Direct Benefit Transfer (DBT): Mechanism to change the scenario of subsidies in India

Before moving on to the discussion on Direct Benefit Transfer (DBT) scheme, firstly we have to understand- ‘what is Subsidy and why it is given?’   Subsidy is a mechanism of welfare state in which government extended its support to the institution, business or individual in the form of a cash payment or a tax reduction. It is generally used as a form of support for particular portions of a nation’s economy which can assist struggling markets by lowering the burdens placed on them, or encourage new developments by providing financial support for the endeavors.


Direct Benefit Transfer (DBT) scheme is aimed at providing selective and thus reaching those who need it most. The purpose of DBT is to ensure that benefits go to individuals’ bank accounts electronically, for minimizing official helm of affairs that delay the fund flow thereby reducing delay in payment, ensuring accurate targeting of the beneficiary and curbing pilferage and duplication. There are three main pillars of DBT-

1. Aadhar Card with Biometric Identification
2. Bank Account linked to Aadhar to receive benefits
3. Beneficiary details for the service being provided

Merits of the DBT

1. Will reduce corruption and leakages
2. Fast benefit delivery
3. No PDS, Transportation and Storage cost
4. Total subsidy amount reduced due to selectivity
5. Facilitating Economic Equality
6. Improvement in Human Growth Indicators like Nutrition, Health, Education
7. Increased circulation of money with a potential to increment in growth

Demerits of the DBT

1. Targeting of BPL(Below Poverty Line) population is still improper.
2. Inadequate banking facilities in Rural and Remote areas.
3. Illiteracy of our population is a challenge to efficiency of scheme.
4. Money provides could be used wrongly.

What more can be done to fill the loopholes is to learn from the “Bolsia Familia” scheme of Brazil where, to stop the misuse of money, woman was selected as head of family and expenditure on health and education was incentivised. Further a temporary portable ATM facility was provided on a regular basis. Given the loopholes been taken care, DBT scheme certainly has the potential to change the overall economic and social status of the Indian Society.

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