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Saturday, August 28, 2004

The greatest challenge before India today is combating mass poverty and making lives of ordinary people bearable.  If dignity is denied to an Indian in 2004 AD, and people are forced to be hungry even as foodgrains are rotting in warehouses, then that is unacceptable.  If in 21st century poor Indians suffer in monsoon from torrents of rain for want of shelter over their heads, or shiver in cold, then that is a disgrace to our republic.

If rights of the poor are trampled upon without reparation, and justice is delayed and denied, and poverty is therefore perpetuated, that is an unbearable shame in a democracy.  If a child born in this land of ours has no access to health care, and suffers needlessly from preventable illness, that is clearly a negation of our democratic ideals, and perversion of our humane Constitution.  If the children are denied basic education of reasonable quality, and if their minds are stunted on account of the unfulfilment of their potential, and their latent talents nipped in the bud, then the political and governance system should be assailed without hesitation.

Sadly, all these and more are true about our country and its governance.  Thanks to our misplaced priorities and irrational policies, the governments over the years failed to do what they ought to, and have always taken upon themselves tasks which are not theirs.  The results are waste of public money, perpetuation of poverty, uncontrolled population, ubiquitous corruption, ecological degradation and failed policies.

The general election of 2004 is in many ways a wake up call to the polity. People everywhere are asking for better governance, sensible policies, opportunities for vertical mobility and rational priorities. One of the incontrovertible facts of the human condition is the perpetual divide between the limited resources at our disposal and our unlimited wants.  If money is available in plenty, then there is no pain in decision making, and no need for prudent application of resources.  Then we won't need governments, nor would public policy be important.  But in real life we have to deal with fiscal constraints, and make sensible allocations and utilize our precious resources wisely.

The UPA government included enactment of a law guaranteeing employment (EGA) to the unskilled poor in its CMP. Any citizen would be entitled to employment as a manual labourer at minimum wage within 15 days after application. If the state cannot provide such work, she would be entitled to unemployment allowance. The current thinking is to guarantee 100 days of employment. Obviously, such a short-term measure is needed to provide succour to the poor in distress. Most of our drought relief programmes and food-for-work schemes were based on this approach. The difference this time is entitlement to citizens, and enforceability in courts of law. Such a law would compel the state to deploy adequate resources to meet its commitments.

There is much to commend such a measure as a means of combating mass poverty. But we need to carefully examine two relevant issues before committing the nation irrevocably to such a course. First, we need to make a cost-benefit analysis. Many experts estimate the cost of such a programme to be at 2% of GDP. The total tax income realized by the Union and States annually is about 15% of GDP. Given the perilous state of our public finances, it is inconceivable that India can raise about 14% of additional resources for this one scheme. Even a cursory estimate indicates that about 100 million agricultural workers suffer seasonal unemployment, or are paid below minimum wages. If the employment guarantee were to really cover all of them, the cost would be about Rs. 50,000 crore per annum at Rs. 5000 per capita for 100 days employment at minimum wages. In an ideal situation, that is a cost which should be borne cheerfully to mitigate the harshness of poverty. But in this day and age, manual labour at subsistence wage is not the kind of employment we should be content with. The idea of employment in the form of digging pits or doing earth work is no longer relevant to the needs of a growing economy. If our hope is that most of these 100 million people will not seek work under EGA, then the objective is not fulfilled. If they do seek work, it is a huge burden on the exchequer, providing low-quality, unsustainable employment.

Second, there is no single silver bullet to combat mass poverty. Ultimately, we should aim at skill promotion, enhanced productivity, and job creation in a competitive market. Many problems need to be addressed simultaneously to make a serious dent in poverty. Education, health care, rule of law, enhancement of agricultural productivity, adding value to produce, infrastructure, technology and markets to spawn and sustain millions of tiny enterprises creating jobs – all these are vital. And all these cost money and require great ingenuity and massive effort. In our quest for magic wands to eradicate poverty, we cannot ignore these real, long-term challenges. For far too long, most of these issues have been ignored, making poverty endemic, and holding back the nation’s productive potential.

The poor are marginalized precisely because they are denied the basic skills, ill health weakened them physically and economically, and non-farm employment is not generated in keeping with the influx of job-seekers. For instance, there is compelling evidence to show that on an average, hospitalized Indians spend 60% of their annual income out of pocket towards health care cost, whether they are admitted in a public hospital or private facility. The devastation such high health care costs bring to the family’s finances is not hard to imagine. Sickness is calamitous to the poor. As a result, 40% of those hospitalized sell their assets, or borrow at usurious rates of interest to meet hospital costs. Predictably, about 25% (35% in Bihar) of hospitalized Indians fall below poverty line only because of illhealth. Our public health systems are in an appalling condition, with pitiful allocations, bad policies, and poor accountability. Among other things, huge outlays are necessary to improve public health, and reduce the burden of poverty. Similarly, many other sectors need vast resources and Herculean efforts.

We need to evaluate carefully how to deploy scarce resources to the best advantage of the poor. Employment guarantee measures are necessary in the short-term, if selectively applied. But if they suck up precious resources from other critical areas where greater outcomes are possible at lower costs, then putting all our eggs in the basket of employment guarantee could prove counterproductive.