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What are the merits and demerits of direct benefits transfer (DBT) scheme in the Indian context?

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What are the merits and demerits of direct benefits transfer (DBT) scheme in the Indian context?
posted Aug 23, 2017 by Anurag Kashyap

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Direct Benefit Transfer is a mechanism to transfer the subsidy amount directly to the bank account of beneficiaries. Main agendas for DBT is to prevent and address following

  1. Leakages,

  2. Delays.

  3. Reducing structural expenses in distributing the subsidies in hand.

  4. Encouraging everyone to have bank account to get engaged in financial activities.

Right now it is applied to only 4 areas that too in selected districts:

  1. LPG subsidies.

  2. Jnani Suraksha Yojana

  3. Old age pension

  4. Scholarships

Mertis of DBT:

  1. Leakage, Delays are prevented.

  2. Reduces Corruptions and black money issue.

  3. Reduces economical inequalities in rural areas as everyone gets theire share rightfully.

  4. Reducing the government expense on PDS, Cooperative society, bureaucracy to distribute scholarships etc.

  5. Reduces time,energy and money of people to get their money/commodity.

  6. Encourage free and fair market structure. Earlier subsidised grains entering market through backdoor used to distort the price in market.

  7. More circulation of money in economy which will lead to atleast 0.5% growth in GDP.

  8. Govt can better focus on other issues and not engaging in distribution.

  9. Transportation charge for FCI and NABARD subsidies for warehouses will be reduced.

  10. Slowly importance of MSP will reduce while price a farmer would fetch will increase which is win-win situation for farmers, Also non-food crops will get importance which is issue right now in India.

  11. Financial institutions will pay attention in rural area once people will have cash in their hand.

  12. Health facility will get better with private hospital giving facilities once people will have money to get treatment.

Demerits of DBT are less but they are:

  1. Money in the hand of poor may get spent in something other than what is needed, A scholarship needed to be spent in education only, but how govt can ensure that, once she has sent it to account.

  2. Most accounts holder are males and has accessiblities to banks, hence it will lead to usage by them only. Females may not the money share if they are the real beneficiaries.

  3. With lesser banks in rural and most part of India, it will be another overhead for people to get their amoung withdrawal.

  4. Delay in transfer may create more turbulency as many will flock to banks to check the amount.

While the merits and demerits are mixture of hopes and assumptions, but DBT is in good spirit and will definetly benefit all stakeholders viz govt, beneficiaries and private institutions. It will ensure right to economical equality by ensuring every beneficiary will get their share on time.

answer Aug 29, 2017 by Vijay