Inequality,Inefficiency,andtheChallengesforSocialDemocracyinIndiasEconomic Transition By PranabBardhan ITheVariousInequitiesandDeprivations Differentpeoplemeandifferentthingsbysocialdemocracy.Withoutgoingintothatdiscussion letmestartbybrieflydescribingwhatIdmeanbysocialdemocracyinthispaperandthengo ontoanalyzingthevariouschallengesthattheIndianeconomyfacesinbringingitabout.

ut. Socialdemocracyforthispaperhasthreeessentialingredients: (1) Democracyprimarilyintheformofmeaningfulpoliticalcompetition,effective accountabilitymechanisms,andsomebasichumanrights; (2) Acompetitiveandincentivecompatibleeconomicsystemwithindividualproperty rightswithinreasonablebounds,andeconomiccoordinationmechanismsprovided bymarkets,multitieredgovernmentaswellascommunityorganizations,with thesemechanismsoperatingindifferentfieldsinmainlycomplementaryways; (3) Aneffectiveandcomprehensivesystemofsocialprotectionforthegreatmassesof peoplefromdeprivation,destitutionandvulnerabilitiestoindividualandsocialrisks ofdifferentkinds. InthispaperIshallkeep(1)and(2)largelyinthebackground,withoutagreatdealof discussion,andlookatproblemsofachieving(3)underthecircumstances.EventhoughIam fullyawarethatwehavemilestogoon(1)and(2),Indiaisatpresentparticularlyand atrociouslydeficientin(3).Indiaistheworldslargestcountryofilliteratesandschooldropouts, ofchildandmaternalmortality,largestnumberofstuntedandunderweightchildren,andthe
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largestincidenceofanemiaandTB,andtheoverwhelmingmajorityofpeoplelackinganyofthe socialbenefitsthatareconsideredaspartofaminimumsocialsafetynet.Morethan400 millionpeoplehavelessthanwhatbyIndianofficialstandardswillbeconsideredthebarest minimumpovertyline.Ifonetakesincomeinequality,orwhatismoreimportant,inequalityof economicopportunity,Indianinequalityisoneofthehighestintheworld,contraryto conventionalwisdom.InacountrylikeIndiainequalityofopportunitylargelydependson distributionofland,ofeducation,andsocialidentityachildborninarurallandlessadivasi (indigenous)familywithverylittlescopeforeducationwillbeseverelyhandicappedinherlife chancesfornofaultofherown. ItmaybewellknownthatlanddistributioninIndiaismuchmoreunequalthan,say,inChina (thisispartlybecauseIndiahasamuchlargerlandlesspopulation).Butmostpeopleseemto beunawarethatIndiaseducationalinequalityisoneoftheworstintheworld.Ifonemeasures thisinequality,verycrudely,justbylookingattheyearsofschoolingintheadultpopulation,it isworsethanthatinalmostallLatinAmericancountries,andsomeAfricancountries,notto speakofChinaagain,thisispartlybecauseofIndiaslargeilliterateandnearilliterate population.Takingalongview,whatismoreimportantthanstaticinequalityisinter generationalmobility.Onthisquantitativeempiricalworkisratherscanty,butsocialmobility maybeparticularlylowinIndia,partlynodoubtbecauseofthedeadeninglegacyofthesystem ofcasteoppressionanddiscriminationinIndia(thoughthereissomeevidencethatsocial mobilityisimprovingforsomeofthelowcastes). Somepeoplethinkthatpreoccupationwithissuesofinequalitydeflectsattentionfrom economicgrowthwhichiswhatmainlyalleviatespoverty,throughcreatingnewandbetterjobs andgeneratingmorepublicrevenueforwelfareprogrammes.Buthowmuchofgrowthtrickles downtothepooritselfdependsoninitialinequality(forexample,ithasbeenestimatedthat thesameonepercentriseingrowthreducespovertybymuchlessinIndiathaninChinapartly becauseofthehigherinequalityinIndia)andtheresultantdistributionofeconomicand politicalpower.Besides,inequalityofopportunityitselfcanhaveseriousadverseeffectson economicgrowth.Thisisparticularlyimportantwhentherearebarriersfacedbythepoorin

landandcapitalmarketsandinskillacquisitionandincopingwithrisks,whichsharplyreducea societyspotentialforproductiveinvestment,innovation,andhumanresourcedevelopment. Theyoftenblockthecreationofsociallymoreefficientpropertyrights(forexample,inland tenure)andinvestmentinhighriskbuthighreturninnovativeprojectsonthepartofsmall producers.Inequalitythatkeepstheworkforcelargelyuneducatedandunhealthycannotbe beneficialforprivatebusinesseither,apartfromthelawandorderproblemsthatinequality generatedconflictsmaybringabout.Moreover,institutionalstructuresandopportunitiesfor cooperativeproblemsolvingareoftenforegonebysocietiesthatarehighlypolarized. SociologistshavenotedhowextremelyhierarchicaltheworkorganizationwithinIndian factoriesis(oftenreflectingthesocialstratificationoutside),andthisisnotunrelatedtothelow productivityofIndianfirmseveninsimpleproductionprocessescomparedtoothercountries, andthesocialdistanceanddistrustbetweenmanagers,supervisersandjobbersontheone handandthegreatmajorityofworkersunderminethecooperationthatisneededfordayto dayshopfloorinnovationsthatcharacterizemoreproductiveworkplaces.Equityandefficiency thusoftengotogether,contrarytotheoppositepresumptionofmuchoforthodoxeconomics. Apartfromseveredeprivationsandhighinequalityofopportunity,anotherfeatureofthe economythatraisesspecialchallengesforsocialdemocracyinIndiaisthatofallthemajor developingcountriesIndiahasthelargestinformalsector,with94percentofthelabourforce workingthere,mostofthemdailyfacingthebrutalinsecurityofnoretirement,disability, unemploymentorhealthbenefits.Evenoutsidetheagriculturalsectormorethan80percent ofthelabourforceisintheinformalsector.Thetinyminorityofformalsectorworkers(two thirdsofthemgovernmentemployees)clingontotheirpaltryprivilegeswithnervousmilitancy, astheyfacethesocialvertigooflookingonthevastmassesoftheunprotectedhuddleddown below.Thisgreatvoid,theabsenceofevenarudimentaryframeworkofgeneralsocial assistance,makestheimplementationofsocialprotectionasdifficultasitisurgent. Theprocessofeconomicgrowthinaworldofglobalcompetitionhasmadethisworkeranxiety andinsecuritymoreacute.Evenwhenmarketcompetitiondoesnotleadtonetjobloss,it usuallycausesagreatdealofjobchurninganddisplacement.Eveninrichcountrieswith

relativelyweaksafetynets(liketheUS,incontrasttotheNordiccountries)thisleadstostiff workingclassoppositiontoglobalcompetition.Thereissomeevidencethatincreasedglobal competitioninthelasttwodecadeshaswipedoutsomeofthelowproductivitytinyinformal firmsinIndianmanufacturing,whomayhavethencrowdedthenontradedsectors.Itisnot surprisingthatinIndiawhereanysafetynet(outsidethediminishingsupportofextended familiesandkinshipgroups)isabsentfortheoverwhelmingmajorityofpeople,mostsurvey evidencesuggeststhatmarketreformsarevastlyunpopular.Yetthesereformsareimportant foruncloggingthechannelsofentrepreneurshipandinnovation. Thematterismademuchworsebythefactthat,unlikeinChinaandVietnamwheretheinitial growthspurthasbeeninlabourintensiveindustries,inIndiathesuccessstoriessofarhave beenlargelyinskillintensive(software,businessprocessing,pharmaceuticals)orcapital intensive(machinetools,vehiclesandcarparts)sectors,andasaresultthehigheconomic growthhasnotresultedinalargeexpansionofjobprospectsforpoorunskilledworkers.The publicpolicydeficienciesineducationandskillformationhavealsolimitedtheemployabilityof thepoorworkersinmanyofthenewjobs. Agrowthpatternthatisskillandcapitalintensiveobviouslyexacerbatestheproblemof inequality.Inadditionthereisapeculiarbimodalityinthesizedistributionofmanufacturing firmsinIndia;mostfirmsarebunchedatthelowerendwithverylowproductivity,paying extremelylowwages,whereasatthehigherend(withamissingmiddle)ofthefirmsize distributionwagespaidaremuchhigher.Thislargewageinequalityinthesameindustryadds ontotheinequalitybetweencapitalandwageincomes. Ontopofallthistherearetheusualprocessesofagglomerationeconomiesofscaleintheearly stagesofgrowthwhichleadtoregionalandsectoralconcentrationresourcesandcapital movetogrowthpoles,thepoorerareasfallbehind.Thelargeurbangrowthdrivenbysuch agglomerationforcesthatIndiaisexpectinginthenexttwodecades,withtheurban populationexpectedtoreach600million,willenhancethisinequality,apartfromstrainingthe urbaninfrastructuretonearbreakingpointandstokingthenativistforcesinbigcitiesin resistancetolargescalemigrationfromtherestofthecountry.Yettheproductivitygap
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betweentheruralandurbansectorsorbetweenagricultureandmanufacturingandservicesis solargethatsuchtransitionwillbeinexorableintheprocessofeconomicgrowth.Insituations whereeconomicgrowthinvolvesextractionandprocessingofmineralsfromlandcurrently belongingtotheindigenouspeopleofIndiawhoareuprootedintheprocess,oracquisitionof landingeneralfromthepeasantsforcommercialandindustrialdevelopment,agreat distributiveconflictisalreadyshapingup,oftenturningintoviolence,ultimatelyturningonthe questionoftheappropriatedistributionofthelargerentalincomefromscarceappreciating resources,nowaccruingdisproportionatelytothecorporateoligarchy,realestatetycoons,the miningmafia,andtheirpoliticalpatronsandcollaborators. Itisinthislargercontextofthemountingforcesofinequalityanddisplacement,theneedfor organizingaviablesystemofsocialprotection,alreadyratherenormous,isallthemore desperate. IIApproachestoSocialProtection:ACriticalAppraisal IntheIndiandiscussiontherehavebeendifferentapproachestothequestionofhowtotackle socialprotection.Averypopularapproachthesedaysistocouchitintermsofrights(tofood, education,information,jobs,etc.),andthereisagreatdealofcommendableactivismonthis front,andalreadysomeachievementstoshow,particularlyinthelandmarklegislationsonthe righttoinformationandtoworkonpublicworksprojects(thoughtheirimplementationin manystatesareasyetratherslowandfeeble,andfacingagreatdealofresistancefrom bureaucrats,contractors,etc.).Thisapproachcan,attheminimum,servetoraise consciousnessamongthepoorandvulnerableabouttheirentitlements,asensethattheyare notmeresupplicantstothepoliticiansorbureaucrats,thatifthelatterfailthereisaccessto courtstoenforcetheserights,andpublicinterestlitigationandcourtinjunctionsonthese mattershaveattractedagreatdealofattention.

Butatthesametimeoneshouldrecognizesomelimitstothisrightsbasedapproach.Ifthe deliverystructureforimplementingsomeoftheserightsremainsasweakandcorruptasitis now,merepromulgationofrightswillremainhollowandwill,afterapoint,generateagreat dealofcynicism.Indianpublicarenaisalreadylitteredwithhundredsofunenforcedor spasmodicallyenforcedcourtinjunctions,andthereissomedangeroftheproliferatingjudicial activisminstretchingtheinterpretationoftheconstitutionalrighttolifeendingup,forallits goodintentions,inunderminingthecredibilityandlegitimacyofthejudiciaryitself. Forexample,iftherighttofoodisexertedwithnoconsiderationoftheefficiencyandcost effectivenessofthewaysofimplementingit(likethecurrentPublicDistributionSystemPDS whichinmanystatesisanenormousprojectoftheftandwastagearoughestimateisthat lessthanaquarterofthesubsidizedfoodgrainsreachesthepoor),itisanunwarrantedand unfairburdenontaxpayerswhofundthegallopingcosts.Inanycasetheprogrammeas currentlyadministeredisweakestinthepoorestregionsthatneeditmost.Foodstampsthat havebeenadvocatedfromtimetotimewillreducesomeofthewastageandtheftinthe storageanddistributionbypublicagencies,butwillnoteliminatetheproblemsof(a)fraud rampantinnonuniversalmeanstestedtargetinglikethattobelowpovertyline(BPL)people and(b)thedevelopmentofsecondarymarketswheremerchantsbuyupthestampsin exchangeofsome(smaller)cashinwhichcaseyoumightaswelldirectlygivepeoplecash ratherthanstamps.TherecentRighttoEducationActdoesverylittleforthepoorqualityand quantityofeducationservicesactuallyprovidedingovernmentschools(thatdrivechildrento privateschoolseventhoughteacherstherearebyandlargelessqualifiedandlesswellpaid)or aboutthenegligencewithwhichthenewpoorstudentsfoistedontheprivateschoolsarelikely tobetreatedwithoutaproperqualityevaluationofschoolsinplace,ortheremedialeducation thatthepoorperformingchildren(atprivateorgovernmentschools)andtheschooldropouts desperatelyneed. ThecurrentEmploymentGuaranteescheme,thelargestofitskindanywhereintheworld,for allitsflaws(whichwouldhavebeenfarlessifaregularandinstitutionalizedsystemof independentsocialauditswereinplace),providesapossiblefallbackoptionformanyable

bodiedruraladultsforworkingonmostlyconstructionprojectsforaperiodof100daysevery year(thoughthislimitof100daysandtimelypaymentofwageshavesofarbeenreachedonly inveryfewareas),andthismayhavealreadyexertedsomepositiveindirecteffectsontherural wageearnedbythepoorestpeople.Thisis,ofcourse,quitedifferentfromtherighttojoboften demandedbyorganizedworkersintheformalsector.Therighttojob,ifnarrowlyinterpreted asthesecurityonagivenjob,canconsiderablydistortthelabourmarket,ifitfreezestheability oftheemployer(publicorprivate)toadjusttochangingconditionsintechnologyormarket, thushurtingthewholeeconomy,andthejobprospectsoflessprivilegedworkers.Itisvery importanttodistinguishbetweeneconomicsecurityandjobsecurity.Aworkershouldhavethe righttoexpectfromsocietygeneraleconomicsecurity,butnotsecurityonagivenjob.Myown empiricaljudgment,however,isthatstringentlabourlawsthatareaimedatensuringjob securityinlargeindustrialfirmsmaynotbethemostimportantconstraintonIndianindustrial growth;otherconstraintslikeinfrastructure,creditandmarketingmaybemoreimportantin manycases,butthattheyconstituteaconstraintcannotbedenied.Thereisultimatelyno alternativetoapackagedealbetweenemployersandorganizedworkers:allowingmore flexibilityinhiringandfiringhastobecombinedwithareasonableschemeofunemployment compensationoradjustmentassistance,fromanearmarkedfundtowhichemployersand employeesshouldbothcontribute.NoIndianpoliticianhasyetgatheredthecourageor imaginationtocomeupwithsuchapackagedeal. Thedistinctionbetweeneconomicsecurityandsecurityofaparticularjob(usuallyintheformal sector)alsobringstotheforegroundaparticularconflictamongworkerswhichorganizedtrade unionswouldratherslurover.ItiswellknownthatsocialdemocracyinWesternEuropecame outofahistoriccompromisebetweencapitalandlabour(thelattergetssociallyprotectedand areasonableshareoftheeconomicpie,andinreturngivesupitsdemocraticpowerof expropriatingtheformer,sothatitcancarryonitsinnovationsthatexpandthepie).InIndia wheretheinformalsectorismassive,socialdemocracymayrequireanadditionalimplicit compromiseinthelabourmarket,betweenformalandinformalworkerssinceinmanyways theirinterestsmaybeinconflict(oneexampleisstringentjobprotectionofformalworkers maybeattheexpenseofthepotentialexpansionofjobpossibilitiesforinformalworkers;
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anotherexampleisthatthegeneralstrikesandbandhsfrequentlycalledbyformalsector unionsaspartoftheirorganizationalmuscleflexingparalysecitylifeandrobthedailyinformal workersandstreetvendorsoftheirsubsistence).Besides,thestrongestorganizedworkersare thoseinthepublicsectorservices,anditistheircorruptandcallousservicenondeliverywhich thepoorinformalworkersaspotentialrecipientshavetofaceeveryday. Ingeneraloneshouldnotlookatthesocialprotectionrightsinabstractionfromcosts(direct andindirect),deliverymechanismsoreventheirpoliticalconstituency.Welldesigned,well administered,costeffectiveprogrammesofimplementingsomebasicrightsgeneratemore politicalsupportevenamongthosewhoarepayingforthem.Oneshould,ofcourse,mention herethatonepositiveimplicationoftherightsapproachisthatofuniversalprinciplesand standards,whichinsomecasesmayhelpbetteradministration.Forexample,ithasbeen pointedoutthatthePDSforfoodgenerateslessmalfeasancewhenitisuniversal(asinTamil Nadu);aswehaveindicatedbefore,whensomepeopleareexcludedunderatargetedsystem ofdelivery,itleadstodualmarketsandmoreincentivesandopportunitiesforfraud,apartfrom erodingitslargerpoliticalsupportbase. Onuniversalisticprincipleofsocialprotectiononeofthecleanestandleastincentivedisruptive ideas,bothethicallyandeconomicallycompelling,isthatofUniversalBasicIncome(UBI),under whicheverybody,richorpoor,getsanunconditionalannual(orperiodic)incomesupplement. Thisisanoldidea,originallyinspiredbysomeEuropeanutopiansocialistsinthe19thcentury, triedunsuccessfullyinMcGovernsPresidentialcampaignintheUSAintheformofaproposed demogrant,currentlysupportedbysomeGreenPartiesinEurope,andactuallyimplemented innonsocialistresourcerichAlaskasince1999(intheformofanannualPermanentFund Dividend).IntheWestthediscussioninoppositiontotheideausuallycentresaroundthe encouragementthismaygivetoidlenessanddependencyandtheunfairnessofahandoutto therichaswell.Ithinkweneedtoworrylessaboutidlenessinacountrywherethe overwhelmingmajorityofthepeopleareextremelypoorandoverworked.Givingtotherichas wellmaybefoundadministrativelytolerablebymanywhoknowtheformidableproblemsof monitoringandcorruptioninIndiaintryingtotargetitonlytothepoor.Themainquestionis:if
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wewantittobeuniversal,canweaffordit?Ofcoursetheanswerdependsontheamountto begivenout,ifthiswillbeareplacementfortheexistingtransferprogrammeswhichhavealot ofwastageandmisappropriation,howtheproblemofmisappropriationofthebasicincome supplementwillbehandled,etc.Letsmakesomebackoftheenvelopecalculations. Supposeinacountryof1.2billionpeoplewewanttogiveouteveryyearRs.5,000toeach family(assumedtohave5members).ThisamountstoRs.120thousandcrores(notcounting administrativecosts,whichneednotbelarge,withelectronichelp).Letsassume,forthetime being,thatwiththeforthcominginstallationoftheelectronicUniqueIdentificationSystem(UIS) theadministrativecostsofthisunconditionaltransferprogramwillbeminimal.Letsnow comparethissumofRs.120thousandcroreswithsomebenchmarkfigures.Thetotalestimates ofhowmuchiscurrentlyspentbythegovernmentonalltheantipovertyprogramscombined easilyexceedthisamount.Whatismoreimportantisthatthisamountismuchlessthanthe totalsubsidiesthegovernmentgivesouttotherelativelyricheveryyear.Wedonothaveiron cladestimatesofthelatter.TheNationalInstituteofPublicFinanceandPolicyhasfromtimeto timeestimatedthetotalamountofsubsidies(implicitaswellasexplicit)givenoutbythe centralandthestategovernments.Thiscomestoabout14percentofGDPeveryyear.These subsidiesareclassifiedintomeritandnonmeritsubsidies.Withoutgoingintotheintricacies ofthedefinitions,letussay,veryroughly,thatthenonmeritsubsidiesmostlygotothe relativelyrich.Ofthe14percentofGDPintotalsubsidies,roughlytwothirdshavebeen estimatedtobenonmeritsubsidies:thatcomestoabout9percentofGDP.Letusmakea conservativeestimateandbringthisfiguredownto6percentofGDPasgoingtotherelatively rich.In200910theannualGDPofIndiawasaboutRs.4500thousandcrores(at20045prices); 6percentofthiscomestoRs.270thousandcrores.Sowhatthegovernmentpaysoutas subsidieseveryyeartotherelativelyrichismorethantwicetheamountitllneedtopayouta basicincomesupplementofRs.5,000toeachfamily,richorpoor.Andifthisreplacessomeof theexistingdysfunctionalprogrammes(likePDS)ornotveryeffectivecashtransfer programmes(likeSGSYSwarnajayantiGramSwarojgarYojanaorIAYIndiraAwasYojana), theincomesupplementscanbeevenlarger.Allthisisbasedonaveryroughandready

calculationandoneshouldnottaketheestimatestooseriously,butitgivesussomesenseof proportion. Butarethepossibilitiesofmisappropriationthatafflictmostsocialprotectionprogrammesin IndiaseriouslylowerwiththebasicincomesupplementideafortifiedwithUIS?Ifthemoneyis depositedinanaccount(atanearbypostofficeorbank)fromwhichwithdrawalsrequirebio metricidentification,andnomeanstestingorrichpoorclassificationisnecessary,manyofthe currentproblemsoffraudandcorruptionandmanipulationofBPLcategoryarelikelyto diminishconsiderably.Yetonecannotruleoutpossibilitiesofclerkswhodissuethewithdrawn moneydemandingbribes,orlocalmusclemenregularlyextortingsomeofthecashfromthe defenselessrecipient(likerobbersinmanycountriestakingtheirvictimstotheATMmachines andforcingwithdrawals).Ofcourse,whenPDSgivesapoormansubsidizedfoodthatcanalso berobbedandsoldinthemarket,butIsupposethelureofdirectcashmaybestrongerforthe criminals.Similarly,chancesofalcoholicsanddrugaddictrecipientsblowingthecasharea problemthatworriesmanycriticsofsuchprogrammes.Ofcoursetherearetwokindsof reactiontothis.Onekindisthelibertarianone,sayingthatweshouldletpeopledecidehow theywanttospendthemoney,bearingtheconsequencesoftheirdecisionispartofthe responsibilitythateveryindividualhastotake,etc.Theotheristhesoftpaternalistickind, tryingtominimizetheproblembyhandingoverthemoneytotheusuallymoreresponsible femaleadultinthehousehold,devisingallkindsofgoodspecificvouchers,etc.Inacountry wherewomenandchildrenareamongthemostdeprivedintheusualwayahouseholdisrun, andchildandmaternalmortalityandmalnutritionareamongtheworstintheworld,concerns abouthowunequallytheunconditionalcashtransferisspentbythefamilyaretobeexpected andthemattermaynotbeleftsimplytothemercyofindividualresponsibility. Moreimportantly,justhandingovermoremoneytothepoorresolvesonlypart(thefinancial part)ofthesocialprotectiontheyneed.Aspettyproducerstheyalsoneedotherkindsof assistance(knowledge,skills,marketingconnections,etc.)oraspatientstheyneedinformation aboutdoctorquality,healthpractices,nutritionandsanitation,andsoon.Intheurbanslums

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wheretheruralkingroupsupportstructuresareweaker,socialprotectionhasalsotoinvolve activesocialsupportstructuresagainstviolence,drugs,familybreakdowns,juvenile delinquency,etc. InanycaseitisprobablyhighlyunrealistictoexpectthattherelativelyrichinIndiawilleasily giveuponmuchofthesubsidiestheyenjoyorthatthevestedintereststhathaveaccumulated aroundlongstandingwastefulprogrammeslikePDSwillallowanythingmorethanmoderate tinkering.Soproposalslikeunconditionalcashtransfersoruniversalbasicincomesupplements areunlikelytoflyinthepoliticsoftheforeseeablefuture,asthequestionofcanweafford suchprogrammes?willremainunderthosepoliticalconstraints,eventhough,aswehaveseen, inprincipleitisresolvable.Newprogrammesofsocialprotectionwithagreatdealoftargeting (withlowercostsbutalsomoreleakages)andsomeadditionalgarneringofresourcesaremore likelytobeimplemented.Oneclassofsuchprogrammesisthatofconditionalcashtransfers, withtheaddedweaponofUIS.InsomesensetheRuralEmploymentGuaranteeisonesuch programme,ofcashconditionalonwork,withselftargetingsavingsomeadministrativecosts andleakageasthenonpoorwillnotusuallywanttoworkonsuchmanual,oftenback breaking,constructionworks.UISmayreduceagreatdealofcurrentleakageintheformof falsemusterrollsofworkers.Inthedeliveryofsocialservices,nothingonthescaleof OportunidadesinMexicoorBolsaFamiliainBrazilhasyetbeenattemptedinIndia.Mostofthe conditionalcashtransferprogrammesfortheseservicesinIndiahavebeenrelativelysmalland aimedatensuringthesurvivalofgirlchildren(andtheirmothersatthetimeofbirth),andtheir continuededucationinschoolsandinraisingtheirageatmarriage.Wedonotyethaveenough rigorousevaluationoftheseprogrammes. Ingeneral,themainpresumptionofconditionaltransferprogrammesissomewhat paternalistic:lefttothemselvesthepoordonotexertenougheffortinsendingtheirchildrento school,healthclinics,immunizationcenters,etc.Sotransferprogrammestrytoinducethem withcontingenttransfers.Thereisalargeadministrativecostinmonitoringandenforcingthe stipulatedconditions.Inanycase,suchdemandsidedinterventions(inducingthepoorto

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demandtheservices)donotsolvethesupplysideproblemswhicharesevereinIndia:not enoughschoolsorhealthclinics,facilities,qualityteachersordoctors,teacheranddoctor absenteeism,etc.Ofcourse,onthesupplyside,ourbureaucracyisoftennotmindfulof(or interestedin)thefactthatthegovernmentmaybethefinancierbutneednotbetheactual supplierandcanworkoutallkindsofinnovativesolutions.Forexample,itcanfinancethe educationservicesbutoutsourcesomeofthem(asinthecaseofcharterschoolsintheUS);just asinthecaseofPDS,theFoodCorporationofIndiacanoutsourceitswarehousingtoprivate companies,insteadoflettingitsprocuredgrainsrotoutside(aboutonequarterofthetotalin recentmonths)forlackofpublicwarehousingspace. IIIGovernanceIssuesinSocialProtection Intheprevioussectionwediscussedtheprosandconsofdifferentapproachestosocial protectionintheIndiancontext.Inthissectionwediscusssomegenericgovernanceissuesthat ariseinanyschemeofsocialprotectionandareparticularlyacuteinIndia.First,letustakeup thedeliverymechanismitself.Iftheservicesaretobeprovidedbythegovernment,arethere enoughincentivesonthepartofthebureaucracy?IntheIndiancivilservice(whichhasoften beendescribedasneithermuchserviceorientednorverycivil)rewardsarenotingeneral performancebased,promotionsareoftenmainlysenioritybased.Frequenttransfers, sometimesarbitrarilydeterminedbythepoliticalbosses,discouragethedevelopmentofany stakeinanyparticularlocalityofservice.Badperformanceisveryseldompunished;inanycase themeasurementofperformanceisnoisyparticularlywhenthequalityofserviceis necessarilymultidimensional.Thispromotesarampantcultureofimpunity.Theschool teachersanddoctorsandnursesarenotpunishedforthederelictionoftheirduties,their salariesandpromotionsaredecidedfromabove,notbythelocalpeoplewhobearthebrunt. Thisobviouslysuggeststheneedfordecentralizationandaccountabilitydownwards.Infact thereissomeevidencethatinsomecases(e.g.inNagaland)whereevenaverysmallfractionof

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theteacherssalarywaspaidbythelocalpanchayatorvillagecouncil,itimmediatelyledtoa significantimprovementinservices.ButinmostpartsofIndia,whilelocalelectionsarenow regularlyheld,effectivedecentralizationismissing,onaccountofaseveredearthofdevolved fundsordelegatedpowerorappropriateprofessionalpersonnel.Localelectionsareusually foughtonsupralocalissues,andmoreoftenthannotthestatelevelpoliticiansand bureaucratshijacktheprocessofmandateddevolution.Suchhijackingismadeeasierbythe lackofinnerpartydemocracyinalmostallpoliticalparties,sothatlocalpoliticalleadersareat themercyofthehighertierleadership.IthasnotbeenwidelyrecognizedinIndiahowthelack ofinnerpartydemocracy,apartfrommakingpoliticalpartiesstructurallyundemocratic,hasthe sideeffectofcorrodingthevitalsoflocaldemocracyinIndia. Thesituationisparticularlyironicinthecities,wheretheelectedmunicipalgovernments,while presidingoverareaswheremuchoftheboomingwealthofIndiaiscreated,haveneitherthe autonomynortherevenuestosignificantlyimprovethequalityorquantityofmunicipal services.Theelectoralprocessalsoencouragespoliticalclientelism,politiciansfinditeasierto lurevoterswithpromisesofprivategoods(say,colorTVsetsorloanwaivers)thanthoseof longtermimprovementofpublicservices(say,qualityofschools).Bothcapture(bythelocal eliteandthestatelevelparties)andclientelismhaveensuredthatlocaldemocracyremainsthe weakestpartofIndiandemocracy. Therearesomeextraincentiveandstructuralissuesinhealthservices(qualitativelysome similarissuesarisealsoineducationornutritionprogrammes).Atthemomenthealthcarein Indiaisprimarilyprivate(andlargelyunregulated).Householdsurveydatasuggestthat85per centofallvisitsforhealthcareinruralareas,evenbythepoorestpeople,aretoprivate practitioners.Whilethepoorqualityofserviceinpublicclinicsandhospitals(andabsenteeism bynursesanddoctors)oftendrivepatientstoprivatedoctors(someofthemquacksorcrooks), insomecasesevenwhenthepublicservicesareavailable,thepatientsprefergoingtoprivate medicalpractitionerswhomorereadilyobligethemwithunnecessaryantibioticsandsteroids.

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Thepublichealthdeliverysystemisafflictedbypoorproviderincentives,coupledwithlow accountabilitytothepatients.Themedicalpersonnelarepaidafixedsalaryindependentofthe numberofpatientsoroftheirvisits,sotheyhavenoeconomicincentivetoservetheminthe publicclinic(theyhavealltheincentivetoaskpatientstocometotheirprivatechambersfor paidserviceandsendthemforunnecessarydiagnostictestsatlabsinwhichtheyhavea monetaryinterest).Thepoorhaveverylittleorganizedvoiceinsanctioningtheerrant provider.Theyareassertiveinelections,butevenalocalelectionisabluntinstrumentof sanctionforanyparticularservice:electoralplatformsaremultidimensionalwherespecific grievancesaboutanyparticularpublicserviceprovidergetdiluted,oftenbylargerstatewide issues.Inaddition,comparedtocurativemedicalservices,theIndiansystemisparticularly deficientinsystematicplanninganddeliveryofpreventivepublichealthservicesorsustained programmesoflargescalediseasecontrol(thepublichealthadministrationinTamilNadu,I understand,isamajorexception).Oneofthecostviabilityproblemsforanypublichealth insuranceserviceforthepoorinIndia(liketheasyetfledglingprogramme,RSBYRashtriya SwasthyaBimaYojanathatissupposedtocoveruptoRs.30,000forhospitalizationrelated expensesforBPLfamilies)isthatthepoorinmostcasesgoforhospitalizationwithillnesses (likediarrhoeaortyphoidormalaria)whichcouldbepreventedbybasicpublichealth programmeslikeprovisionofcleandrinkingwater,sanitation,spraying,etc.Thusthe deficienciesofpublichealthadministrationinIndiaincarryingoutitsprimarydutiesmake healthcareinsurancesocostly. Outsideofgovernmentorprivateprovisionofhealthservicestherecanbeotheralternatives. SeveralNGOsinIndia,aspartoftheirdevelopmentprogrammes,haveinitiatedcommunity healthinsuranceschemesforpoorpeople,oftenlinkingupwithaninsurer(withalargerrisk pool)andpurchasinghealthcarefromanexternalprovider.SEWAinGujaratisanimportant exampleoforganizingcommunityhealthinsuranceforitsmembersandtheirfamiliesinthis way.Thisandothersimilarmodelsneedtobestudiedandreplicatedinamuchlargerscalein workerassociationsandcooperativesinIndia,particularlyintheinformalsector.Inthehistory ofGermansocialwelfareprogramsworkerassociationsplayedaleadingrole.InIndiawhere theinformalsectorismuchlarger,smallscaleassociationsneedtobemobilizedforsocial
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insurance,theNGOscanplayamediatingrolewithinsurersandhelpprocessingpaymentsof premium(apartfromidentifyingbeneficiariesandgivingthemtherequisiteinformation),and thegovernmentcanintroducesomeprovideraccreditationsystemstohelpthechoiceof providers. IVLivelihoodProtectionaspartofSocialProtection? Whentheinformalsectorislargeandthemajorityofpeopleareselfemployedintinyfarmsor firms,theboundarybetweenahouseholdandanenterpriseisblurred,whichmeanssocial protectionprogrammesmayhavealsotoinvolvevariouskindsofprotectionoflivelihoods. Theseincludeprovisionofcredit,developmentofmarketingnetworks,insuranceagainst productionrisks(say,rainfallinsuranceinagriculture,rentingoutserviceforgeneratorsto coverpoweroutagesinmanufacturingfirmsorrepairshops),roads,extensionservices,etc.For thosewhoworkinthecasualwagelabormarketandfortheunemployed,skillformation, vocationaltrainingandpublicfacilitiestoconnectthemupaftertrainingwithpotential employerscanallbepartofageneralsocialprotectionprogram. Ofcoursealltheseprogrammeswillcostagreatdealofmoney(apartfromorganizational resources).Tosomeextentandtotheextentpoliticallyfeasible,somerestructuringofexisting wastefulorineffectiveprogrammeswillsavesomemoney.Butultimately,astheEuropean experienceshows,socialdemocracyisexpensiveonthepublicexchequer,itllbemoresoin Indiawherepovertyanddeprivationaresomassive.IndiastaxtoGDPratioisatthelowerend amongmajordevelopingcountries(muchlowerthaninChina).Whilekeepinginmindthat highertaxratesoftenencouragemoretaxevasion,thereisalotofscopeforraisingthetaxto GDPratio,particularlyfromcapitalgains,inheritance,andtheburgeoningrentalincomesof variouskindsinrealestate(thecorruptpropertyassessmentsysteminourcitiesleavesout muchoftheenormousriseinvalue),inruralandsemiurbanlandaroundinfrastructural projects,andinminesandotherextractiveindustries.Thiswill,ofcourse,immediatelyraise
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loudscreamsfromIndiasrich,butsanerelementsofthelatterwillrealizethatsocial protectionforthepoorwillultimatelyhelpthemaswell,particularlysincethehumancapital chainsarepresentlybrokenwithoutwhichtheirbusinesscannotthrive.Aswehaveindicated before,therearemanywaysequityandefficiencycangotogether.Ofcourse,thetaxing governmenthastoimproveitscredibilitybyminimisingwastefulsocialprogrammes.Atthe locallevelifpanchayatsandmunicipalitiescanraisepropertytaxes(assessedmaybeonarea basednondiscretionaryratesasisbeingcurrentlytriedinMumbai,reducingthepowerofthe assessorofficials)andiftherevenueisearmarkedforspendingontransparentandtimebound specificlocalbenefitprojects(whichcanbepubliclydiscussedingramsabhasandward meetings),thetaxpayersmaybemorewillingtocontribute. Ifsocialprotectionhastoinvolvelivelihoodprotection,atsomepointonehastograpplewith thecontroversialissueofhowmuchofthetraditionalextremelylowproductivitylivelihood patternshavetobeprotectedagainsttheonslaughtofmarketsandcapitalistdevelopment.As thelatterhasoftenbeenidentifiedwithdispossessionanddislocationofpeoplefromtheirland anddespoliationofthelocalenvironment,therearenowstrongmovementsinIndiaagainst acquisitionoflandfromfarmersandadivasisforthepurposeofindustrialandcommercial developmentandmining.Idonothavethespaceheretogointothedetailsofthisimportant controversyhere,Ishallonlyregisterhereapleaforsomebalancebetweentheneedfor economicdevelopmentthatcreatesproductivejobsandenhancessocialsurplus(whichcan potentiallyberedistributed)ontheonehand,andontheotherhandtheneedforminimising (andadequatelycompensatingfor)thedislocationbymeansofaprocessinwhichthelocal stakeholderscanbefullparticipants.Useoflandandmineralsbyprofitseekingcompaniesfor nontraditionalhigherproductivityactivitiesisindispensableifwewantanychangeinthe miserablewayoflifethatthefarmersandadivasishaveenduredforcenturiesastheMarxist economistEmmanueloncewrote,thehorrorsofcapitalismfadeincomparisonwiththe horrorsofprecapitalism,orasJoanRobinsonfamouslyremarked,whatisworsethanbeing exploitedisnottobeexploitedatall.Thereistoomuchromanticizingofthetraditionallife amongsomeotherwisewellintentionedactivistsandtoolittleinterestinassessingthe complextradeoffsinvolved.Infactthereisalargersocialorganizationalissuehere.Voluntary
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groupsandNGOsmoreoftenthannotbeingessentiallysingleinterestadvocacylobbieslack themechanismoftransactionalnegotiationsandgiveandtakeamongdiverseinterestgroups aroundthosetradeoffsthatlargepartyorganizationsrepresentingandencompassingthese diverseinterestscouldfacilitate.Thattheexistingpartyorganizationslackingininnerparty democracydoabadjobofitdoesnotnegatethegeneralpoint.Ontheotherhand,aswehave mentionedbefore,inthecurrentdispensationthesurplusgeneratedintheprocessof developmentintheseareasisgrosslyinequitablydistributed,muchofitgrabbedbythe corporateoligarchy,realestatetycoons,theminingmafia,andtheirpoliticalpatronsand collaborators.Thereisneedfortransparentandcarefullymonitoredauctioningofminingrights amongcompetingcompanies,andforasubstantialannuitypaidtothelocaldispossessed peopleandforanenvironmentalimprovementfundoutofthemoneythusraisedandsharesof thecompanies.Wehavetofindabalanced,equitable,andsustainablewayofdividingthe surplusandminimisingtheloss(bothprivateandsocial,includingenvironmental).Inthis balancingNGOscanplayanextremelyvaluableroleinespousingthecauseofthedeprived, increasingtheirawarenessandinformation,catalyzingtheirorganizationsandactingas watchdogsagainsttheabusesofstateandcorporatepower. VSocialProtectionandDemocraticMobilization Finally,thebigpuzzleinIndiandemocracyisthis:thenumericallylargepooraresoassertiveat electiontime,andyetsocialprotectionforthemcontinuestobeweak,andelectionafter electiontheyselect(orfailtopunish)leaderswhodosolittleforthemintermsofsocial protection.Theremaybeseveralfactorsatplayhere: (i) Itispossiblethatendemicpovertyandlackofsocialprotectionarewidelyregarded amongcommonpeopleasacomplexphenomenonwithmultiplecauses,andthey ascribeonlylimitedresponsibilitytothegovernmentinthismatter.Themeasuresof governmentperformanceareinanycaserathernoisy,particularlysoinaworldof
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illiteracyandlowlevelsofcivicorganizationandformalcommunicationonpublic issues.Aperceivedslightinthespeechorbehaviourofapoliticalleaderfeltbya particularethnicgroupwillusuallycausemuchmoreofanuproarthanifthesame leaderspolicyneglectkeepsthousandsofchildrenseverelymalnourishedinthe sameethnicgroup. (ii) Thelattersuggeststhatwhatismoresalientthansocialprotectionisdignitypolitics. Ofcourse,inalargersensesocialprotectionshouldincludedignityissues.Ifelecting alowcasteleader,howevercorrupt,reducesthechancesofuppercastethugs harassingorrapinglowcastewomen,thatsurelyshouldcountasagaininsocial protection. (iii) Sincethepoorusuallygetmobilizedoncasteandethniclines,themodalitiesofsuch mobilizationareoftenmultidimensional,andpovertyalleviationorsocial protectionisonlyoneofthemanyissuesthatgetarticulatedinthepublicdomain. Also,theprocessofsuchethnicmobilizationisofteneasytobehijackedbytheelite ofthesegroups,whochannelalionsshareofthebenefitstowardsthemselves.The intendedpoorbeneficiariesareoftenunorganizedanduninformedabouttheir entitlements,andtheyalsolacktheabilitytoevaluatethequalityoftheparticular educationorhealthserviceprovided. (iv) ItispossiblethattheobservedpreoccupationinNorthIndiawithsymbolicvictories amongtheemerginglowercastepoliticalgroupsmaybejustamatteroftime.The socialandpoliticalchangeshavecometoNorthIndiaratherlate;inSouthIndia, wheresuchchangeshavetakenplaceseveraldecadesback,itmaynotbea coincidencethattherehasbeenalotmoreeffectiveperformanceinthematterof publicexpendituresonsocialprotectionprojectslikefood,health,education, housinganddrinkingwater.ThisreflectsthefactthatinSouthIndiatherehasbeen alonghistoryofsocialmovementagainstexclusionoflowercastesfromthepublic sphere,againsttheireducationaldeprivation,etc.inawaymoresustainedand broadbasedthaninNorthIndia.Onemayalsonotethattheuppercasteopposition
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tosocialtransformationissomewhatstrongerinNorthIndia,asdemographically uppercastesconstituteingeneralalargerpercentageofthepopulationthanhas beenthecaseinmostpartsofSouthIndia.Sonewpoliticalvictoriesoflowercastes inNorthIndiagetcelebratedintheformofdefiantsymbolsofsocialredemption andrecognitionaimedatsolidifyingtheirasyettentativevictories,ratherthanin committedattemptsatchangingtheeconomicstructureofdeprivation. OnemajordifferencebetweenIndiandemocracyandtheWesternisthattheemphasis hereismoreongrouprights,lessonindividualrights(whichareoftencrasslyviolatedwhen thereisevenaremotechanceofsomegrouporothertakingoffence).Oneindicatorofthe emphasisongrouprightsisthatreservationsareoftenthemostpopulartoolof redistribution.Publicsectorjobreservationsforsomehistoricallydisadvantagedgroups,for example,ferventlycatchthepublicimagination,eventhoughobjectivelytheoverwhelming majorityofthepeopleinthesegroupsmayhavenochanceofeverlandingthosejobs,as theyandtheirchildrenlargelydropoutofschoolbythefifthgrade.Attentionisthus directedatsymbolicpolicies,andthepatronagebenefitsareprimarilyenjoyedbytheelite ofthesegroups,deflectingpublicattentionawayfromthemoreurgentanddifficult challengesofimprovingthedeliverystructureofbasicsocialservicesincludingeducation. Reservationsoftenbecomeasurrogateforeffectiveactiononthesocialprotectionfront. Thereisscopehereforimaginativepoliticalleadersbuildingongroupsolidaritiesof hithertosubordinategroupstofocuspoliticalattentiononbasicsocialservicestheyare denied,notjustinlobbyingwithhigherauthoritiesbutinmobilizinggroupfinancialand organizationalresourcesforthispurpose(includingrevitalizingthevarioustraditional groupbasedcharitableorganizations).Theemphasishastobeongroupbasedsocial movementsthatemphasizeawarenessoftheirpublicentitlements,ofsomejudgmentand adviceonthequalityofelementaryhealthcareandeducationalservicestheyreceivefrom villageprivateprovidersofeducationandmedicalcare,oftheadverseeffectsof superstition,ignoranceandfaithhealing(somewhatonthelinesofthehistorically successfulpeoplessciencemovementinKerala),andofbasicsanitation,drinkingwater

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purification,personalhygieneandenvironmentalpracticesthatimprovetheirlives.As Indiabecomesmoreurbanized,thedifficultiesandcostsofsuchcommunityorganizations andsocialmovementsshoulddeclinecomparedtothoseindispersedruralsociety.There arealreadymanywardcommittees,residentsassociations,cooperativesandselfhelp groups,whichcantrytointegratesocialinsuranceasapartoftheirgeneralactivities,at leastinnegotiatingwiththeauthorities,processingpaperwork,monitoringandsocial auditsofgovernmentwelfareprogrammes.Inruralareaswherelivelihoodscrucially dependonthemanagementoflocalenvironmentalresources(forests,fisheries,irrigation, grazinglands),historicallycommunityorganizations(panipanchayats,wateruser associations,vanpanchayats,jointforestmanagementcommittees,etc.)havebeenactive. Therearenowmanystudiesthathavetriedtounderstandtheconditionsunderwhichthey succeedandwhentheyfail.Oneshouldderivetheappropriatelessonsfromthis experience.Aboveall,socialprotectionhastoinvolvethebeneficiariesinactive participation,awayfromthecurrentframeworkofdolegivingfromthetopbyan insensitive,unmotivatedandcorruptbureaucracy. Inconclusion,whilethediscussiononsocialdemocracyinWesterncountriesoftenputsthe emphasisonitshighcosts(particularlyinviewoftheausteritiesnecessitatedbyintense globalcompetition)andissuesofincentivesforworkandenterprise,inIndiahigh inequality,massivepovertyandavastinformalsectormakethechallengeofimplementing socialdemocracyextremelydauntingasmuchasitishighlyimperative.Theparticular governanceissuesinIndia,withinept,corruptandunmotivatedpublicofficialsinchargeof thedeliverysystem,makethemobilizationofsocialgroupsandcommunityorganizations andvariousparticipatoryprocessesallthemoreimportant.Butthereisamore fundamentalissueherethatinvolvestheinteractionoftheproductivesystemandthe politicalculture.Aswehavementionedbefore,Europeansocialdemocracyistheoutcome ofaclasscompromiseandasocialpact:theworkerswhoareelectorallypowerfulenough toexpropriatethecapitalistsandendthecapitalistsystemhavechosennottodoso,they havefiguredoutthatcapitalismistheonlyviablewayleftforadequatelyexpandingthepie, sotheyarepreparedtobearsomecost(exploitation)andletthecapitalistshavea
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reasonableshareofthatpiewhichinducesthelattertokeepontheireffortsatbringing aboutdynamicinnovations.IamnotsureiftheIndianelectoratehasyetbeenconfronted withthissocialpact,andifsoconfrontedhowtheyllreact. AfterthedemiseoftheshortlivedSwatantraParty,Indiahasnothadafullscalepro businessconservativeparty;eventherightwingpartiesarelargelypopulistonmany economicissueswhentheygototheelectorate.Inspiteofthegreatfloweringof entrepreneurialenergiesinrecentyearsthroughoutthecountry,Ibelievethereisastrong anticapitalist(particularlyantibigcapital)streakinIndianpoliticalculture.Thisisnot surprisinginacountrywheresmallpeople(smallandmiddlepeasants,selfemployed artisansandshopkeepers,bazaarmerchantsandpettymiddlemen,clerks,schoolteachers andserviceworkers)constituteanoverwhelmingmajorityofthepopulation,andtheir ranksareswelledbytheinexorabledemographicpressureandbythetraditional inheritancepracticesinvolvingsubdivisionofproperty.Thereisadeepsuspicionofmarket competitionwherebythelargereconomicinterests,oftenutilizingtheiradvantagesof economiesofscaleandbetterpoliticalconnections,candevourthesmall.Gandhijihad givensensitiveandeloquentexpressiontothisantimarket,antibigcapital,smallis beautifulpopulismandmobilizeditinthefreedommovementagainsttheBritish.Inrecent decadesthosebearingthelegacyoftheGandhianmoralcritiqueofmarketexpansionand competitionhavejoinedforceswiththoseespousingtheleftcritiqueofcapitalist exploitationofworkers,peasants,andothersmallpeopleandtheirrightsovernatural resources,inbuildingactivegrassrootsmovementsinmuchofthecountryforthe protectionoftheenvironmentandofthetraditionallivelihoodoftheindigenouspeople, againstthedepredationsofthecapitalistoligarchy.Eventhoughtheprivatecorporate sectoristhrivinginIndiaandinsomesenseitshegemonylooksmorepervasivetodaythan before,itisinvolvedintheworklifeoftoofewpeople(asitdirectlyemploysonlyabout2 percentoftheIndianworkforce),anditisnotclearthattheelectorateisstillreadyto accepttheclasscompromiseliketheonebehindthesocialdemocracyenterpriseinthe West.Ontheotherhand,thepopulistopposition,foralltheirstrengthinnumbers,have notyetsucceededinpointingtoanyviable,incentivecompatible(i.e.notentirely
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dependentonrevolutionaryormoralzealforsustenance),systemiceconomicalternative, outsidetheesotericconfinesoftheirwishfulthinkingorutopiananarcho communitarianism.Thepassionateintensityoftheirnegativecritiqueofcapitalismisnot matchedbyaconvincingdemonstrationofasustainedpositivealternativesystemthatcan generatethenecessarysurplus.Untilthistensionisresolved,thesocialdemocracyproject inIndiawillremainsomewhattentative.

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