The Economic Survey of 2014-2015 states that the Jandhan Aadhar Mobile (JAM) Number Trinity allows the state to offer support to poor households in a well-targeted, leakage-proof and less distorted way. The new jargon – JAM Trinity – was coined by Chief Economic Advisor Arvind Subramanian. This article explores the Jandhan Aadhar Mobile Trinity initiative and the key benefits of its implemetation.
The term (JAM Trinity) also referred to as a “game changing reform” has become a flavour of the season… finding mention both in the Economic Survey and the Budget.
Jandhan Aadhar Mobile – JAM Trinity Initiative:
The Jandhan Aadhar Mobile Trinity holds the key to one of the greatest reforms in India, i.e. direct subsidy transfers. The government is pinning its hopes on these three modes of identification – Jandhan Yojana, Aadhar number, Mobile Number – to deliver direct benefits to India’s poor.
Until now, the Government has operated many subsidy schemes to ensure a minimum standard of living for the poor. But these schemes seemed to take convoluted routes, and many times the end consumer never got it. So, delivery of affordable products or services to poor people has always been cumbersome.
Consider the following examples:
- MGNREGA, operated through the panchayats, pays minimum wages to rural workers.
- The Centre and States supply rice, wheat, pulses, cooking oil, sugar and kerosene at heavily subsidized prices through the Public Distribution System (PDS).
- Sectors such as power, fertilizers and oil sell their products to people below market prices.
These subsidies are forced to take a winding way through the hands of intermediaries. The resulting situation is obvious – leakages of subsidy en-route to the rightful owner, corruption and inefficiencies that eat away huge chunks of the benefits.
Click to more about the 7 Ways in Which Aadhar can Speed up a lot of Process for you
The government has now carefully planned and placed JAM trinity at the right spot. Aadhaar helps in direct biometric identification of disadvantaged citizens. Jandhan bank accounts and Mobile phones allow direct transfers of funds into their accounts. This can possibly cut out all the intermediaries.
Importance of Jandhan Aadhar Mobile Trinity Initiative:
A prevailing general opinion is that money wasted in inefficient distribution of subsidies is money that is not available for other developmental activities. According to the Economic Survey, about Rs.3.78 lakh crores or 4.2 per cent of GDP, is currently spent on key subsidies. Also, the Survey has some compelling numbers to show that the current system of price subsidies is a leaky bucket.
The government ends up delivering unintended benefits to the rich due to sale of low cost goods. Consider the following cases:
- Three-fourths of the subsidized LPG cylinders are used by the richer half of the population.
- Corporation water is subsidized, but 60 per cent of the poor get their water from public taps.
- Over 15 per cent of PDS rice, 54 per cent of wheat and 48 per cent of the sugar is lost in leakages.
Given this, if an individual is identified as “privileged” who can afford a good standard of living without government aid, the introduction of JAM Trinity will mean that the person will have to pay full price for goods and services that were hitherto subsidized. Petrol subsidies have already been revoked and prices at the bunk now fluctuate with market prices. Diesel subsidies are on their way out. And the Centre recently began identifying the recipients of the LPG subsidy by insisting that consumers map their gas connections and bank accounts to their Aadhaar.
Click here to read more about LPG subsidy.
JAM Trinity is sure to make goods and services cost dearer in the short-term. Over the long-term, when leakages are sealed, savings for the government will mean a lower burden on the taxpayer. Obviously, lower subsidies and fiscal deficit will also mean a better credit standing for India in the long run.
How Jandhan Aadhar Mobile Trinity Initiative works:
The principle of JAM is that an individual’s aadhar number is linked to an active bank account for implementing cash transfers.
According to the Economic Survey of 2014, there are about 125.5 million Jan Dhan bank accounts, 17,757 million Aadhaar numbers, and 904 million mobile phones.
The Government has linked around 100 million bank accounts with registered Aadhar numbers. This will further increase with the introduction of Jan Dhan Yojana which helps to better target and transfer financial resources to the poor. Mobile money facilitates a complementary mechanism of offering direct cash transfer to large number of population.
This is backed by the increasing number of mobile operators applying for payment banks. Hence Mobile Money Platforms provide tremendous opportunities to direct Aadhaar based transfers.
India’s Postal Network can also be linked to the Aadhaar-related benefit schemes. According to the Economic Survey Post Offices can seamlessly fit into the Aadhaar linked benefits-transfer architecture by applying for an IFSC code which will allow them to start seeding Aadhaar linked accounts.
Extending a helping-hand to the poor:
The JAM Trinity initiative can be envisaged to implement periodic and seamless financial transfers to bank accounts after identification through the Aadhaar numbers.
The Prime Minister Jan Dhan Yojana has been a success story when it comes to providing bank accounts to the people who were out of the financial network. Within 100 days of launch of the scheme, over 12.5 crore people have been provided a bank account.
- The DBT scheme for LPG reduced leakages by 24%. The survey said 97% of LPG is consumed by the richest 30% of households
- There is an increasing need to improve financial inclusion by developing banking correspondent
If the Jandhan Aadhar Mobile Trinity works as intended, subsidies will no longer mean money for JAM – either for the corrupt or for the wealthy. Thus the launch of this initiative has become such an important part of Indian economy, that it has become immensely popular in financial circles.
We hope this article was useful. Please check the website for many such resources. Click here to read more about JAM Trinity in news.