June 6, 2023

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Flat growth in DBT in FY22 signals plateauing

Transfer of assorted subsidies and sops to the beneficiaries through the direct benefit transfer (DBT) saw a flat 1% growth to 5.59 trillion in FY22 from the previous year, indicating a plateauing of coverage under most schemes.The DBT system has enabled the government to save significantly on its social-sector welfare expenditure through targeted deliveries. The government’s cumulative savings on expenditure, thanks to the DBT till FY21-end, was2.23 trillion.

Subsidies worth Rs 1.9 trillion were transferred to beneficiaries via foodgrains under the public distribution system (PDS) in FY22, up 14% from FY21. The Centre extended the free grains scheme for 11 months in FY22 compared with eight months in FY21.

Fertiliser subsidies worth Rs 1.24 trillion, 48% more on year, were provided to farmers in FY22 as input costs and global prices of fertiliser doubled during the year. Between FY14 (when the DBT scheme was launched) and FY22, benefits worth Rs 21.97 trillion has been transferred to the beneficiaries, 60% as cash paid to their bank accounts and the balance as in-kind benefits.

The jump in DBT from FY18 onwards could be largely attributed to the increased use of Aadhaar-enabled DBT platforms for in-kind food and fertiliser subsidy distribution (see chart).According to an estimate by the Centre, the Aadhaar-enabled DBT platform helped eliminate 41.1 million fake LPG connections, 39.9 million duplicate ration cards and resulted in 10% savings on wages on account of deletion of non-existent MGNREGS beneficiaries.

DBT beneficiaries (many people are beneficiaries in multiple schemes) stood at 1,541 million in FY22, down 14% on the year as some of the special schemes rolled out to fight Covid in FY21 were discontinued. DBT beneficiaries stood at 1,447 million in the pre-pandemic FY20. While the Centre’s DBT programme is making major headway, many state governments too are giving DBT a further boost by increasingly using it to distribute their subsidies and assorted other sops, which annually cost them around Rs 3-3.5 trillion.