Getting back to the basics

Getting back to the basics

Three reports released in the last few weeks, though not quite connected, form a picture about rural incomes and poverty. First, the report card of the National Rural Employment Guarantee Scheme (NREGP) for the first year of the scheme (April 2006 to April 2007) has said, “Judging from available reports, the scheme is not doing particularly well, whether we look at levels of employment generation, or wage rates, or the extent of corruption or the quality of assets generated." It found that less than 50% of the target man days (two billion) were achieved (critics call it a mere retread of similar programmes in the past that have been plagued by corruption). In Uttar Pradesh, the report said, most people in rural areas were unaware of the scheme. Among the poorest performers were Kerala and West Bengal (reportedly pro-poor states), and among the best performances were Rajasthan, Madhya Pradesh and Chhattisgarh (all BJP-ruled). Finally, the southern states, which normally outperform, haven’t done so well.

Second, the recent Arjun Sengupta report has argued that 70% of the population has to live on less than Rs20 a day. The figure is being quoted at international seminars; I heard the Food and Agriculture Organization using it in Thailand, and others in Singapore. It appears to present a picture different from the one we had got used to, namely that poverty levels were falling rapidly and that per capita incomes had risen by more than 50% in the last six years. It depicts stark differentials between rural and urban incomes, and between the rich and the poor as well.

The third is the Asian Development Bank report published in August, on inequalities in Asia. It is no surprise that income inequalities, measured by Gini coefficients, have worsened in the last decade. However, this impacts access to education and health. The study reveals that in India, while around 5% of children (up to age five) are underweight among the richest 20% households, the share is as high as 28% in the poorest 20% households. Increases in inequality damp the poverty-reducing impact of a given amount of growth. The study shows that in the past decade, per capita expenditures of the top 20% households in India have grown by two and a half times more than that of the bottom 20%. Similar figures were presented in Parliament two weeks ago, from the national survey data.

In the hype over 20-over cricket wins, painting New York buses with India@60, the Sensex at 17,000, we are missing out all this. Diplomats, businessmen, politicians and bureaucrats, all seem lost in the hype, which is growing much faster than the economy, as The Economist had pointed out. Even the media seems insensitive, not just this, but about inflation, onions at Rs30 a kg, rising wheat prices, longer waits for LPG cylinders—in short, the plight of the common man.

The highest in the land need to recognize there is a serious problem. One hopes the new committee that is to look at the future in the All India Congress Committee would accord these issues top priority. Recent figures reveal that direct subsidies to the poor in Singapore, a country that believes in the open market economy, were S$13,600 per head last year. It is possible to look at direct interventions in India which, despite indifferent governance, can make a difference.

Here are three simple suggestions, of just doing what we did well earlier. First, to ensure that the public distribution system (PDS) gets back to the level it was two decades ago, and that fair priced goods are available. Second, to get back to the efficiencies of the Integrated Child Development Services, mid-day meal and nutrition initiatives that worked well in the 1980s and the 1990s—the staff and the programmes still exist, but the delivery is much worse. This is true of preventive health-care programmes, too.

Third, most important, the poor are a victim of the current debate on monetary economics, opening up the capital account, and wheat prices to be set by a derivatives market. It is time to shift the debate to the importance of direct transfers to the poor, of, in fact, shielding them from the fluctuations of the market and of assuring them remunerative livelihoods.

It is time to think up new direct welfare schemes. The NREGP was intended as one such scheme, but the bureaucracy turned it around to fit in with the goals of other schemes such as drought relief and soil conservation. One example that works is in Gujarat. Every expectant mother can get antenatal care as well as delivery at a clinic of her choice, and lists of approved clinics are published at every government office. The state reimburses the clinic directly—there is a limit, which is quite comfortable in the rural areas. Beneficiaries are encouraged to report shortcomings directly. Direct cash transfers are the best way of reaching the poor. If we can do this, and strengthen the PDS, we would have tackled the problem.

S. Narayan is a former finance secretary and economic adviser to the Prime Minister. We welcome your comments at