The year 1991 is one that all of us like to remember, some critically and others favourably. For, it marked the start of nearly two decades of structural changes in India’s public policy and governance systems. But, when it comes to inclusive growth, the success of the reforms tells another story, one that has only partly been told. Team Inclusion reports
While everyone concedes that the benefits of economic growth are percolating to the masses, they do not appear to be doing so in an equitable manner. As the 2011 Global Human Development Index (HDI) report points out India may be an emerging superpower, but in terms of human development, it is ranked 134 out of 187 countries. The report ranks countries on their progress on the three key dimensions of education, health and income. It argues that environmental sustainability can be most effectively achieved by simultaneously addressing health, education, income and gender disparities within and among countries.
Thus, while India has the second highest GDP growth rate in the world, its rank in terms of human development index has not shown any major improvement even as incomes have surged. As the UNDP report noted: ‘despite human development progress of recent years, income distribution has worsened, grave gender imbalances still persist, and accelerating environmental destruction puts a double burden of deprivation on the poorest households and communities.’ For many today, however, India’s growth story is a miracle waiting to happen. Consider the following: India’s GDP growth rate is among the highest in the world today, its forex reserves are at levels far exceeding those when the balance of payments crisis struck in 1991, the stock market is booming as is the competitiveness of Indian industry, and income levels are up.
It has definitely been a long journey from where we were when we got Independence. From a Nehruvian model that sought to create an integrated economic identity for the country, mixing both socialist and capitalist ideas, to one that was market-oriented and again to one that lays its bets on inclusive growth. While the Nehruvian model led to a situation where the State had unprecedented controls and there existed a ‘Licence Raj’ regime, especially when it came to economic matters, it also sought to promote the goals of social justice. And, to ensure that social justice was all-encompassing, the model sought to generate employment by promoting more light industries—the public sector was already in the heavy industries area—while for the advancement of the rural agricultural economies, it suggested land reforms, community development programmes and cooperative institutions, including cooperative farming. While that was one phase that lasted for nearly half-a-century, the BoP crisis in 1991 forced India to change track and go in for economic reforms that hinged on privatisation and liberalisation.
More importantly, as many critics say, the reforms initiated in 1992 appeared to be targeted towards the urban region of the country, were largely industrial in nature and were market linked. They did little to target the essential social sector problems in areas of health, education and employment that continue to dog the nation. Thus, under the ‘new economic initiative’, ‘market mechanism’ was the new driver, the role of the public sector declined, and linkages with the global market strengthened. While there have been significant benefits of the new policy in terms of generating employment and improving poverty levels, some areas of concern remain. It is development in these areas, critics say that are getting left behind in our rush to join the global bandwagon. Policy-makers, however, point to several country-wide social sector schemes being run by the government that are changing the face of the rural countryside.
Today, health, education and employment are three mirrors that can tell the state of a nation. In India’s case too, developments in these sectors have replicated the policy challenges that all governments have faced since Independence. While improved access to health and education is essentially linked to poverty, the vacillations in the government on how many Indians are poor only defeats the purpose of targeting benefits at them. Thus, while the Planning Commission has put the number of poor at 26 per cent of the population, the N C Saxena Committee put it at 50 per cent and the Tendulkar report at 41 per cent.
This is not to say that the government is not taking any measures to resolve these contradictions. As Pranab Mukherjee noted in his Budget speech on 16 March, “We are about to enter the first year of the Twelfth Five-Year Plan which aims at ‘faster, sustainable and more inclusive growth’…. I have identified five objectives that we must address effectively in the ensuing fiscal year. These are: Focus on domestic demand driven growth recovery; Create conditions for rapid revival of high growth in private investment; Address supply bottlenecks in agriculture, energy and transport sectors, particularly in coal, power, national highways, railways and civil aviation; Intervene decisively to address the problem of malnutrition especially in the 200 high-burden districts; Expedite coordinated implementation of decisions being taken to improve delivery systems, governance and transparency; and, Address the problem of black money and corruption in public life.”
The question that arises here is that is the government going to continue to aim at faster, sustainable and more inclusive growth through the existing plethora of social sectors schemes like the UID-Aadhaar to tackle distribution woes, the National Skill Development Fund (NSDF) to tackle industry’s problems in finding trained manpower or the National Rural Livelihood Mission (NRLM) to provide self-employment opportunities or the National Rural Health Mission (NRHM) to meet the health needs of the rural populace. Some of these schemes have been around, albeit under different names, even before the current Prime Minister initiated the new economic initiative in 1992 in his avatar as Finance Minister.
The gains (whatever they are) of such schemes are evident if one looks at the case history of Shivraj, an Irula tribal living in Bangalapadi, a non-descript hamlet located at the foothills of the idyllic Nilgiris district in Tamil Nadu. Shivraj works as a coolie in nearby coffee estates for six months in a year and for the rest of the year, he toils his small land holding to grow millet and sorghum or seeks work on nearby construction works. Shivraj has had no education because his village has no school. In fact, the nearest school is located in Karikur, a good distance away. No wonder then, the village does not have a single graduate, with only four villagers having passed Class 10.
The condition of the village’s approach road is so pathetic that most vehicles refuse to ply on it. The District Rural Development Office and Tehsildar visit the village twice in a year to listen to the grievances of the villagers. Shivraj even remembers the date when District Collector Archana Patnaik came to the village in August last year. “She came on 8 August. We petitioned her for cleaning of the village well but it is yet to be done,” he recollects pointing at the garbage filled in the well. The well is the only source of drinking water for the villagers.
To say that Shivraj is excluded would be an understatement. But he is not alone. Almost every fellow villager of his has a similar story to tell. The story of Bangalapadi runs in the face of inclusive growth that the Central Government is today emphasising on. So do around 1.1 million Lambanis of Tandas (settlements) in Karnataka who are often compared with Roma gypsies of Europe due to their backwardness or the KBK districts (Koraput, Malkangiri, Nawrangpur, Rayagada, Bolangir, Sonepur, Kalahandi and Nuapada) which account for 19.80 per cent of Orissa’s population of which 85 per cent live below poverty line. Closer to Delhi, the Meos of Mewat, who are scattered in three districts of Haryana and steeped in extreme poverty and backwardness, mock at the social security programmes initiated by the Central Government.
They together bear testimony to how mainstreaming of the marginalised has continued to be a mirage despite the Central Government having spelt out its target of providing ‘livelihood security and rural development, access to essential services, social justice and empowerment, gender equity, governance, infrastructure requirements, education and skill development, health and nutrition’, as part of its agenda for the Eleventh Five-Year Plan (2007-12). In fact, the rural-urban disconnect has never been more evident if one looks at the India growth story. As economists Jean Dreze and Amartya Sen note in their book ‘India: Development and Participation’, inclusive growth in India has all along been a myth, with the challenges being the same since we won Independence: education, healthcare, women emancipation, liberalisation and decentralisation.
Similarly, the India Development Report 2008, released by the Indira Gandhi Institute of Development Research (IGIDR), aptly concludes that the trickle-down process of growth has been weak, since growth is not located in sectors where labour is concentrated (for example, agriculture) or in states where poverty is concentrated (Bihar, Orissa, Madhya Pradesh and Uttar Pradesh). In fact, it says that the present pattern of growth has the potential for widening inequality and preventing India from benefiting from what everyone says are its demographic assets.
In fact, it was to tackle this linkage between poverty and illiteracy that the Central Government launched the Sarva Shiksha Abhiyan (SSA) and the Mid-day Meal Scheme. The SSA sought to open new schools where there were none and strengthen existing infrastructure through provision of additional classrooms, toilets, drinking water facilities, maintenance grants and school improvement grants. And, on its part, the Mid-day Meal Scheme sought to tackle malnutrition and all check the steep drop-out rate from schools, particularly at the primary level. And, a decade down the line, the education scenario in the country has improved substantially. Thus, 99 per cent of all habitations have physical access to a primary school and 93 per cent to an upper primary school within the prescribed norms. In 2002, before the SSA began, India accounted for 25 per cent of the world’s out-of-school children. This number has now been reduced to less than 10 per cent. However, the challenges that remain include breaking the social and quality barriers for the ‘last mile child’ and ensuring that schools have the requisite learning conditions that are maintained and functioning. But, if ensuring that schools were set up was one goal, what is also being recognised now is the fact that a sixth of these primary schools have less than two classrooms and 13 per cent of them are single teacher schools, thereby defeating the very purpose of providing quality education.
The increasing enrolment at the primary level also brought to surface another problem that the India growth story is facing: how will it be able to cash in on its demographic dividend. The current education system has little to link it with employment; Considering that India adds 28 million youth to its population every year and will have 700 million people (200 million of them graduates) looking for jobs by 2022, skill development is really going to be the key for employment generation and tackling poverty. The National Skill Development Council has been mandated to train 150 million people by 2022 by catalysing private sector in 20 high growth sectors. Under this, 38 entities have been approved and 24 have already started working, training over 100,000 people in over 220 districts. Today, India has over 8,000 Industrial Training Institutes (ITIs) and Industrial Training Centres (ITCs) which impart training in over 110 trades. The country also has 3,139 polytechnics. The Centre plans to open 1,000 more polytechnics – 300 in the public sector, 300 under the PPP model and 400 in the private sector in the next five years. Besides, the government aims to skill 8.5 million people during the next financial year and 80 million during the 12th Five Year Plan. It will set up 1,500 ITIs and 5,000 Skill Development Centres under PPP at a cost of Rs 130 billion.
It is in this context that the government has initiated steps to make technical and vocational education and training a key element of the country’s education initiative. The need to dovetail skill development with credit and integrate industry with the training institutes to get the best results is also becoming clear. It is here that the NSDC, a public-private initiative, aims to develop skills in the unorganised sector by funding skill training and development programmes. However, the skill development programmes have to be linked to employment opportunities. In fact, this was something that Punj Lloyd, the infrastructure and energy giant, found was missing when it withdrew from CII’s Skill Development Centre in Chhindwara for want of candidates and employment options. “They (the trained persons) should be immediately placed on project sites without any delay otherwise they will lose their skill and accuracy,” says Kamaljit Singh Mehrok, Head, Craftsmen Training Institute in Punj Lloyd.
But if education and skills development form one front of the government’s fight against poverty, it is malnutrition, rural employment and health that will help it tackle the problem of iniquitous and inequitable growth. For, most economists and experts accept that while reforms may boost growth, they also widen inequalities in societies which are already highly unequal, particularly in developing economies like India. Inclusive growth, as the World Bank notes, results from rapid and sustained poverty reduction that allows all people to contribute to and benefit from economic growth. Such growth must be sustainable in the long run and should be broad-based across sectors, and inclusive of the large part of a country’s labour force. More importantly, the inclusive growth approach takes a longer term perspective as the focus is on productive employment rather than on direct income redistribution, as a means of increasing incomes for excluded groups. The question that arises here is that should the government’s various social sector schemes that seek to promote inclusive growth be seen as schemes that improve productivity or are they just doles being extended to the excluded sections of society.
Perhaps, a more important way of looking at the government’s steps to promote inclusive growth would be to examine the way it has allocated budgets to the social sector—social services and rural development—over the years and the results that such allocations have achieved. Today, it is universally accepted that the Central Government’s expenditure on the social sector is only one-fifth of what is spent in this area by the states and Union Territories. The same is the case with spending on education. This is primarily because these are State subjects under the Constitution. But if one sees social sector spending over the years, one will notice that the very definition of poverty seems to have undergone a change. While in the early 1990s, anti-poverty schemes focused on income and employment, the mid-1990s saw the government link poverty to a whole range of development issues, in the hope that the trickle-down benefits of such programmes would help tackle poverty. As the Budget Speech of 1996 notes, the issues to be tackled are: ‘100 per cent coverage of provision of safe drinking water; 100 per cent coverage of primary health centres; universalisation of primary education; public housing assistance to all shelterless poor families; extension of the Mid-day Meal Scheme; road connectivity to all villages and habitations; and streamlining the public distribution system targeted at families below the poverty line.’
This was also the period that saw the government increase its emphasis on the participatory form of governance and decentralisation, when the government passed the 73rd Amendment and the 74th Amendments to the Constitution. The changes were made even as the country was tackling the macro economic crisis and had begun to initiate a number steps to liberalise the economy. But even two decades after Parliament passed 73rd and 74th Amendments advising States to devolve some 29 and 18 subjects of governance to the Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs), respectively, when it comes to devolution of framework, functions, finances and functionaries, the States have continued to suppress self governance. A devolution index prepared by Indian Institute of Public Administration (IIPA) for the Ministry of Panchayati Raj in 2011 says that 24 states have transferred only about 51 per cent of the functions to the three tiers of the PRIs. Worse they have transferred around 37 per cent finances and less than 35 per cent functionaries to the PRIs. The index says that only seven states – Kerala, Karnataka, West Bengal, Rajasthan, Maharashtra, Tamil Nadu and Madhya Pradesh — scored over 50 when it came to devolution. While Jharkhand, Goa and Bihar scored less than 30 per cent. Again, a review of centrally-sponsored schemes for health, education and environment and forests, shows that the government has shown a tendency to constitute a system parallel to that run by the local governments.
The States have dilly-dallied in transferring the powers of levying taxes and tolls to the municipalities to make them financially independent. The precarious financial state of at least two municipalities – Vishakhapatnam and Vijaywada – got confirmed recently when Andhra Pradesh Government asked them to pay salaries of municipal teachers from funds allocated to them under the Jawaharlal Nehru National Urban Renewal Mission. M Ramachandran, former Urban Development Ministry Secretary, during whose tenure the JNNURM was formulated, identifies Maharashtra, Gujarat and Southern states among the better performers on ULB devolution index. “There are problems in Northern states and Northeast,” he claimed hoping that the government would change the grant pattern from category A, B and C cities to smaller cities and adopt a more focused approach towards reforms. Ramachandran advised the government to prioritise capacity building.
Also, it is a well accepted fact that greater empowerment of people and local bodies coupled with an increased use of ICT will help contain corruption and improve governance. In fact, governance reforms have been high on the Central Government’s agenda since 2004. The Right to Information (RTI) Act has brought out inadequacies in governance. Electronic Service Delivery, Citizen’s Right to Grievance Redress, Judicial Standards and Accountability bills have been introduced in the parliament but there has been no forward movement since then. Over 97,000 common service centres have been established and the National E-Governance Plan is under implementation, but the quality of public service has hardly improved. The automated delivery of services, which could have cut down human interface and the possibility of corruption, is yet to fall in place. Moreover, performance management is yet to be integrated with accountability. E-infrastructure has been put in place but red-tapism and bureaucratic delays continue to hamper governance.
Corruption, as Finance Minister Pranab Mukherjee noted recently, was preventing the benefits of high growth percolating to the grassroots. “Governance failures and corruption in the system affect the poor disproportionately. An inclusive development agenda cannot succeed without addressing these issues,” Mukherjee said. “It is evident that the fruits of growing prosperity are not being enjoyed equally by all our citizens. There are gaps in our development efforts and in our governance practices, across sectors and in different regions and segments of the country,” he added.
One such development gap that K C Chakrabarty, RBI Deputy Governor, sees in promoting inclusive growth is in the lack of initiatives taken to promote financial inclusion. According to him, low-income households in the informal or subsistence economy have little awareness and practically no access to insurance products that can protect their financial resources in unexpected circumstances such as illness, property damage or death. Addressing a UNDP organised seminar, Chakrabarty said “empirical evidence shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and higher inequality. Thus, financial inclusion is no longer a policy choice today but a policy compulsion. And, banking is a key driver for financial inclusion/inclusive growth.
Financial literacy, banking through business correspondents, kiosks, mobile vans, mobiles and brick and mortar, credit to farmers, SHGs and unbanked poor, insurance and pension have been some of the major thrust areas in the last seven years as banks, insurance companies and telecom service providers have followed targets in opening accounts, extending credit and insuring the unbanked. They have had some positive results. Pondicherry, Goa, Kerala and Karnataka, for instance, have announced achievement of 100 per cent financial inclusion. The banking credit (Rs 4,467 billion extended to farmers ) exceeded the target by 19 per cent in 2010-11. The number of SHGs and their bank savings too swelled during the period( 7.4 million SGHs having Rs 70 billion saving on 31 March 2011, as against 6.95 million SHGs having Rs 62 million savings in accounts). But the picture may not look so rosy if one were to calculate the amount of loans extended to large farmers vis-à-vis small farmers.
Only a miniscule number of no frill account holders have been provided overdrafts or recurring deposit accounts. The consequence is that though the banks have appointed 50,000 BCs, distributed covered 62,000 villages by January end and are expected to cover another 11,000 villages by end of March, only less than one-fifth of the no frill accounts are active. Till October 2011, 107 million Kisan Credit Cards were issued, yet small farmers continue to tap moneylenders for credit. “The need of the hour is that credit should lead to generation of livelihood activities and people should have recourse to savings. The banks need to use financial inclusion to expand their business activities. Financial Inclusion is an opportunity, not an obligation,” avers M Narendra, Chairman & Managing Director, Indian Overseas Bank.
Today, the country is well positioned for a new phase of growth: it has the demographic advantage, a growing marketplace, a competitive services sector, and a huge untapped consumer demand. But such opportunities will have little meaning if they do not translate into more sustainable growth. For inclusive growth, we need to have a growth pattern that creates employment and the agriculture sector using the rural poor’s unskilled labour is clearly the priority. In order to achieve inclusive growth, holistic and integrated solutions are needed to facilitate rapid and sustainable growth.
At the end of the day, nothing can be achieved without good governance, at all levels. Good governance depends on processes and incentives to not only design good policies, but more importantly on institutions to implement these policies efficiently and with efficient utilisation of resources. Corruption manifests itself in many forms. In some instances, funds meant for schemes for the welfare of the common man end up in the pocket of concerned officials. In some other instances, discretion is used to favour a select few. In all cases, accountability can only be ensured through increased community participation.
Even two decades after Parliament passed the 73rd and 74th Amendments advising States to devolve some 29 and 18 subjects of governance to the Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) respectively, when it comes to devolution of framework, functions, finances and functionaries, the States have continued to suppress self-governance.
However, a major achievement of the panchayati raj system has been the tremendous response that the reservation system in panchayats has received from women. This is seen as major step towards the social empowerment of women in the country, with the number of women holding elected posts in these village level bodies exceeding the mandated 33 per cent. Again, the original Panchayati Raj Bill (1989) sought to politically enfranchise the poorer sections of society, such as Scheduled Castes, Scheduled Tribes and women, even as it gave them some economic power through schemes like the Jawahar Rozgar Yojana. However, the purpose was defeated as discretionary powers remained with the states. As a result, most panchayats in the country today face a resource crunch. This is especially important as following the Mehta Committee recommendations, PRIs were expected to be the main vehicle for community development projects.
In an effort to overcome this financial problem, at least for schemes that involved Central funding that the Central Government announced a major initiative to strengthen Panchayats across the country through the Rajiv Gandhi Panchayat Sashaktikaran Abhiyan (RGPSA). The Government also announced continuance of the Backward Regions Grant Fund Scheme in the 12th Plan with enhanced allocation of ` 12,040 crore, up 22 per cent over 2011-12.
Also, the Panchayati Raj Ministry has recommended to the Planning Commission for allocating funds in developmental activities directly to block panchayats instead of routing them through district headquarters. “What is happening in many districts is that the funds are not available for its backward regions, but a large amount is siphoned off to other parts which are not necessarily a backward region,” says Panchayati Raj Minister V Kishore Chandra Deo.
And, in order to ensure that the resources that accrue to the Panchayats, the Ministry of Panchayati Raj has entered into an agreement with the Unique Identification Authority of India. This is expected to enable the poor to access the benefits and subsidies available under various developmental and welfare programmes being executed through these units of local self governments. Technology has also come to play a major role in the functioning and transparency of the panchayats, with over 40,000 elected village bodies using online software for annual planning and another 70,000 for accounting under the e-panchayat project. Says Union Panchayati Raj Minister V Kishore Chandra Deo “around 70,000 panchayats are making online voucher entries on PRIASoft, an accounting software developed by our ministry and the National Informatics Centre. Similarly, another 41,500 gram panchayats have uploaded their annual action plans online on a planning software called Plan Plus.”
Launched in 2006-07, the Mahatma Gandhi National Rural Employment Programme (MGNREGA) has over the years become the most popular aam aadmi (common man) social security scheme in the country. And, like all social security schemes, it has its own share of critics and supporters. The scheme seeks to provide minimum 100 days employment to unskilled rural households in the country, with the wage bill being borne by the Centre and one-fourth of the cost of material and unemployment doles being paid by states.
An extensive tour of villages in Pondicherry, Thiruvannamalai, Krishnagiri and the Nilgiris districts by Team Inclusion draws a mixed picture of the scheme. In Pondicherry where the employment works have greatly added to the prosperity of the village folks who were already involved in some livelihood activity or the other through Self Help Group (SHG) formation while in the Nilgiris, Thiruvannamalai and Krishnagiri the impact is sporadic.
The urbanised villages in Pondicherry where people sustain on fishing, cattle rearing and agricultu
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Inclusion is the first magazine dedicated to exploring issues at the intersection of development agendas and digital, financial and social inclusion. The magazine makes complex policy analyses accessible for a diverse audience of policymakers, administrators, civil society and academicians. Grassroots-focused, outcome-oriented analysis is the cornerstone of the work done at Inclusion.