WELFARE EFFICIENCY INDEX

  WELFARE EFFICIENCY INDEX (WEI)

 As part of the methodology for assessing the impact of the Direct Benefit Transfer (DBT) system, the Welfare Efficiency Index (WEI) was developed as a composite metric to measure efficiency gains across various dimensions. The WEI comprises three weighted components:

1)DBT Savings (50% weight): This component captures the direct reduction in leakage, normalised against the maximum observed savings of ₹3.48 lakh crore

2) Subsidy Reduction (30% weight): Measures the decline in subsidy expenditure as a percentage of the total national budget.

3)Beneficiary Growth (20% weight): Assesses the expansion in the number of beneficiaries, adjusted for population growth.

The rise in the WEI from 0.32 in 2014 to 0.91 in 2023 quantifies systemic improvements, emphasising that efficiency gains stem from multi-dimensional factors—not merely budget cuts. This index provides a replicable model for global policymakers to evaluate welfare reforms.

The WEI surged, driven by:

• DBT Savings (50% weight): ₹3.48 lakh crore cumulative leakage reduction.
• Subsidy Reduction (30% weight): A decline from 16% to 9% of total expenditure.
• Beneficiary Growth (20% weight): A 16-fold expansion in coverage.