Shrink PDS & rework NREGA, World Bank tells India

Written by Sharad Raghavan | New Delhi | Updated: May 19 2011, 08:51am hrs
A World Bank review of Indias social sector programmes has suggested a smaller public distribution system with more cash transfer, reworking of NREGA as a public works programme for urban areas and finally, a social security package including health care for those without regular employment.

The report titled Social Protection for a Changing India, was commissioned by the Planning Commission. The bank said the three-pillar approach should be combined with social protection block grants by the Centre to state governments that are more tailored to the poverty and vulnerability profile of the individual state(s).

The World Bank report says the number of poor is sharply increasing in urban areas but not enough plans are being made to help them as social protection programmes are more suitable for rural areas.

The report shows India is spending a good amount for centrally sponsored social schemes which at around 2% of gross domestic product, is higher than what developing countries like China and Indonesia spend. However, the report makes the point that while this is large, it tends to be regressive, underlining problems like targeting and capacity constraints within states.

It is the first comprehensive review of the performance of India's main anti-poverty and social protection programmes, with the focus naturally falling on big-budget programmes like the National Rural Employment Guarantee Scheme and the Public Distribution System. The main findings of the report, released at the India International Centre on Wednesday, were presented by John Blomquist, the World Bank's lead economist for social protection in India.

In its study, the report divides the social protection programmes in India into three categories: those designed to protect poor households (PDS, Indira Gandhi National Old Age, Widow and Disabled pensions and NREGA), those designed to prevent households from falling into poverty (Rashtriya Swasthiya Bima Yojana, Aam Admi Bima Yojana) and those designed to promote movement out of poverty (National Rural Livelihoods Mission, Mid-day Meals).

About the PDS system, the report says that while it costs 1% of GDP and covers up to 23% of households, its effect on poverty reduction is low due to high leakages to the non-poor in other words, corruption. Only 41% of the grain released by the government reached the targeted households in 2004-05, the report said. Citing Planning Commission data, the report says that in the early 2000s, a whopping 91.1% of grain allocated for BPL households in Bihar did not reach their intended targets. West Bengal performed the best of all the states in this regard, with 73% of the grain allocated for BPL household reaching the targeted households.

The main problems the report underlines in the PDS system in India are: i) inadequate storage capacity in a number of states; ii) households in most states have to pay for their entire month's rations in one shot, a considerable financial strain; iii) weak monitoring, lack of transparency and inadequate accountability of officials implementing the scheme.

However, the report lauds certain pilot projects and state initiatives.

For example, the use of smart cards to reduce leakages in Andhra Pradesh, Chhattisgarh, Delhi and Tamil Nadu. In Himachal Pradesh and Gujarat, allowing the fair price shops to sell non-PDS items has improved their viability, and reduced the incentives for leakages.

In 2004-05, 80% of the rural households in Tamil Nadu purchased PDS grain, compared to a dismal 3% and 4% in Bihar and Haryana, respectively. On NREGA, the report said that the allocation for this programme is approximately 0.6% of GDP, up to 2009. It also lauds the inclusion of the poorest i.e.; the scheduled castes, tribals and women as workers in the programme.

However, it also underlined the fact that the NREGA implementation across states was uneven, with Rajasthan at the top, with around 90% implementation and Punjab at the bottom, with around 5% implementation.