Swami Ankaleswar Aiyar's response

["Dr. Sanjeev Sabhlok" <sanjeev@sabhlokcity.com>]

---------------------------------------------------------------------
Please help make the Manifesto better, or accept it, and propagate it!
---------------------------------------------------------------------
Thought I'd share this response [extracts]. We should all think very
seriously, together, on this subject. I hope Mr. Aiyar won't mind since the
topic is of tremendous importance. I'll get back on Mr. Aiyar's response
later. SS
=-=--=

Dear Dr Sabhlok,
      Your scheme for a negative income tax to tackle poverty, and the pros
and cons you have discussed with Pronob Sen of the Planning Commission,
need to be converted into an article for publication in the Economic Times.
Why don't you give it a try?
      I have gone into these issues in the past myself. Ideally, every
Indian should have a personal identification number (like the social
security number in the USA) which has to be mentioned forall important
purposes like voter registration, driving and other licences, taxes, bank
accounts and the like. That creates a  system that can  keep track of the
poor and discoiver leakages and fraud. It is an enormous administrative
undertaking, and fraud is rampant even in the US. Of course, the leakages
are surely higher in various subsidy schemes in India, where the non-poor
probably get 80 per cent of all benefits.
   The second non-trivial issue is that poor people get money today from
relatives and extended social groups (like the biradari). Once the centre
steps in, these private transfers to the poor will dry up. Some research
suggests that private transfers can be quite appreciable. I would hate to
destroy private forms of distress alleviation and substitute it by a leaky
bureaucratic effort.

      There is a simpler alternative. Every gram panchayat can be give
given a cash allowance for relief to the five poorest families. There will
have to be open discussion at a gram sabha on who are the most worthy
beneficiaries. This was indeed tried in the old Antodaya scheme. It's less
ambitous than you negative income tax scheme but much easier to implement.
It will reach people who cannot participate in rural employment programs
(the aged, very young, sick and crippled). I suspect this might alleviate
half the existing poverty without totally destroying private transfer
mechanisms.
 The real problem in focusing subsidies on the poor in democracy.
Democracies are majoritarian, not egalitarian. A subsidy that reaches only
the bottom 30per cent will have less popular appeal than a subsidy which
reaches 70 per cent of a targeted section of the populationlike farmers or
urban dwellers.. What economists call "leakage to the non-poor" is not
leakage at all from the politician's viewpoint,  but accurate targeting!

With best wishes,
Swami Aiyar


--------------------------------------------------------------------------
This is the National Debate on System Reform.       debate@indiapolicy.org
Rules, Procedures, Archives:            ../debate/
-------------------------------------------------------------------------