UPSC Mains 2015 GS3 Q5 — Subsidies and DBT
In what way could replacement of price subsidy with Direct Benefit Transfer (DBT) change the scenario of subsidies in India ? Discuss. (Answer in 200 words)
Question Decoded — examiner's intent
- Directive verbs
- Discuss
- Scope keywords
- replacement of price subsidyDirect Benefit Transfer (DBT)scenario of subsidies in India
- Implicit sub-parts
- Comparison of the mechanisms: Distorted market prices (Price Subsidy) vs. Income Support (DBT).
- Impact on fiscal health: Reduction in leakages, ghost beneficiaries, and administrative overheads.
- Behavioral and economic shift: How it changes consumer choice and producer incentives (e.g., in fertilizers or PDS).
- Challenges in the transition: Financial inclusion gaps, digital literacy, and price volatility risks for the poor.
- Common pitfalls
- Spending too much time defining DBT instead of focusing on the 'change in scenario' or transformation aspect.
- Neglecting the impact on 'price signals'—failing to mention how DBT stops market distortion unlike price caps.
- Focusing only on LPG (PAHAL) while ignoring other critical sectors like fertilizers (Nutrient Based Subsidy) or Food (PDS).
- Ignoring the 'exclusion error' risks where technology failure might worsen the scenario for the most vulnerable.
- Dimensions required
- Fiscal/EconomicAdministrative/GovernanceSocial/EquityMarket/Price Mechanics
- Marks allocation hint
Allocate 40 words to the shift from price-distortion to market-pricing, 80 words to the positive transformations in fiscal efficiency and targeting, and 60 words to the structural challenges and risks of this transition. Use the final 20 words for a forward-looking conclusion on JAM trinity integration.
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