Poverty is a multi-faceted phenomenon manifesting itself in a vicious circle of low income, low consumption, poor health and education, poor skills and lack of job opportunities. As poverty affects people over long periods of time, the policies followed by governments in different countries to reduce its impact are both short-term and long-term in nature.

Short-term policy
The short-term policies usually aim to directly tackle the menace. Anti-poverty programmes constitute such policies of shorter duration and try to support income levels of the poor or try and raise their consumption levels. Such programmes include food for work done, employment guarantee schemes and other types of subsidies often by way of price subsidy. But these policies being short-term in nature, mainly provide a topping on the incomes or expenditures of the poor without actually improving their earning abilities. Rather, these policies usually require perpetual public spending.

Many countries have had long histories of such subsidies given to the poor. These have most often politically difficult to do away with and exert enormous pressure on governments that are in the process of initiating public expenditure reforms. But, the flip side is where in the long run public policies such as investments in the economic and social infrastructure could influence the levels of poverty indirectly.

Across the globe what has been observed is that growth of economies has most often not been accompanied by adequate reduction in poverty. Majority of the poor continue to be in South Asia. South Asia accounts for more than half a billion of the world's poor.

In India, eradication of poverty has been a predominant objective of the country's planners. But, as to whether poverty has declined in the last decade is a controversial issue and a matter of much debate. In the Indian states, while average income defined as the per capita state domestic product (SDP) rose, on an average, at a faster pace in the 1990s than in the earlier decade, it was accompanied by a larger variation in the growth rates.

States such as Bihar and UP registered lower rates of poverty, whereas progressive states such as Gujarat and Maharashtra clocked higher rates. So then, even if the per capita income rises, it is possible that poverty may rise. This happens when incomes of lower income classes rise at a rate lower than rise in prices. More than per capita income, consumption of goods is a more oft-used yardstick for measuring poverty.

Rural-urban disparities
About two-thirds of India's labour force continues to depend on agriculture for informal employment as wage labourers, tenants and cultivators. They do not enjoy protection that organised labour gets and live in uncertainty with insecure jobs. Furthermore, though poverty is higher in rural India than in the urban areas, the urban poor live under unhygienic conditions, lack basic amenities and depend largely on informal supplies.. Therefore, to make anti-poverty programmes more meaningful, there is a need to design better and more effective mechanisms for improved service delivery including implementation of cost-based user charges at the local level. The Green Revolution of late 1960s that led to improved food security and higher incomes did lead to some kind of transformation of the rural sector in the country. Focussing public investments on areas with higher concentration of poor farmers or on commodity programmes that cater to commodities produced or consumed largely by the poor could be a very powerfultool for attacking poverty at its roots.

Still lagging behind
Despite achieving food self-sufficiency, having record foodgrain production and existence of a subsidised system of grains distribution in the five decades of independence, the per capita consumption of the poorest sections of society continue to be far below the recommended nutritional levels. This is combined with more than 40 million tonnes of foodgrains (about 20 per cent of production) lying in government's warehouses where there is inappropriate storage facilities, there is deterioration in quality, large losses are incurred and there is multiple movement of grains between depots across the country. Public storage costs have been rising at the rate of 15 per cent annually even as the average revenue from the distribution system has been falling. This has been riddled with additional problems such as declining purchases from ration shops, low income-support, ineffective subsidies for the poor and substantial leakages from the previous universal public distribution system (PDS).

The Indian Government has now launched a new scheme to directly target the subsidy to the poor. But even this system has failed. The poor do not avail of the subsidies. The government requires substantial funds and most importantly plenty of reorganisation is needed. There exists enormous scope for increasing the benefits to the consumers relative to the public costs by improving operational efficiency of the public agencies involved. Their roles should be restricted to price stabilisation and relying on local free market for PDS requirements should be stressed.

Social service spending
Consider: public spending on social services in India accounts for about 45 per cent of the development expenditure and 20 per cent of combined expenditure of the centre, states and union territories. Of this, health and education alone account for roughly 65-70 per cent. The relative share of social sectors in the total real per capita public expenditure has declined between 1986-91 and 1991-96 in 15 major states. The main responsibility for development spending in India lies with the state governments, which contribute approximately 80-85 per cent of the total social sector spending in the country. That is, efficiency of public spending varies across states.

In addition, state spending depends significantly on Central transfers, grants and loans including loans on account of small savings. Since loans add to the debt burden of the states, constraints on their budget allocations are quite severe unlike grants, which are softer and to that extent untied. That is, loans are likely to have a higher efficiency of spending compared to grants. Factoring in such issues, efficiency of state spending of resources transferred from the centre would improve. It would not only help reduce their deficits, but would also make available more resources for anti-poverty and other social development programmes.

A federal set up such as in India calls for a judicious mix of development policies and sharing of resources to be followed at different levels of government and through creation of appropriate institutions. The myriad of central and state governments' anti-poverty programmes that include food subsidies and employment guarantee schemes have not been fully successful also due to inadequate and ineffective administrative planning, poor co-ordination between different levels of government and implementation and lack of appropriate infrastructure. In addition, there have been the problems of rigid programme guidelines, lack of appreciation of field conditions, weak management, monitoring and evaluation and limited capabilities of development functionaries reflecting on the lack of capacity of local institutions to successfully implement programmes. But the boost given to the decentralisation process by the 73rd and 74th Amendments to the Constitution in 1992 has made the states more powerful and competitive indesigning better and more effective mechanisms for reaching the grassroots.

More and more development programmes are likely to be implemented at the local level with constitutionally-elected local bodies playing an increasingly important role especially in rural areas. The Centre needs to modify and untie its other CSS that are targeted at broad development and poverty alleviation. States also need to consolidate their broad development schemes and transfer the corresponding funds to urban and rural governments as untied grants, which has been successfully implemented in states such as Kerala.

Apart from improved mechanism, design and building of institutions and adequate infrastructure play an important role in rendering good services. Public expenditure in rural infrastructure, especially in irrigation, roads, electric power, education and health has contributed both to better production growth and poverty reduction and indirectly in improved agricultural technologies and higher wages. Ignoring indirect effects here can lead to serious inefficiencies in allocating public resources.

Consider education. The distance from the nearest bus stop can affect the enrolment ratio in primary schools. Recruitment of para-teachers (shiksha-karmis) from rural areas has been successfully implemented in states such as MP, Rajasthan and UP. These para-teachers have the added advantages of lower salaries, lesser absenteeism, familiarity with local children and closer relationships. Such experiences also demonstrate that local control and responsibility could be very useful for successful service delivery.