17,000 new credit cards issued by ICICI linked to wrong users

India now had a robust mechanism to create the JAM trinity by getting people to link their Aadhar IDs with their bank accounts.

The recent pandemic has imposed tremendous costs along with personal suffering across the world. India, with its historically underfunded healthcare sector and relatively modest per-capita income levels was bound to face an unprecedented challenge as even most of the advanced countries were found to be suffering.

There will be an objective assessment of the pandemic and how countries have performed – preliminary assessments show that India has done considerably better than many of its competitors given its underfunded healthcare sector. It has also used this opportunity to correct past mistakes made by successive governments by neglecting the healthcare sector while simultaneously building on the strong foundation laid under the Ayushman Bharat yojana. From setting up of new health and wellness centres, new hospitals and upgradation of critical healthcare facilities – India’s healthcare sector post-Covid will be significantly different than what was inherited in 2014. Some of these interventions, including fresh addition in capacity could also help lower healthcare costs over the next few years.

Fiscal interventions

But the silent transformation of India is not just limited to the healthcare sector. The best possible way to demonstrate this is by making a simple comparison. In terms of fiscal interventions, most governments provided direct cash transfers. India and the US were no different as both launched a programme to provide direct cash support. In India, support was provided instantly with the click of a button – and the money could be utilized instantly. In the US, they relied on issuing ‘cheques’ which then had to be taken to banks. This was a big difference in the mechanism of using the same policy tool in two countries – one of them is an emerging market while the other is an advanced economy. Take a wild guess – which one is which?

The remarkable progress made by India in terms of its ability to provide instant benefit relies on three important pillars – the Jan Dhan, Aadhar and Mobile – JAM Trinity. The use of direct cash transfers was necessitated as there were significant leakages in our subsidy targeting which meant that a lot of taxpayer money got wasted – while those who deserved help were also often left out. The reluctance to do direct cash transfers was an outcome of the lack of financial inclusion for many decades. The ambitious Jan-Dhan push was a step to correct that as India ensured near-universal access to a bank account at the household level. Thus, India now had a robust mechanism to create the JAM trinity by getting people to link their Aadhar IDs with their bank accounts.

The benefits of the Jan Dhan Yojana have been confined to statistics that talk about how much money has been saved by using the DBT or other such statistics. But the real benefit is the critical role it has played in terms of ensuring India had a robust digital infrastructure to provide instant support to people in the form of direct cash transfers.

The social security net

In fact, since 2014, the government has been focused on creating a robust system of a social security net for Indians. This began with the Atal Pension Yojana to provide pensions post-retirement, the Pradhan Mantri Suraksha Bima Yojana – an accidental life insurance coverage and the Ayushman Bharat Yojana which covers medical expenses. It is virtually difficult to imagine the devastating impact that the pandemic would have had on the poor and vulnerable sections of the population in the absence of these social safety nets.

There is also a need to recognize that most commentators had dismissed Jan Dhan, some termed it as ‘destined for failure’ while others commented on how it may not serve any useful purpose but may in fact increase operating costs for banks. Covid-19 has proved them all wrong as these instruments have played – to varying roles some degree in cushioning or absorbing at least a part of the shock induced by the pandemic.

Many have been talking about the 1991 reforms recently – indeed, those reforms were important for the country and its economy. However, it is important to recognize that despite these reforms, India could not ensure near-universal access to bank accounts, or to improved sanitation facilities, or even electricity. That many continued to live without such essential services in 2014 reflected a governance failure – or perhaps the fact that successive governments gave lesser emphasis to the holistic development of society. This is precisely why the focus has shifted post-2014 towards not just ensuring economic growth but also focusing on the overall development of the country.

Even as we acknowledge all that has been achieved over the last 7 years, there is a recognition that a lot is yet to be achieved. Be it in the form of ensuring universal access to necessities such as piped water or working towards ensuing housing for all – both of which will likely be achieved by 2024. There is also scope for augmenting our public healthcare system such that quality healthcare is made more easily accessible universally. While the Ayushmann Bharat does provide coverage to the poor and vulnerable, but the scheme can be expanded further to include a wider population thereby creating a wider social safety net.

In the growth stage

India’s social safety net is still at a very nascent stage, and this is largely an outcome of a lower level of per-capita income and the low tax to GDP ratio. As India’s economy expands, and tax collections improve, the social safety net will gradually expand – and take on some of the burden of the shoulders of honest taxpayers.

But the critical point is that we now have in place the elementary building blocks of a modern tech-enabled social safety net. It was this social safety net that was instrumental in cushioning some impact of the pandemic on the bottom one-third of our population. That it worked during a once-in-century pandemic serves as an excellent stress test for the robustness of the system. Eventually, who knows, maybe several advanced countries too attempt to emulate India’s model and combine smart policies with their own versions of a ‘digital stack’.

(The author is a director at the Public Policy Research Centre, New Delhi. He tweets @sumeetbhasin.)