The pitfalls of India's JAM

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By:
Kanika Saigal
Published on:

India's national ID and financial inclusion system creates the rails on which food and financial aid can reach some of the most vulnerable in society. But its rigidity in a crisis is a weakness.

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Picture this: you are the leader of a developing country. Out of 1.4 billion people, nearly 70% live in rural areas, over 20% are illiterate and 22% live below the poverty line of $1.90 a day, according to the World Bank.

Suddenly, a viral pandemic such as Covid-19 hits. In an attempt to save lives and stop the spread of the virus, you introduce an all-encompassing lockdown that forces people to stay at home and businesses to close.

But the vast majority – 80% – of people work in the informal economy, living hand to mouth, relying on working every day to feed themselves and their families.

They have two choices: go against guidelines and continue to work to put food on the table, or obey and starve.

What is the solution? For India, it could be JAM – the combination of the Pradhan Mantri Jan Dhan Yojana, known as Jan Dhan, (J) and Aadhaar (A) programmes, and the prevalence of mobile phones (M).

Ambitious plan

In 2014, prime minister Narendra Modi launched an ambitious financial inclusion plan – Jan Dhan – to expand access to financial services to every eligible person in the country.

It means any Indian citizen can walk into their nearest bank branch and open an account. Even children as young as 10 were encouraged to open accounts, with support from a responsible guardian.

Over 18 million were opened within a week of launch.

Today, over 80% of Indians have a bank account. By comparison, in Kenya – the home of mobile money – it's about 75%; Nigeria's banked population is 40%; and in Pakistan, it's only 21%.

Then, in 2018, the government rolled out its biometric identification programme – Aadhaar – in earnest. While it is not a legal requirement to link IDs to bank accounts, that link is necessary to receive government money into an account.


The elements of JAM have helped distribute welfare to people in need over the last few years and have plugged government subsidy leakages 

Aadhaar is also required to access the country's public distribution system (PDS) for food aid, where eligible citizens can pick up subsidised or free grains from specific ration shops.

The elements of JAM have helped distribute welfare to people in need over the last few years and have plugged government subsidy leakages.

Then, on March 24, India's harsh lockdown against coronavirus came into force. Two days later, Modi announced a $22.6 billion stimulus programme to help those in need. JAM will be the rails used to get cash to its most vulnerable citizens.

Ideal system?

JAM, or something similar, could be the ideal system for any hypothetical country. Indeed, over the years, a number of delegates from other developing countries – such as Kenya, Nigeria and Ethiopia – have visited India to learn more about the system. 

"JAM was essentially a master stroke for the Indian government," says Mahesh Ramamoorthy, regional managing director, APMEA, at financial services company FIS.

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Mahesh Ramamoorthy, FIS 

"Of course, there were some bumps in the road along the way," he says. “But a lot of these have been ironed out, and the system is working well.”

But problems persist.

Firstly, while Aadhaar covers much of India's population, thousands have still fallen through the net: 20% of the population – 280 million people – still do not have bank accounts linked to their ID number so cannot get cash deposited into accounts.

And those unable to receive aid cannot travel elsewhere for support.

Tens of thousands of migrant workers desperate to get home have been unable to do so because state borders and transport hubs are shut. They have been forced to stay put or make the journey home on foot.

If they stay, they cannot collect rations because Aadhaar and PDS are linked to residency and not place of employment.  

Secondly, there is a question of health and safety.

People may not be able to get money into their bank accounts, yet they still may be eligible for a free meal from a government-run kitchen, thanks to Aadhaar. But, in a pandemic, when the aim is to limit contagion, should government officials be checking fingerprints? Probably not. 


JAM was essentially a master stroke for the Indian government. Of course, there were some bumps in the road along the way, but a lot of these have been ironed out, and the system is working well
 - Mahesh Ramamoorthy, FIS 

No doubt the system can be adjusted – to retina or facial scans, for example – but that will take time and money to implement.

Right now, NGOs and human rights groups are calling on India’s government to abolish the use of Aadhaar to access food aid because many of the country's most vulnerable will lose out.

For some nations, there are large political and privacy issues that hinder national identification systems. Many may have national ID schemes, but comparatively few are mandatory. Indeed, Aadhaar isn't technically mandatory in India, but in a situation such as this – when a global pandemic threatens your livelihood – it is almost impossible to live without it.

JAM may get much of India out of a sticky situation, but those without it will be left with a bitter taste in the mouth.