Direct cash through Aadhaar to save 0.5% of GDP for India: IMF

May 2, 2013

International Monetary Fund quoted that integration of direct cash transfer with Aadhaar will take time but the scheme will help Indian government save 0.5 per cent of the GDP.
Benefits

Better targeting of spending on the poor
Indian government save 0.5 per cent of the GDP
The combination of schemes will eliminate the estimated 15 per cent leakage cited above for the programmes.
Direct cash transfers can bring down costs and diversion by phasing out middlemen and complex bureaucracies present in current subsidy programs.

Challenges

Timeframe for bringing India’s population of 1.2 billion into the Aadhaar programme could extend beyond 2014
Integrating this database with information on individuals eligible for subsidised fuel will take time

Current Subsidy programs

Food & kerosene- Available from Government Stores at below market prices
Fertilizers- All fertilizers sales are at subsidized Prices
LPG Cylinders- distributed directly, with a limit on each household’s subsidised purchase

Pilot Projects

Pilot programmes delivering subsidised kerosene using Aadhaar-based identification have been set up in Rajasthan
Pilot scheme replacing subsidised LPG with direct cash transfers was also launched in Mysore, Karnataka

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