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