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.