Spreading JAM - Part 1 (The 'J')

The accountants in the Govt. of India's Finance Ministry must have a sense of humor. In the Economic Survey report released along with the annual budget, the government released data regarding the number of new bank accounts opened (Jan Dhan Yojana), new Aadhar (identification) cards issued, and Mobile phone penetration. To track the progress of this trifecta of issues, the writers of the report have coined the acronym 'JAM' and improving these metrics is frequently referred to as 'spreading JAM.' At Vartaa, we too thought that the 3 metrics were important to track to get a better idea of overall socio-economic progress in the country. In this three part series we will examine each of these 3 metrics, why they matter, and their progress in recent years.

First up is the J in the JAM- Jan Dhan. Objective of "Pradhan Mantri Jan-Dhan Yojana (PMJDY)" is ensuring access to various financial services like availability of basic savings bank account, access to need based credit, remittances facility, insurance and pension to the excluded sections i.e. weaker sections and low income groups. Roughly translated, it means Prime Minister's People's Wealth Scheme. Prime Minister Narendra Modi announced the scheme during his first Independence Day address in August 2015. The largest initiative of the scheme has been helping people open bank savings accounts.

Why does this matter? "Cash transfers can directly improve the economic lives of India’s poor, and raise economic efficiency by reducing leakages and market distortions" says the Economic Survey report. We couldn't agree more. Direct Benefit Transfers (DBT) gets cash directly into the hands of those in need, reduces corruption involved in disbursing benefits (subsidized food grains, fertilizer subsidies, pensions etc.), empowers people to purchase their items from the best vendor, and gives them flexibility to use the most fungible of assets - cash - for their most urgent needs.

So how has this initiative done since its launch in 2014? If you look at bank accounts alone, the progress is impressive- Over 200 million accounts have been opened as of March 2016. On 20 January 2015, the scheme entered into Guinness book of world records setting a new record for 'The most bank accounts opened in one week,' in the last week of August 2014. Despite Jan Dhan’s record-breaking feats, basic savings account penetration in most states is still relatively low – 46 per cent on average and above 75 per cent in only 2 states (Madhya Pradesh and Chattisgarh). A lot more ground needs to be covered but it is heartening to see the needle move in the right direction. Next week we will discuss the spread of 'Aadhar'- the National Unique Identification initiative.

*Chart renders best on Desktop. We publish a modified version for phone.