I ran into Karam Pal last week in the Haryana village of Khairla, as he tried to persuade me to drink hot tea under a blazing June sun. The hospitality offered by Pal, a chowkidar was unmistakably Indian. So, too, was his tragic story, a case study of how the poor in India slip in and out of poverty.
His face lined beyond his years, Pal (68) explained how his savings (around Rs 4 lakh) had been spent on medical care for his 25-year-old grandson, who fell from the roof of their home one hot summer night five years ago. That same day, the young man got into the Indian Army. It’s been six years, but Pal’s grandson is still bed-ridden. Pal’s son, an army soldier, “died of shock and pain”. At an age when Pal should have enjoyed some fruits of his life’s labour, he supports a family of seven, struggling to balance their needs with an unceasing, expensive round of private doctors and hospitals in an attempt to heal his grandson.
Like millions of Indians, Pal pays what economists call a “poverty premium” to access basic services. The poverty premium is a cost the poor — realistically estimated at more than 500 million people — pay because India’s well-meaning but deeply flawed social-security schemes don’t do what they are supposed to. So, the government’s move, announced on Tuesday, to give the poorest Indians more food will similarly prove costly without meticulous, urgent reform.
Much has been written about the massive leaks, widespread corruption and mismanagement that derail the government’s attempts to ensure inclusive growth through subsidies and other social welfare spending. Here are three examples of what reaches beneficiaries from every rupee spent:
42 paise: food subsidies for the poorest
70 paise: the national rural jobs-for-work programme
52 paise: fertiliser subsidies for the poorest farmers.
Since so much spending is fictional, the benefits are marginal. At least 20 million ration cards for subsidised food are in the name of ‘ghosts’, people who don’t exist. The colossal amounts wasted on such subsidies drain resources urgently required for real benefits like better hospitals, better schools, better transport and other infrastructure facilities for millions like chowkidar Pal.
Yet, the government has no choice but to spend more on social welfare because inclusiveness is the bedrock of its political foundations. Over the last decade, Indian spending on social welfare grew nearly five-fold, rising from $9 billion in 2000 to $42 billion in 2010. That’s half the Plan outlay for 2010-11.
This high-cost, low-benefit model is worsening the poverty premium, notes a new study from CLSA Asia-Pacific Markets, a consultancy. “Between subsidy schemes for petroleum, food, fertilisers, employment and midday meals (for children), the Indian government will spend at least $250 billion on services for the poor in the next five years, but we estimate more than $100-110 billion of this will leak, either through rank corruption or via ‘ghost recipients’, whose identity is hard to prove or disprove.” How much is $100 billion (Rs 4.6 trillion)? It’s more than three times the national defence budget or enough to wipe out India’s budget deficit, with change to spare.
Identity, or the lack of it, is at the heart of India’s endemic poverty and the urgent need to reform its tottering welfare state. In Khairla, a relatively prosperous village of tiled roads and brick houses, every second person I spoke to had an identity problem. One odd-jobs worker supported his family of six and an abandoned aunt, whose village was acquired by the government and razed to build Delhi’s new airport. For three years, he has tried and failed to get her ration card moved to Khairla, an hour’s drive from her old home. Officially, the aunt exists in some government record. It is probable that someone else gets subsidised food in her name. Another narrated how last year the fingerprints of all villagers listed as officially poor were recorded for a national health insurance scheme. Only a handful received the cards, but the identities of 1,650 people exist in official records somewhere.
It is to address this mess in national identity that former Infosys CEO Nandan Nilekani is working overtime to generate India’s first national identification number by August. In his current avatar as head of the Unique Identification Authority of India, Nilekani’s goal is to generate 12-digit identities for 600 million Indians in the first phase over the next five years.
So, last week, Nilekani was foremost among the experts Planning Commission Deputy Chairman Montek Singh Ahluwalia consulted before announcing the government’s ambition to accelerate growth from 8.5 per cent to 10 per cent between 2012 and 2017. This growth, he emphasised, must be inclusive. “A large number of people think that we are spending money, but it is not reaching the beneficiary,” said Ahluwalia.
This is the plan: the unique identification (UID) system will be the starting point of national social security reform — to remove ghosts, surrogates and other anomalies stopping money from reaching the bottom of the pyramid. The new, to-be-expanded subsidised food network will be linked to the UID.
None of this will be easy or quick. Success will depend on a level of coordination, cooperation and innovative government thinking that India has never demonstrated. But if the poorest Indians get a number that allows them to prove who they say they are, it is a battle well begun.