In March, the first set of measures announced to help poor Indians deal with the economic shock of the coronavirus lockdown included cash transfers to women who held Jan Dhan bank accounts, which had been set up as part of a massive drive to broaden access to the financial system. Though they were to get only Rs 500 per month for three months, even this minimal amount would have offered some relief to India’s poorest women.
Except it didn’t reach millions of them.
Researchers from Yale and the University of Southern California found that of around 326 million Indian women living in poverty, half were likely to have been excluded by these measures because of the inadequate coverage of the Jan Dhan scheme. More than 150 million people missed out on the limited support measures announced by the government.
To make things worse, data suggests that even those who were getting cash transfers in their accounts had trouble accessing the money.
The average percentage of failed Aadhaar-enabled Payment System transactions – which are often used to withdraw money from Jan Dhan accounts through micro ATMs – was 39% in April. Failed transactions come with a high cost, since banks often do not allow second attempts. In other cases, the money was debited from the account without actually being withdrawn, only to be returned after two weeks, if at all.
Taken together, these data points made it evident that if the government is hoping to reach the poorest with cash support in this time of crisis, neither Jan Dhan accounts nor Aadhaar-enabled Payment Systems will be useful.
In his primetime address announcing an economic package for the country on May 14, Prime Minister Narendra Modi brought up the Jan Dhan-Aadhaar-Mobile combination that his government has frequently referred to. This raised concerns that, despite the data, the government would continue to insist on this mechanism, excluding millions.
However, when Finance Minister Nirmala Sitharaman finally announced the details of the package, the only direct intervention on this front was in the form of an additional Rs 40,000 crore allocated to the Mahatma Gandhi National Rural Employment Guarantee Scheme, which ensures 100 days of work a year for rural families.
The Business Standard reported that the government had initially been hoping to provide direct cash transfers to migrant workers, but realised that the process of identifying them as well as actually delivering the money – presumably through Jan Dhan and Aadhaar – would be too cumbersome and prone to failure.
So the government decided to move the allocation towards MGNREGS, which Prime Minister Narendra Modi once called a “living monument” to the failures of the Congress-led government that preceded him. The scheme allows individuals to identify themselves as needy, which would address the fact that the thousands of workers who have left urban areas to return to their rural homes will not have to worry about not being on the rolls.
To its credit, the government has decided to rely heavily on the scheme, despite its own criticism and occasional step-brotherly treatment towards MNREGS.
However, much more needs to be done. The People’s Action for Employment Guarantee group, in a statement, said that the additional Rs 40,000 crore only brings the total amount allotted to MGNREGS to the level it would have been at if the scheme been given an inflation-adjusted commitment in the Budget at the start of the year.
The group called on the government to double this allocation to address the likely surge in demand as Indians struggle to deal with the economic shock caused by the lockdown. Among other things, it said the government should pay unemployment allowances, mandated under the MGNREGS law, allow individuals to work for up to 200 days, permit quick registration of job cards and ensure that payments are made promptly.
Since wage payments for MGNREGS are routed to error-prone Aadhaar-linked bank accounts, activists say the government should monitor the system closely and dispense with them in favour of other mechanisms, including handing out cash, if it is standing in the way of people accessing money that is their due.
These are useful suggestions. By relying on MGNREGS, rather than its much touted JAM architecture, the government has shown that it is willing to put aside its own petty politics to ensure that cash reaches the needy. Now it needs to double-down and provide sufficient support to the hundreds of millions who face destitution thanks to the massive economic shock caused by Covid-19 and the lockdown.