THE JAM TRINITY

The JanDhan-Aadhaar-Mobile (JAM) trinity has proved to be a game-changer and helped in reaching out to the citizens living in the farthest corners of the country, during the coronavirus pandemic. With the lockdown placing immense strain on the household budgets of several sections of society, the JAM trinity acted as a safety net and helped millions who were in need immediate monetary assistance. Introduced in the first term of this Government, the Jan Dhan scheme proved to be a boon and its Its strong inter-linkage with the mobile linked Aadhaar scheme has facilitated swift transfer of money into bank accounts of beneficiaries without pilferage or corruption.

 

Even before the pandemic this was used as a vehicle of direct fund transfer of MSP of farm produce and Kisan Samman Nidhi. This was also the modality of transfer of relief funds for natural disasters, insurance for unskilled labourers, repaying LPG, farm fertilizer and other subsidies and MNREGA. Student subsidies for dresses, books, school-bags for students in government schools along with their scholarship money is also paid similarly. The government spends about 4.2% of the GDP on subsidies. This is a costly affair and in the past most of the benefits did not reach the intended beneficiaries. The rich ended up taking most of the benefits and corruption was rampant. Disgusted with the situation in 1985, the then Prime Minister, Rajiv Gandhi, had said that out of every rupee spent by the government for welfare of the downtrodden, only fifteen paise actually reached the persons for whom it was intended!

 

As if that was not enough there were lots of leakages in the way to the beneficiaries. Over 15% of PDS rice, 54% of wheat, and 48% of the sugar are lost in leakages. The Centre and States supply rice, wheat, pulses, cooking oil, sugar and kerosene at heavily subsidised prices through the PDS. Then, sectors such as power, fertilisers and oil sell their products to people below market prices. Such subsidies cost the exchequer quite a bit. Yet, as they used to make their winding way through the hands of intermediaries, leakages, corruption and inefficiencies nibbled away substantial parts. So naturally, despite the centre announcing subsidies and aid packages there were no change in the living standards of the poor. With Aadhaar helping in direct biometric identification of disadvantaged citizens and Jan Dhan bank accounts and mobile phones allowing direct transfers of funds into their accounts, it was made possible to cut out all the intermediaries and so the corruption.

Why blame the intermediaries only, even the State governments were either corrupt or careless. Millions of students of minority communities disappeared from the list of beneficiaries when biometric identification was made mandatory for scholarships! Who was thriving on this loot before JAM?

 

Cash-based social assistance can be delivered most efficiently and timely when the percentage of the population that has access to the three components—IDs, phones, and financial accounts—is high, systems are well-integrated, the existing system of benefits and transfers has wide coverage, and benefits are paid through financial accounts linked to the ID. The government has created a JAM Index based on Findex data to rank countries on their use of ID systems, mobile phones, and financial accounts to effectively make government payments. India and Kenya are two top ranking countries in this index. The Prime Minister Jan Dhan Yojna or PMJDY accounts helped the government to reach everyone, even if the accounts were zero balance accounts. Even people who hesitated to enter the mainstream were also brought in and given confidence, with opening of their accounts, disbursing of RuPay Cards and insurance cover. The financial inclusion thus brought in by Jan Dhan stood with the underprivileged during a pandemic and it was because of Jan Dhan that many people and small businesses were able to get collateral-free loans.

 

Aadhaar seeding of bank accounts gave the government an instant KYC (know your client) benefit. This enabled beneficiaries getting benefits directly into their Jan Dhan and KYC verified accounts. The government thus used these three modes of identification to implement one of the biggest reforms in independent India – direct subsidy transfers to the poor.

 

So even if the JAM Trinity does make your goods and services dearer in the short-term, take heart. Over the long-term, the plugging of leakages and savings for the government will mean a lower burden on you, the taxpayer. Of course, lower subsidies and fiscal deficit will also mean a better credit standing for India. If India can afford to immunize 1 billion plus people today, a substantial credit should go to the savings from plugging these unholy leakages, along with the extra that we are paying for petrol!

Now do you remember how so many progressive thinkers and elites, both inside and outside the country, made fun of Jan Dhan Accounts as empty accounts, wasting banking time? How a learned former Finance Minister mocked digital payment by wondering whether his green grocer will ever accept digital payment for 2 Kg of potato? Today not only the green grocer but the ice cream vendor, the three wheel driver, the barber, the cobbler and the paan-wala all accept digital payment on BHIM or PayTM apps. Imagine how much extra GST the government is earning from these digital payments! All these were cash transactions in the past and invisible to the tax-men.

 

The JanDhan-Aadhaar-Mobile (JAM) trinity has undoubtedly changed the financial condition of the poor in our country. By bringing the financially excluded in the mainstream of banking, by saving pilferage and disbursing government benefits to genuine beneficiaries in their Aadhaar seeded bank accounts linked to their mobile phone numbers, and by providing SMS updates to citizens on their bank transactions, the JAM trinity catapulted our banking and our system of distribution of subsidies to a different level altogether. Digital payment has become popular and cash is losing its vice grip on our economy.