TWALKITOUT: With the phasing in of LPG subsidy to bank, a new process steps in as an experiment to implement a tool to achieve numerous goals in an integrated manner. Direct subsidy to bank would inculcate a number of practices into our system, which could further be implemented on other subsidized items by the government.
The current figures from RBI indicate that only around 57% of Indian have a fully operational bank account. with the schemes of direct subsidy to bank, we achieve the goal of financial inclusion for masses in an indirect manner.
As an individual buys LPG for his/her family, he/she is forced to pay the full price, with the subsidy coming back into a bank account, just like a reoccurring deposit scheme and hence an indirect saving deposit everytime one buys a subsidized LPG cylinder.
Channel to Transfer Subsidy
Once the above two steps are acomplished on large scales, the Government stands a chance to divert other subsidies like Public Distribution System, cheaper food and other subsidized items directly into the bank account.
Hold on Cash
With the subsidy coming back into the bank rather than paying lesser amounts, increases the per capita hold of money, as spending less on subsidized item makes us spend less, but a returned subsidy in bank account makes us hold the liquidity.
This is one of a kind initiative and is being implemented nation-wide, even the use of Adhaar Card is being popularized even after the setback from the Apex Court of India. The impact of such a decision could be measured long term though, the motives seem clear.
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