Every Indian should have access to banking channels where her money can be parked; and there should be ease and efficiency of transactions, and secure, accurate identification of the account holder to check diversion of benefits
“The rule is, jam tomorrow and jam yesterday—but never jam today”
—Lewis Carroll: Through the Looking-Glass and What Alice Found There
Alice was faced with a peculiar dilemma when offered jam by the White Queen; she could never have it today, but only tomorrow or yesterday. You guessed her problem: when tomorrow came, it would be today, so, as per the White Queen’s edict, she could never have her jam “today”, or any other day, for that matter. The aam aurat/aadmi in India are in danger of being caught in a similar trap involving JAM, unless a lot of thought is given to how to operationalise JAM, popularise it, enable it to gain wide acceptance, and surmount the innumerable obstacles posed by those who are better off (and don’t need JAM) but nevertheless are haunted by imaginary fears. I refer, of course, to the path-breaking initiative of the government to marry technology and finance to improve the living standards of millions of Indians. JAM has three components—the Jan-Dhan Yojana (J), aimed at financial inclusion for the population as a whole; Aadhaar (A), the issuance of biometric identification cards to all Indians; and Mobile (M), the instrument that can be found in the hands of about 700 million Indians today.
J, the first corner of this trinity, will make banking and other financial services reach the millions who are currently unserved or underserved by existing banking systems. This will obviate the need for often understaffed/unstaffed “brick and mortar” bank branches. The recently-licensed payments banks, with their focus on technology, are better placed to service remote populations with the skilful use of mobile technology, M, the second part of the trinity. The triangle is completed by Aadhaar, A, the unique identification number that ensures financial services and benefits flow to the persons for whom they are earmarked.
The three essential conditions to be fulfilled if JAM is to operate smoothly are: (1) access of every Indian to banking channels where her money can be parked; (2) ease and efficiency of transactions; and (3) secure, accurate identification of the account holder to check diversion of benefits. An inadequate understanding of these requirements in transferring government benefits to intended beneficiaries has bedevilled implementation of schemes involving newly-created bank accounts and has provided fodder to those Luddites who see red at the very mention of the word “cash transfers”. For example, the government of Puducherry rushed through a scheme to overcome supply-side constraints in the form of a dysfunctional public distribution system by transferring money directly to individual bank accounts. This ill-conceived measure ran into three issues which hastened its early demise: (1) inconvenient access to banks meant that people had to incur the double cost of visiting banks to draw cash and then going to the ration shop to purchase rice; (2) arbitrary deductions by the bank of apparently outstanding dues denied the beneficiaries access to the full amount of the cash transfer; and (3) the money could be used to purchase anything, which meant women, children and the old might not get rice, were the amount to be spent by the men of the family on items like alcohol. Hasty moves to pay MGNREGA wages through existing inefficient banking channels have also come a cropper.
“Cash transfers” is a term that has been widely misunderstood and, I suspect, often deliberately misinterpreted to serve partisan ideological ends. For a start, we need to be clear about unconditional versus conditional cash transfers. In the former, no specific behaviour is sought from the recipient in exchange for availing of the cash transfer benefit; for example, availing of services of a public health facility or educational institution or fulfilling specific conditions like registering for antenatal care. This is in contrast to conditional cash transfers where availing of a specific, generally public, service provision entitles the beneficiary to the cash transfer. One problem with conditional cash transfers is the failure to provide satisfactory public services; for instance, if there is no doctor or nurse at a primary health facility, the failure to register for antenatal care would deprive the beneficiary of the cash transfer conditional on antenatal care registration. Going in blindly for unconditional cash transfers in such cases is fraught with its own dangers, like the apprehension in Puducherry that the male household head would spend the cash on liquor, thus denying his vulnerable family members access to sorely needed nutrition, health or education benefits.
It is here that the government needs to use its imagination in devising a workable, effective solution covering schemes in different sectors. Unconditional and conditional cash transfers should be linked to a mobile wallet created for each beneficiary/consumer. This mobile wallet will be linked to the bank account and Aadhaar number of the individual consumer. Cash transfers (whether unconditional or conditional) under different heads—health, food, education—will flow into the individual’s mobile wallet. Choice should be given to the consumer to access the service from a public or private provider, to reduce inefficiencies of state/private monopolies/oligopolies. Goods/service providers will be paid through the mobile wallet for goods/services delivered, using point-of-sale machines that identify the customer through Aadhaar identification procedures.
There is also the important issue of identifying the eligibility of the beneficiary for specific types of assistance. The government has scrapped below poverty line (BPL) lists. These suffered from two infirmities—one, the lists often left out the poorest and most marginalised sections of society; two, they were not dynamic, in that there was no provision for updation as families exit or new ones enter the ranks of the poor. The 2011 Socio Economic and Caste Census (SECC) has attempted to use household data—based on an intensive nationwide survey conducted in rural and urban areas—to identify households which could be defined as suffering from deprivations of different degrees, using income and assets as criteria. While this is better than the old BPL classification, the SECC also has some grey areas which could affect the identification of those households genuinely in need of various social protection programmes. The authenticity of the data gathered during the survey can be open to question. There is also the issue of, over time, including households which, because of various factors, move afresh into the deprived category. More importantly, there is no basis to ascertain income earnings, especially in case of households that are not covered by the Income-tax Department records and which, as in the case of agricultural households, are not liable to pay income tax. The possibility of families subdividing themselves to avail of benefits cannot be ruled out—one is reminded of the efforts made by sections of the agricultural elite, in the two decades after land reforms were introduced in the 1950s, to show land ownership in the name of servants and even animals to avoid parting with agricultural land.
One possible method of checking misuse of benefits would be to insist on bank accounts being linked to the Permanent Account Number (PAN) cards issued by the I-T Department and to the Aadhaar identity. Over time, as this writer has often advocated, this should be accompanied by a move to a cashless economy. Currency notes of over R50 denomination should be withdrawn from circulation and mobile wallets should become the norm for cashless transactions. Moreover, transactions of a monetary value of over, say, R500 should be mandatorily through a cashless system. This would provide, through the income-tax network, full details of the receipts and expenditures of every household, automatically excluding from the ambit of government benefits those who are not entitled to them. If there is doubt about the feasibility of a country moving to a largely cashless economy, we need see no further than the example of Sweden. Cash represents just 2% of Sweden’s economy and only 20% of consumer payments are made in cash in Sweden, as compared to 75% in the rest of the world (this figure would be well over 90% in India). Nor does the oft-parroted argument about the illiteracy of India’s citizens holds water—one just has to see how Indian men and women have taken to mobile phones to realise that lack of education is no hindrance to the enthusiastic adoption of “liberating technology”.
However, this would be possible only when there is a broad consensus on the applicability of Aadhaar for all types of transactions. Sections of the intelligentsia have voiced apprehensions about the misuse of private data of individuals, despite the fact that the Aadhaar card has the same information as the identity card issued by the Election Commission, except for the additional incorporation of biometric information. These groups have been actively agitating in the country’s highest judicial forum against the widespread adoption of this technology. Forgotten is the harsh fact that for a person deprived of so many economic and social rights, a hypothetical loss of so-called “privacy” is hardly the most important consideration. Forgive the atrocious pun, but without JAM, India’s poor and disadvantaged run the risk of being denied their bread and butter.
The author is partner, Access Advisory