UPA's Inclusive Growth Agenda For India
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Image: Madhu Kapparat for Forbes India
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THE BIG JOB: NREGS has created a social safety net for millions of landless labourers but the government is yet to formulate a similar scheme for those in the unorganised sector
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hen Finance Minister Pranab Mukherjee presents the United Progressive Alliance (UPA) government’s first full budget in its second term, he may in some ways be presiding over a tipping point. The Indian brand of high public spending on social welfare has gradually started showing results, although they are still patchy. India has committed huge capital to development. It must now strengthen the framework in which it operates its human development programmes.
Mukherjee is expected to spend more money on the UPA’s pet welfare projects such as job guarantee, food security and rural healthcare. But he must also control the ballooning fiscal deficit to deny room for further price rise and fiscal imbalances. He also has to prepare for new challenges as a member of the
G-20, the high council that replaced the G-7 as the world’s top agenda-setting body.
As the country’s chief economist Kaushik Basu told Forbes India in an earlier interview: “India is becoming, whether we like it or not, a fairly major player in the world and as a consequence we are charting into a terrain of policy formulation that we are not familiar with.” But unlike in the past, socialist policies have better acceptance in the world today and fiscally India is playing from a position of strength.
“For the first time, we are not tied down by balance of payments. We are not aid-dependent and capital is not an issue. India can achieve whatever it wants,” says Bimal Jalan, former governor of the Reserve Bank of India.
If India can show that a robust public sector can go hand in hand with modern markets and private enterprise in fuelling equitable growth without creating economic imbalances, it will be a model to copy for developing nations. To achieve that, however, it must hurry to fix its marquee projects.
“The rapid growth [seen in the recent past before the financial crisis] was not planned to be inclusive,” Abhijit Sen, member of the Planning Commission said at a conference on human development recently. “The truth is that the rapid growth unexpectedly provided us more resources and we could spend more [on social welfare schemes]. But the growth was not planned to be inclusive.”
The government response has typically been to plough in more money into these schemes. However, human development issues widely vary from state to state and more money is not always the answer. Often the challenge is building local institutions and managerial capabilities.
“Seventy to 80 percent of the human development problems are concentrated in eight to 10 states,” says K.P. Kannan, professor at the Centre for Development Studies (CDS) and member of the Arjun Sengupta Committee on the unorganised sector. While a state like Kerala boasts of human development indicators that are sometimes on par with developed countries, Uttar Pradesh and Bihar’s indicators are as abysmal as of some impoverished African nations.
As the schemes mature, they should become more nuanced to adapt to the needs of each state and region. Kerala, for instance, has more old people compared to, say, UP. So what the southern state needs is an affordable pension scheme more than money for primary education, which is already institutionalised and working relatively well.
Irudaya Rajan, a professor at CDS, points out that 60 percent of the elderly in Kerala live on medicines, 30 percent have multiple diseases and 3 percent are bedridden. “Yet there is no insurance cover for the old.”
The government would also need to plan for the structural shifts its development projects would entail. Balram Yadav, managing director of Godrej Agrovet, says that labourers who went home during the festival season never came back.
“We kept thinking they would come after a few more days. It never happened because they now get NREGS work in their village and don’t need to migrate for a little extra money.”
Job Guarantee
The NREGS arguably the country’s most controversial and successful-in-parts social security plan, was recently renamed as the Mahatma Gandhi National Rural Employment Guarantee Scheme. The government is now planning to use NREGS as the pivot around which other social security schemes such as the National Rural Livelihood Mission will be built. Crafted mainly by economist Jean Dreze and activist Aruna Roy, NREGS was received with much enthusiasm in many states such as Rajasthan and Andhra Pradesh. Since its inception in 2006, NREGS has managed to lift the wage rates in many parts of the country.
Y.K. Alagh, chairman of the Institute of Rural Management Anand (IRMA), has pointed out that the biggest impact of NREGS has been that it “has liberated the agricultural labourer from the tyranny of the land owner, who has exploited the labourer for ages”.
It has also helped slow migration from villages. For instance, in the remote district of Balaghat in Madhya Pradesh, distress migration fell from 4,217 in 2005-06 to 2,840 three years later, mainly because locals found jobs under NREGS between the two major crop seasons of Rabi (spring harvest) and Kharif (autumn harvest).
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