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All that money down the drain
Tackling poverty through consumption oriented schemes has been a failure; rather we should go for investment oriented policies that create social assets

Over the past 60 years, our policymakers have rolled out hundreds of pro-poor polices with the avowed aim of eradicating poverty and banishing destitution from the face of the country. In the process they have allocated thousands of crores of taxpayer’s money towards a plethora of programmes and schemes. Despite such large-scale largesse, the social infrastructure in the country remains decrepit and in spite of the government’s subsidy bill growing larger every year, there seems to have been no tangible and material improvement in the lives of the beneficiaries.

In fact subsidies aimed at increasing the consumption level of the poor actually get diverted to other channels, which are then cornered by middle-men and manipulators. A study by the National Council of Applied Economic Research reveals that 40-50% of kerosene sold under the public distribution system gets diverted to the black market and is sold for over 22 rupees. In 2008 the fuel subsidy touched a figure of $57.8 billion but the expected benefits did not come to pass. The year saw an inflationary spiral, which burnt the pockets of farmers and small time traders, and people ended up paying more for less.

Even the much hyped Mahatma Gandhi National Rural Employment Guarantee Act for providing employment to rural folks has failed to create any worthy social infrastructure for sustainable and long-term employment. The amount invested in MNREGA could have been used to create rural and semi-rural infrastructure that could have generated employment and facilitated agriculture and trade. Most of the agriculture produce are sold at cheaper prices given the fact that their shelf live is short and farmers find it difficult to rent out a cold storage or preserve the produce for a longer time. Thus, construction of cold storages or pakka roads under MNREGA could have served the programme’s purpose better.

Social policies in India are not well laid down, and are seldom progressive and visionary. Rather, the approach is often ad-hoc, a knee-jerk response to the demands made by various social groups and a quick fix measure to solve their problems. Priorities for social investments are often skewed, and generally targeted towards meeting only the needs and demands of groups and communities demarcated along the lines of castes and tribes. Unless our politicians and policymakers start thinking of social investments as a means to deliver public goods to the greatest number of people, and without any electoral biases, the benefits of social investments will remain constrained.


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