Such a short journey


We have certainly come a long way in including the poor in the banking and financial system in the last two years. But is this enough?

The transition from Jan Dhan of 15 August 2015, to Universal Basic Income in the Economic Survey of January 2017, has been a swift one. Jan Dhan, was about instantly including the unbanked poor into the financial system so that wages, specific subsidies could be transferred directly to them without any leakages.

Just a letter issued by a gazette officer, with an attested photograph of the person was enough to start a zero balance bank account, which entitled the account holder to be part of many other financial services like insurance, accident and pension cover (provided some criteria were met and premiums were paid from the account directly). By April 2016, about 22 crore accounts were started with deposits amounting to Rs. 36,700 crore, averaging out to a deposit of about Rs. 1,668 per account. However, over 60% of these accounts were zero balance, and an estimated 33% were second accounts. So, even inside this segment of Jan Dhan withunbanked poor, hoping for cash benefit transfers, there were the not so very poor with an average of Rs. 4000 to spare for deposits into Jan Dhan accounts. So far, LPG subsidy has made it into the bank accounts regularly. This was accompanied by a push to digital payments, payment banks and payments over mobile phones called JAM (Jan Dhan, Aadhar, and Mobile). Mobile phones now have a high degree of penetration in India; by 2015, 82% of the population had a connection. Phones become a substitute for payment by cards or cash, overcoming the cost and paucity of bank branches, card reading machines and ATMs, especially in rural areas. This digital world was expanding at an unhurried pace. Barely literate and illiterate people (and older people of all classes) still prefer to count and hold cash rather than press numbers on smart phones. Not to mention the uncertain state of power and internet connectivity in the smaller towns.

Then came November 2016 and demonetisation. There was a surge of cash into some 48 lakh Jan Dhan accounts to double the total amount deposited in Jan Dhan within a month. It is believed that the wealthy used the Jan Dhan accounts of their servants and employees to deposit unaccounted for cash. But for the majority, the accounts were rapidly depleted because livelihoods and incomes were hit for over three months. These account holders are mostly in temporary, contractual jobs, farm labourers or self-employed in petty trades, their families members too are often domestic workers or helpers in the same petty trade.

The Economic Survey has acknowledged that they were the primary collateral damage of the exercise to fight black money hoarding by the rich. They are the subjects of occasional newspaper reports on farmer distress, troops of migrant workers returning to their villages in Uttar Pradesh, Bihar, Orissa, and West Bengal due to closure of micro and small enterprises in Tamil Nadu, Punjab, Karnataka and Kerala. Subsequently, they will not need the remittance services of the banks or mobile phones for a while, and it’s quite likely that their unsubstantial savings will not grow. It’s also likely that they will be excluded from most financial transactions except debt for a while.

The Economic Survey informs us that India is ready for a Universal Basic Income (UBI) now. People below the poverty line will get Rs. 1,200 every month, to stay alive. This is a calculation based on the official estimate of poverty line. However, this largesse is possible only if other subsidies like PDS (Public Distribution system), fertiliser and poverty alleviation schemes are scrapped. Otherwise, India cannot afford UBI since ports, electricity, internet, bridges and road connectivity are also needed. However, the Finance Minister thinks that Indians are not mature enough to accept this otherwise first-rate idea. He is probably correct. The government of the day is quite convinced that as a sovereign state it cannot deliver basic public goods or welfare services to all citizens, but why should the people be similarly convinced? Food for thought indeed.


Anuradha Kalhan

Anuradha Kalhan is an independent researcher. She was earlier a Fellow at NMML, Teen Murti.