Chief Economic Advisor Arvind Subramanian's 2017-18 Economic Survey will be discussed, among other things, for its consideration of a Universal Basic Income as an anti-poverty measure. What's between the lines, however, is how effectively Subramanian has called out both the Left and the Right's blind spots when it comes to poverty.
On leakage in government schemes
India's Left simply does not adequately acknowledge corruption, leakage and misallocation in welfare programmes, or appreciate why the experience of this leakage for decades has coloured citizens' views on the State's ability to deliver and made them weary of their dependency on corrupt officials. The Economic Survey shows just how big a problem it is.
In a set of two maps, repeated three times in the Survey, Subramanian and his team use original calculations from program administrative data (2015-16), the National Sample Survey and the India Human Development Survey to code maps to the district-level by the share of the poor they are home to, and the extent of funds they access for the seven largest welfare schemes. They find that the districts with the most poor are also the ones with the biggest shortfall in funding; the districts accounting for the poorest 40% received 29% of the total funding.
— arvind subramanian (@arvindsubraman) January 31, 2017
Exclusion errors--leaving out the deserving--hits the poorest most. "An estimate of the exclusion error from 2011-12 suggests that 40 percent of the bottom 40 percent of the population are excluded from the PDS. The corresponding figure for 2011-12 for MGNREGS was 65 percent," the Survey says.
Not only does the Left consistently resist the (accurate) characterisation of many welfare schemes as leaky and inefficient, it also opposes tech-driven ways to improve the schemes, cash instead of kind, and direct transfers to accounts--all of which would help to reduce misallocation.
But where the Left might want to paper over the scale of the problem, the Right refuses to acknowledge change. What works best for fixing these leakages is universalising them, not doing away with them, Subramanian's Survey finds. "Both PDS and MGNREGS have improved considerably with technology and with the expansion of the schemes... [Leakage] in the PDS has reduced from 54 percent to 34.6 percent--a drop of nearly 20 percentage points in seven years (from 2004 to 2011). Linearly extrapolating to 2016, out of system leakage for the PDS overall could have reduced further to 20.8 percent. Even this figure may be an underestimate since it does not account for improvements in technology and expansion of coverage that have occurred in the past five years... Similarly, the MGNREGS has changed considerably in the recent past. [There have been] improvements in monitoring technology, asset creation and job provision... in the scheme over the past 2 years."
None of these are things that you would know if you only read weekly columns from right-wing economists bashing the MGNREGS as a ditch-digging scheme that did nothing for poverty, or the PDS as a pointless waste.
Welfare schemes do not make the poor choose leisure over work
Claiming that the MGNREGS made agricultural labourers too lazy to work is another favoured trope of the right-wing commentator. In the context of a Universal Basic Income, Subramanian is at pains to point out that there is simply no evidence that such schemes reduce the incentive to work, which is driven by dignity as well and not only necessity. The Survey also takes on the argument of the Right that money or welfare should always be in return for work, the thinking that drives critics of the MGNREGA to argue that workers are simply breaking stones or digging ditches. The Economic Survey points out that work is already detached from income--for the rich who gain money they did not work for through birth and inheritance.
As Subramanian says, these are new ways to acknowledge unpaid, unacknowledged, non-wage work; "It is the acknowledgment of the economy as a common project".
Poorer states are not catching up, no matter what their CMs say
The Survey finds that spatial dispersion in income is still rising in India in the last decade (2004-14), unlike the rest of the world and even China. Moreover, the story of this lack of convergence is that the 'BIMARU' states--Bihar, Madhya Pradesh (and Chhattisgarh), Rajasthan, Odisha and Uttar Pradesh--remain those at the greatest distance from states like Tamil Nadu and Kerala on income and consumption. This despite the assertion by Prime minister Narendra Modi and the Chief Ministers of Madhya Pradesh and Rajasthan that their states can no longer be considered backward.