Anti-poverty or anti-poor programmes?

Whatever else the motives behind the Lok Dal's Om Prakash Chautala's threat to withdraw support to the government on the subsidy cut issu...

Whatever else the motives behind the Lok Dal8217;s Om Prakash Chautala8217;s threat to withdraw support to the government on the subsidy cut issue may be, it must be clearly understood that concern for the poor is not one of them. The reason is simple: none of the recent cuts made in subsidies really affects the poor, since the poor have very little access to them anyway. Recent studies by the World Bank, based on surveys in various parts of the country, in fact, show that the late prime minister Rajiv Gandhi was right when he said that just around 25 paise reached the poor for every one rupee spent in their name. What8217;s more, they show that of all the programmes targeted at the poor, the Public Distribution System, or the system of subsidised food through ration shops, is the worst in terms of leakages.

Of course, that8217;s hardly surprising given the fact that, contrary to what is generally believed, the PDS never began as a pro-poor programme. It was essentially a buffer-stocking operation, designed to ensure thatthere were no sharp fluctuations in foodgrain prices. It was only later that politicians began thinking of it as an anti-poverty measure. How badly that failed can, of course, be judged from the fact that just around 40 percent of the total quantity of grain supplied through the PDS is actually consumed by the poorest 40 percent of the people in India. In fact, if you look at the current structure of PDS in the country, it has little to do with the number of poor people. Andhra Pradesh, for example, gets around 13 percent of the share of funds from the PDS, but it has only 5 percent of the country8217;s poor people. Similarly, Kerala gets 10 percent of the PDS, but has 2 percent of the country8217;s poor. And Haryana, where Chautala comes from, gets 3 percent of PDS funds but has one percent of the country8217;s poor.

The converse is also true: states which have a very large share of the poor, such as Uttar Pradesh and Madhya Pradesh hardly have a PDS worth the name. Uttar Pradesh, which has 18 percent of the poor getsjust around 8 percent of the PDS pie; Bihar with 16 percent of the poor gets 5 percent of PDS; Madhya Pradesh, with 9 percent of the poor, gets 4 percent of PDS. What8217;s surprising is that, though most of these facts are well-known, they8217;ve hardly been focussed upon in any serious manner. And, given the clout of states such as Andhra Pradesh in today8217;s fractious politics, it8217;s hardly likely that any quick redressal is on the cards either. While the new targeted PDS programmes introduced by the United Front government have helped increase the amount of PDS grain going to some of the poorer states, the fact is few states have actually got their act in place, to identify the poor and to issue separate ration cards to them. Even in states which have issued separate cards like Andhra, a UNDP-sponsored study showed that for every 100 white8217; cards issued to the poor, only 34 went to the real poor.

Worse, this high degree of leakage from programmes which, over time, have come to be identified as being pro-poor, isnot limited to the PDS alone. Information supplied by the National Sample Survey for 1993-94, for example, shows that the number of poor who participate8217; or get covered by various programmes such as IRDP or public works programmes is negligible. For IRDP, for example, just 6.5 percent of the poorest 20 percent of families 8212; or the lowest quintile of the population 8212; had access to IRDP in 1993-94. Contrast this with the fact that as much as 5.6 percent of the top quintile of the population 8212; or families that lay in the top 20 percent income bracket 8212; also had access to IRDP in rural areas. How these families, the richest in the area, could even qualify for programmes like this, shows how badly they8217;ve been designed and executed. Similarly, in the case of public works programmes, just 5 percent of families in the bottom quintile in rural India are covered, while 7 percent of the top 40 percent income families get covered by these schemes. Given the fact that the proportion of poor children who actually getenrolled in schools is very low, the benefits of subsidising primary education also get watered down significantly 8212; according to a World Bank estimate, of the total subsidy on primary education, only 14 percent goes to the poorest 20 percent of the population.

That, of course, is how the subsidy spiral keeps increasing. In the name of the poor, various governments keep pumping in more funds into subsidies, most of it gets lost8217; this way, and so more has to be pumped in. The cycle goes on. At the same time, money that could be spent on development, say in new irrigation projects or roads, gets less and less, and overall growth suffers 8212; naturally, the poor can8217;t get jobs and so remain the way they are, poor. Andhra Pradesh is the best example of how subsidies cripple an economy, because this is the state that had the sharpest incidence of subsidies, and compressed in time.

Between 1990-91 and 1995-96, expenditure on subsidies rose from 4 percent of the state8217;s GDP to 6 percent. Correspondingly,expenditure on infrastructure fell from 3.5 percent to 2.2 percent, and economic growth fell from 5.5 percent of the 8217;80s to well under 4 percent. Irrigation facilities declined, and rice production fell by one million tonnes. With the correlation so stark, and the streak of competitive populism so stark, understandably, few of the country8217;s politicians want to tell the lay public about this.