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Question:  In what way could replacement of price subsidy with direct benefit Transfer (DBT) change the scenario of subsidies in India? Discuss.


Answer:  Direct Benefit Transfer is a method of economic security where the government transfers a certain amount directly to the bank accounts of the beneficiaries without having to provide individual subsidies on products and services. This method has proved successful in pilot studies and its benefits are widespread.

Benefits of Direct Benefit Transfer (DBT)

  • Reduction in leakages
    The government subsidies in PDS system is plagued with leakages through misuse of funds as well as fake beneficiaries that put addition stress on already weak resources of the country. By opting for DBT, the leakages through fake enrollment can be stopped as amount directly gets credited to bank account.
  • Savings on transportation and storing charges
    Additional charges on transportation and storing takes place while carrying out PDS. These put strain on infrastructure and resources of government while handling the process. Through DBT, the government does not have to worry about storing or transportation as people directly buy from market using the transferred amount.
  • Enhancement of quality
    The PDS system is plagued with low quality of products due to black marketing by people involved. If DBT is carried out, people can buy products of their choice and quality without relying on inferior quality under PDS. This will enhance the quality of product life too.

Drawback of DBT

  • Misuse of subsidy amount
    The DBT amount is liable to be misused by certain sections of people for their vices such as alcoholism, gambling etc. This will deteriorate conditions for women due to increase in incidence of domestic violence. People will not even have food products that was intended under PDS.

Way forward

DBT is a unique experiment and measures are underway to make it efficient for using the service instead of individual subsidy.

Thus, Direct Benefit Transfer is indeed a novel idea that seeks to revolutionize social scheme in India. Successful implementation will be watershed moment in the history.

Updated on 22 Jun 2020 |   Added on .19 Jun 2020  |  by admin