Covid-19 Cash Relief

What is the issue?

For some time now, the JAM trinity (Jan Dhan-Aadhaar-Mobile) has been put forward as a dream cash-transfer infrastructure for India.
However, for effective cash relief in response to the COVID-19 crisis, the government must think beyond the JAM trinity.

What is the illusion?

The supreme goal of JAM trinity is adhaar-enabled mobile banking.
In 2017, NITI Aayog CEO predicted that, in the next 2½ years, every Indian will transact by using just a thumb finger in 30 seconds.
An illusion emerged that India had developed an ideal infrastructure for Universal Basic Income (UBI) through JAM, ready to be deployed at any time.

How has this illusion faded?

In the early days of Covid-19 crisis, JAM was often invoked as a possible tool of emergency relief.
But when the time actually came to make cash transfers to the poor, JAM turned out to be of little use.
For all the excitement it had generated, JAM had not gone beyond some fancy digital-payment systems for the privileged.
Poor people were still running from pillar to post to collect their meagre benefits from old-fashioned bank accounts.
There are crowds already in banks, and it is all set to swell further as and when the lockdown is lifted.

Will the relief package through JDY Account be effective?

The lead cash-relief measure in the national relief package consists of monthly transfers of Rs. 500 to women’s JDY accounts.
The effectiveness of the cash transfer through women’s JDY accounts is by comparing it with any other cash transfer method.
It could be compared with the list of households that have a National Rural Employment Guarantee Act (NREGA) job card.

What is the comparison?

Number of accounts - There are about 14 crore for NREGA cards and 12 crore or so for women’s JDY accounts in rural and semi-urban areas.
For purposes of cash relief, the JDY approach turns out to fare poorly on several counts.
JDY accounts are a mighty mess - But the NREGA job-cards list is far more transparent and well-organised.
During the initial JDY wave, in 2014-15, banks opened JDY accounts en masse to meet the targets.
Banking norms went for a toss - Many accounts were opened without consent, Aadhaar numbers were seeded without safeguards, etc.
It is not clear what proportions of JDY accounts are operational today.
Exclusion error - Cash transfers to women’s JDY accounts are likely to involve large exclusion errors.
Less than half of poor adult women have a JDY account.
The NREGA job-card list have much better coverage of poor households.
The natural complementarities between NREGA and social security pensions would further help to reduce exclusion errors.
Inclusion errors - These are likely to be larger in the JDY approach.
Job cards are meant for rural workers, JDY accounts are for everyone.
National Election Studies 2019 data show that JDY beneficiaries tend to be better-off than NREGA beneficiaries.

Payment issues - There have been significant payment issues with NREGA payments, often related to Aadhaar.
But then, numerous “direct benefit transfer” schemes have faced similar problems, also reflected in official transaction data.
Both the Aadhaar Payment Bridge System (APBS) and the Aadhaar-Enabled Payment System (AePS) have technical glitches.
So, transfers to job-card holders are more reliable than transfers to JDY accounts of women.
Payment methods - NREGA job-cards list lends itself to the “cash-in-hand” method (on-the-spot payment in cash) as a possible fallback.
Cash-in-hand may seem like the antithesis of JAM, but it may become important if the banking system comes under further stress.
Several States have already resorted to cash-in-hand for relief payments during the lockdown.

What could be done?

For cash relief, the central government could switch from use of women’s JDY accounts to the NREGA job-cards list in rural areas.
As for the JAM trinity, it should come down to earth for a reality check.

Source: The Hindu