Social Protection in India: The Present and the Future (Part 1 of 2)

India’s economic growth has brought about an improvement in various socio-economic indicators. Yet, many in India still grapple with deprivation, inequality and vulnerabilities in terms of income, healthcare, nutritional status, educational attainment, and access to economic resources and opportunities.

A. Overview of the Social Protection (SP) systems in India

The country has a broad ambit of social protection programmes, but the overall public expenditure on social protection (excluding public healthcare) is only ~1.5% of the GDP[i], lower than many middle-income countries.

Most SP programmes are aimed at addressing capability deprivation (inadequate nutrition, lack of employment, low educational attainment), rather than providing safety nets to deal with contingency risks (health shocks, death, disability). Contingent social security covers mostly organised sector workers, who comprise only 8% of India’s workforce. In the past decade, a social security scheme (Rashtriya Swasthya Bima Yojana) has been introduced for unorganised sector workers, but less than 20% of the population is covered under any form of insurance[ii]. Out-of-pocket health expenses, which create barriers to seeking healthcare and can push marginal households into poverty, form as much as 89%[iii] of private expenditure on health.

Against this backdrop, India has only recently started a long overdue move towards universal social security. In 2015, the Government of India introduced a life insurance scheme (PM Jeevan Jyoti Yojana), an accident insurance scheme (PM Suraksha Bima Yojana) and a contributory pension scheme for unorganised sector workers (Atal Pension Yojana).

B. Big programmes, bigger challenges

India has numerous programmes funded at different levels of government with different aims and target beneficiaries. The national budget for 2016-17 mentions around 950 centrally sponsored schemes (aimed at all socio-economic causes, not only social protection) which cost about 5% of GDP. This is in addition to programmes funded by each of the 29 state governments.

However, most programmes do not bother measuring actual outcome or impact. Barring the biggest few, there has been little analysis of their effectiveness, and little attempt at evidence-backed reforms. What is well-known – and admitted by the Government – is that most resources in these programmes fail to reach their beneficiaries. The Ministry of Finance’s latest Economic Survey acknowledges that welfare spending in India suffers from severe issues such as misallocation (the poorest areas face the greatest shortfall of funds) and ineffectiveness (high leakages and targeting errors).[iv]

 GoI Economic Survey 2016-17Source: GoI Economic Survey 2016-17

Among a bevy of SP programmes, two of the biggest are the Public Distribution System, which ensures access to food at low prices, and Mahatma Gandhi National Rural Employment Guarantee Scheme, which assures a minimum duration of employment to rural households. Both are implemented on a mammoth scale which, in fact, compounds challenges such as inefficiency, systemic leakages, and corruption.

1. Public Distribution System (PDS) and the Right to Food

PDS was launched in 1997 as a targeted food security programme that distributes subsidized food items to the poor through fair-price shops. PDS receives the maximum budgetary allocation of all SP programmes in India, costing ~1% of GDP. The administration is decidedly cumbersome and leakage-prone: The Central Government procures food grains and transports them to each state, while State Governments are responsible for identifying eligible households and delivering the subsidised items to designated shops, from where beneficiaries can buy entitled amounts at heavily subsidized prices.

In 2013, the Government of India legislated the National Food Security Act, 2013 which takes a rights-based approach to access to food, and entitles the poorest two-thirds of India’s population to 5 kilograms of foodgrains per person per month at highly subsidized prices. This Act subsumes PDS along with other food security programmes such as Integrated Child Development Scheme (support to expectant women, new mothers & children) and Midday Meal Scheme (hot meals to school kids).

Challenges: India’s largest SP programme suffers from mammoth issues, such as high diversion ratios (proportion of foodgrains fraudulently sold in the open market), faulty targeting (high inclusion and exclusion errors) and wastage of grains in transit. Financially, PDS is massively inefficient: The Government spends Rs 3.65 to deliver Rs 1 worth of food[v]. Recently, as part of the discussion on cash transfers replacing subsidies, the Government attempted to estimate inefficiencies in PDS. It was found that only 28% of PDS resources reach the intended beneficiaries – 36% are lost due to leakage (pilferage, wastage) and another 36% get diverted to non-beneficiaries (due to corruption, targeting errors). Due to this, ~40% of the intended beneficiaries do not receive their entitlements.

Source: GoI Economic Survey 2016-17

Prospective reforms: Innovative reforms have been piloted in various states, such as introduction of food stamps (Bihar), monitoring through community participation (Chhattisgarh) and smart IT solutions (Tamil Nadu). Going forward, there are recommendations for the Government to consider direct cash transfers or food stamps to reduce the inefficiencies of the in-kind benefits system.

2. Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS/NREGA)

Incorporated as a legislation in 2005, MGNREGS is a self-targeted, labour-intensive public works programme that takes a rights-based and demand-driven approach to employment. It aims to enhance livelihood security in rural areas by guaranteeing 100 days of employment per year to each rural household at specified wages. Since April 2008, MNREGS is active throughout India. Despite certain implementation issues, it has been appreciated for various reasons including empowering rural women (56% female participation in 2016-17), reducing distress migration, and monitoring through social audits.

Challenges: These include administrative issues, leakages, corruption, delays in wage payment, violation of workers’ entitlements, problems in monitoring & evaluation, etc. Doubts are raised on MGNREGS’ effectiveness in boosting rural productivity and creating worthwhile assets. Agricultural landholders allege that availability of ‘easy’ wage-employment under MNREGS makes it hard to obtain agricultural labour. Leakages are ~20% and much as 43% benefits end up going to non-targeted persons.

 Source: GoI Economic Survey 2016-17

Prospective reforms: Reforms have included direct payment of wages into beneficiary bank accounts, diversification of livelihood opportunities, and selection of public works as per identified needs. Improved administrative capacity and effective community monitoring can address some of the execution ailments. However, the question is whether MGNREGS, in its present form, is worth being continued in perpetuity. Enhancement of human capabilities and a real solution to rural unemployment are essential in the long run unless one is content to remain in a cyclical trap of low-skill labour producing low-quality outcome for the sake of creating jobs.

To tackle all these implementation challenges, India is now attempting to reform its mechanism of transferring benefits. The second part of this series looks at India’s recent moves to deal with inefficiencies in programme implementation, including the much-debated Universal Basic Income.

 

This blog post is published as part of the Ambassador Series, which presents insights into social protection around the world from the viewpoint of our Ambassadors, a group of international online United Nations Volunteers who support the online knowledge exchange activities, networking and promotion of socialprotection.org.

 

 

[i] International Labour Organization. World Social Protection Report 2014-15.

[ii] Business Standard. “Jan Suraksha schemes to help eliminate Jan Dhan's zero balance accounts.” May 8, 2015.

[iii] World Health Organization Global Health Expenditure database.

[iv] Ministry of Finance, Government of India. 2017. Economic Survey 2016-17.

[v] The Economic Times. “Govt's food delivery spend thrice the cost: Independent evaluator”. February 27, 2014.

Other references:

The International Bank for Reconstruction and Development/The World Bank. 2011. Social Protection for a Changing India.

International Labour Organization. 2013. A Social Protection Floor for India.

(Banner image: MoRD GoI)

Comments

Thank you for the post, Amiya. Considering Public Distribution System (PDS) and the Right to Food, policy implementation seems to be very centralized. Are there discussions related to institutional markets linked to local family farmers purchase in the reform debate?  

 

Thank you, Iris. Family farmers are already linked to local (government regulated) institutional markets where they can sell all their produce at fixed 'support prices'. However, due to infrastructural and logistical issues faced by the government institutions who buy this produce, this system of purchase has turned out to be very inefficient and wasteful. Reforms in agricultural marketing are being discussed, which include allowing greater flexibility to farmers to sell directly to private institutional buyers, and more liberal contract farming. It would, however, be necessary to ensure that small farmers don't get exploited in a non-regulated market set up -- hopefully, farmer cooperatives and self-help groups (which already exist for supporting farmers) can help out here.

Thank you, Amiya. In fact, decentralization is crucial for policy achievments in this case. As always, the local context tells a lot from what is possible or not to implement.