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The 'JAM Trinity' of Jan Dhan Yojana, Aadhaar and Mobile numbers should be linked effectively for better transfer of subsidies to the intended beneficiaries.
Acknowledging that eliminating or phasing down subsidies is neither feasible nor desirable, the Economic Survey tabled in Parliament today said the JAM allows the state to offer this support to poor households in a targeted and less distorting way.
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"If the JAM Number Trinity can be seamlessly linked, and all subsidies rolled into one or a few monthly transfers, real progress in terms of direct income support to the poor may finally be possible," it said.
It observed that price subsidies are often regressive, meaning "a rich household benefits more from the subsidy than a poor household".
The estimated direct fiscal cost of subsidies is about Rs 3.78 lakh crore or about 4.24 per cent of GDP.
Among other commodities, the government subsidises rice, wheat, pulses, sugar, kerosene, LPG, naphtha, water, electricity, fertiliser and iron ore.
Prime Minister Narendra Modi recently stated that leakages in subsidies must be eliminated without reducing the subsidies themselves.
The survey also made a case that Post Offices can fit into the Aadhaar linked benefits-transfer architecture.
India has the largest postal network in the world with over 1,55,015 Post Offices of which (89.76 percent) are in the rural areas.
"Similar to the mobile money framework, the Post Office (either as payment transmitter or a regular Bank) can seamlessly fit into the Aadhaar linked benefits-transfer architecture by applying for an IFSC code which will allow post offices to start seeding Aadhaar linked accounts," it said.