Poverty is a major issue for a large part of the human geography with over 700 mn people being afflicted in countries in Asia, Africa and Latin America.
The Nobel Prize for economics this year goes for work on poverty which is probably the most serious challenge for the world. Therefore, there is a move away from behavioural economics, which has been popular with the jury and extensions of markets which has dominated the core work of other winners. In fact, there was some talk outside that the award would go to someone like Prof AK Sen. In an age when people are less enchanted with free markets and capitalism and economists like Thomas Piketty have occupied centre stage it is quite appropriate that Abhijit Banerjee, Esther Duflo and Michael Kremer have been accorded this award.
On the face of it, their work is quite simple. There are four parts to their story. First, there is need to identify the causes of poverty, second have the necessary interventions in place which can address the issue and third, carry out field experiments which work so that those which don’t can be abandoned. The last is the cost-benefit analysis to evaluate efficacy. Accordingly, those which work can be persevered.
Poverty is a major issue for a large part of the human geography with over 700 mn people being afflicted in countries in Asia, Africa and Latin America. Over time several measures have been used to counter this problem with different modicums of success. The recipients work is based on carrying out experiments with solutions once the problem has been identified so that the policies become effective.
India can take pride in such an approach because over the years successive governments have been fighting poverty through different measures. In fact, while the awardees talk of identifying the problem first, in India we have the entire menu on the table: health, family planning, education, credit, agriculture, social security and so on. These have been on the agenda from the time of independence and in all our Planning documents.
Banerjee, Duflo and Kramer talk of interventions being identified and here too India has been fairly successful in formulating in different kinds of policies. Therefore, there are specific programmes for enhancing agriculture and various schemes are brought in to address health, education etc. New innovations have come through the NREGA programme or the PM-health scheme (Ayushman Bharat). One can even go back to the employment guarantee programme, minimum needs programme, Green revolution, etc. which were used in the seventies and eighties as the problems were well understood and were common to all states.
The third part of their thesis is that we need to carry out experiments to see how they work and integrate to make them effective. This is significant in India because we have the tendency to set monetary or financial targets which are achieved without being too effective. Hence, it is not uncommon to come across schools being constructed without having teachers and books and furniture. Teacher absenteeism is common. Policies, thus, fail to deliver. On the other hand several states like TN, AP, MP etc. have implemented the mid-day meal scheme which work well ensuring children attend schools.
India can be a good example, to show how poverty has been tackled. It tells policy makers what should be done and the safeguards that have to be built. While there is still reason for us to be dissatisfied on the state of poverty—300 mn are still deprived—credit has to be given for lowering the proportion given the level of leakages in the system which lead to wastages. In fact, the measures taken by the present government since 2014-15 to improve the distribution of fiscal benefits through better delivery mechanisms is commendable and can be a useful template to be followed across the country for all programmes.
Clearly, the road ahead is long for us and the Niti Aayog can take the thesis of these awardees as a template for evaluating all the programmes of the government and create a report card on the achievements and misses so as to improve the effectiveness of policy. Such an evaluation will help to sieve out those programmes that have not worked because efficiency parameters have not been met. The same funds can be routed to others which have worked or alternatively new programmes can be constructed. It is important to make every rupee of expenditure work with a definite cost-benefit analysis being in place.
The awardees have not added the willpower to get things done which is what is missing in most of the countries which have high poverty. In fact, in most of the countries in Africa and Latin America where the rulers are dictatorial, there is less incentive to bring about change which makes this goal a distant dream. In democracies like India a major challenge has been corruption which is what should also be addressed by countries to make their policies effective. Curiously most of the poorer nations have low scores in the World Bank Governance Index of the Corruption Index of Transparency International. Hence, there is a fifth dimension which is a practical issue that has to be appended to make such policies work in poorer countries.
(The author is Chief economist, CARE Ratings. Views are personal.)