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Money where the mouth is

Give direct cash to the poor. Not only will this sidestep corruption but it’s also politically viable. E Somanathan writes.

india Updated: Sep 10, 2011 19:44 IST

As of 2006, over 43% of Indian children under five were malnourished, a rate that has barely budged since the early 1990s. This gives India the dubious distinction of having the highest percentage of malnourished children in the world. There are at least 53 poorer countries with lower malnutrition rates, including Bangladesh, Nepal, Haiti and several African countries. At Independence, India was poor, so it wasn’t thought possible to guarantee food security until some economic growth had taken place. Today, per capita income in India is six times as high as it was then. Yet, despite the public distribution system (PDS) and many government programmes, we are still faced with this appalling situation.

The reason for this situation is well known. An army of corrupt politicians and officials manipulate the eligibility conditions of every programme to extort money from recipients and divert it into their own pockets. Even the proposed Food Security Act is likely to become one more addition to the list of schemes under which the majority of Indians will continue to be humiliated and cheated by ration-shop dealers and officials with monopoly power.

It appears that the act may incorporate the worst of both worlds: it will be targeted at below poverty line households rather than being universal, and it will involve procuring and distributing grain through the PDS. Targeting ensures that a majority of genuinely poor households get left out (in modern India, it’s hard to be classified as poor if you are poor and easy if you aren’t) and pushing grain through the PDS involves enormous cost and waste.

But the world has changed. There is a now a better way available, one that will ensure food security for all, and that will be not just politically feasible but also an absolute political winner.

The Universal Identification (UID) system, now being rolled out, will permit biometric identification of individuals. All the government has to do is offer a smart (machine-readable) card to every adult woman using the biometric ID. This eliminates the need for verification by local officials of any kind, removing discretion and avenues for harassment. The biometric central database of fingerprints, photographs, and iris scans itself ensures that there are no duplicate ID numbers given. Then the government should announce a payment of R100 to be made available once a week when the card is swiped and fingerprints scanned in a shop. For each such swipe, the shop will get an electronic payment of R100 and be required to give R100 in cash to the cardholder. Every shopkeeper in the country will then want to get a card and fingerprint reader in order to get the resulting customers’ business.

This will also remove the ration-shop monopoly. Shopkeepers will compete for customers and this will ensure that money can’t be stolen from the recipients. Competition will also confine merchants’ commissions to a small percentage. The system can be implemented by the government of India without local officials having any chance to intervene and siphon off money.

For the majority of Indians who face food shortfalls, the scheme will bring genuine food security for the first time in their lives. It will enable the purchase of 20 kg of food grains per adult woman per month at an average price of R20 per kg (this works out to 33 kg per household, on average). Moreover, it will give women the flexibility to buy dal, oil, medicines or anything else, if that is what they need most at any given time. By giving the biometric/economic power to women who are at the centre of a household, it will ensure food reaches children and women are empowered.

The scheme should be almost universal. Only those rich enough to pay income tax, (and therefore have PAN cards) should be excluded from the scheme. This can be done easily enough through a process that can’t be manipulated. Of course, the amount of payment must be adjusted on a monthly basis to track the price of food. This should be done on a national basis. The process will have to be kept clean, transparent and non-manipulable.

The cost, less than 3% of the national income, can be raised by cutting wasteful subsidies on petroleum and fertiliser, and shrinking the PDS itself. These subsidies, so far politically untouchable, can be reduced as the government that implements this scheme will be very popular. It will be electorally unbeatable and will be able to promote politicians who work for the public good. That is the only way we can improve our education and infrastructure and achieve double-digit growth rates.

At Independence, Nehru made a pledge to “fight and end poverty and ignorance and disease… and to create social, economic and political institutions which will ensure justice and fullness of life to every man and woman”.

It would be fitting for the family of the man who made the pledge to help finally redeem it. The technology is here and the politics are irresistible.

(E Somanathan is professor and head of the planning unit at the Indian Statistical Institute)

*The views expressed by the author are personal.