Distributive policy

Policy watch: free catering program

The Finance Minister sings the praises of the Prime Minister’s Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). As part of this program, free food grains were distributed to people in need. This was welcomed in a recent International Monetary Fund (IMF) working paper. He credited the free food grain program with only a 10 basis point increase in extreme poverty in 2020 to 0.86% despite COVID.

There are three things wrong with FM’s glorification of the free food program.

First, she should examine how gurudwaras (Sikh places of worship) give free food to the needy. Yes, they feed the hungry and needy, but only after doing something in return for the temple – perhaps sweeping the floor, polishing devotees’ sandals and slippers, serving food to devotees, or helping the elderly to move around the temple. place of worship. Sikhs have a culture of helping people, but first teach them to help themselves. Politicians, unfortunately, like to hand out alms, and even take credit for it. They don’t teach people how to work for a living.

Indian politicians have made almsgiving a rule. It’s good politics. But it is corrosive to the atma nirbharta (or self-reliance) which the prime minister likes to preach to people. Preaching is not enough. Programs must be created and proper follow-up must be put in place so that people learn to earn their bread. In this sense, the MGNREGA program was better. He gave people a guaranteed income, but only after they worked for it. It was poorly executed. But that did not remove the essential link between work, dignity and livelihood.

There is a second problem with such praise. He ignores a critical study on the consequences of the management of the Covid in the world. But it is more specifically about India and China.

The graph clearly shows that while China has succeeded in protecting its poor, India has not. China has seen an increase of just 1 million in the number of its poor. India saw an increase of 75 million. So, was the “10 basis point rise in extreme poverty” greater than the 75 million? If so, it was terrible management, on a disastrous performance. If not, then someone falsified the numbers. Or was the report misunderstood? Or was it cleverly marketed? There is little room for comfort on the poverty front.

Study the table a little closer. India has actually succeeded in decimating its middle class. China has instead reduced the number of rich and protected the common man. Shouldn’t India have done that too?

There is a third problem with the FM eulogy and IMF working paper. The real test of eradicating poverty is actually per capita income – this is a figure that government websites in India don’t give. But the data is available elsewhere. And this is where there is a problem that FM should be extremely concerned about.

Just consider per capita incomes for each year after 2014. However, since growth rates vary from year to year, it is best to look at decadal growth rates instead.

You’ll find that India’s GDP per capita grew by only 33% between 1961 and 1970. It then rose to 125% over the next decade. The following decade, 1981-1990 was disastrous, and GDP per capita growth was only 26%. It was then that India was brought to its knees and had to mortgage some of its gold reserves.

Liberalization has helped India recover and the ten-year growth in GDP per capita has increased to 46%. Then, thanks to the pragmatic policies of the Vajpayee government and the UPA-I, the GDP per capita increased by 200% during the period 2001-2010.

Look at what has happened over the past decade. India’s per capita GDP growth has slipped to just 30%, a tiny bit more than the disastrous decade of 1981-90. So, has poverty been eliminated?

The problem starts when governments try to win popular mandates by handing out largesse and don’t focus on growing the economy. Economic growth suffers. The misuse of law enforcement mechanisms makes matters worse. And wealthy individuals are beginning to flee the country. A few months ago, the finance minister of West Bengal tweeted how more than 35,000 HNI had fled the country.

Almost at the same time, the Pew Research findings confirmed what many feared – that India had protected and nurtured a few wealthy people. He had damned the poor.

And nothing shows this better than what happened in Uttar Pradesh. Yes, the government was returned to power. But look at the per capita incomes in this state. It is the lowest in India, just after Bihar. This is despite the largesse the center has shown to that state and the special funding of projects in Mathura, Ayodhya, Allahabad/Prayagraj and Varanasi, among others. When the money is spent, it should have increased people’s incomes. But when that doesn’t happen, you can be sure there’s something seriously wrong with the economy.

It’s one of the reasons why the FM’s glowing remarks about free meals are so reckless. It points to a government that won votes through the distribution of doles, not by promoting economic growth. As for the authors of the IMF working paper, they clearly chose to use a microscope where a wide-angle camera lens would have been more appropriate.

Next week we will try to examine some of the policies that have led India to this impasse.

The author is a consulting editor at the FPJ

Posted: Thursday, April 14, 2022, 07:00 IST