Poor Economics

Written by The Financial Express | Updated: Feb 28 2014, 09:32am hrs
Sarojini Naidus good natured jibe at how much it cost the country to keep Mahatma Gandhi in poverty is now coming true for the countrys poor, and in a manner that few could have imagined. Initial estimates of how leaky Indias anti-poverty programmes are, out from the Planning Commissions Independent Evaluation Office, suggest that the government spends Rs 3.65 to deliver food worth R1. Which means that despite all the years of so-called better targeting of schemes, were back to the number that the late Rajiv Gandhi had spoken about several decades ago. It is especially ironical that, despite this, the government plans to go ahead with its leaky Food Security Act. Indeed, the government has just put on hold its best chance of cracking the problem. The Aadhaar-based direct benefits transfer scheme, in the case of LPG, had already succeeded in eliminating a large part of the theft that takes place.

The problem goes far beyond theft though, it applies to the very design of such schemes. In the case of MGNREGA, for instance, spending 30% of the amount on construction material is a pure waste since the idea is to give unemployment assistance, not to dig wells or build roads which, in any case, dont even get built. In the case of the food subsidy, even if perfectly targeted, there are large storage costsincluding grain rottingthat can be done away with through cash transfers.