Chanakya IAS Academy Blog


  • After 68 years of independence, country is still suffering from poverty and disparities, though state resources are continuously utilised in the name of poverty alleviation. Huge amount is spent on key subsidies by the government.
  • But, it is widely accepted that India’s welfare system is pervaded with leakages. Rampant corruption diverted the benefits intended for the poor to the pockets of middlemen and corrupt officials.
  • JAM trinity is an attempt to increase effective use of available technology.
  • What is JAM Trinity?
    • JAM Trinity refers to-
    • J- Jan Dhan Yojana bank account (PMJDY).
    • A- Aadhar, a unique number to identify everybody with biometric details.
    • M- Mobile phone number.
  • Any customers applying for a bank account under the Pradhan Mantri Jan Dhan Yojana should provide Aadhaar number as identity proof. The applicant has to produce his mobile number for the Aadhaar enrolment in the account. This is the way of linking Trinity. Once the linking is complete, the customer will be identified by Aadhaar number.
  • What role can JAM trinity play?
    • JAM Trinity can effectively cut the leakages by enabling better delivery of direct benefit transfer (DBT).
    • JAM will lead to Unique Identification of beneficiaries thus eliminating fake beneficiaries.
    • JAM will also lead to financial inclusion of people living in villages and in backward areas.
    • JAM trinity is creating an atmosphere for enabling DBT and will also help in direct delivery of various government schemes like scholarship for students, Janani Suraksha Yojana, old age pension etc.
    • The strong link is that country’s 70% of population uses mobile phone. Lack of full reach of Aadhar registration and lack of total financial inclusion are weak links of the trinity but situation has improved substantially on these two count as well.
  • Technological innovations and possibilities of cash transfer
    • New innovations in Information and Communication Technology have brought the opportunities for direct cash transfer to help the poor. As per recent experiments leakages can be curtailed by reducing involvement many department in the distribution process.
    • A recent study evidence that MGNREGA and social security payment were paid on an average 10 days faster with new Aadhar link bank accounts through direct benefit transfer system and leakages minimised by 10.8 %.
  • Magnitude of distortion in price subsidies
    • Government provide adequate subsidies in railways services. Passenger tariff on train artificially kept low.
    • These controlled rail prices actually provide more benefits to the rich and the poor. Deliberate low passenger tariffs have affected Railway finances and it has been unable to generate resources for capacity expansion to the growing need of population. To maintain the balance, railways tries to cross subsidise passenger fare by raising the freight tariffs. This has resulted in diversion of freight traffic to road Transport. Consequently this has caused more emission, pollution, traffic congestion and accidents.
    • In case of liquefied petroleum gas that touching fact is that among the all LPG users, the poorest 50% of household consume only 25% of LPG. The net welfare gain from LPG subsidy for Poor household is less than rupees 10 where the LPG welfare gain to rich household is close to rupees 80.
    • As per estimate only 46% of total consumption of the subsidized kerosene is by households living Below Poverty Line. 51% of subsidised kerosene is consumed by non poor and almost 15% of subsidised kerosene is actually consumed by the relatively better off, the richest 40%.
    • The purpose of subsidizing fertilizers is to incentivize farmers for cultivation of high yielding varieties of crops. But in true sense it benefits of fertilizer manufacturers and rich farmers. Again manufacturers avail the benefits of freight subsidy for transit.
    • It is estimated that a large fraction of price subsidies allocated to water utilities up to 85% are spent on subsidizing private taps when 60% of poor household get their water from public taps.
    • Price subsidies distort markets in multiple dimensions that ultimately hurt the poor. For wheat and rice the government provides subsidy to both producer and consumer. Wheat and rice are procured from the farmers at guaranteed minimum support price. High MSP encourages MSP supported crops and discourages cultivation of other crops. This brings a supply-demand mismatch of non MSP supported crop and raises their price and volatility in the market. This ultimately hurts the poor household who tend to have uncertain income stream. High MSP coupled with water and electricity subsidies lead to conservation of water intensive crops by rich farmers that cause depletion of groundwater table.
  • The JAM Solution :
    • Above distortions in subsidy distribution can be easily solved by JAM approach. Seeding Aadhaar number into the bank account is the key for implementation of the program. This will definitely help in plugging leakages and better resource distribution to the poor.

Bottleneck to JAM and possible solutions

  • PMJDY aims to extend the banking services to the unbanked population in the country for upliftment of the under-privileged. The critical areas for the sustenance of this plan are proper remuneration for agents, penetration of bank accounts for transaction readiness etc.
  • Aadhaar has got statutory status in the budget session of the Parliament but the debate is still going on related to privacy issues.
  • Reliable mobile and data connectivity in the remote rural areas may not be available to effectively deliver DBT benefits directly to the people.
  • JAM trinity’s real challenge is with non-cash benefits such as subsidies on food, kerosene, LPG etc. Converting these subsidies into cash equivalent and paying it directly into the bank account is a challenging issue. Quantification of cash equivalent must be carried out in a realistic way.
  • The method of settings income criteria for identify the potential beneficiaries and then transferring the cash equivalent through the JAM trinity is very cumbersome.
  • At present success of the welfare scheme is directly proportional to degree of abuse by middleman and higher income group. But the success of JAM trinity depends on penetration of Information and Communication Technology.
  • Setting up of service quality benchmarks for Digital Financial Transactions and their constant monitoring is essential to build trust in this new system.
  • Spreading financial literacy with involvement of civil society, opening more branches and improving bank infrastructure are major challenges.
  • People have to be better educated so that they can better manage their accounts and also safeguard themselves from various fraudulent activities.
  • Telecommunication companies are reluctant to invest in remote areas because of low profit. Government can give active support for infrastructure development there.
  • Farmers saying high upfront costs of fertilizer and then waiting for subsidy through banks account, may be adversely affected. So a mechanism needs to be advised for this.
  • Strict monitoring of subsidy route. Any suspicious activity should be thoroughly investigated by Vigilance agencies.
  • Banking corresponding agents can be used to educate farmers not to fall into trap of moneylenders.
  • There is need for infrastructure like cellular towers, cheap mobile plans, electricity etc.
  • Government should see to it that various schemes like Smart city, Skill India, Digital India and Make in India integrated with JAM and DBT so that less leakage and productive results are achieved at a faster pace.


If the JAM trinity can be seamlessly linked, and all subsidies are routed through bank account, the real progress in terms of direct income support to the poor may finally be possible. The critical areas that need to be taken care of to make JAM and DBT effective are:

  • Adequate and timely disbursement of transaction processing charges to the banks and agent.
  • Pacifying the debate around privacy related issues of Aadhar.
  • Setting up and monitoring of service quality by the Finance ministry, TRAI, NCPI and UIDAI.

If these measures are taken, then twin problem of rationalising the subsidies and at the same time protecting the poor can be solved effectively.

Question: JAM trinity is an attempt to increase effectiveness of welfare measures by making effective use of available technology. Elucidate. Also discuss the challenges to JAM and solutions.

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