INDIA’S DIRECT BENEFIT TRANSFER: ECONOMY

INDIA’S DIRECT BENEFIT TRANSFER: ECONOMY

NEWS: As governments around the world reevaluate their social protection systems, India's Direct Benefit Transfer (DBT)

WHAT’S IN THE NEWS?

India’s Direct Benefit Transfer (DBT) system, built on the JAM trinity, has saved ₹3.48 lakh crore by reducing leakages in welfare schemes, becoming a global model for efficient, inclusive governance.

Context and Global Relevance

  • India’s Direct Benefit Transfer (DBT) framework is drawing international attention for its success in reforming welfare delivery and optimizing fiscal efficiency.
  • Governments across the world are studying the Indian DBT model as they look to restructure their own social protection systems.

What is the Direct Benefit Transfer (DBT) System?

  • Launched on January 1, 2013, the DBT system was introduced to transform the way subsidies and welfare benefits are delivered to citizens.
  • The primary goals include streamlining administrative processes, reducing leakages and fraud, improving the accuracy of beneficiary targeting, and ensuring timely delivery of funds.
  • Initially managed by the Planning Commission, the DBT Mission was moved to the Cabinet Secretariat in 2015 to enhance coordination and accountability.
  • The backbone of DBT is built on the JAM Trinity — Jan Dhan bank accounts, Aadhaar biometric identification, and Mobile phones, which together ensure digital, traceable, and efficient fund transfers.

Scope and Reach of DBT

  • The DBT mechanism is used for distributing funds across a wide range of government welfare schemes, including scholarships, pensions, LPG and food subsidies, wages (like MGNREGS), and cash benefits like PM-KISAN.
  • DBT’s integration with the Digital India Programme has expanded its technological capacity, enabling faster rollout of new schemes and improved grievance redressal mechanisms.
  • The system aligns with the principle of "minimum government, maximum governance" by reducing bureaucratic delays and direct physical handling of cash.

Progress and Achievements of DBT

  • The DBT system has led to estimated fiscal savings of ₹3.48 lakh crore by reducing inefficiencies, removing duplicate or fake beneficiaries, and minimizing leakages.
  • The Welfare Efficiency Index (WEI) has improved significantly, reflecting better targeting and coverage with fewer administrative costs.
  • Overall government subsidy expenditure reduced from 16% to 9% of the total budget, while the number of beneficiaries surged from 11 crore to 176 crore over a decade.

Sector-wise Analysis of DBT Impact

  • Food Subsidies (PDS):
  • Aadhaar-based authentication helped eliminate fake and duplicate ration cards.
  • Resulted in savings of ₹1.85 lakh crore, which is 53% of total DBT savings.
  • MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme):
  • About 98% of wages are now transferred directly to workers’ bank accounts.
  • Ensured real-time accountability and saved ₹42,534 crore in wage disbursement errors and fraud.
  • PM-KISAN Scheme:
  • DBT helped identify and remove 2.1 crore ineligible farmers, ensuring more accurate targeting.
  • Led to ₹22,106 crore in savings by preventing undue benefits.
  • Fertilizer Subsidies:
  • Through real-time point-of-sale tracking and Aadhaar validation, sales of 158 lakh metric tonnes (MT) of fertiliser were optimized.
  • Resulted in ₹18,699.8 crore in savings by reducing diversion and overuse.

Challenges Facing DBT Implementation

  • Beneficiary Identification Issues:
  • Errors in Aadhaar seeding and demographic mismatches sometimes lead to exclusion of legitimate beneficiaries.
  • Biometric Authentication Failures:
  • Fingerprint mismatches, especially among the elderly and manual labourers, cause transaction failures.
  • Limited Banking and Digital Infrastructure in Rural Areas:
  • Many remote areas still lack sufficient access to functional bank branches, ATMs, and internet connectivity.
  • Low Digital Literacy:
  • A significant portion of rural beneficiaries are not digitally literate, leading to misuse or underutilization of benefits.
  • Complex and Overlapping Subsidy Structures:
  • The coexistence of multiple welfare schemes with overlapping objectives can cause confusion and administrative burden.

Suggestions and the Way Forward

  • Improve Data Accuracy and Authentication:
  • Enhance database integration across departments to eliminate Aadhaar mismatches and false exclusions.
  • Expand Rural Banking Infrastructure:
  • Increase the number of banking correspondents, mobile ATMs, and digital service centers in underserved areas.
  • Enhance Digital Infrastructure and Connectivity:
  • Provide stable internet connectivity in rural areas to support DBT platforms and e-governance tools.
  • Promote Digital and Financial Literacy:
  • Launch targeted campaigns to educate beneficiaries about their rights, the use of DBT platforms, and how to lodge complaints.
  • Customize DBT for Local Conditions:
  • Introduce region-specific DBT models to address the socio-economic and geographic needs of diverse populations.

Conclusion

  • India’s DBT system has become a global model for welfare delivery by aligning fiscal prudence with inclusive governance.
  • While the system has proven its capability in improving transparency and reducing corruption, continuous refinement is essential to overcome infrastructure gaps and ensure that no deserving beneficiary is left behind.

 

Source: https://educationpost.in/news/education/current-affairs/social-issues/as-governments-around-the-world-reevaluate-their-social-protection-systems-indias-direct-benefit-transfer-dbt