The notional imperative

  • 05/05/2008

  • Financial Express (New Delhi)

India's current phase of economic growth has highlighted both the disparities in benefits of growth as well as enhanced capacity of the government to do more for those who may not have benefited directly from growth. If the current bout of inflation is on account of faster growth in demand as compared to growth in production capacity, then we need to be more attentive to the needs of those who may be priced out of the market. A few indices such as the consumer price index for agricultural labour do tell us how the cost of living for the rural poor may be affected by inflation. But such instances are few where economic data capture the impact of economic developments on the poor. Whether it is food, housing, health or education, greater access to these needs by the lower-income population would be the goal of inclusive growth strategies. These would, therefore, be the targets of government expenditure aimed at poverty reduction. These efforts need to be quantified if we must assess the changes in our approach to the problem. How much do we know about the effort that goes into poverty reduction? Surprisingly, while there are a large number of anti-poverty programmes and schemes in India, information on how much money is spent on poverty reduction is not easy to come by. The measures to assess the impact of various schemes of the government, or even of economic growth, are indirect. What is measured is essentially the outcome in terms of the extent and intensity of poverty, and very rarely the influencing conditions. Available data determines the extent of understanding, often. But given the purposefulness of government programmes and expenditures on poverty reduction, it is interesting that there are no easily available estimates on how much the government spends on schemes for the poor. The key data that is more easily available refers to poverty. This is, of course, a measure of the extent and intensity of poverty. While this is inadequate to measure the impact of various programmes on poverty reduction, it is widely available, thanks to periodic surveys of consumer expenditure. Since it is not government programmes alone that lead to changes in the intensity or extent of poverty, it is worthwhile to understand how much of the total expenditure is, in fact, on the poor. Most of the data available on the status of the poor is based on consumption expenditure surveys in which other attributes of surveyed households are also collected. These surveys do not quantify government expenditures, but merely provide a profile of access to various services. The data, however, offers important pointers to the effectiveness of these programmes and expenditures. And what they often show is that the poor do not have access to these services. Universalising access to basic services remains an unmet challenge. But can one measure the effort based on utilisation statistics? Taking food requirements first, at a basic level, a robust public distribution system (PDS) is expected to provide the poor access to food at reasonable prices. But clearly the PDS cannot do everything. Bear in mind that foodgrain distributed through the PDS now exceeds 35 million tonnes, double the level of offtake some 10 years ago. The coverage has expanded and, in principle, more of the poor have been brought under the system. The level is now lower than the offtake in 2003-04 and 2004-05, but the ability to provide higher quantities of grain through the PDS over a longer period is a reflection of the capacity to spend more. The cost is not small. The food subsidy bill is expected to exceed Rs 32,000 crore in this year's Budget. If gaps between procurement and issue prices widen, given the current inflationary conditions, the subsidy bill should be much greater than the budgeted level. But is the entire expenditure on the PDS to be taken as expenditure on poverty reduction? The data challenges in this context are formidable. Attempts to quantify expenditure on the poor are based on a classification of various government programmes into those that aim at poverty reduction and those that do not. It is widely accepted that the effectiveness of the implementation of these programmes varies considerably, and therefore, adding up all the expenditures is not an entirely satisfactory measure of the effort that goes into poverty reduction programmes. Just as all growth is not poverty reducing, not all expenditures on poverty reduction would be poverty reducing. But would the budgets of the government, state or Centre be able to say how much is the share of expenditure that is actually on poverty reduction? It is clearly not easy to find a consensus on which programmes are entirely for the poor in India. The economic data on the poor will continue to show only indirect links between their status and public expenditure.