Big Ideas for India Contest: Question 2: Is there an alternative to entitlements for the social sector?

Given India’s deep and wide poverty, anti-poverty programmes have been the hallmark of most governments in the past 60 years. That they have clearly not worked is evident in the poverty numbers. Be it in urban India or in rural India, even as a small part of India shines, a large fraction of the population still has a hand-to-mouth existence.

The UPA government has focused on creating various Rights – Right to Employment (through NREGA), Right to Education and the soon-to-come Right to Food. All of these involve handouts and entitlements of some sort. The result is that the social sector spend in India has ballooned to $100B of the trillion-dollar economy. With efficiency of spend being estimated at no more than 25 percent, there is clearly significant wastage and leakage.

So, what is the alternative to entitlements? Or, is there?

Contest Overview.

14 thoughts on “Big Ideas for India Contest: Question 2: Is there an alternative to entitlements for the social sector?

  1. Direct Cash Transfer is the best way for social inclusion and it will lead to more choice of consumption pattern among poor.

  2. Honestly I dont think there is an alternative to begin with. I think the right approach is to get the Unique ID working and move the efficiency percentage closer to 60 – 70 percent.

    Once this has worked for maybe 5 years, we can look at alternatives, where we slowly bring down the social entitlements and spend more judiciously. Discussing alternative approaches at this point would backfire.

    As an aside, i was surprised to know that US entitlement spending alone equals India’s GDP:

  3. Atanu Dey’s words “Incentives Matter”.

    India Govt forms Entitlement policies with Group in mind.
    Minorities, Poor, Below Poverty Line……
    Start with Individual in mind, for entitlements.

    1)Subsidy: Today, producers (Fertilizer Firms, ONGC, OMC’s,Universities, …..) are subsidized to provide cheaply to consumers.
    Ditch this.
    Let the producer charge fully. To have market-share, He’ll be forced to optimize production/marketing
    Let consumer pay fully. He’ll optimize usage.
    Allow credit/voucher facility for consumer to utilize the goods.

  4. i wonder if the picture of indian poverty is too coarse grained, and that we all take it for granted.

    may be we should ask statspotting for a pictorial view, i have the feeling that since independence there have been patterns that we can exploit. not all of india is poor, it is just that there are pockets, and that the pockets keep varying, in reponse to regional and political variations.

    let us look at the graphi, if one can be made available, then let us talk about it, it will make more sense.

  5. Direct Cash Transfers – based only on economic criteria, none on on caste / religion based critiera would be a good starting point. Incentive structures for delivery agents (the government) need to be aligned properly with outcomes – for example, reward civil servants in places with low transfer leakage with significant bonuses and sack incompetent or colluding ones who do not do what they are supposed to.

    Having said that, in the long term, the key is to move AWAY from an entitlements-based regime. We need to give people opportunity to access the market, and stop there.

  6. Alternative would be to restrict entitlements to essential sectors (Healthcare, for example; A sick man cannot contribute to society but a cured one can). All other infusions should be in the form of remuneration for services/products either directly or in a PPP mode.

  7. The criteria for use of resources should be stringent.
    What I am suggesting here is that every farmer should not be given a tax break or free seeds or fertilisers … It should be directly proportional to their incomes and farm outputs. Today there are farmers who drive in the fanciest of cars and have incomes of more than 1crore from farming, but still use all the incentives.
    Also there should be a timeline or number of times that the same family or its generations can use “right/incentives”. WE need to make them “self-sufficient”

    There are huge holes and most of the money is pocketed by Government parties or spent right around the election time. As a suggestion rather than a budget session every year, there should be quarterly reviews of the same. This would give an indication of whether a particular Scheme is really serving the purpose.

  8. While it is true that it is not always the entitled who are favored with entitlements, or who take advantage of them, entitlements are a way of keeping the country from going insane.

    If some of it is wasted, it is from bad administration, and it is that which has to be improved. And can be, given modern tools, and good administrators.

    Ideas like Direct Cash Transfer are at best be termed insane. I remember that governments used to give educational assistance in the form of cash allowances for the poor students.

    In most cases that I knew the money was spent on drinking and partying, and the ones who did not get it were made to look like ignorant fools.

    One of the many ills that Direct Cash transfer can bestow. I wonder which…

    Entitlements will die, when the underlying circumstances that demand them are dead, and when social opinion degrades the acceptance of entitlements.

    As of now the one accepting entitlements appears smarter, but that needs to change. This is where the media can do work, to recognize and adulate people who have refused entitlement and have emerged out of the entitlement regime.

  9. “Give a man a fish, and you feed him for a day; teach the same man to fish, and you feed him for a lifetime.”

    The Government has a choice: either keep handing out fish to those who need it, or teach them how to fish.

    Here again, the Government does not have to “do the teaching”, as this is not the Government’s core competency. It just has to get competent entities to do the job for it.

    The Government can also choose to keep handing out fish until the population is quipped to fish on its own. In such a scenario, the Government and the citizens need to ensure transparency and accountability so that the fish meant for the needy is not siphoned off by the politician and his middlemen.

  10. Oh golly, Am I too late for the contest?

    Ok, as an alternative to entitlements,

    I have 2 thoughts.

    1. India should have a high land tax. A high land tax will automatically incentivise the best usage of land. A tax slab, beginning at land value of Rs 15 lakhs onwards, maybe. That should protect most subsistence farmers.

    It will either improve the government revenue, or bring land value down. The first improves welfare by reducing the inflation tax, the second improves welfare by reducing the barriers to entreprenurial activity.

    2. Announce an employment prize. Announce a really large prize for employing people. Calculate the mathematical product of all salaries paid out to people within a particular period. Give the prize to the entrprise that has the highest score . It will ensure that those desirous of the prize will have to employ a lot of people to win the prize.

  11. NREGA has failed, it was bound to . Its time that government stop funding these schemes and allow private sector to participate.
    Compulsive family planning should be enforced to release burden on natural resources.
    India stands at 134th place out of 183 in Ease of Doing Business Index.
    This is the reason of unemployment in India.
    Government should help the private sector to train more people so that we can have more skilled labour. this will generate employment for both the trainees and the trainers.
    Government should abolish all the subsidies on petroleum, and businesses and give tax relaxations.

  12. 1) Stop the crap of these schemes.

    2) Let private sector enter this field. One of the current problem is only government can do these things using Tax payer’s money and there is no competition. Sure private sector people can be corrupt and can eat big portion of the money but then there can be different, better private player. With government only scheme this does even have a chance.

    3) Provide incentives to people who are generating jobs for these poor people and provide necessary services to poor. Now what stops private sector from doing so today ? Well first its so hard to start any business and then there is so little profit in it. But then government can certainly fix these problems by making it easier to start businesses and also provide Tax Credit and other incentives to these private players so profit looks interesting.

    4) Start using modern technology to spread all of this information. Rather leave it to again private player to spread the information and provide them to incentives/credits for doing so.

    5) Perform well and make it easy for private players to get in all other sectors of government functioning. Its a collective outcome so naturally improvements in other sectors like infrastructure/education/health will help in addressing social sector problems too.