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Monday, September 11, 2017

Modi Government Gives Shock Treatment To Social Policy

The Modi government is finally getting some flak, as it should, for its confused economic policies, epitomised by the demonetisation blunder last year. Despite relatively favourable circumstances (including good monsoons and a decline in international fuel prices), the rate of economic growth is declining quarter after quarter. For manufacturing, it is even close to zero, according to the latest estimates. Statistics related to employment and wages are even more worrying. To illustrate, one of the most telling - and least noticed - macroeconomic indicators today is the stagnation of real wages: according to the Labour Bureau's Wage Rates in Rural India (WRRI) series, ably analysed by Yoshifumi Usami among others, the wages of agricultural labourers in rural areas have remained more or less constant in real terms during the last three years. So much for inclusive growth.

Having said this, it is in the field of social policy that the failures of the central government are most glaring. For instance, there have been no initiatives of any significance in the fields of education and health during the last three years. Health policy, in particular, has been a subject of deep confusion. Three years ago, the government was making grand promises about universal health care and even health becoming a fundamental right. Nothing has come of them. 

When it comes to social security, there have been some initiatives, but mostly of a misguided sort. As things stand, social security for the informal sector in India builds on five critical programmes: the National Rural Employment Guarantee Act (NREGA); the public distribution system (PDS); the Integrated Child Development Services (ICDS); midday meals for school children; and pensions for widows, the elderly and disabled persons. All these programmes have suffered important setbacks during the last few years.

The NREGA came under attack as soon as the Modi government came to power. Initially, the government tried to restrict the programme to the country's poorest districts. When that turned out to be difficult to get away with, caps were imposed on NREGA expenditure, leading to an unprecedented crash (30 per cent or so) in NREGA employment in 2015-16, along with mounting arrears in wage payments. More recently, the central government seems to have accepted that NREGA is there to stay, and financial allocations have even picked up a little bit. Yet, attacks on the programme continue. The recent committee report on NREGA wages, for instance, argues not only against the payment of minimum wages, but also in favour of NREGA wages being held constant over time in real terms. If accepted, this recommendation is likely to lead to the entire programme being gradually phased out, as labourers themselves lose interest.

Turning to the PDS, the system did improve in many states (especially the poorest states) during the last few years as the National Food Security Act was rolled out. These gains, however, are in danger of being undone by the imposition of Aadhaar-based Biometric Authentication (ABBA) on the PDS. There is growing evidence that ABBA has already done much damage in Rajasthan and Jharkhand. Official data for Ranchi district, where ABBA has been compulsory for more than a year, shows that about 20 per cent of cardholders have been excluded from the PDS month after month since January. The situation is likely to be worse in other districts, where there are serious connectivity problems. In spite of these and other indications that ABBA is inappropriate technology for much of rural India, the central government continues to promote it blindly.

As far as ICDS and midday meals are concerned, both schemes received shock treatment in the Union Budget 2015-16, in the form of severe budget cuts - 36 per cent for midday meals and more than 50 per cent for ICDS (partly reversed later on under public pressure). While the cuts were sought to be justified on the grounds that state governments were due to receive a higher share of the indivisible pool of taxes, it is a mystery why the axe fell so heavily on children. Both programmes are yet to recover from this setback. The allocation for midday meals in this year's Union Budget, Rs. 10,000 crores, is still 25 per cent lower in money terms than the corresponding allocation four years ago - in real terms, the decline would be even larger.

Last but not least, the central government is undermining social security pensions for widows, the elderly and disabled persons. The central contribution to old-age pensions has stagnated at an abysmal Rs. 200 per month since 2006, even as the salaries and pensions of government employees went up by leaps and bounds. Instead of expanding non-contributory pension programmes, which are of great value to some of India's most vulnerable groups, the central government is promoting contributory programmes such as the Atal Pension Yojana (APY). The modalities of this programme are of little use to destitute widows or elderly couples, who have shown little interest in it.

This brief overview would be incomplete without a few words about maternity entitlements. All Indian women (except those covered by maternity benefits in the formal sector) have been entitled to maternity benefits of Rs. 6,000 per child since 2013 under the National Food Security Act. This legal right has been brazenly violated by the central government for more than four years. This year, the Union Budget finally made a modest allocation of Rs.2,700 crores for maternity benefits. State governments were also told, at a consultation held on February 22, 2017, that arrangements would be made for maternity benefits to be paid with retrospective effect from January 1, 2017. But none of this has happened so far. In an affidavit submitted to the Supreme Court on April 2, 2017, the Ministry of Women and Child Development made the lame statement that "the implementation guidelines are being drafted". More recently, the central government instructed the state governments to restrict maternity benefits to one child per woman, showing once again its disregard for the law.

The silver lining is that there is no sign of a similar abdication at the state level - at least not yet. In fact, the slow but steady trend towards more active social policies has continued in many states during the last three years. However, there is a danger that the centre's indifference (if not hostility) towards social policy will soon percolate to some state governments as well. This prospect is no less worrying than the slowing down of economic growth, considering the vital role that social support plays in the lives of the poor.

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