Effect of Social –welfare schemes on Indian economy
Introduction: India, by and large, is poverty ridden country, where more than 70% of the population is living in rural parts. Majority of the population are not having access for the proper living standards including clean drinking water, houses, education and healthcare. So Government of India introduced various social –welfare schemes to address the problems of these people mainly targeted to uplift the poor. Objectives of these schemes look so good when is seen on the draft, but when it comes to reality, it is different story. The existing socio-political system in India made these objectives ineffective, thus, stopping the benefits of these schemes to reach the targeted population. Our study underlines the fact that how these social-welfare schemes are getting burden on the Indian economy and the need to review these schemes, so as to make sure these schemes are being implemented effectively.
Review of literature:
We have mainly gathered information from Planning commission website and evaluation studies on social welfare schemes done by central and state governments.
Need/Importance of the study:
Present governments in India are mainly concentrated on populist schemes rather than growth and development. Large share of the budget is being allocated for various welfare schemes and since these schemes are being ineffective they are not adding any value per se. If the money spent on these schemes is not being utilized properly, it will be only add to the woes of the country currently facing. So it is highly required especially in current scenario where economy is in turbulent times to review the schemes and bridge the loopholes that are plagiarizing the system
Statement of the problem:
Ineffective implementation of the large scale social welfare schemes is hindrance to the development of the economy and country as whole. Due to this ineffectiveness how the country is losing its opportunity to allocate these funds in proper way where there is a scope for growth and development is matter of discussion.
Objectives:
Our objective in this study is to find out how much money is being spent on the social welfare schemes and subsidies given especially through PDS (public distribution system). On total GDP, what is the percentage of this money is being allocated are major objectives in our study.
Research methodology:
We have done and analysed our study based on 3 factors.
1. Study of MGNREGA
2. Study of Food security bill
3. Study of Public Distribution system
We have broadly analysed these schemes and came up with our findings how much money has been spent annually on these schemes, yet not being productive for the growth of the economy.
Results and discussions:
Overview and findings on MGNREGA:
Performance and Achievements
Over the past 4 years or so, MGNREGA's performance according to key aggregate indicatorshas been quite impressive, particularly when compared with previous employment programmes. Forone, budgetary allocation for MGNREGA has expanded steadily from its base of about Rs.113,000million in 2006-07 to Rs.401,000 million in 2009-10. As per data available from the MGNREGAwebsite, the cumulative expenditure under MGNREGA works since 2006-07 has been Rs.1,037,600million. The cumulative employment generated has been 8790 million person-days over the sameperiod.
Since its launch, the benefits of MGNREGA has reached women, SC/ST families and thepoor. Over the last four years, the share of SC/ST families in the work provided under MGNREGAhas ranged between 50-60%. The share of women in the employment provided has risen steadily from41% in 2006-07 to 50% in 2010-118. With nearly 100 million bank/post office accounts opened forMGNREGA workers, and about 85% of NREGA payments being made through them, MGNREG has also moved financialinclusion of the poor several steps forward.
Since the inception of policy, its share as a percentage of fiscal deficit has been really high. Which is hurting the economic growth.
There are some other factors as well apart from this related to implementation of the program:
Major Issues in MGNREGA Implementation
Aggregate figures of achievement however, hide several lacunae in the core MGNREGA. A field assessment of the status of MGNREGA implementation in selected panchayats was undertaken by partner organizations of the National Consortium on NREGA. Below table summarizes the main findings of the field assessment carried out.
Now comparing with other world economies:
How to get things on track?
In the light of the review above, let’s look at some of the ways in which MGNREGA implementation can be reformed to harness its true potential. It is our attempt to work out a minimum agenda for reform of MGNREGA implementation.
• Dedicated Human Resources at the Cutting Edge of Implementation
• Capacity Building of Human Resources
• Network of Capacity Building Institutions
• Information Technology for MGNREGA
• Banking Correspondent Model
Top Level Changes:
• Management Structures at National and State Levels: National Authority for MGNREGA
IMPACT OF NFSB ON NATIONAL ECONOMY
India’s high economic growth rate in the past decade has not been fully reflected in the health status of its people, with 22 per cent of its population undernourished. According to the National Family Health Survey 2005-06, 40.4 per cent of children under the age of three are underweight, 33 per cent of women in the age group of 15-49 have a body mass index below normal and 78.9 per cent of children in the age group of 6-35 months are anemic. These are disturbing statistics which point to nutritional deficiencies. The NAC proposal for a National Food Security Bill is perhaps the most important national effort yet to address these deficiencies in India. It is at times assumed that the relationship between economic growth and health is unidirectional with improving economic conditions leading to better health. In reality, and as confirmed by recent research, the reverse is equally true and health is an 'economic engine.' That is, better health which is an important end in itself leads to and may, in certain cases, be a necessary prerequisite for economic development
The Food Security Bill, the UPA-II’s flagship scheme, envisages the distribution of wheat, rice and coarse grains at just Rs 2, Rs 3 and Re1 a kilo each to about 65 per cent of the population — 75 per cent of them in rural areas and the rest in cities and towns. Add to that, some entitlements to ‘special groups,’ like destitute or homeless persons, who will be entitled to at least one meal a day. Through this world’s largest experiment of providing food grain to poor, the government plans to double its food subsidies to 2 per cent of the GDP.
This scheme can have severe impact on India’s economic growth prospects.
The proposed Food Security Bill came on a day (Thursday) when the Reserve Bank of India also came out with its Financial Stability Report, which categorically states that India’s inflation risk remains high and a slowdown in revenue collections and higher spending on subsidies may make it challenging for the government to achieve the fiscal deficit target of 4.6 per cent of the Gross Domestic Product (GDP) this financial year (2011-12).
It also said that India’s trade deficit for this fiscal is expected to widen sharply to between $155 billion and $160 billion from a little above $104 billion a year ago. Both these deficits will only bloat immensely in due course, should the bill be passed and implemented. But, it is the trade deficit, which will soar manifold since the government will have to resort to large scale import of food grain as our own grain output is not adequate to handle such a voluminous expenditure programme
It will worsen the fiscal deficit situation, but more than that it is India’s trade deficit which will be hit hard as the programme will require 70-80 million tonnes of more food grain every year. India obviously does not produce that much and the shortfall will have to be met from imports.
The country produces 225-230 million tonnes of food grain every year barring a bumper crop year when the output surges by a few million tonnes more. Where will the rest come from, if not from overseas market! It will increase food inflation.
Farmers’ production choices may also be affected by the NFSB; with increased demand for staples like wheat and rice, farmers may choose to invest more in these crops rather than in other (potentially higher value) crops, leading to a decrease in agricultural diversification towards high-value agriculture. In addition to its potential economic and nutritional impacts, an increased focus on just a handful of crops can also have environmental effects: for example, the Punjab faces water scarcity and thus is not ideally suited for persisting rice production, but it may be tempted to continue increasing rice production in order to take advantage of the increased demand and higher government payments.
Then there is the procurement problem, if the government goes in for enlarging the public distribution system without revamping it, there is no guarantee that the food grains will reach the poor. Then there is problem of storage. Currently, the state-run Food Corporation of India and the Central Warehousing Corporation have the capacity to store 87 million tonnes of grain. The CWC has 487 warehouses with a capacity of 10.6 million, while the FCI, with 1,500 godowns, accounts for the rest.
Effect of ineffective PDS on Indian economy:
The Public Distribution System (PDS) in India is more than half-acentury old as rationing was first introduced in 1939 in Bombay by the British Government as a measure to ensure equitable distribution of food grains to the urban consumers in the face of rising prices. Thus, rationing in times of crisis like famine was the historical precursor to the national policy of stabilization and management of food grains.The Sixth Five Year Plan (1980-85) had, inter alia, envisaged that the
Public Distribution System would “have to be so developed that it remains hereafter a stable and permanent feature of our strategy to control prices, reduce fluctuations in them and achieve an equitable distribution of essential consumer goods”. Essential Supplies Programme, introduced in 1982 as the 17th point of the New 20 Point Programme, intended to expand the PDS through more FPSs, including mobile FPSs, to make available text books and exercise books to students on a priority basis and to promote strong consumer protection movement.
Though government increased the PDS system with great fanfare, loopholes in the system and corruption made the system inefficient. Below table explains the amount of money allocated for PDS on total expenditure.
Food subsidy of the central government
Year Amount(crore) % of total government expenditure
1990-91 2450 2.33
1991-92 2850 2.56
1992-93 2785 2.27
1993-94 5537 3.9
1994-95 4509 2.8
1995-96 4960 2.78
1996-97 5166 2.46
1997-98 7500 3.23
1998-99 8700 3.11
1999-00 9200 3.03
2000-01 12125 3.61
2001-02 17612 4.83
2002-03 21200 5.1
Source: planning commission
Factors making PDS ineffective:
What is ailing India's Public Distribution System (PDS)? "Corruption" is the one and only answer to that question. Even the Central government's new Targeted Public Distribution System (TPDS) is in no way helping to weed out graft in the entire sector.
Fair price shops and PDS have been the breeding ground for corruption right from its inception.
Results of a study conducted by Delhi-based research firm Centre for Media Studies and Transparency International are enough to conclude that PDS needs a total overhaul to get rid of its dubious distinction of being one of the most corrupt sectors in the country.
The study on corruption in India's Public Distribution System covered 4,405 respondents over 20 states and found that the chain of ration shops provide supplies to only 10 per cent of the country's population. However, the government claims it supplies goods to 16 per cent of the people.
PDS — evolved as a major instrument of the government's economic policy for ensuring food security for the poor — is arguably the largest distribution network of its kind in the world with 4.89 lakh fair price shops.
The government woke up to the reality a bit too late. Realising that PDS has failed to serve poor people, the government started issuing distinctive ration cards to families living Below Poverty Line. From June 1997, the Centre introduced Targeted Public Distribution System (TPDS).
Under this scheme, the states are required to formulate and implement foolproof arrangements for identification of the poor.
The main users for PDS goods are rural poor families of six crore for whom about 72 lakh tonnes of foodgrains were earmarked during 2006.
However, the survey has found out that 60 per cent households using PDS are not getting ration supplies. The survey further said in high-poverty states, 'out-of-stock' scenarios were as high as 80%. And, 34% of those visiting PDS offices had to make four or more visits before their voice could be heard and suitable action was taken. Moreover, nearly 50% of them paid bribe for obtaining a new and legitimate ration card.
Even though the fair price shop owners are blamed for corrupt practices, their plight is also not very hunky-dory. Low margins in the business lead to low profitability, especially after the launch of targeted public distribution system; credit provided is so low that they cannot lift enough stock from government godowns; they have no control over quality of grains; they too may have to pay bribe to PDS officials to get their quota of supplies.
Recommendations/suggestions:
Following are the recommendations we have come up with.
Introduction: India, by and large, is poverty ridden country, where more than 70% of the population is living in rural parts. Majority of the population are not having access for the proper living standards including clean drinking water, houses, education and healthcare. So Government of India introduced various social –welfare schemes to address the problems of these people mainly targeted to uplift the poor. Objectives of these schemes look so good when is seen on the draft, but when it comes to reality, it is different story. The existing socio-political system in India made these objectives ineffective, thus, stopping the benefits of these schemes to reach the targeted population. Our study underlines the fact that how these social-welfare schemes are getting burden on the Indian economy and the need to review these schemes, so as to make sure these schemes are being implemented effectively.
Review of literature:
We have mainly gathered information from Planning commission website and evaluation studies on social welfare schemes done by central and state governments.
Need/Importance of the study:
Present governments in India are mainly concentrated on populist schemes rather than growth and development. Large share of the budget is being allocated for various welfare schemes and since these schemes are being ineffective they are not adding any value per se. If the money spent on these schemes is not being utilized properly, it will be only add to the woes of the country currently facing. So it is highly required especially in current scenario where economy is in turbulent times to review the schemes and bridge the loopholes that are plagiarizing the system
Statement of the problem:
Ineffective implementation of the large scale social welfare schemes is hindrance to the development of the economy and country as whole. Due to this ineffectiveness how the country is losing its opportunity to allocate these funds in proper way where there is a scope for growth and development is matter of discussion.
Objectives:
Our objective in this study is to find out how much money is being spent on the social welfare schemes and subsidies given especially through PDS (public distribution system). On total GDP, what is the percentage of this money is being allocated are major objectives in our study.
Research methodology:
We have done and analysed our study based on 3 factors.
1. Study of MGNREGA
2. Study of Food security bill
3. Study of Public Distribution system
We have broadly analysed these schemes and came up with our findings how much money has been spent annually on these schemes, yet not being productive for the growth of the economy.
Results and discussions:
Overview and findings on MGNREGA:
Performance and Achievements
Over the past 4 years or so, MGNREGA's performance according to key aggregate indicatorshas been quite impressive, particularly when compared with previous employment programmes. Forone, budgetary allocation for MGNREGA has expanded steadily from its base of about Rs.113,000million in 2006-07 to Rs.401,000 million in 2009-10. As per data available from the MGNREGAwebsite, the cumulative expenditure under MGNREGA works since 2006-07 has been Rs.1,037,600million. The cumulative employment generated has been 8790 million person-days over the sameperiod.
Since its launch, the benefits of MGNREGA has reached women, SC/ST families and thepoor. Over the last four years, the share of SC/ST families in the work provided under MGNREGAhas ranged between 50-60%. The share of women in the employment provided has risen steadily from41% in 2006-07 to 50% in 2010-118. With nearly 100 million bank/post office accounts opened forMGNREGA workers, and about 85% of NREGA payments being made through them, MGNREG has also moved financialinclusion of the poor several steps forward.
Since the inception of policy, its share as a percentage of fiscal deficit has been really high. Which is hurting the economic growth.
There are some other factors as well apart from this related to implementation of the program:
Major Issues in MGNREGA Implementation
Aggregate figures of achievement however, hide several lacunae in the core MGNREGA. A field assessment of the status of MGNREGA implementation in selected panchayats was undertaken by partner organizations of the National Consortium on NREGA. Below table summarizes the main findings of the field assessment carried out.
Now comparing with other world economies:
How to get things on track?
In the light of the review above, let’s look at some of the ways in which MGNREGA implementation can be reformed to harness its true potential. It is our attempt to work out a minimum agenda for reform of MGNREGA implementation.
• Dedicated Human Resources at the Cutting Edge of Implementation
• Capacity Building of Human Resources
• Network of Capacity Building Institutions
• Information Technology for MGNREGA
• Banking Correspondent Model
Top Level Changes:
• Management Structures at National and State Levels: National Authority for MGNREGA
IMPACT OF NFSB ON NATIONAL ECONOMY
India’s high economic growth rate in the past decade has not been fully reflected in the health status of its people, with 22 per cent of its population undernourished. According to the National Family Health Survey 2005-06, 40.4 per cent of children under the age of three are underweight, 33 per cent of women in the age group of 15-49 have a body mass index below normal and 78.9 per cent of children in the age group of 6-35 months are anemic. These are disturbing statistics which point to nutritional deficiencies. The NAC proposal for a National Food Security Bill is perhaps the most important national effort yet to address these deficiencies in India. It is at times assumed that the relationship between economic growth and health is unidirectional with improving economic conditions leading to better health. In reality, and as confirmed by recent research, the reverse is equally true and health is an 'economic engine.' That is, better health which is an important end in itself leads to and may, in certain cases, be a necessary prerequisite for economic development
The Food Security Bill, the UPA-II’s flagship scheme, envisages the distribution of wheat, rice and coarse grains at just Rs 2, Rs 3 and Re1 a kilo each to about 65 per cent of the population — 75 per cent of them in rural areas and the rest in cities and towns. Add to that, some entitlements to ‘special groups,’ like destitute or homeless persons, who will be entitled to at least one meal a day. Through this world’s largest experiment of providing food grain to poor, the government plans to double its food subsidies to 2 per cent of the GDP.
This scheme can have severe impact on India’s economic growth prospects.
The proposed Food Security Bill came on a day (Thursday) when the Reserve Bank of India also came out with its Financial Stability Report, which categorically states that India’s inflation risk remains high and a slowdown in revenue collections and higher spending on subsidies may make it challenging for the government to achieve the fiscal deficit target of 4.6 per cent of the Gross Domestic Product (GDP) this financial year (2011-12).
It also said that India’s trade deficit for this fiscal is expected to widen sharply to between $155 billion and $160 billion from a little above $104 billion a year ago. Both these deficits will only bloat immensely in due course, should the bill be passed and implemented. But, it is the trade deficit, which will soar manifold since the government will have to resort to large scale import of food grain as our own grain output is not adequate to handle such a voluminous expenditure programme
It will worsen the fiscal deficit situation, but more than that it is India’s trade deficit which will be hit hard as the programme will require 70-80 million tonnes of more food grain every year. India obviously does not produce that much and the shortfall will have to be met from imports.
The country produces 225-230 million tonnes of food grain every year barring a bumper crop year when the output surges by a few million tonnes more. Where will the rest come from, if not from overseas market! It will increase food inflation.
Farmers’ production choices may also be affected by the NFSB; with increased demand for staples like wheat and rice, farmers may choose to invest more in these crops rather than in other (potentially higher value) crops, leading to a decrease in agricultural diversification towards high-value agriculture. In addition to its potential economic and nutritional impacts, an increased focus on just a handful of crops can also have environmental effects: for example, the Punjab faces water scarcity and thus is not ideally suited for persisting rice production, but it may be tempted to continue increasing rice production in order to take advantage of the increased demand and higher government payments.
Then there is the procurement problem, if the government goes in for enlarging the public distribution system without revamping it, there is no guarantee that the food grains will reach the poor. Then there is problem of storage. Currently, the state-run Food Corporation of India and the Central Warehousing Corporation have the capacity to store 87 million tonnes of grain. The CWC has 487 warehouses with a capacity of 10.6 million, while the FCI, with 1,500 godowns, accounts for the rest.
Effect of ineffective PDS on Indian economy:
The Public Distribution System (PDS) in India is more than half-acentury old as rationing was first introduced in 1939 in Bombay by the British Government as a measure to ensure equitable distribution of food grains to the urban consumers in the face of rising prices. Thus, rationing in times of crisis like famine was the historical precursor to the national policy of stabilization and management of food grains.The Sixth Five Year Plan (1980-85) had, inter alia, envisaged that the
Public Distribution System would “have to be so developed that it remains hereafter a stable and permanent feature of our strategy to control prices, reduce fluctuations in them and achieve an equitable distribution of essential consumer goods”. Essential Supplies Programme, introduced in 1982 as the 17th point of the New 20 Point Programme, intended to expand the PDS through more FPSs, including mobile FPSs, to make available text books and exercise books to students on a priority basis and to promote strong consumer protection movement.
Though government increased the PDS system with great fanfare, loopholes in the system and corruption made the system inefficient. Below table explains the amount of money allocated for PDS on total expenditure.
Food subsidy of the central government
Year Amount(crore) % of total government expenditure
1990-91 2450 2.33
1991-92 2850 2.56
1992-93 2785 2.27
1993-94 5537 3.9
1994-95 4509 2.8
1995-96 4960 2.78
1996-97 5166 2.46
1997-98 7500 3.23
1998-99 8700 3.11
1999-00 9200 3.03
2000-01 12125 3.61
2001-02 17612 4.83
2002-03 21200 5.1
Source: planning commission
Factors making PDS ineffective:
What is ailing India's Public Distribution System (PDS)? "Corruption" is the one and only answer to that question. Even the Central government's new Targeted Public Distribution System (TPDS) is in no way helping to weed out graft in the entire sector.
Fair price shops and PDS have been the breeding ground for corruption right from its inception.
Results of a study conducted by Delhi-based research firm Centre for Media Studies and Transparency International are enough to conclude that PDS needs a total overhaul to get rid of its dubious distinction of being one of the most corrupt sectors in the country.
The study on corruption in India's Public Distribution System covered 4,405 respondents over 20 states and found that the chain of ration shops provide supplies to only 10 per cent of the country's population. However, the government claims it supplies goods to 16 per cent of the people.
PDS — evolved as a major instrument of the government's economic policy for ensuring food security for the poor — is arguably the largest distribution network of its kind in the world with 4.89 lakh fair price shops.
The government woke up to the reality a bit too late. Realising that PDS has failed to serve poor people, the government started issuing distinctive ration cards to families living Below Poverty Line. From June 1997, the Centre introduced Targeted Public Distribution System (TPDS).
Under this scheme, the states are required to formulate and implement foolproof arrangements for identification of the poor.
The main users for PDS goods are rural poor families of six crore for whom about 72 lakh tonnes of foodgrains were earmarked during 2006.
However, the survey has found out that 60 per cent households using PDS are not getting ration supplies. The survey further said in high-poverty states, 'out-of-stock' scenarios were as high as 80%. And, 34% of those visiting PDS offices had to make four or more visits before their voice could be heard and suitable action was taken. Moreover, nearly 50% of them paid bribe for obtaining a new and legitimate ration card.
Even though the fair price shop owners are blamed for corrupt practices, their plight is also not very hunky-dory. Low margins in the business lead to low profitability, especially after the launch of targeted public distribution system; credit provided is so low that they cannot lift enough stock from government godowns; they have no control over quality of grains; they too may have to pay bribe to PDS officials to get their quota of supplies.
Recommendations/suggestions:
Following are the recommendations we have come up with.
No comments:
Post a Comment