We Need To Re-weave Our Social Security Net
India’s social protection system, founded in the 1970s is rural focussed, designed only for the poor.
It is outdated.
India of 2020 is different. Poverty is a challenge, but vulnerability is a bigger challenge. The migrant labour, workers in the informal sector, educated yet unemployed youth, women, farmers who depend on the vagaries of nature are the ‘vulnerable’ .They too need the safety net
India currently spends less than a measly 3% (lowest amongst its peers) of its GDP on social security.
Resize, reshape and strengthen
Safety net enhances critical social outcomes. It is by far the most potent tool to lift crores out of poverty, and support the vulnerable to reach their full potential. It builds resilience against socio economic crises and shocks.
A Crux study in 12 geographies, across 350 districts and focussing on ‘targeting’, coverage, implementation, monitoring, evaluation and preparedness highlights that effective implementation and political will is key. Social safety net has a significant impact on poverty reduction, ranging from 15% to 25%, depending on the platform and delivery efficiencies.
The study cautions that, often fatigue sets in and diminishes ‘return’ on public spending. However, the policymakers can ‘postpone’ the diminishing phase; even accentuate the return by continually and evolving the program design. However India is at the beginning of the curve and decades away from flattening ‘returns’.
Social-nourishing is good economics
The deprived suffer bad health, diminishing labour participation, lowering productivity and reducing output. Several other outcomes deteriorate. The next generation is highly susceptible too. The political cost of poverty is even more staggering, threatening (leads to less) public conviction in institutions and democracy.
Unfortunately many policymakers do not appreciate the inverse co-relationship between poverty and the business cycle.
A social security net is business accreting. It is even a bigger growth trigger during economic downturn (pandemic), reducing the severity of recession.
Social-nourishing stimulates a virtuous cycle; is a catalyst and self-regulating economic stabiliser, enhancing opportunities, employability. It increases disposable income, often doubling it under optimum circumstances, creating aggregate demand. It improves market-labour efficiencies, adding value for both the employees and employers alike and builds the platform for formalising the economy.
A formalised economy has several growth drivers. Formal economy offers an excellent return on investment, enhances economic mobility, strengthens the economy and is a huge multiplier.
Design & delivery determine impact
The programs need to be focussed and customised to the lay of the land and the circumstances of the geographies. The Crux study reveals that the program ‘design’ is as important as the implementation and the intent. Take for example; in Bihar monthly cash transfer impacts, but in Gujrat a ‘lump’ yearly transfer is more effective, even if the amount is lower. Similarly, asset ‘acquisition’ makes people more ‘self-sufficient in certain parts, but equally dependent in others.
Policymakers must not lose sight of the fact that poverty is getting increasingly concentrated, especially in the lagging regions and districts. The absorptive ability and the institutional weaknesses in these regions are both a cause and effect. The institutional deficiencies manifests in reduced outcomes and diminishing return, resulting in lower future grant. This perpetuates poverty.
Waiting, deprived and, often denied
India has come a long way in reducing poverty and improving living conditions for a large segment of its people.
Yet, wealth inequality continues to plague India, and is on the rise. Oxfam report says the richest 1% own more than 40 %, while the poorest 50% own less than 3 % of national wealth.
A recent government study confirms the 12 hugely funded pro-poor schemes a failure. One is left wondering if pro-poor programs are implemented by an indifferent and even a hostile anti -poor system.
Contrary to popular belief, India started early and in earnest; expanded considerably. Programs like MGNREGA and PDS are truly evolutionary and even transformational.
India’s economy has expanded 21 times in real terms since independence and has the fiscal space to widen the net.
Poor too deserve ‘ease of living’
However the effectiveness of the safety nets can largely be enhanced by improving the delivery of ‘public goods’ by focussing on ‘ease of living’ of every citizen. In a democracy the poor are equal masters, and deserve a dignified living. This mind-set alone will create the foundation to build effective and humane safety net.
The policymakers must particularly focus on the softer aspect. Physical infrastructure is important and a growth driver. Social and moral infrastructure is the bedrock for development. Corruption still ‘eats’ away a quarter of the outlay. Often the pro-poor programs benefit the ‘well to do’. Men benefit more than women. The vulnerable benefit less. The denied are often exploited by the middlemen.
Politicians focus on outlay, instead of impact and are keen to fund, not to the deserving, but to those most relevant in the political power game.
‘Forbidding’ this, ‘forcing’ that
Similarly the ethos of the government needs to change from ‘monitoring to serving’. This attitude breaks societal will, bends the spirit, and reflects in deteriorating moral compass.
Our fiscal capability is improving. Yet we need to broaden the fiscal pool expand opportunities by ‘attracting, inducing and collaborating with the private sector. A fair PPP model brings in innovation, delivery capacity and enhances the impact. India’s modern infrastructure is built in the PPP mode.
The government must have the political will to deepen some of the programs at the cost of ‘coverage’ of the others .Programs are often implemented badly; poorly designed never implemented. Non merit subsidies enrich people at the cost of the deserving. The long term effect is loss in confidence and a sense of being denied.
The policymakers must streamline, bundle schemes into a core set of flagship programs and provide the local authorities an element of choice and flexibility for effective implementation.
Finally the government must not cocoon itself into the ‘welfare’ state mould. It must plough on, increase economic momentum and ‘balance’ wealth with equality.
Wealth creation is not sufficient for equality. However in India’s case it is necessary.
