By Suganya Balakumar
The JAM trinityPradhan Mantri Jan Dhan Yojana, Aadhaar and Mobile numberhas the potential to link all Indians into one common financial, economic, and digital space, said Finance Minister Arun Jaitley as Pradhan Mantri Jan Dhan Yojana (PMJDY) completed three years on 27th August 2017. He also mentioned that this is nothing short of a social revolution.
The abbreviation to the trinity (JAM) was coined by the Chief Economic Advisor, Arvind Subramanian. It was first used in the Economic Survey February 2015. The JAM trinity is being touted as a game changing reform that will allow the transfer of benefits in a leakage-proof, well-targeted and cashless manner.
Jan Dhan Yojana: Towards financial inclusion
The first component, Pradhan Mantri Jan Dhan Yojana (Prime Minister’s People Money Scheme), is India’s national mission for financial inclusion. It aims at ensuring financial servicesavailability of savings and deposit accounts, remittance facility, access to credit facilities, insurance and pension, financial literacythrough affordable means.
The plan aims to provide at least one basic banking account for every household. Moreover, it envisages channelling all government benefits directly to the beneficiaries accounts. The campaign was launched by Prime Minister of India Narendra Modi on 28th August 2014. This mission also holds a Guinness World Record of opening 18,096,130 accounts during the week 23 to 29 August 2014. As of August 2017, the mission has opened 29.58 crore accounts and has garnered Rs 65,900 crores. The number of zero balance accounts declined from 76.81% in September 2014 to 21.41% in August 2017. This mission shows that the government aims to include a larger population of the country in the growth process.
Linking Aadhaar and mobile phones
The second component, Aadhaar, is a unique 12-digit identification number issued to individuals for establishing a unique identity for every individual in the country. It aims at eliminating fake identities and documents. As of August 2017, 1.171 billion people have been enrolled in the Aadhar system. Presently, 52.4 crore Aadhaar numbers are linked to 73.62 crore bank accounts.
And the third component, Mobile phones, is the wireless mode of communication. Over the years, the mobile phone has not only been used as a mode of communication but also as an enabler for healthcare, education and financial inclusion. It helps in connecting the government to the citizens.
Benefits for the underprivileged
The JAM trinity has proved to be highly beneficial for the poor. It is providing them access to financial services. It has also benefitted the government by reducing subsidy burden, and by bringing legitimacy to the government.
The Economic Survey 2015-16 mentioned that the JAM Trinity would help reduce leakages and provide more fiscal space to the government. The first variety of JAM, PAHAL, aimed at transferring LPG subsidies via Direct Benefit Transfer. It reduced leakages by 24%! Direct Benefit Transfer in LPG was successful, and policy makers should try to emulate its success.
Long way to go: The challenges
The Economic Survey 2015-16 elaborated on the importance of identifying challenges in order to spread JAM. It said that the policymakers should consider first-mile (beneficiary identification), middle-mile (distributor opposition) and last-mile (beneficiary financial inclusion) challenges. The report further recommended that the Centre should prioritise areas where it has the highest control over the first and middle-mile factors and where leakages are high. The most promising targets for JAM are fertiliser subsidies and within government fund transfers. These areas are under significant Central control and have substantial potential for fiscal savings.
The JAM trinity is not without flaws. With regard to the implementation of the PMJDY, the mere opening of bank accounts does not mean better financial inclusion. The government should take measures to inculcate the habit of using these accounts amongst the people.
Though PMJDY has achieved the opening up of bank accounts, there is still some way to go before bank-beneficiary linkages are strong enough to pursue Direct Benefit Transfer without committing exclusion errors. The government should aim at the efficient transfer of money from banks to the beneficiaries hands. Hence, the government should invest in improving Business Correspondent networks. The use of mobile money should also be promoted. Finally, in those areas where the Centre has less control, the states need to step up to improve the financial connectivity.
Therefore, the government needs to solve the issues of leakages, exclusion and financial connectivity in order to efficiently implement the JAM trinity.
Featured Image Source: PMINDIA