India: Government planning to deduct part of subsidies and hand it over to beneficiaries to boost demand

Published on The Economic Times, by Yogima Sharma, August 1, 2015.

NEW DELHI: The government will likely put some money in your bank account every month if it goes ahead with a proposal currently being considered at the highest levels. The plan is to expand the direct cash transfer scheme, by deducting a portion of the subsidy each family receives through various government welfare schemes and putting an equivalent amount of cash in the account of the beneficiary … //

… DK Pant of India Ratings said the success of the programme would partly depend on how the right beneficiaries were identified. The pilot will be launched in 10% of the 300-odd food surplus districts in the country using the Aadhaar database, the government official said.

Using the Aadhaar database could cause hiccups when the scheme is launched nationwide, as Aadhaar still doesn’t cover the entire population and the SC has ordered that it shouldn’t be insisted upon to offer state support.

NC Saxena, a former member of the now-defunct Planning Commission, said he didn’t want subsidy transfer to substitute government support in providing public goods such as health and education. It should be additional money, he said.

How it will work

If the total subsidy outgo towards a family of seven in a village — an earning couple, elderly parents and three kids — is Rs 7,000 a month including old-age pension or scholarship, Rs 350 as 5% of this will be transferred to the account of one of the family members.

The government may choose to transfer the money to the account of an elderly woman member of the family to avoid misuse, the official said.

(full text).


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