DBT can save exchequer 0.5 per cent of GDP: IMF

As the Centre tries to go for subsidised LPG in select districts, IMF considers direct transfer of subsidised fuel to be a challenge

The International Monetary Fund (IMF) today praised the the Direct Benefits Transfer scheme, stating it could save the exchequer up to 0.5 per cent of gross domestic product (GDP), besides better targeting of subsidies.

“If the direct cash transfer and Aadhaar are integrated, eliminating the estimated 15 per cent leakage due to problems in identification, the savings could be around 0.5 per cent of GDP,” IMF said in its ‘Asia and Pacific: Regional Outlook’.

Half a per cent of GDP means saving of Rs 56,859 crore in terms of estimated GDP for 2013-14 (Rs 1,13,718,86 crore).

IMF said it was estimated that the elimination of the leakages due to outdated biographical information, ghost identification, double registration, and other losses from having a nationally uniform, biometric database would be 15-20 per cent of total spending.

The report added the direct cash transfers that entail direct payments to recipients from the government could cut costs and eliminate diversion by phasing out the middlemen and bureaucratic constraints.

Even as the government tries ambitiously to go for subsidised LPG in select districts from

May 15, IMF considers direct transfer of subsidised fuel to be a challenging task.

“The integration process would extend the timeframe for bringing 1.2 billion Indians into the Aadhaar programme beyond 2014, and that integrating this database with the information on individuals eligible for subsidised fuel will be time consuming,” it said.  

IMF said in a country like India, capacity building for electronic payment delivery and shifting of subsidies from companies to individual farmers could be very challenging.

It said shifting the fertiliser subsidy from companies to individual farmers and building up the capacity to deliver payments electronically could also be challenging in a large country like India.

IMF said though pilot programmes delivering subsidised kerosene using Aadhaar-based identification of eligible recipients had been set up in Rajasthan, replacing the current system on a broad basis would have to be done with care.

In the first phase of direct cash transfer, now called direct benefits transfer, just around 35 million transactions were completed, transferring only Rs 45 crore to Aadhaar-seeded accounts of beneficiaries. This translates into an average transfer of only Rs 1,285 an account since January 1.

The government had estimated that about 1.6 million beneficiaries would be covered under Phase-I of the scheme rolled out in 43 districts. Of these, about 1.3 million beneficiaries have been identified by banks but only 550,000 of them have reported their Aadhaar numbers to banks.