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The following are extracts from my reply to the PMO expert. Comments/ views
much appreciated. SS
POVERTY ALLEVIATION PROGRAMMES
... (expert's name witheld) has briefly covered some of the anti poverty
strategies of the Government as follows:
"To keep things in perspective, I am briefly recounting the present anti
poverty strategy which consists of four distinct components:
a) "The now-dormant plank of redistribution of land which is an unequivocal
failure outside West Bengal and Kerala for want of political will.
b) "Transfer of other income generating assets and upgradation of the
technological skills of the poor through vocational trainings (IRDP,
TRYSEM, etc.)
c) "Tackle the seasonality of poverty particularly of the landless poor by
providing for wage employment in public works (JRY, IJRY, etc.)
d) "Provision of direct nutrition supplements to women and children under
ICDS, subsidized supply of essential commodities through PDS, financial
support to pregnant women, old age pensions and so on.
Comment:
-------
These issues have been covered in sections 4.1-4.4 of my paper. There are
many other programmes which owe their existence to the removal of poverty
or "helping the poor".
POVERTY RATIO
... has briefly touched upon the statistics of the decline of poverty:
"The above measures, singly or in some combination, shaped our fight
against poverty and enabled reduction of the Headcount index from 53.07
percent in 77-78 to 37.27percent in 93-94. There has been serious doubts
expressed in academic circles about the veracity of the poverty level of
37% as it is seen inconsistent with the steady economic growth rate of the
same decade and is therefore argued to be inflated."
Comment:
------------
This has been touched upon by me in my Introduction as well as footnote No.
27. I have no dispute with poverty statistics.
CONCERN ON THE IMPLEMENTATION OF NEGATIVE INCOME TAX
... has expressed five reservations or concerns regarding NIT. I deal with
these below:
"You have argued that the anti-poverty strategy so far has been ineffective
mainly due to the failure in targeting and consequent leakages of subsidies
to the ineligible sections. Keeping this in view you have proposed the
strategy of Friedman's Negative Income Tax. You argue that a supplemental
direct Income transfer programme of Rs. 573 p.a. would have perhaps been
more successful in benefiting the poor than the several porous schemes in
place. Following are some of the clarifications that we are seeking on your
proposal:
a) "From your paper you seem to look at poverty as a cash deprivation and
not a capability deprivation as beautifully defined by A.Sen. Will cash
doles eliminate poverty of the able-bodied-but-resourceless poor
Individuals? By resource here, I mean material assets, education, health,
self-esteem etc.
Comment:
---------
This has been covered in my footnote No.1. Elaborating on this, note that
cash is a numeraire, purchasing various material assets as per the
consumer's solution to his utility maximization problem. It is therefore
likely that cash grants are the best way to eliminate capability
deprivation, where the individual concerned takes the optimal decision
based on local circumstances and information. In any case, Sen's concept of
capability deprivation is a matter to be decided by the individual who is
deprived, rather than by you or me or a planner who imagines various
deprivations. Also see sections 5, 6.1, 6.9, 6.10, 6.11 and 6.12.
b) "While the current components of the anti-poverty strategy are plagued
by poor targeting and leakages (a World Bank study puts it as high as 60%
in PDS), how can it be credible that the block/ITax/bank teams
suggested by you for implementation will be above the malaise?
Comment:
----------
This has been covered in sections 6.4 and 6.5. Section 6.8 also touches
upon this tangentially. In my Conclusion, I have suggested an Experimental
Project, without which matters such as this cannot be conclusively
resolved. Previous discussion, including with Yogendra Sharma, Senior
Economic Advisor, Finance Ministry, does suggest though that the method
proposed by me is less likely to have such leakages.
c) "Some measures in the old anti-poverty strategy like land redistribution
failed for want of political will. What is the basis of your faith that the
withdrawal of all subsidies to the non-poor which forms an essential
feature of your proposal will be politically acceptable?
Comment:
-----------
As I have stated in the NIT paper, "Putting into place a programme of NIT
while subsidies and loss-making public sector undertaking continue as
before, would be completely disastrous." The concerns raised have been
covered in section 6.8. The incentive structure of our politicians is
discussed separately in "The Inevitability of Political Corruption in
India" which can be downloaded from
../debate/notes.html.
d) "Is there any example of countries where the NIT is successfully
implemented in situations like in our country wherein poverty is not a
state of the marginalised destitute but a reality for a major section of
the population?
Comment:
---------------
The USA has the Earned Income Tax credit system, coupled with unemployment
grant, food stamps, etc. There are fundamental weaknesses in each of these
methods, and I do not recommend these. NIT is the best theoretical
mechanism. That we do not implement it or see its implementation on a large
scale across the World is possibly due to the confounded thinking and
vested interests at various levels: it is not a comment on the feasibility
or otherwise of NIT. There is also nothing wrong in India being the first
to do right to its citizens (the poor as well as the non-poor, viz., tax
payer: see Section 2.4.
e) "Your paper also does not give due consideration to the empowerment
strategies for the poor, by which I mean facilitation mechanisms for
organizing the poor on the non-economic facets of poverty (education,
sanitation, health, self-esteem)."
Comment:
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Covered in section 6.11.
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