Direct cash transfer scheme will reduce budgetary deficit: Kamath

Written by fe Bureau | Mumbai | Updated: Dec 6 2012, 08:28am hrs
The soon-to-be-launched direct cash transfer scheme by the government will reduce budgetary deficit by checking seepages, said KV Kamath, non-executive chairman of ICICI Bank and Infosys.

I believe direct cash transfer will change the budgetary process in the country. It will change our deficit process and it will make a huge lot of good as money goes into the hands of people," Kamath said at a PwC conference.

He said the seepage in the subsidy distribution is as high as 40%, which could potentially get eliminated through the implementation of the scheme. The scheme is being launched in 16 states starting January 1, 2013.

The government aims to transfer R3.2 lakh crore a year to beneficiaries of its subsidy schemes and welfare programmes. The new scheme aims to plug leakages in the current subsidy regime and will cover more than half of India's population, making it the world's largest cash transfer programme.

India currently has a cash transfer system where banks and post offices are used to pay old-age pensions to poor people. The government is now attempting to significantly expand the scope of cash transfers by using the bank accounts and the Aadhaar or the Unique Identification (UID) Number, programme.

Kamath said the cash transfers could easily be a success in the country as there are already necessary systems in place. I think we are capable in the technology context and banks are already prepared in this context through Aadhar scheme and the benefits on the KYC front it brings," he said.

Kamath also said that he expects annual growth of 7.5-8% for the country in the next five years for the economy.