India’s Direct Benefit Transfer and Public Distribution System: Can They Work Together?

The recently announced Direct Benefit Transfers (DBT) programme of the Government of India is being hailed as a ‘game changer’. Many in the media and social commentators have been quick to compare it with the Brazilian Bolsa Familia. Unfortunately both the critics of cash transfers as well as the supporters seem to have got it wrong. The DBT programme merely provides for the efficient transfer of money from existing cash transfers (mostly social pensions and scholarships for students) directly to the recipients’ bank accounts, leveraging information technology and the newly launched biometric platform (the Unique Identification/Aadhar Number) and combining it with an innovative banking solution using business correspondents.

The sticky point here though is the transfer of existing ‘in-kind’ subsidies through the DBT, especially food subsidies that use the Public Distribution System (PDS). Much of the confusion around this was created by the unclear messages sent out by the government, which has given ammunition to critics of the programme.