15 July, 2009

Garibi Hatao, Common man & the Budget

Poverty alleviation programs are great on paper. What else could be done to fight this menace

I was attracted to this topic, thanks to our budget. It set me thinking on the whole “Garibi Hatao” plank of Congress party. Investment consultants would advice you against averaging, when the investment inherently is not good. They would advise that you would be throwing good money after bad. Averaging as a concept works well if one wants to eliminate the timing risk, not the asset risk. With so much rhetoric, sound & fury on poverty alleviation, why is not going away… especially, when gargantuan amounts are being thrown at it? Some success can be rightfully claimed, though. But, that is like saying that I sowed a bag of seeds & 10 saplings did sprout. It is such a waste.
So, poverty is as much a reality as is Taj Mahal! At least, Taj Mahal was temporarily made to vanish by P C Sorcar. Alas, he can’t do that for poverty, even for an instant!
Poverty is well entrenched
We have had a socialistic mindset and have been wanting to “Garibi Hatao”, for about 62 years now. But Garibi is well entrenched. There are various figures bandied about – from two thirds to 80% of the population living on less than US$2 a day.
So, where is all the money that has been spent on poverty alleviation, since independence? Government machinery is like a sieve – most of it passes through and very little is left. Rajiv Gandhi had once said that only 20paisa of every rupee spent reaches the beneficiary. He had been optimistic. It is the middle men & politicians who benefit from these and what is left is not targeted very well. So, why is the government persisting on the same formula, though it is not working? Political & personal gains, partly answers that. Then, there is the charade of keeping up the pretence of doing something for the poor. If such “Garibi Hatao” ideas work, West Bengal would be a rich state, being under communist rule for over three decades. But, it is one of the states in India where poverty is pervasive.
So, why keep doing the same things to eliminate poverty?
For one, “Garibi Hatao” connects with these people as it at least states what needs to be done. Hence, being seen as a doer of good is important than doing good.
National Rural Employment Guarantee Scheme ( NREGA ) is assuring 100 days of work and the allocation for the same is Rs.39,100 Crores. Fine. But it is essentially manual work. And this amount needs to be spent y-o-y. Will there be work y-o-y for a population that starts depending on these? Under National Food Security Act, the Government intends to give 25 kilos of rice or wheat for BPL families ( about 25% of the population ). Are these sustainable ? Will it really help them in the long run? Give a man a fish and you solve his problem for a day; teach him how to fish and you solve it for a lifetime, goes a Chinese proverb. How true.
What could be done
Education & Health - Is it not better to ensure that the schools in these areas have teachers and the health centres, doctors do come in? Education & better medical facilities are only there on paper for these people. But proper delivery will make all the difference to them. Fixing these through proper implementation & oversight could be the answer, instead of throwing more money at it. It would be a far better idea to upgrade the human capital through proper education & allow them to progress & upgrade in life, rather than putting them on life-support systems endlessly.
Training - Is it not a better idea to train them in Vocational courses? Indians are good entrepreneurs. Why not train the rural population through such courses that will empower them to start their own micro businesses ? And do this pan-India vigorously to help create jobs.
Financing & Empowerment - Government is supporting Women’s Self Help Groups, which is good. But what about encouraging micro-financing and assisting in development of this sector, instead of trying to lend more and more and incurring bad debts. Private microfinance institutions like SKS Microfinance works on a for-profit basis. Grameen Bank in Bangladesh is another such institution, that has made a huge difference to the poor. Still, these institutions are profitable and delinquencies less than 1%, inspite of servicing an “unbankable” customer base. Why not provide such institutions access to cheap credit ( currently, they are all from private sources ) so that they can expand their geographical coverage ? Government will help in poverty alleviation better if it were to support such efforts which already exists.
Borrowers do not pay back the banks as they feel there will be a loan waiver somewhere on the horizon. Past Loan waivers have created an incentive for those who do not pay. Hence, it will lead to more and more bad loans in future, which have to be waived off.
Agro-processing -Much has been said about this aspect. The current budget gives Investment linked incentive on Cold chains & ware houses for agro-processing. Since bulk of the people in India live in villages, agro processing should be given priority and incentives extended to such industries. It would be a good idea to have a agro-mission for seeding the country with such projects and assisting & guiding entrepreneurs to set up such industries.
Tax incentives to those who empower - Imparting appropriate skills to the people across the country is a mammoth task. Corporates who are present throughout the country could be roped in offer appropriate skill training in rural areas ( where their factories are located ) and can be allowed some tax rebates for doing that. That way, corporates will have an incentive to train the people, will be able to employ some of those trained & will get a tax break.
“Garibi Hatao” is a noble intention. Implementation is the key. Government could walk with others who can help in it’s mission of achieving a poverty free society by 2020. And save a lot of tax payer’s money.

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