Direct cash through Aadhaar to save 0.5% of GDP for India: IMF

May 2, 2013

International Monetary Fund  quoted that integration of direct cash transfer with Aadhaar will take time but the scheme will help Indian government save 0.5 per cent of the GDP.
Benefits

  • Better targeting of spending on the poor
  • Indian government save 0.5 per cent of the GDP
  • The combination of schemes will eliminate the estimated 15 per cent leakage cited above for the programmes.
  • Direct cash transfers can bring down costs and diversion by phasing out middlemen and complex bureaucracies present in current subsidy programs.

Challenges

  • Timeframe for bringing India’s population of 1.2 billion into the Aadhaar programme could extend beyond 2014
  • Integrating this database with information on individuals eligible for subsidised fuel will take time

Current Subsidy programs

  • Food & kerosene- Available from Government Stores at below market prices
  • Fertilizers-  All fertilizers sales are at subsidized Prices
  • LPG Cylinders- distributed directly, with a limit on each household’s subsidised purchase

Pilot Projects

  • Pilot programmes delivering subsidised kerosene using Aadhaar-based identification have been set up in Rajasthan
  • Pilot scheme replacing subsidised LPG with direct cash transfers was also launched in Mysore, Karnataka
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