and Auditor General (CAG) in 2021 and 2022 shows a massive drop in leakages and errors.
Since the inception of DBT in 2013, ₹28 lakh crore has been transferred through the route (for over 300+ central and 720 state schemes), with ₹5.5 lakh crore transferred during the Covid lockdowns. By March 2021, DBT had generated a total savings of ₹2.2 lakh crore for central schemes alone due to the removal of 94 million duplicate, corrupt, or non-existent beneficiaries across databases. The public distribution system (PDS) and similar schemes contributed about ₹1 lakh crore in savings by removing about 40 million fake accounts. The Ujjwala Yojana scheme alone resulted in savings of ₹72,000 crore. Money saved implies more spending, newer schemes and further inclusion.
Evidence of financial inclusion is the Pradhan Mantri Jan-Dhan Yojana (PMJDY), which has enrolled over 480 million beneficiaries with accumulated savings of over ₹189,000 crore in February, which implies that the poor now have funds for food, take care of emergencies, and potentially invest too.
Digitisation has streamlined the transfer process, resulting in substantial time savings, reduced errors and cost of governance and eliminated malpractices. Quick digital transfer process has enhanced trust in the system and has increased the money in circulation by reducing money inventory at various points.
But there are still opportunities to enhance India’s public distribution governance. First, it is crucial to strengthen the technical infrastructure and provide further transparency. There have been some instances in the past — such as the lack of traceability of maternity benefit payments as reported by the Niti Aayog in 2020, issues reported in the PM-Kisan Yojana, or Aadhaar’s de-duplication functionalities — which need addressing. The databases also need continuous clean-ups, including further biometric verifications at every point. Technical and operational gaps leading to inclusion or exclusion errors must be plugged to ensure the money reaches the intended beneficiaries.
Second, while JAM has brought the rural poor within the ambit of the banking system, issues such as the lack of access to a COP (confirmation of payee), network failure and point-of-sale malfunctions have led to a high number of dormant or low-activity accounts. Over 80 million Jan-Dhan accounts in 2022 were declared inoperative, which is a major burden on the banks, and suggests that several beneficiaries are not availing their rightful benefits. There is a need to track and reactivate such accounts.
Third, the discovery of and access to benefits could be eased further. Enrolling in government schemes is complex due to varying eligibility criteria, and the multitude of documents and identity requirements. When foreign governments rely on just one Indian document, the passport, why can’t various departments and states also rely on just one document or ID? Simplification will allow superior beneficiary identification as well as enable deeper analytics for sharper targeting of schemes to those who need them the most.
Finally, the design and prioritisation of benefits could be assessed more broadly: From transfer of money to the needy to empowerment in broader ways. Jan Samarth is a step in the right direction to enable easy access to government credit schemes for individuals and small and medium enterprises. It is high time the government considers extending DBT as the sole means of distribution. A wealth of data on the impact of government schemes and citizens’ feedback could inform the design and implementation of future policies. This will strengthen the foundation for a new and revolutionary era in public distribution governance.
Ashish Garg is managing director and senior partner, BCG. Sidharth Madaan is partner, BCG
The views expressed are personal
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