Cash Transfers in India potential to save .5% of Indias’ GDP and eliminate 15% subsidy leakages


The DBT (Direct Benefit Transfer) of UPA is attracting international attention. The initial project has taken off in late 2011, and critical mass is expected to be achieved in 2013.

The Governments DBT rides on APBS which in turn is dependent on UIDAIs’ Aadhaar numbers.

Integration of direct cash transfer with Aadhaar will take time but the scheme will help Indian government save 0.5 percent of the GDP, International Monetary Fund (IMF) said on Monday.

The ‘Regional Economic Outlook: Asia and Pacific’ report further said the integration of these two programmes — Aadhaar and direct cash transfers — promises further major payback

At the same time, the report advocates that the government must be careful while dismantling the old structure and replacing with the new DBT. Hence, the progress will be slow, but the benefits will be far reaching.

In the long run, major gains are expected from DBT with LPG subsidy and fertilizer subisdy

The Government provides a subsidy of Rs 24.38 a litre on PDS kerosene and Rs 320.38 per cylinder on domestic LPG as on March 1.

The total subsidy on PDS kerosene and domestic LPG during 2009-10 and April-December 2010 is Rs 34,391 crore and Rs 29,525 crore, respectively

There is mixed reaction to the routing of kerosene subsidy through Aadhaar in Rajasthan. The major challenge would be to ensure that the subsidy amount reaches the recipients banks accounts in time. Otherwise, it will end up in a double whammy.

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