Demonetisation, GST raised risks for poor; social protection needs private hand to step up

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Updated: April 11, 2019 5:32 AM

Although the political parties are coming with income support schemes such as PM-KISAN of BJP and NYAY of Congress to address the issue, there might be other alternatives that can better deal with these problems.

The disruption caused by major reforms such as GST and demonetisation have increased the risks faced by the poorest households in India, leaving behind the social protection system of the yesteryears, which has failed to catch up with the new reality. Here’s where the private sector can step up to help adequately address the new challenges faced by the society, World Bank lead economist Ejaz Ghani says.

There is a need to revamp the traditional social protection system, which was developed in the 1970s to meet the growing demand for social services. Public-Private Partnership (PPP) model and community engagement can play an important role in it, Ejaz Ghani wrote in the Financial Express this week.

India has a broad ambit of social programs such as Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGA), Public Distribution System (PDS), Indira Awaas Yojana (IAY), Indira Gandhi National Old Age Pension Scheme (IGNOAPS), Rashtriya Swasthya Bima Yona (RSBY), and others.

Social protection is an important factor determining the economic growth of a country as it allows individuals to better manage risk vs return choices, Ejaz Ghani wrote.

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“Disruptions brought about by the introduction of the goods and services tax (GST) and demonetisation may have heightened risks to the poorest households, due to increased burden of compliance on small and informal firms,” Ghani wrote.

Chief executive of the Centre for Monitoring Indian Economy (CMIE) Mahesh Vyas had earlier told The Indian Express that while the job losses could have been at least 3.5 million due to note ban, the reduction in the labour force was to the tune of 15 million. CMIE has also recorded job loss of 11 million people in 2018.

Although the political parties are coming with income support schemes such as PM-KISAN of BJP and NYAY of Congress to address the issue, there might be other alternatives that can better deal with these problems.

These social protection programmes are mainly aimed at addressing capability deprivation (inadequate nutrition, lack of employment, low educational attainment), rather than providing safety nets to tackle contingency risks such as health shocks, accident, death and disability. Contingency social protection mostly covers the organised sector workers.

The World Bank in the past has pointed out towards the inefficiencies in the current social protection programmes such as leakages of subsidies in PDS and implementation challenges faced by MNREGA and RSBY.

India is changing rapidly with growing urbanisation, therefore, the previous protection schemes covering mostly rural poor may not work much, according to Ejaz Ghani. Further, the over-reliance on traditional mode of providing social protection via government and publicly-financed programmes limits the potential for social protection, due to fiscal constraints, he wrote.

Ghani suggested to use PPP model for the development of social infrastructure. “Given the growing demand for social services, operator-led PPPs provide opportunity for innovative and collaborative service delivery in scaling up social infrastructure in India,’’ he wrote. Further, it transfers operational risks from the state body to the private sector and forces them to take a long-term view, he added.

Community participation should also be used to better cater the needs of a region. And, integrating gender into the design and implementation of such programme can bring better balance in the society, wrote Ghani.

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