Wednesday, November 26, 2014

India Embraces the Welfare State

NEW DELHI – In recent weeks, India’s parliament, often justifiably derided for the frequent disruptions that mar its work, has surprised its detractors by passing two crucial pieces of legislation that could transform the lives of hundreds of millions of people.

The first, the Food Security Act, grants 67% of India’s population a right to 35 kilograms of rice or wheat for three rupees (less than five US cents) per kilo. Together with related provisions that would provide meals to infants and expectant mothers, and subsidized pulses to supplement cheaply available food grains, the law will add $6 billion to India’s annual fiscal deficit. But it would also abolish the risk of starvation and malnutrition in a land where too many have gone hungry for too long.

The second law assures fair – indeed generous – compensation to people, often small-scale farmers, whose land is acquired by the state for development purposes. In a country where two-thirds of the population is still dependent on agriculture and small holdings are all that a majority of Indians live on, the new law helps those who have often felt exploited and deprived of their livelihoods by the state’s power of eminent domain.

The new law requires the consent of 80% of a major tract’s landowners before the state can acquire it, and includes exacting provisions for the rehabilitation and resettlement of those affected. It will even compensate tenant farmers for their loss of livelihoods and require that those displaced by land acquisition be offered employment in the institutions that displace them.

Taken together, the new food-security and land-acquisition laws underscore the Indian government’s gradual but firm move toward making the world’s largest democracy a society in which citizens’ welfare is based on rights and entitlements rather than ephemeral charity. Detractors on the right insist that the new laws will break the budget and undermine economic growth, while opponents on the left argue that they do not go far enough in covering all of India’s poor and vulnerable. The government believes that criticism from both sides suggests that the laws strike an appropriate balance.

At a time when democracies are struggling with various models of welfarism, seeking to balance the imperative of fiscal retrenchment with alleviating the insecurity of vulnerable populations, India has moved in a direction that few thought possible for a developing country. From the Right to Information Act, which has empowered citizens and boosted government accountability and transparency, to the Right to Education Act, which has led to record-high school enrollment and pumped resources into moribund classrooms, the current government’s reforms have changed the face of Indian society.

One in five rural households benefit from the Mahatma Gandhi National Rural Employment Guarantee Act, which provides employment mostly to the Scheduled Castes, the Scheduled Tribes, and women in villages (in my own state, Kerala, 92% of the beneficiaries are women, whose lives have been transformed by their new income). By raising the bargaining power of agricultural labor, the act’s passage has led to higher farm wages, greater purchasing power for the rural poor, and lower distress migration. And sustained government investment in public health is reflected in steady improvement in India’s infant mortality rate, maternal mortality rate, and life expectancy.

These measures cost money, but they also enable the poor to break free of poverty. When government policies keep India’s telecom rates among the lowest in the world, it ensures that the poor can have access to a technology that increases their autonomy. When the government promotes food security, it is part of a bold effort to strengthen agriculture, which has led to record-high production of food grains.

At the same time, economic reform has not been abandoned. Controversial budget provisions that had earlier deterred investors are being reviewed. The decision to permit foreign direct investment in multi-brand retail and civil aviation has been pursued, even at the cost of losing a recalcitrant coalition ally. Subsidies on diesel and cooking gas have been reduced in the face of vociferous opposition. Pension reforms have been passed, and insurance reforms are on the anvil.

India has suffered, like most developing countries, from declining foreign investment, poor export performance, and a depreciating currency. But even pessimistic estimates project 5% growth in the coming fiscal year, and a good monsoon should ensure a bumper harvest.

The measures that India should take to get its economic narrative back on track are the stuff of heated debate among economists and pundits. But for the aam aadmi – the common man in whose name every party claims to speak – these debates pale in significance beside the major steps taken to build a social safety net in a country where everyone had been expected to fend for himself.

Cynics say the new measures are motivated by political considerations alone: the next general election is due by May 2014. Before it was passed, one wit joked that the Food Security Bill meant “food for the poor, security for the ruling party, and the bill for the taxpayer.” But it should be no surprise in a democracy that the government should pursue policies that are popular with a majority of voters. The fiscal costs of such measures are high, but the average Indian is better off now than he or she was nine years ago. Any government would feel vindicated by that record.

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    1. CommentedLeo Arouet

      Excelente artículo. Estamos luchando y tratando de buscar un estado de bienestar en Perú igualmente. Se necesitan programas sociales o inversión pública en los sectores sociales para que un país siga avanzando y mejorando.

    2. CommentedJagan Rampal

      Despite the proclamation of the universal welfare, 'Food Security Bill' does not add up.

      I am not even looking at the many dimensions that media has gone to town about e.g. the timing close to elections, budget deficit, no infrastructure for rolling out such a scheme, corruption at each level of government machinery etc, though these are pertinent views.

      The maths that I understand goes like this. I buy wheat at Rs 25 per Kg. So if you give the stuff to 800 million people at Rs 2, someone has to pay the rest. There are 400 million more who are not poor enough to take advantage. So there are three possibilities.

      1. The left out 400 million pay for the 800 million enjoying the sudden munificence of the present government. That means soon I will buy atta at Rs 75 per Kg.

      2. Government is rolling in money. No sweat about small change like US 6 B per year.

      3. This is like many other schemes the present government has in mind. Big on the sound bites , zero in efficacy. So please those 800 million, fend for yourself. Don't expect that food or security anytime soon.

      Can anyone advise which one out of the three is the case?

      Best Regards

    3. CommentedChetan Purohit

      Sir, I know you are good writer & office bearer at UN. Just to get popularity in society at very high cost. Cong made it ego issue. What poor need is practical policies that allows small & mid scale manufacturing fast set up to get additional job creation. By providing food at low value doesnt make them employable, need good industry friendly university syllabus that makes them employable from day one. One can say on no. of technical graduates we are at so & so ranks, but do they are employable. Check with industry HR leaders you will get better feedback. Industry is crying for good talent, at same time talent is crying for good job. There is gap between skills in demand & supply. WHAT PEOPLE NEED IS SUPPORT STRUCTURE TO EARN FOR FOOD, NOT FREE FOOD. WHAT YOU ARE DOING EXACTLY OPPOSITE FREE FOOD, NO SUPPORT STRUCTURE TO EARN FOR FOOD.

    4. Commentedprashanth kamath

      2000 to 2005 - 60 million new jobs created - mostly NDA period (1998-2004).
      2005-2013 - 2 million new jobs created.

      - For eight years you have pauperized the working class and filled your crony capitalist friends.
      Now you have come up with food security and land bills for reelection.
      Do not sing your party line, there are very few of your voters that read this place.

    5. Commentedprashanth kamath

      Author: But it should be no surprise in a democracy that the government should pursue policies that are popular with a majority of voters.

      -Nazis did that too.

    6. CommentedJ St. Clair

      all humans...are restrained by their governments & existing might as well give government & corps all the rights to make laws and all the rights to distribute money and resources....if they miss anyone oh're back on your own to "fend for yourself" an unfriendly some are in already

    7. CommentedJ St. Clair

      who are these law makers/investors..aka as the same persons...they are not different persons...

    8. CommentedDeepak Tiwari

      Mr. Tharoor's estimate of $6 billion on account of food security law is severely underestimated. During UPA-II, government’s fiscal deficit increased to Rs 23.7 trillion against Rs 8.7 trillion during UPA-I and Rs 6.2 trillion during the NDA regime. Is this kind of largess sustainable? Further, what is worrisome is the quality & productivity of such entitlements. What is the purpose of right to education if the quality of education is poor or teachers are inadequately trained? Can cheap supply of food (only cereals are guaranteed at throw away prices) stave off the problems of hunger or malnourishment? Not only the distribution system is plagued with corruption choking the delivery system, the food security program will also dis-incentivize small and marginal farmers from farming.

      Another law encourages over 10 million street vendors to set up shops on the roadside after getting a license. Are we still thinking to make Mumbai like Shanghai? Needless to say, the socialist conscience of Sonia Gandhi will sabotage the economy. It’s no secret now that government is actually run by Sonia Gandhi. All key economic reforms have been held hostage to Sonia Gandhi’s socialist schemes at the cost of national bankruptcy.

    9. CommentedProcyon Mukherjee

      I have observed very closely how the food subsidies and free distribution of Rice in particular makes the farmers actually worse off in zones of extreme poverty in Western Odisha, which is even worse than the worst places in Somalia in terms of per capita income. The free rice does not leave the go-down, but is exchanged and the go-down remains perpetually full. So the very purpose gets defeated, while the marginal farmer finds it difficult to send his produce to the government go-downs as the physical inventory is so high while the book inventory is still in the making of a mutually 'beneficial' adjustment.

      Welfare, no doubt, but will it touch the people?

    10. CommentedSriharsha Mannava

      Mr. Tharoor seems to have got MMR incorrect. It is Maternal Mortality Ratio and not Rate. Also being a Congressman, he seems to have put on blinders that mar his credibility as an objective personality on public issues.

    11. CommentedSumit Gupta

      Because it is so fiscally expensive right now, I wish the Food Security would apply to the most needy- maybe the bottom 33%. On the other hand, I see even factory level workers making USD 200 a month, who are the "lucky" lot in todays scenario, depend on government subsidy for affordable grains through fair price shops. Overall I think it was a much needed Act, it is a shame that in India people have to sleep hungry, what kind of super power shall we become

    12. Commentedsanthosh kumar

      Mr. shashi tharoor must explain ---1)why it has taken 5 years to come out with food security bill in the first place?

      2) whether the infrastructure is in place to implement the food security act?

      3) why it has brought watered-down version of the food security bill? bring this version of the bill, one doesnt require 5 years of time....a Phd student in economics with full statistics of poor and govt revenues can write a bill of this kind

      4) mr shashi tharoor must explain " how it transforms the lives of citizens?....he is projecting this senseless food bill as game shashi tharoor should stop showing paradise to people , instead concentrate on ground realities....we dont need your food, we need employment to earn our living...

      5)what your govt (upa) has done regarding employment generation? your bullshit NREGA will not solve the employmnet problem...nrega is not at all a employmnet , it is just social safety net...please mr tharoor, dont call nrega as employment for god sake

      6)i think you have imbibed "washington consensus" concept very well in your mind...we are importing everything from outside?....why cant we manufacture it here in india and provide employment in india?

      the article lack depth and lack of understanding of never faced a poverty problem in your life.....tharoor, you dont eat for 10 days, then you will come to know what is the meaning of poverty? stay and sleep in ac rooms....come on to delhi streets , people are sleeping on foot paths...

      senseless article..tharoor quit your ministry and go to UN and work because you dont understand india

    13. CommentedFrank O'Callaghan

      The Food Security Act is the first law that I have learned of in the last thirty years that fills me with hope.

      If this is built upon, both in India and outside, there is hope for the world. It implicitly accepts that the world contains enough for all to live well. Basic decent conditions of living should not be reduced for the opulent waste of the rich.

    14. CommentedViswanathan Suresh

      Whilst I do agree that a welfare scheme that ensures food security for the poor is laudable and necessary, I must nonetheless point out that the government has learnt little or nothing from the way the its measures pan out in practice. Nor has it done anything whatsoever to correct the many failings of current policies for the poor.

      What one is yet to see is any tangible measure to combat the enormous seepages and wastages that the current approach to food distribution is plagued with. The bulk of the food is pilfered and sold again at market prices and what gets sold in many ration shops is sub-standard, inedible stuff. A better approach with less logistical complexity and a greater chance of reaching the poor would be to opt for real cash transfers, a method that appears to have worked in places like Kenya & Mexico. Of course, these are smaller countries with lesser complexities than India but there is still a lesson or two to be learnt there.

      What the government does not get is the fact that many poor would much rather pay for a service than get it free form the government. How many would want to go to a public hospital if they could avoid it?How many would want their kids to eat free lunches at schools where you run the risk of getting poisoned & killed ?

      Perhaps the poor will fall for this gimmick and vote for the Congress but at grass roots levels, there will be a lot less bang for the enormous bucks that will get spent.