16th April – Necessary steps to ending poverty

It is by now close to 50 years since Indira Gandhi brought the idea of eradicating poverty into the electoral arena in India. ‘Garibi Hatao’ had been her slogan. The role that income generation actually played in lowering poverty in India may be gauged from the facts that economic growth had surged in the 1980s, and the late 1960s was when agricultural production quickened as the Green Revolution progressed.

Why we failed till now?

  • This is because the approach of public policy to the problem has been to initiate schemes which could serve as no more than a sedative.
  • These schemes failed to go to the root of poverty, which is capability deprivation that leaves an individual unable to earn sufficient income through work or entrepreneurship.
  • Income poverty is a manifestation of the deprivation, and focussing exclusively on the income shortfall can address only the symptom.

Politics over poverty –

  • Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) is paying farm households below a threshold ₹6,000 a year. An income-support scheme for any one section of the population is grossly inequitable. We can think of agricultural labourers and urban pavement dwellers as equally deserving of support as poor farmers.
  • The PM-Kisan has, however, been dwarfed by the promise of the Nyuntam Aay Yojana (NYAY), which envisages an annual transfer 12 times greater to the poorest 20% households. While this scheme is not discriminatory, it is severely challenged by the issue of beneficiary identification in real time.
  • Both the schemes on display, but NYAY in particular, have been criticised as running into the absence of fiscal space. This is really neither the case nor of the essence, the latter being the role of income transfers in eradicating as opposed to alleviating poverty in India.
  • Dissecting the fiscal costs –
  • NYAY is estimated to cost ₹3.6 lakh crore per annum at current prices. This comes to approximately 13% of the central budgetary outlay for 2019-20. This expenditure can be incurred without any consequence for the fiscal deficit if all Centrally Sponsored Schemes are taken off and subsidies trimmed just a bit.
  • But the point is that at 13% of outlay, NYAY would amount to more than twice the combined expenditure on health and education and more than capital expenditure in the same budget, they being the items of public expenditure that most impact poverty in the long run.
  • There is an opportunity cost to be acknowledged of an income-support scheme of this magnitude being implemented while there exists a severe deficit of social and physical infrastructure in the country.

What should be done?

  • In light of a pitch that has been made for the implementation in India of a publicly-funded universal basic income (UBI) scheme, we can say that from the perspective of eliminating poverty, universal basic services (UBS) from public sources are needed, though not necessarily financed through the budget.
  • There is indirect evidence that the provision of health, education and public services matters more for poverty than the Central government’s poverty alleviation schemes in place for almost half a century.
  • Per capita income levels and poverty vary across India’s States. A discernible pattern is that the southern and western regions of India have lower poverty than the northern, central and eastern ones. This, very likely, is related to higher human development attainment in the former.
  • A UBI would imply that a nationwide income support scheme that channels funds from a common pool to households in the poorer States would be tantamount to rewarding lower effort by their governments.
  • There is a crucial role for a few services in eliminating the capability deprivation that is poverty. At a minimum these services would involve the supply of water, sanitation and housing apart from health and education. It has been estimated that if the absence of such services is accounted for, poverty in India would be found to be far higher than recorded at present.

Conclusion –

There are no short cuts to ending poverty, but ending it soon is not insurmountable either.

SourceThe Hindu

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