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Direct Benefit Transfer: Policy Brief

Updated: Aug 24, 2021


On 1st January 2013, with an aim of reforming the government delivery system for a simpler and faster flow of funds/information, the Government of India initiated Direct Benefit Transfer (DBT). The policy has affected 380 schemes administered through 55 ministries. In the financial year 2017–18, benefits worth INR 2,02,224 crores (USD 30.58 billion) were transferred by the central government to 12.4 billion beneficiaries under different DBT programmes. Popular programmes like the Public Distribution System, PAHAL, and Mahatma Gandhi National Rural Employment Guarantee (NREGA) Scheme have the highest number of DBT beneficiaries. The primary motive behind DBT is to ensure that benefits go to individuals' bank accounts electronically, minimising tiers involved in fund flow thereby reducing delay in payment, ensuring accurate targeting of the beneficiary and curbing thievery and duplication.

Education is the social institution that ensures a smooth functioning of society. It is the instrument through which society imparts crucial knowledge to the people about job opportunities and cultural norms that may help them to improve their personal lives. The government of India understands the importance of education as a key institution and as a result, facilitates the distribution of various incentives in the form of scholarships and grants, along with various other in-kind incentives to make it attractive to a wider population. To ensure a smooth and hassle-free flow of these incentives, the government must adopt the Direct Benefit Transfer policy in the sector, throughout the country and make its proper implementation a priority. The application of DBT can take different forms depending on the different circumstances:

Unconditional Cash Transfers (UCTs) to cover direct or indirect costs of education; Conditional Cash Transfers (CCTs) in rural areas to encourage behaviour change and stimulate demand. These include cash transfers to parents from marginalised communities conditional on enrolment, attendance, performance or completion of schooling;

Vouchers tied to school performance promote parental choice, school accountability and stimulate supply of quality schools.

Over the last decade, India has accomplished nearly universal access to primary education. However, the foremost challenge in the Indian education system remains the low learning outcomes as well as the poor quality of education delivered. DBT acts as a policy alternative and possible solution to the impending challenge.


The introduction of DBT in education first came to light when researchers began asking questions regarding the accountability of the service providers in the sector. They asked, who are the schools accountable to? The response was obvious, government schools are responsible to the government. In the current structure of education accountability, school principals, teachers and administrators are the primary stakeholders, with parents and children playing a secondary role. This gives rise to a system in which the parents have no say and therefore those who can afford it, move to private schools while the quality of government schools continues to deteriorate. If designed correctly, DBT can help alter this stagnant system in public schools, and address concerns of school and teacher accountability. Unlike the school centric funding approach, where the government funds government schools who then educate students, DBT stresses on a student centric funding approach where the government directly funds the student.

According to Article 26 of the United Nations Declaration of Human Rights, everyone has a human right to free and compulsory elementary education. This aspect of the article is widely recognized and implemented, whereas another crucial component to the article is often missed out and not implemented. According to clause (3) of the article, parents have a prior right to choose the kind of education that shall be given to their children. The policy of Direct Benefit Transfer incorporates this as it provides poor parents with the funding to educate their child, wherever and however they want. Parents can avail vouchers and use them in any school that they want to send their child to, thus giving the parents a clear choice irrespective of their economic background.

DBT also improves the student attendance and enrollment rates, as students get better incentives for attending schools. A study on the delivery of in-kind benefits to secondary school students in Uttar Pradesh shows that students who receive a cash transfer are 36% more likely to attend schools and are 65% less likely to drop out. For instance, Government of Odisha in partnership with the Department of International Development restructured the Pre-Matric Scholarship Scheme along the lines of DBT, giving birth to the Odisha Girls’ Incentive Programme (OGIP) which significantly improved the enrolment rates by 14% over a period of 3 years.

For a proper implementation of DBT in education, the government first needs to calculate per child funding, and set up mechanisms to transfer this funding. It also needs to select the most appropriate type of transfer, unconditional or conditional cash transfers, vouchers or some combination of these. The shift to a per student, electronic cash transfer system, allied with freedom to access any school of choice can increase the efficiency and effectiveness of government expenditure in four ways: First, a digital fund flow allows the tracking of money at every stage. Second, an informed parental choice brings maximum benefit to the student thereby increasing productivity. Third, per child funding models have a greater scope for public-private partnerships that have higher efficiencies.

Lastly and most importantly, DBT ensures an integration of markets where schools are forced to improve their quality and at the same time lower costs due to increased competition.

Experiments in cash transfers and vouchers across the world have demonstrated encouraging results not only in attendance and enrolment rates, but also in learning outcomes. The impact of Conditional Cash Transfers on learning outcomes is statistically significant as merit based conditions incentivise parents to pay more attention to the learning of their child.


It is popularly accepted that educational opportunities for children ought to be equal. A child’s life chances should not be fixed by certain morally arbitrary circumstances of their birth such as their social class, race, and gender. The global education development agenda presented in the Goal 4 (SDG 4) of the 2030 Agenda for Sustainable Development, adopted by India in 2015 - seeks to “ensure inclusive and equitable quality education and promote lifelong learning opportunities for all” by 2030.

The education policies adopted by India over the years, including the National Education Policy 2020, have laid a great emphasis on increasing enrolment rates and curtailing drop out rates. However, the government fails to tackle the concern that not all schools provide the same level of education. The quality of education delivered in a government school in Bihar may be radically different from that in Kerala or another private school in the state itself. The question then arises, how do we ensure an equitable and meaningful access to education without heavily investing in infrastructure?

Direct Benefit Transfer can be a potential solution to this widely common problem. DBT in education will not only ensure equality of opportunity but an increased efficiency of government expenditure in education. Through direct cash transfers covering educational expenditure and vouchers, students can go to any school that they like.

Given this increased freedom of choice, both private and public schools will compete for students from all backgrounds in opposition to the current scenario. The contemporary status quo ensures that students from economically disadvantaged groups go only to government schools and students from wealthier families go to private schools. This has given birth to a vicious cycle that limits those from disadvantaged backgrounds to their existing lifestyles.


The Indian government spends twice as much in educating a government school student than it does in educating a student studying in a private school. This difference is highlighted by the distinction between the Accounting Cost and Economic Cost of education. Accounting cost is the descriptive cost that adds up all the expenditure incurred, while economic cost is a conceptual cost that calculates the lowest possible cost of that activity. In India, the Accounting Cost of education is much higher than the Economic Cost.

Studies conducted by various organisations including the United Nations have pointed out, over the past decade that in developing countries like India, corruption and administrative leakages are leading to monetary losses of the scale that could help remove poverty, in a few years. According to Global Financial Integrity, India lost an average of $34,393 million due to illegal financial flows between 2002 and 2011. GFI said that India is amongst the top five countries losing money, behind China, Russia, Mexico and Malaysia.

Both of these challenges are deeply interconnected and can be solved to a great extent by the use of DBT. The application of DBT across the country requires DBT readiness, that is, the ability of states/UTs to ensure government-to-citizen (G2C) and government-to-bank/business solutions through the use of Information, Communication and Technology (ICT) viz. electronic transfer of cash from government to citizen or for effecting cashless in- kind transfers. Accurate targeting of beneficiaries due to Aadhar and biometric verification makes it possible to avoid leakages due to ghost beneficiaries.

The confluence of three technological trends—the maturing of biometric technology (which allows the technology to be applied at scale), increased mobile penetration (over 75%), and exponential increases in cheap computing power and storage—today makes it feasible for a DBT system to be implemented in a large country like ours. It allows India to ‘leapfrog’ generations of sub-optimal service delivery systems and migrate directly to a cutting-edge system of quality education delivery.


The system has sufficient funds but they fail to reach the students. Thus Per Child Funding Model (PCFM) is a policy alternative that can be followed through DBT. PCFM creates a system where the money follows the child and not the school, thereby ensuring a quality education delivery for all. Conventional wisdom suggests that in the process flows of decentralization, funds must follow functions and enable functionaries. Fiscal decentralization has been neglected by state governments rendering the decentralization of functions and functionaries incomplete and inadequate. The PCF model is highly alterable depending on the socio-economic environment of a country.


Each policy has its defined domain and stakeholders. A stakeholder’s analysis generates knowledge about stakeholders in a given policy domain and is usually conducted before the policy is implemented through vivid observations, interviews and community participation. Through the analysis, I will try to understand the dynamic relationship between the different stakeholders of Direct Benefit Transfer in education.

Direct Benefit Transfer (DBT) framework has a multi-stakeholder architecture which delivers benefits to beneficiaries in a timely and effective manner. The policy under consideration is said to have four main stakeholders. Namely, teachers, students, parents and the government. While all four of them are organised, have a voice and rally for their interests, the voices of teachers and the government are way louder than that of students and parents. The four stakeholders have been identified on the basis of their organisation level and rallying capacity.

The primary interest of the government, which is the most influential stakeholder in this policy, is to ensure quality education and development of well informed citizens.The government is responsible for implementing the policy through the development of required infrastructure. However, a lack of decentralisation and decision making power with the frontline workers hampers the implementation of the policy, thus reducing the level of influence exerted by the government. The figure below explains how different departments in the government work together to facilitate a holistic environment for successful implementation of DBT.

Source:; PFMS- Public Financial Management System

Teachers constitute the second most influential stakeholders as they play a key role in assessing which students are deserving of Conditional Cash Transfers (CCTs) under DBT. Parents and students are the service consumers with maximum interests in the policy and least influence.

Parents have a deep interest because the policy provides them with the free choice to send their kids to any school they wish, irrespective of their economic background. DBT, as has already been mentioned, increases the school/teacher accountability to the parents. DBT also allows easy tracking of funds, thus ensuring a greater influence of the parents in educating their child.


As a first-of-its-kind programme in India, DBT can be used successfully to enhance the quality of education delivery to a huge extent. As has been mentioned above, DBT remedies not one but several deep-rooted setbacks of the Indian Education Sector. However, the implementation of DBT currently faces several challenges due to a lack of infrastructure and people capacity which need to be curbed for a successful implementation of the policy.

Logistically, India does not have a banking system efficient enough to ensure a smooth and hassle-free transfer of funds yet. A large proportion of targeted beneficiaries lack access to basic banking facilities. Long queues, paperwork and digital illiteracy act as serious roadblocks. While the current government has initiated several policies for developing the banking sector towards the goal of a ‘cashless economy’, the country still has a long way to go.

The implementation of DBT in education may also be hindered by an institutional limitation, the incapacity of the system to implement the policy. Ground level government workers and teachers lack a proper training suited to the implementation of DBT. Policies of institutional and people capacity building can be adopted alongside the implementation of DBT to ensure it’s non-failure.

The National Education Policy (NEP) of 2020 envisions an education system rooted in Indian ethos that contributes to a holistic multidisciplinary development of the youth and aims to accomplish inclusive and equitable education by 2030. The NEP is set to bring changes in the educational structure of India with an aim to make India a global knowledge superpower.

Improving the quality of education delivery is a continuous process and NEP 2020 is a big step in the process. While the policy is theoretically and ideologically progressive, it fails to talk about the implementation part of it and even after several recommendations from civil society organisations has failed to capture the importance of DBT. If combined with DBT, and other similar implementation-oriented policies, NEP 2020 can prove to be the way of capitalising India’s expanding youth population.



DBT In Education: A Policy Blueprint Centre for civil society

Parakh, Neha; Ravi, Vijay; Saindane, Nishant; Singh, Aishwarya; Thapliyal, Mitul. DBT in Education. 2017-18. MicroSave, 2018. Retrieved from

Cover School Vouchers - Centre For Civil Society. Retrieved August 10, 2020, from

(2015, August 31). Per-child funding model for financing school education in India. Retrieved August 10, 2020, from

Standard Operating Procedure (SOP) Modules for Direct Benefit Transfer (DBT), DBT Mission, Cabinet Secretariat, Government of India

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