Pradhan Mantri Jan-Dhan Yojana: Silent revolution

PM Jan-Dhan Yojana envisions a social security umbrella big enough to cover the whole country

ajay

Ajay Singh | June 6, 2015


#jan-dhan yojana   #pmjdy   #arun jaitley   #financial inclusion  

Illustration: Ashish Asthana

Good intentions often pave the way for the worst outcome. We saw it in the 1980s when a plan for rural poverty alleviation, known as the integrated rural development programme (IRDP), was launched. Rajiv Gandhi gave it a big push. The IRDP was modelled on the success of microcredit in Bangladesh.

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The massive initiative aimed at lifting the rural populace out of poverty was vigorously monitored by the prime minister’s office (PMO). Since the Congress ruled at the centre as well as in most of the states, the writ of the PMO was effective and unchallenged. Regional rural banks (RRBs) were set up on war-footing to connect the economically and socially marginalised to the banking sector. People were encouraged to open bank accounts and avail loans. An institution called NABARD was created to refinance the credit and take care of subsidy given to the rural poor. The landless belonging to the scheduled castes/tribes were given incentives and a huge subsidy (85 percent) to purchase livestock like pigs, buffaloes, cows and goats to supplement their income and come out of poverty.

There was nothing wrong with the programme in terms of its content till the notorious Indian bureaucracy turned it into a massive rural corruption racket. Animals were purchased and shown dead on paper all over the country to avail the loan waiver. The booty was shared by bank staff, block level officers and beneficiaries. Within a few years, the IRDP, the biggest financial inclusion and anti-poverty programme then, turned out to be a stinking mess of corruption and scandals.

The Pradhan Mantri Jan-Dhan Yojana (PMJDY) is even more ambitious than the IRDP. But have we learnt lessons from the past before rolling out yet another scheme? However, there are enough indications to suggest that the PMJDY is better designed than the IRDP. Unlike the IRDP which encouraged people to take loan and avail subsidy, the PMJDY is not linked to doles but to entitlements. It is aimed at creating awareness among the poor about their rights as citizens. The attempt to link these accounts with the direct benefit transfer (DBT) is intended to do away with the middlemen who used to get fattened on the doles meant for the poor.

Unlike the IRDP which was aimed exclusively at the rural poor, the PMJDY is an all-inclusive scheme which does not discriminate between urban and rural citizens. In a country which is on the cusp of furious urbanisation, any distinction on the basis of rural/urban in any programme would have been a recipe for disaster. For the first time policymakers recognised that the urban poor were no less miserable than their rural counterparts.

What is particularly remarkable about the PMJDY is the way it is designed to contain the transmission loss of subsidies meant for the poor but often pocketed by intermediaries. The seeding of the beneficiaries’ accounts with Aadhaar and connecting them also with their mobile numbers would evolve an identity grid across the country. It would have a positive impact on internal security as well.

The manner in which the scheme is linked to the new insurance and pension plans will extend a social security umbrella over those living on the margins and struggling for their day-to-day survival. That is the precise reason why we call it a ‘silent revolution’. It is ushered in simply by motivating people and without deploying any additional resources. It will be a great achievement if the PMJDY evolves into an effective mechanism to deliver people’s entitlements in a transparent manner.

But the devil is always in the detail. What will happen if the PMO will no longer be interested in the programme? What will happen if the notorious bureaucracy strikes back with a new way of salting away people’s entitlements? The bureaucratic ingenuity in innovating methods of corruption should hardly be underestimated. In such a situation, what is attained would be frittered away sooner than later. The risk of this silent revolution meeting a premature death is also not a distant possibility.

ajay@governancneow.com 

(The article appears in the June 1-15, 2015 issue)

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