1. Surprise! As India takes to Jan Dhan Yojana, spending on alcohol falls

Surprise! As India takes to Jan Dhan Yojana, spending on alcohol falls

SBI research shows greater penetration of the Jan Dhan Yojana is strongly correlated with falling spending on alcohol.

By: | Published: October 17, 2017 5:18 AM
The Pradhan Mantri Jan Dhan Yojana (PMJDY) is giving alcohol sales in rural India a hangover—at least, that is what an analysis by the State Bank of India’s researchers shows. (Representative photo: IE)

The Pradhan Mantri Jan Dhan Yojana (PMJDY) is giving alcohol sales in rural India a hangover—at least, that is what an analysis by the State Bank of India’s researchers shows. Studying CPI rural data, the SBI research says that states that opened greater number of PMJDY accounts saw a meaningful drop in rural inflation. PMJDY, apart from driving financial inclusion, was meant to be the channel for direct benefit transfers (DBT)—with Aadhaar seeding of accounts, plugging the leakages typical of, say, PDS or fertiliser/power subsidies, would get easier. But the worry was that greater circulation of money would stoke inflation in rural areas, and DBT could encourage expenditure on demerit goods. Instead, the SBI analysis shows that the spending on alcohol and tobacco has fallen in states where more PMJDY accounts were opened. It is true that a wide array of very diverse factors, the from demonetisation effect to increase in awareness, could explain the fall in CPI intoxicants—something that the SBI research also takes care to highlight.

Research shows DBT influences what can be considered positive expenditure. The Self-Employed Women’s Association (SEWA) experiments with unconditional cash transfers found that the results for the poorest villages were “transformational”—beneficiaries used the cash for micro-scale self-employment, and added to material acquisitions. Some that were just above the poverty line increased expenditure on health and education. A meta-analysis of various pieces of research on spending of cash transfers made by David Evans of the World Ban and Anna Popova of Standford University found that these resulted in a slight reduction of spending on demerit goods. So, if DBT were to become PMJDY’s core function, the scheme could deliver more than was hoped for originally.

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      Santanu Mukhopadhyay
      Oct 31, 2017 at 3:19 pm
      Alcohol consumption and introduction of PMJDY are only coincidental. The urban citizens who are the major sector in PMJDY, do not consume alcohols of high category, which is controlled by govt. The villagers consume the cheap hariya country-liquors, which is sold unofficially in remote areas. This requires further investigation. If we really want our India to make free of Gutkha, pan parag etc. their production must be stopped. There is no point of printing in smallest font on the pouch " chewing tobacco is injurious to health".
      Reply

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