[Feb 2008, Volume V Annual Issue] Pdf File size - The IIPM Think Tank

CREDITSFounderDr. M. K. ChaudhuriEditor-in-ChiefArindam ChaudhuriManaging EditorPrasoon.S. MajumdarDeputy EditorM.N.V.V.K. ChaitanyaConsulting EditorPrashanto BanerjiResearch FellowsPathikrit PayneSray AgarwalAkram HoqueTanaya BoseGroup Design DirectorSatyajit DattaSenior DesignerAmit SharmaDesignerDinesh ChandelkarSaurabh MishraProduction ManagerGurudas Mallik ThakurProduction SupervisorsDigember Singh ChauhanSoumyajeet GuptaChief Marketing AdvisorAmit SaxenaMarketing & SalesNeha MalhotraPrincipal OfficesSatbari, Chandan Haula, Chattarpur,Bhatimines Road, New Delhi - 110074IIPM Tower, Junction of , 32nd Road & S.V.Road, Bandra (W), Mumbai - 400 050IIPM Tower, 419 100ft. Road, Koramangala,Bangalore - 560 034IIPM Tower, 893/4, Bhandarkar Road,Deccan Gymkhana, Pune - 411 004IIPM Tower, 145, Marshall’s Road,Egmore, Chennai - 600 008IIPM Tower , 19, Inqulab Society, gulbai Tekra,Off C.G. Road, Ahmedabad - 380 015IIPM Tower, 6-3-252/2, Erramanzil, Banjara Hills,Hyderabad - 500 082We are keen to hear from anyone, who would like toshare their experiences concerning Indian economicissues, or would like to know more aboutIIPM Publications. You can e-mail us on m.chaitanya@iipm.edu & neha.malhotra@iipm.eduOr alternatively please call Neha Malhotra at 9971808015Additional Thinkingwww.iipmthinktank.comwww.iipm.eduwww.iipmpublications.comwww.arindamchaudhuri.comwww.thesundayindian.comwww.thedailyindian.comwww.businessandeconomy.orgwww.gidf.orgwww.planmanconsulting.comPrinted by:Rolleract Press Servies, C-163, Ground Floor,Naraina industrial Area, Phase-I, New Delhi - 16Disclaimer :All efforts have been taken to ensure the veracity of the informationcontained in the research, however The IIPM Think Tank expresslydisclaims any and all warranties, express or implied, includingwithout limitation warranties of merchantability and fitness for aparticular purpose, with respect to any service or material. In noevent shall The IIPM Think Tank be liable for any direct, indirect,incidental, punitive, or consequential damages of any kindwhatsoever with respect to the and materials, although the readermay freely use the research and material provided, The IIPM ThinkTank retains all trademark right and copyright on all the textand graphics.The First Words And The Last Wordpolitical will to challenge economic exclusionDear reader,A punctilious examination of erstwhileunion budgets, specifically the ones presentedby the current UPA government highlightsthe fact that they are never about theinclusiveness of the Indian growth story. Prasoon.S.Majumdar M.N.V.V.K.ChaitanyaWhat’s more, many of the budgetary measuresare really only for the rich and undeni-Managing Editor Deputy Editorably there still exists many and elementary socio-economic challenges, which the statehas still not grappled with.Perusing all of the collated opinions of numerous budget advocacy groups spreadacross the length and breadth of India and presented in this issue, we at the IIPM ThinkTank are of firm opinion that the upcoming budget can indeed turn into a tactical tooland event of short term use in the secular and strategic national economic planning.Given the gap between political rhetoric and reality, Union government cannot characteristicallyafford to use the lame excuse of fiscal constraint and curb expenditure uponvital social services. As at the same time and in actual fact, we are not advocating formore governmental role interference, under the guise of grandiose social care programmes.What we hope for is a bold (economically) and courageous (politically) budgetaryintervention that actually appreciates each Indian as an independent and autonomouseconomic agent and only facilitates his aspirations by provisioning a superiorspread of socio-economic choices, in true liberal sense. Lastly, the imperative of socialinclusion, political accountability and financial transparency should lie at the heart ofupcoming Union Budget 2008-09 and form a cornerstone of planning priorities for the‘Other India’.In cooperation with other IIPM centres, the IIPM Think Tank draws together developmenteconomists, multilateral organizations, the private sector and civil society groupsbehind efforts to establish the public policies that Indian economy need to ease sociodevelopmentdisparities. There are many exclusive essays and seminal opinion pieces inthis special issue, which you might be fascinated with. Happy reading and IER welcomesyour views.Best,Prasoon.S.MajumdarM.N.V.V.K. Chaitanya

CALL FOR PAPERSIER is a quarterly journal featuring contents of academic and professional interest that are of utility to managers, policymakers, politicians, consultants, teachers and students in the areas of Economics and Management. It is a multidisciplinaryplatform for sharing and disseminating knowledge in the issues of education, health, poverty, unemployment, agriculture,industry, service, FDI, international trade, infrastructure and environment, pertaining to Indian economy. We passionatelybelieve in the credo that we constantly seek to follow: rethink, edify and delineate. This enduring commitment has helped usfoster and broaden the parameters of public policy debate and alternatives. Toward that goal, we strive to achieve greaterinvolvement of the intelligent, concerned change agents (reform minded politicians, public servants, academicians, sociallyresponsible firms, civil society organizations and citizens) in questions of policy and the ideation. In order to further augmentvalue and provision a broad perspective to Indian economic problems, your knowledge and expertise in the above mentionedfields would be highly valuable to IER. We would like the possibility of receiving a write-up from you, on a topic of your expertiseand interest as per the under-mentioned guidelines.Guidelines For ContributorsContent: Articles should be in the areas of education, health, poverty, unemployment, agriculture, industry, service, FDI,international trade, infrastructure and environment, pertaining to Indian economy, which are of contemporary interest andvalue to the esteemed and intellectual readers. The journal seeks to present an eclectic approach supported by empiricalresearch or practical applications as necessary. Contents that demonstrate clear and bold thinking, fresh and useful ideas andsolutions, accessible and jargon-free expression, and unmistakable authority and proficiency are those most likely to meet ourreader’s needs.Reviewing Process: Each article is reviewed by the Economics Research Group (ERG). If found suitable, the same may besent for another round of review before final acceptance. With prior information and consent, the editors reserve the right tomodify and improve the manuscripts to meet IER’s standards of presentation and style. The editors also have full right to acceptor reject an article for publication. Editorial decisions will be communicated within a period of 2 weeks of the receipt of thesubmission.Word Length: Articles should be of 2,500 to 3,000 words including abstract and references.Headings And Sub-Headings: Headings should be typed in capital and underlined; sub-headings should be typed in upperand lower case and underlined.References: References to other publications should follow the Harvard style.Figures, Charts And Diagrams: Use of figures, charts and diagrams should be kept to the minimum and text should indicatewhere the same will appear. All tables, charts, graphs should be typed on separate sheets. They should be numbered asTable-1, Table 2, etc. The graphs must have the minimum amount of descriptive text and the axes should be labeled withvariable written out in full, along the length of axes.Abstract And Key Words: An abstract within 100 words and three key words should be submitted.Author’s Bio-data And Photograph: A brief bio-data with full postal and e-mail addresses and a coloured photograph shouldbe sent along with the articles.Copyright: Authors should warrant that their work is not an infringement of any existing copyright and will indemnify thepublisher against any breach of warranty. The articles published in IER will become the legal copyright of the publisher. Thearticles appearing in IER are the personal responsibility of the authors themselves and do not reflect the views of the editor,principal or the Economics Research Group (ERG) or the sponsoring organization. The author(s) will receive a complementarycopy of IER in which their articles are published; they will also receive ten reprints of their articles for their personal use.Submission: The submission should be sent to M.N.V.V.K. Chaitanya at m.chaitanya@iipm.edu

Cover Design: Amit Sharma, Cover Photo: Bivash BanerjeeA Budget For Elite, In A NationFull of PlightThe IIPM Think Tank 08Union Budget:2008-09—OptionsAnd OpportunitiesS.Narayan 14Union Budget 2008-2009:Riding, Not Undermining The WaveAshima Goyal 20A Longer View On Union BudgetRam Kumar 26Basic Education In India: An OverviewVimala Ramachandran 30Primary Concern(s): AssessingEducational Expenses In BudgetsPramod.K.Yadav 50Status Of Health Services In India:An OverviewImrana Qadeer 58Health Budgets In The Context OfNational Rural Health Mission (NRHM)Ravi Duggal 88Gender Budgeting And Beyond:Emerging Issues For Budget 2008-09Bhumika Jhamb & Yamini Mishra 96The Politics Of Union Budget And TheProletariats Of India(F)ACT SHEETAnimesh Naskar 108Turning ‘Inclusive Intent’To Real Time Inclusion:Will To Actualize SCSP And ChallengeExclusion In The Private SectorPaul Divakar,Sadanand Bag,SemmalarT.,Umesh Babu & Ashutosh.K.Vishal 116Budget For The Excluded: SpecialFocus On The Dalits And AdivasisSakti Golder 128Budgeting For Children In IndiaBharti Ali 136Informal Economy: A Thought ForThat India Which Is Yet To ShineU.K.Srivastava 142NCMP, Development Goals andPublic Expenditure: A Study ofFiscal Responsibility And BudgetManagementSiba Sankar Mohanty 148Rural Infrastructure And Livelihoods:Moving Ahead With The New PovertyAlleviation ProgrammesAmir Ullah Khan & Aarti Bhardwaj 158Agenda For Inclusive Growth InUrban DevelopmentIndu Rayadurgam 166Green The Budget And GuardThe Left OutS.P.Udaya Kumar 174Union Budget 2008: For Once, Let UsHave A Budget For FarmersDevinder Sharma 180A Level Playing Field ForThe Small FarmerM.Rajivlochan 184Need To Take A Re-look At CentralNon-Merit SubsidiesPradeep.S.Mehta & V.V.Singh 190Analytical Aspects Of Public DebtManagement In IndiaIndrajit Mallik 196Public Expenditure In India:Issues And ConcernsK.Gayithri 200Budget India: From Allocations ToEffective ExecutionShanti Jagannathan 212Social Accountability And Monitoring InUnion Budgets: A Bottom Up ApproachSita Sekhar 218What Does The Budget Have To DoWith Disaster Risk Reduction?Mihir.R.Bhatt 224India’s Security Expenditure –An Outline AnalysisRahul Bhonsle 228Growth Not By GDP Alone;Need For Paradigm ShiftS.P.Singh 234Government, Market and AgrarianCrisis in VidarbhaMadhumanti 240Dalits Are Not Getting Their Due SharesThrough Budgetary Allocations: A CaseStudy On The SCP Budgets In RajasthanSubrata Datta 250Developing India: What Is Holding UsBack?Jayaprakash Narayan 270

Reliving TheGreatIndianDream8 THE IIPM THINK TANK

A N INCLUSIVE INTENTBefore the honourable Finance Minister Mr. P. Chidambaramgoes on to deliver another of his UnionBudget speech (this is his seventh) on 29th ofFebruary, 2008, isn’t it reasonable for him to introspect inretrospect as what has been the effect of his previous sevenbudgets on this economy? Isn’t it essential for a FinanceMinister to know whether his previous budgetary initiativeshave been insistently instrumental in pulling out even oneIndian out of the millions from indigence and insolvency?Isn’t it fairly common sensical to find out how many newchildren have got admitted in the various schools acrossthe country? Doesn’t it make sense to ask as to how manymothers are still dying in this country while giving birthor for that matter, how many of his country men are stilldying of curable diseases like TB and malaria? For all thebudgetary allocations that have been announced over theyears upon various schemes, isn’t it significant to know howmany young Indians still stand productively disengaged,devoid of any essential human capabilities and developmentalcapacities? Or for that matter for all the budgetsthat has been allocated over the years, isn’t an imperativeto take stock of the status of our senior citizens, peopleof special needs, Dalits and women? And finally isn’t itimportantly urgent to know what has been the status onjustice delivery - the bedrock of democratic India?If a Finance Minister, guided by conventions does notfeel that it is his job to take a stock of all these strategicsocio-economic outcomes, then there is no point in theentire budget exercise. Even if a Finance Minister defiesall conventions and makes an attempt to take stock of theaforementioned parameters and does not find convincingimprovements, then too there is no economic rationale tocontinue the budget exercise, in its extant and entire versions.For it has been long that the politicians of this Ministryhavebeen aiming at power, and power without any responsibility.It is important for the policy maker to realisethat the Union Budget is a national exercise, wherein eachand every citizen contribute to its fund in form of taxes (directand indirect) and thus it should be an exercise whereinthe benefits should encompass each and every citizen’s lifein a definite and proportionate fashion. The crude fact isthat in the present budgetary framework, the top-20% takeeverything away and in turn leave the underprivileged bottom-80%of the society with nothing, forever placing themTHE INDIA ECONOMY REVIEW9

Reliving TheGreatIndianDreamIBP suggest that the most significant impacts achieved by independentbudget groups lie in improvising budget transparency and awarenessat a serious disadvantage. In a functional democracy likeours, if something like this does not get upturned, then theentire budget exercise loses its essential quintessence.For it is an open secret that nothing like that has everhappened, as then the state of affairs would not have beenas miserable as it stands today. Post independence UnionBudgets had always been a low key affair (relatively speaking!)but then it had gone in for a complete image makeoversince 1991 when our current Prime Minister and thenFinance Minister Dr. Manmohan Singh, made it a platformto announce the economic reform package. Then onwards,each and every gentleman from North Block has tried hisbest to blatantly utilize this platform to gain political mileage,to such an extent that at it times delivered recklesspolicy packages only appeasing their political party’s stakeholders,with no concern to the vast majority. As a result ofthis, over the years the budget which ideally should put upwith serious stock taking exercise(s) has reduced to a weakdocument with persuasive political overtones.What is amazing is the manner Finance Ministers, overthe years have been baselessly allocating invaluable financialresources, which are hard earned tax payer’s money(as if it is their own), to earn brownie points from few sectionsin connivance with popular media!! In fact over thelast few budgets it became all the more evident that thebudgetonomics of almost all Finance Ministers was moreto gratify the selected sections of the society. This can becorroborated with the fact that in almost all pre-budgettalks and consultations, the FM talks to the big corporateand industry associations and rarely to any social watchgroup and representative of budget advocacy organisation.It’s very clear that the society or the social sector representativedo not have any sort of significant inputs and activeparticipation in either pre-budget discussions or textualproposals. The whole concept of budget for aam adamiis nothing but has become a big farce, which has got lostsomewhere in the crowd of big lobbyists. Consider this: themanner the fertilizer policy has been structured goes toprofit only the companies and not the farmers in anyways.The resultant economic packages (that aims at reducingthe budget deficit) have been consequently reducing thesocial sector allocations and expenditures. And the irony isthat, in most of the Union budgets, the prices of cosmeticand luxury products are revised and rarely do any essentialproduct finds reference (as if, India needs Pedigree morethan Parathas). In fact media, which ideally should havebeen responsible in addressing many understated concernstaken as a whole, has played the role of a mute spectator,persistently playing to the tunes of policy makers and overhypedbudgets year after year in a meaningless manner !!At this juncture, it very appropriate to indicate that theresearch undertaken by International Budget Project (IBP)suggest that the most significant impactsachieved by independent budget groupslie in improvising budget transparency,awareness and civil society participationon one hand, and augmenting budgetaryresources for existing programs andprocess improvements in their eventualutilization on the other. It also providesevidence that the analysis carried out byindependent groups can directly lead topositive improvements in budget policies,more specifically in social sectors.The strategic intent (inclusiveness) ofthe previous budgets can clearly be gaugedby the nation’s economic performance.10 THE IIPM THINK TANK

A N INCLUSIVE INTENTSeventeen years into reforms, it cannot be doubted that India’seconomic performance had been rightly stupendous.It has not just quadrupled its GDP, doubled its growthrate, it even went on to accumulate a mammoth foreignexchange reserve (from a mere USD one billion in 1991, toalmost USD 200 billion plus) now. In fact, it is interestingto note that in the year 1990, the Sensex for the first timetouched the four digit figure of 1000, which has shot upto a staggering twenty fold at present. In fact, the biggestthreshold to this growth came post 2000. As between 2000and now, India has almost doubled its income per-capita.Most of the other economic indicators too have showna persistent northward trend. But as far as the key socialindicators are concerned, the results have just not beenoverturned, but assumed an alarming enormity. And thisclearly shows the exclusive and elitist intent of our FinanceMinisters in course of drafting the budget documents! Infact, there has been virtually no change in India’s socialdevelopment and corresponding equity and social justiceoutcomes.In 2000, UNDP HDR ranked India at 128th position andin 2007 we are placed at 126th! This has been true not justfor UNDP HDR, but for most of the other global reportsin social sector. It is amazing that not upon a single socialindicator India has performed better – be it education,health, employment, gender issues or on justice delivery orfor that matter social security to unemployed, senior citizens,Dalits and people with special needs.There isn’t much doubt in the fact that this years budgettoo would have its typical and selective stretch of the rosypicture of Indian economy, conveniently underminingthose 60% children who drop out from schools (even beforethey finish Class-VIII or of those who finally make itto the higher secondary only 11% have the privilege highereducation and with just 3% having access to technical education!!)At best a few more rupees would be allocated inthe name of those 1.34 crore out of school children, in theage group of 6-14 years. It is amazing that the policy makernever goes to investigate as to how India has evolved asa global health destination and yet India’s spending onpublic health as a share of GDP is the 18 th lowest in theworld. On account of such meager allocations and lack ofaccountability a staggering 15% of the population does notsurvive the age of 40. It is estimated that there are threeWho Do The FM Meets?Deputy Chairman of Planning Commission, M.S.Ahluwalia metthe FM on December 13, 2006.Agricultural experts, including Ashok Gulati of IFPRI andfarmer leader Sharad Joshi participated in a pre-budget meetingwith the FM on December 29, 2006.AITUC’s Gurudas Das Gupta, ITUC’s Sanjeeva Reddy gave ajoint memorandum to the FM on December 29, 2006.CII submitted a pre-budget memorandum to the FM on January01, 2007.ASSOCHAM presented its list of pre-budget proposals(memorandum) on January 04, 2007.Corporate bigwigs including Ratan Tata, Mukesh Ambani, AnilAmbani, Sunil Bharti Mittal, Azim Premji, Venu Srinivasan,AM Naik, Venugopal Dhoot, Kiran Karnik, Malvinder Singh,Kiran Mazumdar Shaw, CII President R.Seshasayee, FICCIpast-president YK Modi and ASSOCHAM President AnilAgarwal met the FM in a pre-budget meeting on January 09,2007.Representatives of Foreign Institutional Investors (FIIs) helddiscussions with the FM on January 27, 2007.Leading economists such as the Director-General of RIS,Nagesh Kumar and the Director, Madras School of Economics,D.K. Srivastava met the FM on December 31, 2006.Indian Electrical & Electronics Manufacturers' Association(IEEMA) met with the FM to submit their pre-budget memorandumon November 07, 2006.Union Petroleum and Natural Gas Minister Murli Deora metthe FM to present the Ministry’s pre-budget proposals on January25, 2007.The Congress Parliamentary Party held a pre-budget meetingwith the FM on December 14, 2006.Who Does The FM Not Meet?Several civil society organisations (CSOs) despite all effortshave been unable to meet the FM.People’s Budget Initiative – a coalition of several people’s organisations,including reputed national and international NGOsmade numerous attempts to seek an audience with the FMwithout any success.Source: 'Budget 2007-08: Dream or Despair?'; Response to theUnion Budget 2007-08, CBGA, New DelhiTHE INDIA ECONOMY REVIEW11

Reliving TheGreatIndianDreammillion people who are living with HIV/AIDS, some 1.8million people contract TB every year and of which 3.5lac people die of it, some 1,07,000 leprosy patients live inIndia. As such the public health delivery does not reachevery corner of the country and wherever it reaches thereis crying need of a complete overhaul. There are PHCsacross the country where there are no doctors and even ifthere are doctors there are no medicines that are available.For all the health budgets that have been allocated tilldate, people still spend 95% of their budgets upon privatehealthcare services. What more, health costs still remainone of the primary reasons for people being pulled back topoverty levels in the country. In fact, in this given scenarioit is indeed amazing that in 2005-06 budget, Rs. 250 crorewas initially allocated for setting up six AIIMS like institutionswhich was then eventually reduced to Rs. 75 croresin 2006-07 budget and for the year 2007-08, Rs. 150 croreswas kept aside for the same program. But then leave aboutinitiating this scheme; the FM even do not seems to haveany apparent idea of allocating funds at the first place in anefficient and effective approach.For all that our Honorable Finance Minister announcedin his previous budget with respect to people with specialneeds, there still exist some 150 million who are blind andsome 2.19 million people with some form of disabilitiesor the other. Of those there are only a mere 34% whoare productively engaged!! On the issue of gender equalityIndia's performance is getting from bad to worse. TheGlobal Gender Index measures gender-based inequalitieson economic, political, education and health-basedcriteria. India ranks 114 th in 2007’s report, slipping severalnotches from the previous year's ranking. India has thesingle highest share of neonatal deaths in the world, 2.1million. Moreover, the critical exploitation of childrenhad made India placed in the ‘World's Worst Place to BeA Kid’ list- prepared by Foreign Policy magazine. Around1.2 million children (under five years of age) die frommalnutrition every year and around 12 million are forcedto work as child labour in most excruciating conditions.Not just women and children, the state of the underprivilegedsection of the society is most scandalous!! Picturethis: As per Human Rights Watch Report 2007 – ‘Crimeagainst Dalits are appalling which occur every 20 minutesin India. Every day three Dalit women are raped, two aremurdered and two of their houses are burnt! These figuresrepresent only a fraction of actual atricoties for manyDalits do not register cases for fear of retaliation by thepolice and upper-caste Hindu individuals. Official figuresshow that there are still 0.343 million manual scavengersin India from Dalit community. Yet there have been nosignificant budgetary allocations for their socio-economicupliftment!!’ In fact not just Dalits, as far as an Indian pooris concerned, it is all the same. Over the years the budgetarypriorities has been misplaced to such an extent that onehand India takes pride in having four billionaires in the topThere are three million Indians who are living with HIV/AIDS. Some 1.8million people contract TB every year and there are 1,07,000 lepers12 THE IIPM THINK TANK

A N INCLUSIVE INTENTExpenditure on judiciary is a mere 0.2% of the GNP. Around 50% ofthe expenditure is currently generated by court fees and finesten billionaire’s list in the world, yet there exists 400 millionpeople who find it difficult to manage even one squaremeal per day. The well intended NREGA scheme whichguaranteed a minimum 100 days of employment across600 districts across the country is riddled with corruption,poor physical implementation and administrative incapacityat all levels. People are rampantly cheated on wages andthere have been reports that on an average some 40 daysof employment are generated as against the stipulated 100days. Last year budget added 330 districts under the purviewof NREGA program. Rs. 11,300 crore were allocatedfor NREGA in 2006-07 but only Rs. 7,986.02 crore wasreleased (leave utilization) up to February 28, 2007. Thus,somewhere around Rs. 3,500 crore was left unused withthe government. Since the scheme was launched in 2005,there was an old surplus of Rs. 2,000 crore which was usedin last year allocation. In effect the total funds available forthis scheme as in 2007-08 are Rs. 17,500 crore. This effectivelymeant that allocation per district had been actuallyreduced from Rs. 56.5 crore to Rs. 36.36 crore clearly indicatingthe intent of the budget exercise!!The state of affairs looks alarmingly similar on theother social fronts as well. For any Finance Minister mightsay that his role is just confined to give an accounting ofrevenues and expenditure through the budget and nothingmore than that. He might even state that it is not theMinistries sole responsibility to track as to where do thefunds disappear which were meant to construct schools,hospitals or pay wages through the NREGA scheme. Orfor that matter it is none of his Ministries concern thata Dalit woman is being raped and beaten up every eighthours! In fact to make sure that nothing like this ever happensthe first priority and the foremost responsibility of theFM should be to adequately fund the judiciary and starthundreds of courts so that no one can get away by siphoningfunds and raping an innocent woman. Today they canget away simply because they know that at any given pointin time there are over 20 million cases that are pending inHigh Courts and around 26 million cases are pending inthe subordinate courts across the country, and so justicecan never be delivered. The fact of the matter is that today,almost all courts are on dearth of funds. The expenditureon judiciary is a mere 0.2% of the GNP. Around 50% ofthe expenditure of the judiciary is currently generated bycourt fees and fines, making the entire process dangerouslyslow. As a net effect not just corruption and criminalisationthrives at every stage of social delivery but more than that,the slow delivery of justice has forced some quarter millionunder trials languish in the jails under inhuman conditions.This year the FM can definately bring in a change thebudget in the exercise by allocating adequate funds onthe social sectors as there has been an unprecedentedcollection on the tax revenue front. Butthatalone wouldnotservethe purpose as it is pertinent for the Ministry torealise Union Budgets has to be a stock taking exercisefor all these basic parameters as only this would entitlebasic human existence for all, and then there is nothingelse left that is important enough for the government toput its mind on. For everything else would be taken careby itself. It is also pertinent to realise that the varioussocial schemes and the allocation in the budgets have adirect ramification upon entire economy and polity. It isessential for FMs to portray public priorities and as wellpresent their budgets against an excellent record of effectiveexecution of reforms in the previous year. In a rapidlydeveloping economy like India, where socio-economicproblem also needs to be handled on an urgent basis, abudget should actually inform, the millions of people gluedbefore the television, about the development and initiativesin the social sector just like a progress report and alsoshould speak about societal development, not about whathave been done for the top-20%. But then being the electionyear the chances are that the FM in order to appeasethe party’s stakeholders would again deliver a non-representativebudget which would only grossly discount anddiscolour the social priorities and engineer a magnificentgrowth story for the 20% of the population. It would againbecome an annual platform wherein, using the fine art ofrhetoric; attempts would be made to build an economicsystem for the top-20%, by the top-20% and for the top-20%! And if that happens, it is time that we immediatelyban such a futile budget exercise!!!THE INDIA ECONOMY REVIEW13

Reliving TheGreatIndianDreamUnion Budget2008-09—Options And OpportunitiesS.NarayanThe Institute of South Asian Studies, National University of Singapore, Singapore14 THE IIPM THINK TANK

A N INCLUSIVE INTENTIn the first week of February, the Finance Minister haddiscussions with a large cross section of the CongressParty about the forthcoming Budget. While there wasuniform praise for the way in which he had managed theeconomy, there was an undercurrent of anxiety and expectation.It was clear to everyone that this was the last budgetbefore the elections, and that it was important that themessage was electorate friendly. This places a burden uponthe Finance Minister, as the expectations are indeed high andhe has several constraints.The Union Budget is essentially the presentation of theproposed income and expenditure statement of the Central-Government for the forthcoming year. As such, it should be anaseptic document, devoid of emotion, but over the years, it hascome to be seen as a policy statement of the Government ofwhat it intends to do.At the top is the need to adhere to fiscal prudence. In 2004,when the first budget of theUPA Government waspresented, the fiscal deficitsof the state and centerexceeded 8.4 percent, andtax collections were under10% of the GDP. The lastthree budgets have seenimprovements in the fiscal deficit at the center, and also in thestates. The 2007-08 Budget estimates are for a fiscal deficit of3.3% of GDP at the center and 2.3% in the States. Thisimprovement has been less dueto prudence in expenditure andmore due to exceptionalbuoyancies in tax revenues.Gross tax revenues are likely toexceed Rs. 5,60,000 crores, afigure nearly three times thecollections in 2001-02. This hasbenefited the states, as there isgreater devolution. In addition,the introduction of VAT hasresulted in tax buoyancy for thestates. This, coupled with thedebt-restructuring schemeintroduced for the states in 2001and 2002, has improved stateConsolidated revenue balanceof twenty eight states is likely toimprove by the end of this year,with a surplus of 0.3% of GDPfinances considerably. State Governments in their budgets for2007-08 committed to bring further improvements in theirfiscal position in line with their Fiscal Responsibility Legislations.Notwithstanding some variations across the states, theconsolidated revenue balance of 28 state governments is likelyto show a considerable improvement by the end of this year,with a surplus of 0.3% of GDP as compared with a deficit of0.1% of GDP in 2006-07. As a result, the combined fiscaldeficit of the states and the center is expected to be around5.5% of GDP, indeed a remarkable achievement.The concern is that increases in expenditure are likely to puta pressure on fiscal improvement. The recent report of theIMF on the state of the Indian economy points out to thisweakness and expresses concerns that improvements in fiscalmanagement are unlikely to happen, going forward.There are two reasons for this. First, there has been anincrease in subsidy bills. The subsidies for food and fertilizerhave risen by over 30% fromthe budget estimates. Increasesin food prices have been causedby global increases in prices ofwheat that have resulted inincreases of the GovernmentMinimum Support Price,without being able to increasethe off take prices. Fertilizer prices have been affected byincreased feedstock costs, caused primarily by increases in oilprices. Second, though oil prices have risen, Government hasTHE INDIA ECONOMY REVIEW15

Reliving TheGreatIndianDreamnot been able to pass the consequent product price increasesto the consumers. As an alternative, the public sector oilcompanies have issued oil bonds whose repayment is guaranteedby the government. During 2005-06 and 2006-07, specialbonds issued to the oil marketing companies amounted to Rs.17,263 crore and Rs. 24,121crore. During the currentyear, oil bonds of Rs. 30,500crore value have already beenissued in the market.There is yet another offbudget liability. With growinginflows of capital into thefinancial markets and for investment, the Reserve Bank hashad to intervene to purchase dollars and to keep the currencyfrom appreciating too fast. The resultant liquidity is absorbedby the issue of Market Stabilization Bonds, again an off budgetvehicle, with the interest burden becoming the responsibilityof the Government. The RBI has had to intervene repeatedlyto absorb capital inflows, and to offset the liquidity createdThere is a faster pace ofexpenditure due to front loadingand higher interest payments onlarger borrowings under MSSthrough the MSS. The outstandings under MSS that was Rs.75,924 crore in April 2007, has increased to Rs. 1,61,058 croreby January 2008, an increase that has represented a purchaseby RBI of over $25 billion during this period. Lower interestrates in the U.S. as well as high growth rates in India are likelyto exacerbate these flows,putting greater pressure onthe rupee. The commitmentfor MSS will become larger,reflecting in the increasedinterest liabilities for theGovernment. Interest paymentsfrom the budget for theperiod April – November 2006 were Rs.87,943 crore, but haveincreased to Rs. 1,03,648 crore in the corresponding period in2007. These slippages have been pointed out in the Mid-TermReview for 2007-08 of the Central Government. There hasbeen a faster pace of expenditure due to front loading, as wellas higher interest payments on account of larger borrowingsunder the MSS. The front loading was a deliberate measure to16 THE IIPM THINK TANK

A N INCLUSIVE INTENTavoid parking of funds and rush of expenditure at the yearend. In contrast, the taxes and duties have more back loadedpayment schedules, leading to a gap between income andexpenditure in the first half of the year. The Government hasexpressed confidence that the annual fiscal and FRBM targetswould be met on the strength of fiscal consolidation measuresin conjunction with growth dividends. For the year 2008-09,there would be concerns over these mounting expenditurepressures on the revenue side. At the same time, Governmenthas also to contend with the fact that the National DevelopmentCouncil has recently adopted the Eleventh Five YearPlan, and that the Gross Budgetary Support for the Plan has tobe considerably higher if the Eleventh Plan targets are to beachieved. On the non-plan side, the impact of the Pay Commission,whose report will be presented for implementationlater this year, would have to be provided for.On the revenue side, the Finance Minister would have tocontend with the fact that there are signs that the economymay be slowing. Exports are already lower than target, andindustrial production is also showing signs of softening. TheRBI’s expectations about industrial performance indicate aslower growth and lower confidence for 2008-2009.mainly reflecting the impact of higher food prices. For theGovernment, between increased growth with high inflationand moderate growth with lower inflation, the latter is theobvious choice. These concerns have not stopped the industryassociations, the newspapers, the media and other interestedgroups from presenting their wish lists to the Government,and a study of these lists brings out the expectations as well asanxieties of different interest groups. Corporate India urgedfor moderation of its direct tax burden, promising thatindustry would respond with even more robust performance ifcorporate tax rate were cut in Budget 2008-09. Fiscal incentiveshave also been sought to encourage India Inc to expandits footprints abroad. The major indirect taxation recommendationsof CII’s pre-budget memorandum include continuationof the existing peak rate of custom duty of 10 percent asimported goods have already become cheaper by 10.35There are signs that economy maybe slowing. Exports are lower thantarget and industrial production isalso showing signs of softeningFinally, the concerns that are affecting the global economywould have to be factored in. There is the worry that the U.S.economy may stagnate or even slide into recession. The recentinterest rate cuts by the U.S. Federal Reserve have raisedconcerns about the opportunities for arbitrage in the financialmarkets. It is argued that there would be greater capitalinflows causing greater pressure on the rupee. The managementof large capital inflows has been difficult. The ReserveBank of India has rightly been worried about inflation, and haschosen to monitor developments in the financial and capitalmarkets closely, rather than to intervene immediately. Inflationbased on year-on-year variation in Consumer PriceIndices (CPIs) eased during November/December 2007 from ayear ago, but continued to remain above the WPI inflation,THE INDIA ECONOMY REVIEW17

Reliving TheGreatIndianDreampercent due to appreciation of rupee against the US dollarsince 1 st March 2007.Other suggestions are:• Personal income tax burden should be lowered. Associationshave suggested that the peak income tax rateshould be reduced to 25 percent from 30 percent andshould be levied on more than Rs. five lakh. Major directtaxation recommendations of CII’s pre-budget memorandumare abolition of levy ofsurcharge on corporatetaxes, abolition of dividenddistribution tax or alternatively,reduction of thedividend distribution taxrate to five percent• There is a request forreduction in excise duty rates. While FICCI favorsexcise duty cut to 14 percent, Assocham has sought cutsin excise duty to 12 percent. Currently, the Cenvat dutyrate is pegged at 16 percent.• Both associations have made a case for bringingagricultural incomes under the income-tax net. TheCII has recommended investment and productivityenhancements in agriculture and allied sectors in orderto strengthen the rural economy• Building people, strengthening rural economy andenhancing competitiveness are the key focus areas ofthe Pre-Budget Memorandum tabled by CII for thefinancial year 2008-09. The pre-budget memorandumfor the year 2008-09 has suggested measures to encouragethe industry to invest and organise in-houseIn Bharat Nirman and NREGS,problems appear to be in the areaof administration and supervision,both of which can be tackledtraining programmes.• In case of Central Sales Tax (CST), CII has recommendedreduction of CST rates from three percent totwo percent with effect from April 1, 2008 to phase outCST to facilitate transition to Goods and Services Tax(GST) and inclusion of natural gas in the list of ‘DeclaredGoods’. CII has also requested for announcement of asuitable GST model asanother eventual step to beimplemented by 2010.There are thus two distinctstrains of thought that arevisible. At the level of industryand corporate India, there isan expectation of lower tariffregimes for direct as well as indirect taxes, and several industryspecific concessions. For the political establishment, there isan expectation of announcements on easing of personal taxesas well as announcements that would be election friendly,mostly in the nature of sops and subsidies.Yet in order to keepthe economy growing and inflation under control, tight fiscalmanagement is required. The budget would have to take noteof all these expectations.At the forefront is the policy objective of the UPA, ofinclusive growth. It is important to stress the balance betweenboth, and there should be emphasis on expenditure oneducation, agriculture and health. The Bharat Nirman and theNREGS are excellent programmes, and the problems appearto be in the realm of administration and supervision, both ofwhich can be tackled. At the meeting of the National DevelopmentCouncil, it was agreed that there should be an initiativefor food security, and a programme of Rs. 25,000 crores hasbeen drawn up. It is important that this programme be funded,and, more important, that the details thought through so thatimplementation is speedy and effective. It is also necessarythat all the big ticket items mentioned in the Eleventh FiveYear Plan, especially education and health, be adequatelyfunded, with an emphasis on programmes that can deliverresults within the next fifteen months.Relief for individuals can only come out of moderation oftax rates, and it is possible to anticipate some measures thatwould give relief to the small and medium income-tax payers.It is also likely that some more of the exemptions in theIncome Tax Act may go, though the simplified Act that has18 THE IIPM THINK TANK

A N INCLUSIVE INTENTbeen promised for the last two years is nowhere to be seen.These would be the easier decisions to take. The moredifficult ones are to ensure that growth does not falter, thatcapital flows are managed, and that inflationary pressures donot mount. It is imperative that the term of the Governmentdoes not end with GDP growth that is less than 8.5%. Thereare several options for achieving this.First, there is the concern that manufacturing sector growthneeds to be maintained. Investment in infrastructure helpssteel, cement, and a number of related sectors including earthmoving machinery, electricals and the like. Housing growthhelps a number of allied sectors including household hardware.It is obvious that there needs to be a thrust on infrastructuregrowth through incentives that may include tax concessionsfor investment in infrastructure, or measures that wouldmake capital available easily to entrepreneurs. It is alsonecessary that some big ticket infrastructure policies includingprivate airports and ports be announced. The other growthdrivers are automobiles, auto ancillaries, petrochemicals,drugs and pharmaceuticals, and it is possible that there wouldbe sector specific concessions in terms of R&D allowances,customs duties, and excise duties.The introduction of the Goods and Services Tax (GST) isdue in the year 2010, and it is important to take some preliminarysteps. The service tax and excise duty rates would have tobe brought together, and this is a very good opportunity ofreducing excise duties across the board to 14%. The twopercent drop would incentivise industry and have no revenueimplications given the tax buoyancy. Also, since MODVAT is acascading rate, it is unlikely that squeezing from the top wouldlead to revenue losses. It is possible to strongly recommendthis as a measure that needs to be taken this year. There alsoneeds to be more clarity and transparency on the GST front,and the road map to the new regime.On customs duties, it is time to reduce duties to their finallevels, to remove distortions between intermediate goods andfinal goods, and to provide adequate countervailing duties tobalance out the costs of imports. The step downwards incustoms has been long, and it needs to have a landing this year.Income tax and corporate tax are the areas of interest to thelargest number of people, and it is likely that there may besome moderation in personal income tax. It is possible toconceive of a slight reduction in corporate taxes, say in thesurcharges that could be linked with investments and growth.Finally, the ambit of service tax could be widened further,and the taxes on transactions in equities increased. These havebeen good revenue earning measures. It is difficult to guessnumbers, but it is likely that the fiscal deficit targets could bemaintained, with some ambitious projection of revenues, thatmay or may not materialize. On the monetary front, therecould be a softening of interest rates by the banks, as well assome greater oversight upon capital inflows. Some effectivemeasuresto curb capital inflows like restrictions on ECBs,could also be considered.Bibliography:1. Budget Documents 2002- 2003 to 2007-2008 www./finmin/nic.in2. Economic Survey 2006-07 www./finmin/nic.in3. Mid Term Economic Review of the Central Government2007-08 www./finmin/nic.in4. Macroeconomic and Monetary Developments- ThirdQuarter Review 2007-08; Reserve Bank of India (RBI),January 29, 2008THE INDIA ECONOMY REVIEW19

A N INCLUSIVE INTENTThe virtuous Indian growth cycle is helping fiscal consolidation.Tax revenues are buoyant. High profits translate intolarge corporate tax collections. The buoyancy of service taxwith respect to service economy (GDP) is 6.4%. For the firsttime direct taxes have overtaken indirect taxes. In the previousfiscal year growth in gross tax collection exceeded budgeted by5.8 percent. This year 30 percent growth of tax revenues isexpected against the 17 percent envisaged in the budget. Thetax/GDP ratio has risen to double digits at 11.8 percent whilethe combined gross fiscal deficit of Centre and State Governments,which used to be in double digits has fallen to 5.6percent of GDP in 2007-08, although off balance sheet itemsare estimated to be about two percent. Government debt/GDP ratios are also falling. The ratio for the Central Governmentis down to 56.8 percent.The biggest failure of the nineties was in managing Governmentfinances. The emphasis on the fiscal deficit and stabilizationthrough high interest rates only led to a cut in capitalexpenditure, and did not restore fiscal health. A regime ofhigh growth and low interest rates is the best strategy to lowerdebt. High growth in America after the world war made for arelatively painless lowering of the debt/GDP ratio. England,which followed “correct” conservative deflationary macroeconomicpolicies with high interest rates, suffered low growthand a continued high debt/GDP ratio for more than a decade.For reformers who had long been warning about the dangersand the constraints high government deficits and debt create,how India grew in these circumstances is a major puzzle.But the answer is to be found in the neglect of countryspecific factors. To associate high deficit/debt ratios with crisesis to extrapolate unconditionally from the Latin Americandevelopment experience where these features were foundtogether. But these countries also had low savings investmentrates and low population densities. In India higher privatesavings compensated for government dissavings. In highpopulation density countries such as India and China investmentin infrastructure, even if financed through deficits, islikely to be productive.The most essential reform features are more openness tothe rest of the world and removal of restrictions on privateenterprise, once these are in place it becomes possible toimplement others gradually. The most important ongoingreform requirement, which is also essential for equity andinclusiveness, is to improve the delivery of public services.Fiscal Responsibility and Budget Management Act iscontributing to the improvement in government finances,which look on track to meet announced targets withoutdifficulty. The revenue deficit is to come down to zero and theCentre’s fiscal deficit to three percent by 2009. But inadequateattention has been paid to incentives in formulating the Act,so that it is being mechanically achieved through compressingcapital expenditure, while maintaining subsidies. The letter ofa law can always be achieved through loopholes even whileThe FRBM Act is implemented ina mechanical fashion, throughcompressing capital expenditure,while maintaining subsidiesviolating its spirit. An example is the creative use of oil bondsto maintain the subsidy on petroleum products. Only theinterest payment on these bonds enters the governmentTHE INDIA ECONOMY REVIEW21

Reliving TheGreatIndianDreamThe tax base is much broader inindustrial economies (with a tax/GDP ratio of about 30%), while weare barely touching double digitsbudget. Compliance is better if, rather than restrict the deficititself, constraints are placed only on spending. Caps canenforce reductions in discretionary spending, with escapeclauses for emergencies. New transfer payments can beallowed only if these transfers are demonstrated to haveassured funding so that they do not increase deficits in thefuture. One advantage is that in a slowdown, as revenues fall,the deficit can increase, since restraints cover only spending.This sort of macro stabilization provides another escapeclause. Such flexibility lowers pressure to break rules, givingthe law more credibility not less.The idea is to look more broadly into the incentive aspectsof government tax and expenditure decisions. Governmentbudgeting systems have yet to be modernized. Changing fromplan-based incremental budgeting to project or output basedaccounts and management information systems would giveclear low-level accountability, continuous feedback fordecision-making, and create incentives for the efficientdelivery of output. Government guarantees should be avoidednot so much because they couldadd to future expenditure, butmainly because they encouragemore risky and opportunisticbehaviour from those whoreceive such guarantees.Lowering of rates, broadeningof coverage, and reduction ofloopholes is the third beneficialtrend affecting Indian fiscalstructure. This improves incentivesfor compliance and decreasestransaction costs.This budget should, as othershave in the past, take steps toexpand the tax base, using newtechnology to do so, focusmassively on administrativesimplifications, and adoptmodern systems. The long-term solution is to build a computerizeddatabase and eventually make the filing of tax returnscompulsory. This will eventually make it possible to pay anegative income tax, a clean and leakage free method ofredistribution. Tax exemptions should be removed but gradually.Those encouraging wasteful tax arbitrage should be thefirst to go. Eventually, only those that yield major externalitiesshould be retained.As India grows the tax-expenditure ratios of its governmentshould aim to approach that of a developed economy. Butthere is a long way to go as yet. More than 1/3 rd of the expenditureand taxes of an industrial country are related to socialsecurity, compared to almost non-existent amounts here. Wetend to raise more from excise than from direct taxes while indeveloped economies it is the reverse. Their tax base is muchbroader with a tax/GDP ratio of about 30 percent while we arebarely touching double digits. Our governments have to spenda much higher percentage on infrastructure.A major shorter-term goal is to converge to averageASEAN tariffs of about eight percent by 2010. WTO agreementswill also force reduction and rationalization. In thesecircumstances, the expansion in direct taxes is indeed a boon.But given the expansion in activity taking place, and improvedcompliance and broad basing, revenue may expand despite acut in excise rates. The experience with the destination based22 THE IIPM THINK TANK

A N INCLUSIVE INTENTState level VAT since 2005 has been good. The CST beingphased out; the aim is to establish GST by 2010. This will yieldthe enormous efficiency gains of one market.But huge anomalies remain, and the convergence tointernational norms and rates has a long way to go in the oilsector. This is important because of the steep and sustainedrise in international oil prices. India has among the highesttaxation of the oil sector—only Europe has more. In Mumbaiin 2006, out of a petrol price of Rupees 47, only 23 went to oilcompanies, the rest to government. In New Delhi taxes andduties accounted for 55 percent of the price of petroleum fuel.In the US taxes come to only about 17 percent.It is difficult to deal with the conflicting demands of stabilization,cross subsidization, conservation, revenues andefficiency in this sector. Since the share of ad-valorum dutiesis large compared to specific duties, government revenues risesteeply with dollar fuel prices. Oil revenues account for aboutone-third of the sales tax collections of the States. Heavy taxeson petroleum and aviation fuel subsidize diesel and kerosene,the common man’s fuel. In the past, the structure of Indian oilpricing deferred the impact of an international oil price riseon the Indian consumer, but the lack of competition led tocost padding by refineries implying prices that remainedhigher than necessary over time. High taxes may be justifiedfrom the conservation point of view, but they should not risewith external oil price shocks.After the first oil shock, an administered pricing mechanismwas set up in 1974. This was basically cost plus with an oil poolaccount for reducing the volatility of oil prices and crosssubsidization of diesel and kerosene. The story of Indian oilprices is one of steady upward creep. In particular, whenworld prices were falling in the eighties, Indian oil prices didnot fall. In dismantling this administered price structure in thelate nineties, as part of the liberalizing reforms, import paritypricing had been agreed on for domestic refineries. But thiscontinued to give them protection, allowed cost padding forprofits, and denied the consumer the benefit of lower Indiancosts of processing. Although India is a large importer ofcrude it is a net exporter of refined petroleum products. Therebalancing to make the changes revenue neutral had alsoincreased excise while reducing custom duties. The share ofspecific duties had been raised decreasing that of ad valorumduties. After dollar oil prices began to rise in 2003, governmentreduced duties on raw crude to five per cent while thoseon refined products continued at 10 per cent. But the StateGovernments continued to impose large and variable advalorem duties. There was some rise in retail prices but all theprice increase was not passed on to the consumer, and the oilmajors had to share the subsidy burden. In the year, 2006 asoil prices fell to $65, the decrease was not passed on either,with the ministry saying that retail price levels would bereviewed after international prices fell to below $52. In effect,administered prices have continued. There was no change inthe duty structure or in consumer prices as world prices shotup subsequently. The increase is not being passed on butneither was the decrease. Even as international oil pricesincreased sharply in 2007, the cost of a basket of Indian crudedid not rise as sharply. It was about $70 in the summer but hadincreased to $89 in January. The appreciation of the exchangerate helped reduce the cost, but potential for further immediateappreciation is limited. The slowdown in America maymoderate any further rise in international prices.In New Delhi, taxes and dutiesaccounted for 55 % of the priceof petroleum fuel. In the US taxescome to only about 17%Something has to be done about passing on the costs, butthere is scope to absorb part through rationalizing taxes.Shifting to specific taxes would reduce price volatility. Uniformlow duties on crude and products, and free competitiveentry in retail would be more transparent and less interventionist.It would lower refining costs, eventually passing theseon to the consumer. The taxes were originally designed toraise revenue when the turnover was small. Today when the oilsector has grown enormously lower rates would still yield largerevenues. For example, the very high rates of tax on aviationfuel were designed to tax a small luxury sector. But air traffichas grown enormously and is no longer a luxury. The less welloff are also able to fly with the no-frills airlines. More of thiscategory would be able to fly, and the continental-size economywould derive connectivity benefits if taxes were lowered.Further expansion in volumes would raise revenues.Some stabilization is necessary, especially for transient oilshocks, but more pass-through of prices to the consumer willencourage conservation and the development of oil-substi-THE INDIA ECONOMY REVIEW23

Reliving TheGreatIndianDreamtutes. Rapid technological developments are lowering the costof alternative fuels, such as ethanol, and the budget shouldencourage their use. These have the potential to provide analternative revenue source for the farmer.The fourth trend is the necessity, in a democracy, to designinclusive growth strategies. The budget is expected to contributeto this, especially when ten State elections are due this yearwith national elections to follow in the next. But there is achoice between wasteful populist schemes, and those that buildcapacity and create sustainable opportunities for the poor.The story of the oil sector illustrates the tendency to imposehidden indirect costs and then give direct subsidies. Thebudget can begin by reducing such hidden costs. The healthygrowth in revenues makes it possible to raise the exemptionlimit for income tax, thus benefiting the less well off. Provisionmust be made for the next Pay Commission award tied toimprovements in the productivity of government servants.Oil sector illustrates the tendencyto impose hidden indirect costsand then give direct subsidies.Budget can reduce such costsSomething must be done for the rural areas where much ofIndia still lives and suffers. Water harvesting and irrigation is apriority. But steps must also be taken to make migration easier.We must organize for a large movement of people and try tocreate dispersed opportunities. India’s expenditure on health,education and social security is inadequate and much belowinternational norms. Spending on these categories in afocused way would be more effective than on ill designed andleakage prone multiple social schemes. But design improvementsare required to make this expenditure more effective.As discretion is cut the possibility of holdup by lobbies andspecial interest groups falls. More effective delivery of publicservices is the key reform required to improve the lot of theless well off in this country. Since State and local governmentsare responsible for many of these services, they must bemotivated to improve delivery through a judicious use of thecarrot and the stick. There are many examples of designinnovations that have been effective such as the conditionalityattached to additional central assistance under JNNURM,which has forced the Maharashtra State Government to finallyrepeal restrictive Urban Acts. Apart from more such conditionalitiesand tax incentives local levels of government haveto be empowered through effective decentralization of24 THE IIPM THINK TANK

A N INCLUSIVE INTENTpowers, and a focus on outcomes and not outlays. Specificbenchmarking can encourage competition across localitiesand convergence to best practices. But to prevent exploitativelocal feudal regimes from taking over, improved accounts,transparency, accountability and information sharing isrequired. New technologies make this possible. The fourtrends outlined above are conditional on high growth continuing.Is this feasible given the current doubtful global trends?India has reached a critical mass, and is currently in astructural catch-up process driven by openness, technology, itsdemographic profile and sustained by diversified sources ofgrowth. It is not dependent on demand from any one country.It is not even dependant on foreign capital, with high domesticsavings and investment rates of above 30 percent of GDP. Theforeign savings or current account deficit required to fund thegap is marginal at less than one percent, and can be easilyfinanced from stable capital flows. Firms are cash rich, and nothighly geared, so that they are less exposed to interest ratesshocks. Domestic, household and corporate savings alreadyexceed the projected requirements for 9% growth during the11 th Plan. Household savings had fallen in 2004-05 sinceconsumption increased, but they resumed an upward trend in2005-06. Given high profits there has been a sharp increase infirms’ savings. Private savings are on track, but there is a gapin public savings required to finance the planned increase inexpenditure of 1 to 2.5% of GDP. This can be met partly frombetter expenditure efficiency, partly from the ongoing turnaroundwhereby public savings became positive after a longtime in 2003-04. Private savings are sufficient to compensatefor the shortfall, but intermediating private savings to thepublic sector will require some sort of public sector borrowing.In this context we should make a distinction betweenstructural and cyclical deficits. At the present juncture theGovernment does not need to spend to boost demand. It issensible to run a cyclical surplus or to reduce debt and deficitsso as to be able to spend more when private demand slowsdown. But in a developing country with per capita incomes farbelow potential, spending to remove bottlenecks and developinfrastructure is always required. So the government should runa cyclical surplus but a structural deficit. Monetary policysupport is also required to maintain the growth momentum.There are signs of an industrial slowdown but policy is notreducing Indian interest rates for fear of inflation, to discouragepotential asset bubbles such as in housing and maintainfinancial stability. The interest differential is attracting largeinflows, which are putting pressures on exchange rates andcreating a large fiscal cost of sterilization. Monetary authoritieswant fiscal restraint to help reduce demand and thereforeinterest and exchange rates. But these capital flows are notdemand driven, but respond to return differentials. Theyoriginate in the capital account of the balance of payments, notin the current account. Therefore, reducing the interest gap isa better way to moderate them. International interest rates aremoving downwards, and since domestic demand also needs aboost, domestic interest rates should follow, part of the way.Investment is driving current growth but investment ultimatelydepends on consumer and export demand. It can collapserapidly without the latter. So the budget must maintainproductive expenditures. It was one of the reform myths thatinterest rates could not come down unless governmentborrowing requirements came down. But the lower interestrates since the early years of this decade, that helped triggerthe current high growth cycle, have abolished that myth. In anopen economy with freer capital flows the fund shortages thatkeep interest rates high do not exist, and it is not dangerous tolower interest rates in a labour surplus high population densityeconomy where capital can be productively used.Finally, there is the question of promise versus performancein the budget and delivery of public services more generally.The past record of the government does not inspire confidence.Low levels of promises have been made and those oftennot delivered. For example, budgetary support to the Plan as aratio of GDP has averaged about 2.2%. There has been a slowincrease since 2000-01 to 03; but still the budget estimate isalways above the realized estimate and both are below therequirements estimated in the Plan. This forces a largereliance on extra budgetary resources, in which there are oftenlarge shortfalls, to fund central plan outlays. So where will weget the needed infrastructure from? But more promises havebeen better kept in recent period and there is some movementtowards better governance. The conscious attempt, to recordhits and explain misses in announced targets may itself help toimprove the record. The website of the Ministry of Finance(MoF) now carries a section on the implementation ofpolicies. So we may expect the same four trends in the nextbudget, but it will stand or fall with its ability to use thecurrent revenue bonanza to boost it further in sustainableways, rather than fritter it away.THE INDIA ECONOMY REVIEW25

Reliving TheGreatIndianDreamA Longer View OnTheUnionBudget2008-09R. RamakumarCentre for Development Studies, TataInstitute of Social Sciences(TISS),MumbaiThe Union Budget for the year 2008-09 is an importantopportunity for the Finance Minister to correct anumber of imbalances in the expenditure pattern ofthe central government. First, this is the last full budget of theUPA government, and it is its last chance to keep the promisesmade in the CMP, most of which require major expenditurecommitments. Secondly, it presents a chance to declare theintent of the government not to be tied to the irrationallegislations of expenditure control, such as the FRBM Act. Inwhat follows in this paper, I shall elaborate on these two pointsfrom a long-term perspective.It is well known that India had, in 1991-92, entered into aprogramme of fiscal adjustment, which continues to dominantlyguide economic policy thinking. From 1991 onwards,concerns have been raised by scholars on the impact of thenew policies on public expenditure in the social sectors.International experience since the 1980s has shown thatperiods of fiscal adjustment have also been periods wheresocial expenditures have been adversely affected. According toEbel (1991), “the rapidly changing economic environment ofthe 1980s characterised by government debt obligations hasleft governments scrambling to juggle budgetary priorities…Inthe majority [of countries], the share of social sector expenditurehas been squeezed by higher priority debt servicingrequirements” (p. 11-12). In this context, what has been theactual experience of India in the 1990s and 2000s?26 THE IIPM THINK TANK

A N INCLUSIVE INTENTThe results of an analysis of public finances in the 1990s and2000s show that, overall, the fears of expenditure contractionraised by scholars were real. A long run feature of the fiscalpolicy in India was the inability of the state to raise tax collectionstowards meeting expenditure requirements. In the 1980s,the total expenditure of the government in India had increasedsignificantly, as a share of the GDP, in a large number ofanti-poverty programmes and employment-creating activities.As these higher levels of expenditures were financed out ofborrowings, the debt-GDP ratio of the government rosesharply. A fiscal crisis followed. This problem was most severefor the central government, and it attempted pass on a part ofthese costs to the States in form of higher interest rates ontheir borrowings. The financial transfers from the Centre tothe States also were reduced in this period. As a result, thefinances of the State Governments also entered into a periodof crisis by the early-1990s.The major response of the central government to the fiscalcrisis was to go in for strict fiscal control measures, including alegally set ceiling on budgetdeficits through fiscalresponsibility legislations.Our analysis shows that thepublic expenditure of thecentral government declinedsharply in the 1990s and2000s, as compared to the 1980s. While there was someincrease in the share of social sector expenditures and humanpriority expenditures as a share of the total expenditure, threeimportant qualifications may be in order. First, real per capitaexpenditure on human priority areas actually slowed down inthe 1990s and 2000s relative to the 1980s. Secondly, in theframework of a slowdown in public expenditure as a whole,rising shares may mean little absolute increase in spending andrising growth rates may be unsustainable. Thirdly, on theground, these moderate increases in expenditure by the centrehave mattered little because most of the expenditure isthrough the State governments. While the expenditure stanceof the Centre has a greater influence on the generation ofaggregate demand, the expenditure stance of the Stategovernments is more critical in the financing of social sectorschemes. About 85 percent of all the expenditure in the socialservices is met by the State governments.For the State governments, the conclusions that emerge are85% of all the expenditure in thesocial services is met by the Stategovernments, playing more criticalrole in social sector financingat variance with those of the Centre. The total expenditures bythe States as a share of the GDP rose in the 1990s and early-2000s, but this rise was primarily to finance non-developmentalexpenditures like interest payments. Within total expenditure,the share that went into developmental expenditure declinedin the 1990s and 2000s. Developmental expenditure as a shareof the GDP also fell in the same period. In the case of socialsector expenditures and human priority expenditures by States(the sphere where majority of the social sector expendituretook place), there were unambiguous falls relative to GDP andtotal expenditure. Within specific sub-sectors like educationand health too, this relative decline in expenditure was visible.Expenditure by the government on social and economicservices is a crucial necessity for fulfilling the basic needs ofpeople in developing countries. In India, this democraticfunction of the government would appear to face a seriousthreat from the nature of fiscal contraction that has beenfollowed. The budget for the year 2008-09 should begin aprogressive transformation of the fiscal policy in India towardsreversing the policy of fiscalcontraction.However, such a transformationis today constrained bya legislation passed by theParliament, called the FiscalResponsibility and BudgetaryManagement (FRBM) Act. The FRBM Act was passed byParliament in 2003. In this version of the Act, the Governmenthad to reduce the revenue deficit to zero by 2005-06. In July2004, the Act was amended to postpone the year of eliminationof revenue deficit to 2008-09. In the amended form, theAct stated that the governments should initiate ‘‘appropriatemeasures to reduce the fiscal deficit and revenue deficit so asto eliminate revenue deficit by 31 st March 2008 and thereafterbuild up adequate revenue surplus”. Towards achieving thisgoal, the government was to set annual targets for fiscal andrevenue deficits so that the final targets in 2008-09 could bemet. Thus, from the early 2000s, fiscal compression became alegally binding policy for the government. The falling expenditureof the centre as a share of GDP from the early 1990sonwards was a direct result of this legally binding fiscalcompression. Within the framework set by shrinking totalexpenditure in the 1990s and 2000s, there was a slowdown inthe flow of funds to human priority areas relative to the size ofTHE INDIA ECONOMY REVIEW27

Reliving TheGreatIndianDreamthe economy. As one study noted,…this decline [in allocations]is particularly conspicuous in terms of the structuraladjustment and stabilisation policies of the government thatseems to have ignored its commitment to sustain budgetaryallocations to key social sectors including education. As aresult, investment in educationhas been seriouslyaffected, and this will undoubtedlyimpact on thequantity and quality ofeducation in future (Shariff,Ghosh and Mondal, 2002, p.6). More recently, the Union Planning Commission seems tohave understood the implications of continuing with theFRBM Acts to any strategy to development that would involveacceleration of revenue expenditure. The Planning Commission,in its attempt to have “faster” but “more inclusive”growth in the Eleventh Five Year Plan, has outlined a strategythat includes a number of new initiatives, such as the expansionof school education, programmes for provision of healthcare, drinking water, rural infrastructure and schemes for“bridging the divides”. All these ambitious programmesbelong essentially to the revenue-development expenditurecategory and cannot be implemented if the FRBM/TFCtargets of elimination of revenue deficit are achieved. Theentire strategy of the Eleventh plan would collapse if revenueIt may not be easy for the CentralGovernment to cut the revenuedeficit from 2.1 percent in 06-07to zero percent in 08-09deficit is eliminated by 2008 or 2009. It maybe appropriate to quote at length from thedraft approach paper to the Eleventh Planin this context:“These targets could prove difficult toachieve because the shift in Plan expendituretowards the social sectors has meantthat a large proportion of expenditureundertaken will be revenue expenditure asper the current budgetary definition.According to this, all grants by one tier ofthe government to another, or to theprivate sector, are treated as revenueexpenditures, irrespective of whether suchexpenditures create assets or not…Theseproblems suggest that it may not be easyfor the Centre to cut the revenue deficitfrom 2.1 percent in 2006-07 to zero percentin 2008-09 while also achieving large increases in Plan expenditurewith a high revenue component. Indeed, the very thrustof the approach to the 11 th Plan presented in this paper, whichinvolves combining innovative financing of infrastructure witha massive decentralised thrust on education, health andagriculture, may be defeatedif the FRBM discipline isinsisted upon with the currentdefinition of revenue deficit(GoI, 2006).”The Planning CommissionApproach Paper also discussesthe issue of fiscal deficit targets in the FRBM Acts. It saysthat important Plan expenditures, such as in infrastructure,may have to be postponed if the targets of fiscal deficit areadhered to. Such postponement, the paper argues, “couldjeopardise growth” and could reduce the space available for“counter-cyclical fiscal measures” in times of economicslowdown. A much needed initiative in this budget would be todo away with the obsession with controlling fiscal deficit.Demands for a more flexible FRBM Act are also fully endorsedby international experiences with fiscal responsibilitylegislations. The FRBM Act has to go off the rule book or bedrastically amended. One only hopes that the Central Governmentwould take an initiative in this regard in the UnionBudget for 2008-09.28 THE IIPM THINK TANK

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Reliving TheGreatIndianDreamStatus OfBasic EducationIn India: An OverviewVimala Ramachandran, Development EconomistI. The Context: Where Do We Stand?Travelling around the country to do research upon elementaryeducation, women’s education and empowerment isboth an exhilarating as well as a deeply disturbing experience.Wherever one travels one cannot but notice that eventhe poorest families are eager to access educational servicesand want their children to break out of the cycle of povertyand low educational achievement.Yet, miles and miles of barren land, impoverished ruralareas, dysfunctional health centres and elementary schools,as well as poor roads are a grim reminder of the hard factthat India is a county of immense diversity and sharp30 THE IIPM THINK TANK

A N INCLUSIVE INTENTinequalities. At the time of India’s independence, less than afifth of the population was literate. After independence,efforts were made to expand access. But the fact that accessto education was a moral obligation enshrined in theDirective Principles of State Policy (Article 45) kept itbeyond the purview of an enforceable right. In 1993, theSupreme Court in Unnikrishman Vs. the State of AndhraPradesh, recognised primary education as an importantaspect of one’s personal life and liberty and located it withinArticle 21, a Fundamental Right. In 2002, both Houses ofParliament passed a legislation to amend the Constitution torecognise basic education as a Fundamental Right (86 thAmendment). The Census of India 2001 reveals that despitea host of schemes and programmes, only 65.38 percent ofthe Indian people are literate (75.85 percent men and 54.16percent women). A staggering number of children, close to38.41 percent of boys and 51.88 percent of girls in the agegroup of 6-14 years, are not attending school.While the statistics of the education department (SelectedEducation Statistics, Government of India, 2006) claim that99 percent boys and 82 percent girls, aged 6-10, are enrolledin schools, the National Sample Survey (NSS), Governmentof India (61st Round, 2004-05) reported the enrolment rateto be 80 percent among boys and 73 percent among girls inrural areas and 88 percent boys and 85 percent girls in urbanareas attend school.This data hides major disparities across region, caste,class, tribe and ethnicity, as well as the rural-urban andgender divide. For example, there is convincing evidence toshow that the contiguous regions of Rajasthan, Bihar, WestBengal, Jharkhand, Orissa, Uttar Pradesh and parts ofMadhya Pradesh need special attention. Similarly, some ofthe North Eastern states like Arunachal Pradesh, Meghalaya,Nagaland and Assam have long been neglected.II. Education For All: Policy FrameworkFrom 1950 onwards, the Government of India (GOI) hascreated policy instruments to promote Universal ElementaryEducation (UEE) in an attempt to eliminate all formsof discrimination based on caste, community and gender.Some of these are: 2• Policy-level recognition of the importance of providingchild care facilities/crèche within school premises. TheIntegrated Child Development Programme (ICDS) wasinitiated in 1975-76 in 33 Blocks and now covers 5,671Blocks (Projects) with 7.44 lakh Anganwadi Centres.Slated to be universalised, an additional 467 Blocks(1,88,168 Anganwadi Centres) will be operational by theend of the Tenth Five Year Plan; 3• Provide schools within walking distance, and satelliteschools for remote hamlets, stepped after the adoption ofthe National Policy of Education and Programme ofAction, 1986. Enrolment at the primary level went upfrom 19.2 million (5.4 million girls) in 1950 to 130.8million (61.1 m girls) in 2004-05 4 . In the 1990s the numberof schools increased by 14.8 percent at the primary level,50.65 percent at the upper primary level, 38.43 percent atthe secondary level and 85.74 percent at the highersecondary level 5 . However, these impressive achievementsneed to be tempered in the light of the highdrop-out rates which stand at 29.0 percent (24.42 percentClose to 38.41%of boys and51.88 % of girls in the age group6-14, are not attending schoolgirls) at the primary level, 50.84 percent (51.28 percentgirls) at the elementary level and 61.92 percent (63.88percent girls) at the secondary level; 6• Provide alternative education programmes to reach out toout-of-school children (never enrolled and drop-outs) —through bridge courses, residential schools and focussedinitiatives for minorities and special focus groups (likemigrant groups and etc);• Appoint more women teachers in rural areas and providethem with secure residential accommodation services.Expand the pool of women teachers by lowering job qualifications,provide intensive training (near the place ofdwelling), among others;• Improve the quality of education and motivate teachers tomake learning a joyful exercise;• Provision attractive incentives like mid-day meals, uniforms,textbooks, exercise books, attendance scholarshipand free bus passes;• Involve the community in managing the school throughmobilisation and formation of village education commit-THE INDIA ECONOMY REVIEW31

Reliving TheGreatIndianDreamTable 1: Education Policy In India 1951 To 2005Period Policy Framework Programmes and Approaches Of The Central Government1951-68 Constitution of India Expansion of the formal schooling system. State governments shoulder theresponsibility for primaryeducation.1968-86 National Policy onEducation, 19681986-92 National Policy onEduction, 1986 JomtienConference for Educationfor All followed by EFAprojects – most of themwith foreign aid1992 to20022002onwardsRevised National PolicyonEducation, Policy Mid-dayMeal, 1995 Supreme CourtOrder on Mid-day meal in2001Free and compulsoryeducation bill, 2004Revised Mid-day mealprogramme in 20041976: Education shifted to the ‘Concurrent list’ therebygiving the GOI and state governments equalresponsibility for promoting and managing education.1980s: Non-Formal Education introduced to supplementformal schooling, thereby increasing Central investmentin primary schooling.Andhra Pradesh Primary Education Project, early 1980 (British ODA)Environmental Education, 1986 (British ODA) Environmental Education,1986 Project, 1987 (Sida) Total Literacy Campaign, 1988 (Domestic resources)Mahila Samakhya in Karnataka, UP and Gujarat, 1989 (Dutch Government)Bihar Education Project, 1991 (UNICEF) Rajasthan Lok Jumbish, 1992 (Sida)UP Basic Education Project, 1992 (World Bank)District Primary Education Programme (DPEP), 1993 with consortium fundingfrom DFID India, World Bank, Delegation of the European Union, UNICEFand Royal Netherlands Government) National Programme of NutritionalSupport to Primary Education (commonly known as the Mid-day Meal Scheme)was launched as a Centrally-sponsored Scheme on August 15, 1995. Its objectivewas to boost “universalisation of primary education by increasing enrolment,retention and attendance and simultaneously impacting on nutrition of studentsin primary classes”. Sarva Shiksha Abhiyan 2001 – an umbrella programme forelementary education in India. November 2001: the Supreme Court of Indiadirected all state governments to provide cooked midday meals in all primaryschools (order dated November 28, 2001); follow-up order April 20, 2004 – whenit was reported that few states were giving a hot cooked meal and many weredistributing dry rations.Free and compulsory education made a Fundamental Right for all childrenbetween 6-14 years and included in Part III (Fundamental Rights) of theConstitution of India; Universal mid-day meal for primary schools across thecountry. Central Government has approved a revised scheme, entitled NationalProgramme of Nutritional Support to Primary Education, 2004 (NPNSPE,2004) Objectives of the revised Scheme are:• To boost universalisation of primary education (classes I-V) by improvingenrolment, attendance, retention, and learning levels of children, especiallythose belonging to disadvantaged sections,• Improve nutritional status of students of primarystage, and• Provide nutritional support to students of primary stage in drought-affectedareas during summer vacation also.tees with at least 50 percent women members;• Decentralise educational planning and administration,bring it closer to the people sothat it reflects the specialneeds and aspirations of the community;• Mobilise public opinion for primary education anduniversal literacy in general and women’s education inparticular. Additionally, advocate for greater political willand administrative commitment;• Adopt a holistic and convergent framework for synergybetween different strategies/projects to revitalise primaryeducation – the main thrust of the District PrimaryEducation Programme (DPEP) launched by the Govern-32 THE IIPM THINK TANK

A N INCLUSIVE INTENTment of India (GOI) in 1993-94 ;• Evolve context-specific strategies to respond toeducational needs, especially of girls and otherspecial focus groups (SSA 2002);• Make elementary education a Fundamental Rightof every single child in the 6–14 years age group(83 rd Constitutional Amendment, GOI, 2002);• National Programme for Education of Girls at theElementary Level (NPEGEL) introduced toaugment resources in educationally backwardblocks of the country;• Kasturba Gandhi Balika Vidhyala (KGBV) toreach out to out-of-school girls and provideresidential education for students from sociallydisadvantaged groups. This programme was initiated in2004 in the educationally backward blocks of India.III. Challenges In Education Access And Retention:Highs And LowsThe decade from 1991 to 2001 saw the country’s literacy raterecord an increase of 13.17 percent, the highest increase inany decade after independence.• As many as 1,52,304 new primary schools and 1,10,830 newupper primary schools have been opened since 1990(Select Educational Statistics, GOI, 2006). Physical accessto formal primary schools improved considerably;• The growth rate of literacy was higher among females thanamong males;• The growth rate of literacy was higher in the rural areas(14.75%), as compared to urban areas (7.2%). Though,despite these improvements literacy in urban areas was80.3% and that in rural areas 59.4%;• Female literacy went up from 32.17 percent in 1991 to45.84 percent in 2001 – a 13.67 percent jump (the increasein previous decades being 7.35 percent in 1981-91, 6.13percent in 1971-81 and 5.74 percent in 1961-71);• The decadal increase in female literacy was an impressive24.87 percent in Chhattisgarh, 20.93 percent in MadhyaPradesh and 23.90 percent in Rajasthan.There has been an increase in enrolment rates and thepercentage of never enrolled children is steadily decreasing.Muslim Girl Child Most Vulnerable 7An important exception to this trend is found amongscheduled caste (SC) and scheduled tribe (ST) children andMuslim girls. A GOI-commissioned study by the Social andResearch Institute (SRI) says the estimate of out-of-schoolchildren is highest among Muslims (9.97 percent). Thestates and Union Territories that are worse than the nationalaverage are Bihar (28.34 percent), Daman Diu (28 percent),Uttar Pradesh (14.37 percent), and West Bengal (11.33Nearly 1,52,304 primary schoolsand 1,10,830 upper primary schoolshave been opened since 1990percent). The estimate of out-of-school Muslim children inrural areas (12.03 percent) was the highest among all socialgroups. (SRI report on assessing the number of out ofschool children in the 6-13 years age group, submitted toMHRD, GOI; New Delhi 2005, page 26-27.)An analysis of the trends between the 1991 Census andthat of 2001 reveals a disturbing pattern:• The Muslim girl child is amongst the most vulnerablegroup for future education policy planners; 8• The enrolment rates of Muslim girls have steeply fallenrelative to the all-India average, especially during andafter the decades of the 1990s (Shariff and Razzack inCouncil for Social Development Report, India SocialDevelopment Report, OUP, New Delhi, 2006);• Shariff and Razzack point out that the difference inliteracy rates amongst Muslim men and women and theirTHE INDIA ECONOMY REVIEW33

Reliving TheGreatIndianDreamnon-Muslim counterparts was greater in urban areas.Also, while literacy levels were more even amongstMuslim and Hindu women in the 1950s, 1960s, 1970s andeven the 1980s, the differences have widened substantiallyamong the younger age women around the year 2001. (Asper Census 2001, 55 percent Muslim men are literatecompared to 64.5 percent non-Muslim men, and 41percent Muslim women are literate compared to 46percent non-Muslim women);• Similarly, the most recent NSSO report (61 st Round2004-05) highlights rural-urban differences and thesituation of children from SC and ST communities.West Bengal Is The Worst LaggardEnsuring access to upper primary schools (Classes V/VI toClass VII) is one of the most formidable challenges faced bygovernments in India. The most recent compilation of schoolspecific data reveals that the ratio of primary to upperprimary schools and upper primary classes in high schoolsremains 2.57 in the country as a whole. Again there are wideregional differences. Perhaps the worst ratio is seen in WestBengal (5.28) – only one in every five children who enrol inprimary school can hope to find a school beyond Class IV.Table 2: Percentage Increase In Schools,Enrolment And Teachers, IndiaPercentage Increase In # Of Schools 1986-93 1993-2003Primary 7.89 14.18Upper Primary 17.11 50.65Secondary 24.74 38.43Higher Secondary 53.00 85.74Percentage Increase In Enrolment 1986-93 1993-2003Classes 1-5 12.94 26.15Classes 6-8 24.93 37.49Classes 9-10 32.11 43.21Classes 11-12 55.72 28.73Percentage Increase In # Of Teachers 1986-93 1993-2003Primary 8.75 17.83Upper Primary 12.73 40.01Secondary 14.62 20.09Higher Secondary 44.30 68.68Source: 6 th All India Educational Survey, 1998 And 7 th All India Educational Survey,NCERT, 2004Children Attending School (5-14 Years Of Age)Attending per 1000Population10008006004002000Source: NSS 61 st RoundRural Rural UrbanMale Female MaleUrban, Rural, Male and FemaleUrbanFemaleSTSCOBCOthersDropping Out: Reality CheckElementary education in India is characterised by highdrop-out and low completion rates, persistent inequities andpoor quality. While close to 90 percent children in the 6-11age group are formally enrolled in primary schools (formal,Education Guarantee Scheme (EGS)/Alternative Schools(AS) and private schools), nearly 40 percent drop out at theprimary stage (Select Educational Statistics, GOI, 2006).Drop-outs Are More Among Poor And SociallyDisadvantaged PopulationAs is evident in Table 3 above, the number of childrenenrolled in upper primary drops sharply, and comes downfurther at the secondary level. The situation is worse for therural and urban poor and socially disadvantaged groups,such as SCs and STs. The drop-out rates among SC childrenare higher than the average drop-out rate.In 2003-04 there were 23.12 million SC children (10.36girls) in primary and only 8.07 million children (3.34 milliongirls) in middle schools. But interestingly, girls’ enrolment atall stages has increased quite sharply with almost 45 percentof students at the primary level being girls. A similar trend isvisible among ST children.But the ratios of SC and ST children still remain far lowerthan the national average. Only 48.6 percent of SC girls and40.6 percent of ST girls are enrolled at the elementary levelas compared to the national average of 56.22 percent of allgirls. The sharp drop from primary to elementary is yetanother clear indication of high drop-out rates, especiallyamong the most deprived children who access governmentschools in rural and tribal areas.Marginal Change In Drop-out RatesWhat is worrying is that there has been a marginal change in34 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 3: Enrolment (In Millions) From 1950 To 2004Year Primary Upper Primary SecondaryBoys Girls Total %GirlsBoys Girls Total %GirlsBoys Girls Total %Girls1950-51 13.8 5.4 19.2 28.13 2.6 0.5 3.1 16.13 1.3 0.2 1.5 13.331960-61 23.6 11.4 35 32.57 5.1 1.6 6.7 23.88 2.7 0.7 3.4 20.591990-91 57 40.4 97.4 41.48 21.5 12.5 34 36.76 12.8 6.3 19.1 32.982000-01 64 49.8 113.8 43.76 25.3 17.5 42.8 40.89 16.9 10.7 27.6 38.772001-02 63.6 50.3 113.9 44.1 26.1 18.7 44.8 41.8 18.4 12.1 30.5 39.52002-03 65.1 57.3 122.4 46.8 26.3 20.6 46.9 43.9 19.5 13.7 33.2 41.32003-04 68.4 59.9 128.3 46.69 27.2 21.5 48.7 44.15 20.6 14.4 35.0 41.14Source: Select Education Statistics, Department of Education, MHRD, GOI, 2003-04, New Delhi 2006Table 4 : Enrolment (In Thousands) Of Scheduled Castes From 1980 To 2004Year Primary Upper Primary SecondaryBoys Girls Total % Girls Boys Girls Total % Girls Boys Girls Total % Girls1980-81 7213 3768 10981 34.31 1621 602 2223 27.08 906 246 1152 21.351985-86 8727 5194 13921 37.31 2537 1082 3619 29.90 1378 432 1810 23.871990-91 9737 6057 15794 38.35 2747 1413 4160 33.97 1713 635 2338 27.161995-96 11284 7892 19176 41.16 3453 1992 5445 36.58 1854 887 2741 32.362000-01 12059 9136 21195 43.10 4066 2628 6694 39.26 2418 1394 3812 36.572003-04 12764 10365 23129 44.81 4733 3343 8077 41.39 1978 1251 3229 38.74Source: Select Education Statistics, Department of Education, MHRD, GOI, 2005drop-out rates. The drop-out rates of SC and ST boys(elementary level – Classes I to VIII) seem to have increasedin the last two to three years. Within each categorythe situation of girls is worse than that of boys (with theexception of the forward castes / economically better offwhere the drop-out rates of girls have fallen more sharplythan that of boys. More SC and ST children drop out thanthose of forward castes/ communities. If rural/ urban ratesdisaggregated by caste/ community and gender were available,the combination of gender, social and location disadvantagecould be demonstrated far more convincingly. It isextremely distressing that 71 out of 100 tribal girls drop outbefore even completing elementary education.Official statistics often generate scepticism. An independentsurvey, the National Family Health Survey (1998-99)reports a significant increase in school attendance amongchildren 6-14 years of age (73.7 percent girls, 83.1 percentboys). But it also reveals that only 34.2 percent girls and 53.3percent boys (of all those who responded to the survey)complete primary education.The Macro View: Critical Inter-state DifferencesThese trends also hide important inter-state differences.While the overall completion rate of the full primaryeducation cycle (completing Class V in some states andcompleting Class IV in others) is 78 percent in Karnataka,62 percent in Maharashtra and 55 percent in Tamil Nadu,the figure dips to under 40 percent in Uttar Pradesh, Bihar,Orissa and Madhya Pradesh.Several studies (Yash Agarwal 2000, 2001, GopinathanNair et al 2001, Jha and Jhingran 2002, Vimala Ramachandran2003) have found that while the proportion of neverTHE INDIA ECONOMY REVIEW35

A N INCLUSIVE INTENTing precisely those sections that require the maximumattention and resources to a ‘second tier of education’,more deeply inscribing negative social markers on children.child can advance, especially a first generation learner,burdened with a combination of ill health and domesticchores before and after school. 10Social Barriers To Education: A Cruel RealityChildren of communities engaged in scavenging, disposal ofdead animals and such like “impure” occupations areshunned by other children in the school. The teachers arealso not very sympathetic to their predicament. Such issuescannot be captured in macro-data or in large-scale studies.Recent qualitative micro studies done in six states havecaptured a range of discriminatory practices practised inschools and its impact on the schooling of children fromspecific social groups (Vimala Ramachandran, Ed., 2004).Malnutrition And Hunger: No Food For ThoughtThe recent State of the World’s Children report (2007) hashighlighted the nutritional status of children in the countryas a whole. The NFHS-3 data reveals that 38 percent ofchildren under-three are stunted (too short for their age), 19percent are wasted (too thin for their height) and 46 percentare underweight (too thin for their age). Notwithstandingthe ICDS programme and the Mid-day Meal Scheme(MMS), recent evidence has highlighted the alarmingnutritional status of Indian children. Given prevailinggender relations and attitudes and practisestowards girl children, the chances are thatgirls account for a larger proportion ofmalnourished children 9 .In The Poorest States, Mid-day Meals Are A FarceResponding to the grim nutritional status of children, theSupreme Court of India ordered (dated November 28, 2001)a universal cooked mid-day meal programme. Following theSupreme Court’s directive, 23 of the 35 states and UTsswitched over to cooked meals. An estimated 58 millionchildren (around 55 percent of all children in the 6-11 agegroup) are currently receiving cooked meals spread over 29The rapid growth of EGS schoolshas revived the old debate ofdualism in Indian educationstates and UTs. According to the Annual Report of theMHRD, around 106 million children were covered underthe scheme in 2003- 04 (R. Govinda and K. Biswal, 2006).The irony is that the areas which have some of the worstnutritional status are among the states where the mid-dayLong Shadows Of Ill-health AndDomestic ChoresMicro-studies in the past seven years haveshown that in four to five years of severedrought in many parts of the country, shortterm and persistent hunger among childrenwas flagged as an important issue (VimalaRamachandran Ed., 2003 – Hierarchies ofAccess, Sage Publication). Poor health andfrequent illness impedes regular attendancein school. The link between health andeducation is yet to be addressed, especiallyin the case of children from the poorestquartile. It is not tough to imagine how far aTHE INDIA ECONOMY REVIEW37

Reliving TheGreatIndianDreammeal programme is not being implemented in letter andspirit. In reality, Mid-day Meal Schemes are a farce.When Learning Takes WingFor a long time, poor performance on the basic schoolingfront was attributed to a lack of schools and teachers on thesupply side, and poverty, parental attitudes, social barriersand prevalent social customs on the demand side. As notedearlier, significant progress has been made on both fronts.Recent research indicates that an important factor explainingboth the high drop-out rates and also the persistence ofout-of-school children is the stark fact that many of ourschools are unattractive - physically and pedagogically.Giving adequate attention to the software of education andissues of quality is a must.Tapas Mazumdar Committee(1999) calculated that an additional4,00,000 schools are neededWhat A Primary School Should Be, What It Is?The official policy is that a primary school must have at theminimum two rooms, two teachers and a pupil: teacher ratioof 40:1. It must be located within a kilometre’s walkingdistance for a child. The ground reality is very different:• Despite an increase in primary and upper primary schools,the annual growth rate of school buildings is around onepercent per annum, much lower than the populationgrowth rate;• To ensure UEE, the Tapas Mazumdar Committee set upby the GOI (1999) calculated that an additional 4,00,000schools are needed;• Owing to a major shortage of teachers, teacher-pupilratios are as high as 1:80 in some states, placing an undueburden upon teachers and also affecting the quality of theirteaching activities in an adverse fashion.The perennial problem of single teacher schools, multigradeclassrooms, poor quality teachinglearning materialand inadequate state of teacher training has to be seenagainst the wider backdrop of not involving the communityin managing the school environment.No Significant Gender Gap In Learning OutcomesThe most recent District Information System on Education(DISE) statistics reveal that 47.83 percent boys and 48.50percent girls passed Class IV/V with 60 percent and moremarks. An NCERT-sponsored study on learning outcomesalso does not reveal any significant gender differences inlearning outcomes, 11 a key quality indicator of the government.However, this kind of data is not available for the fullelementary cycle (classes VII/VIII)Learning Levels AbysmalThe real issue is not of a gender gap in learning outcomesbut of extremely low learning levels across the country – 35percent of all children in the 7-14 age group cannot read aClass I text and close to 52 percent cannot read a short story;44 percent children in Class II to V in government schoolscannot read an easy Class I paragraph. As the saying goes,when a person is drowning it really does not matter if it is 35feet of water or 50 feet of water.The recent Annual Status of Education Report (ASER2006) prepared by Pratham to assess the learning levels of childrenacross schools reveals a rather dismal picture – theinability of children in Class III to read a story at Class II levelshows that the reading ability in private schools is far betterthan in government schools, and there is no significantgender difference across different states in India (see chartbelow). With respect to gender and education it is veryimportant to recognise and appreciate that once girls are ableto enrol and attend school regularly, there is little difference inthe learning outcomes.Table 7 : Teacher-Pupil RatioYear Primary UpperPrimaryHigh/Hr.Secondary1950-51 01:24 01:20 01:211970-71 01:39 01:32 01:251980-81 01:38 01:33 01:271990-91 01:43 01:37 01:311999-00* 01:43 01:38 01:322000-01* 01:43 01:38 01:322003-04 01:45 01:35 01:33* Provisional38 THE IIPM THINK TANK

A N INCLUSIVE INTENTFluent Story Readers, ASER 2006Andman & NicobarPondicherryTamiilnaduKeralaGoaKarnatakaAndhra PradeshMaharashtraDadra & Nagar HaveliDaman & DiuGujaratMadhya PradeshChhatisgarhOrissaJharkhandWest BengalAssamMeghalayaTripuraMizoramManipuramNagalandArunachal PradeshBiharUPRajasthanHaryanaUttaranchalPunjabHimachal PradeshJammu & KashmirStatesStory BoysStory Girls0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00Percentage Who Can Read StoryThinking Many Steps Ahead And LaterallyMany factors determine whether children will continue ordrop out, whether, and how much, they learn, and whetherthey acquire the skill/interest to pursue further education. Ifand when children do drop out due to poverty, migration,other economic factors and rigid gender roles, the presenceor absence of programmes that enable them to get back intothe formal system determines whether they can re-enrol inthe school system.Negative Impact Of Drop-outsExperience shows that the presence of demoralised youngsters,who may have completed primary school or droppedout, acts as a disincentive for younger children in the family/community. Particularly so if the education imparted doesnot lead to any material gain (employment/self-employment),or even the unquantifiable value addition in terms ofsocial capital. Increasing adolescent crime and social unrestamong ‘literate’ youth further reinforces negative attitudesTHE INDIA ECONOMY REVIEW39

Reliving TheGreatIndianDreamTable 10: Work Children (6 To 11 Age Group) Before And After SchoolBoys What Children Do? GirlsAlways Sometimes Rarely ▲ Almost NeverUP KARNATAKA AP UP KARNATAKA APBEFORE GOING TOSCHOOL ▲ Sweeping, Cleaning the house ▲ Washing utensils and clothes Lighting the fire, cooking Fetching Water Collecting fodder, feeding animalsAFTER SCHOOL Collecting fodder / fuel wood Domestic labour (urban slums)▲ ▲ Collecting cow dung Fetching water ▲ Fedding the cattle Grazing cattle and goats Doing odd jobs in the fields Running errands ▲ ▲ Cooking Sibliing care ▲ Washing utensils Working during holidays / vacations Short-term bondage to pay ▲ ▲ ▲off loans Leisure time spent playing,Watching TV (urban area) Free time used for weavingbeskets/ beedi rolling /other jobs Source: Vimala Ramachandran et al, 2004towards both the youth andeducation (Planning CommissionWorking Group on Adolescents,GOI, 2001).It is now universally recognisedthat in order to revitalise basiceducation, it is essential that weneed to focus on the following:• Move from ‘access only’ to‘access to good qualityeducation’;• Move from primary to upperprimary, middle and high schooland forward linkages to higherand technical (includingvocational) education;• Create multiple exit points afterclass VIII through vocationaleducation, skill and livelihoodtraining alongside opportunitiesfor out-of-school children toimprove their educational levelthrough accelerated learningprogrammes.Even if most children are ableto avail of 10 or 12 years ofschooling, the presence orabsence of institutions of highereducation (including vocationaltraining) determines access.While government subsidy fortechnical and higher educationhas significantly decreased in thelast five years, the number of goodquality institutions is few andfar between.The OutsidersSpecific groups that constitute themajority of out-of-school childrenpose a huge challenge– notableamong them are child workers,special needs children andadolescent girls.40 THE IIPM THINK TANK

A N INCLUSIVE INTENTLink Between Child Labour And Non AttendanceIt is often argued that children remain out of school becausetheir families need the income from their labour, that theirpresence at home, especially of girls, frees parents and oldersiblings for jobs. But recent studies of the time utilisation ofchildren reveal that a large majority of out-of-schoolchildren are not engaged in full-time work. Many are neitherin school nor active members of the workforce (VimalaRamachandran et al. 2004; Snakes and Ladders; WorldBank, New Delhi).A recent GOI report on Child abuse (WCD, GOI, 2007)reveals that the picture on the ground is quite complex.Most working children are in the 12+ age group. While amajority of child workers in the informal sector (tea kiosks,workshops, restaurants) are boys, a majority of the invisibleworkforce like domestic workers are girls. Bidi rolling isanother area where 83 percent are girls. Importantly, evenwhen they do work, the causation need not be from childlabour to non-attendance. Often, it is those children who areexcluded from school who take up work as a default occupation.Moreover, even when the child’s income is essential forthe family, the time spent in these activities is small andflexible. Finally, many school-going children work bothbefore and after school hours. Drawing a one-to-onecausality between work and nonenrolment in school couldhide context specific nuances of this very serious issue.Unfortunately, data on special needs children – physicallyand mentally challenged – remains scanty, notwithstandingsome pioneering work done in select DPEP districts in thepast three years where an effort was made to set up specialschools and integrate these children in general schools. Aneducational environment remiss at handling ‘normal’children has a long way to go before it can be expected torespond satisfactorily to the needs of special needs childrenwith deprivations.Less Than One-Third Adolescents In SchoolLess than one-third of adolescents (11-17 years) are inschool (NFHS-3 2004). The situation has not changed muchsince NFHS-2 (1998). Of the drop-outs — for girls marriageis usually the reason — less than half have minimumliteracy skills. Yet this group continues to receive inadequateattention. More disturbing is the conventional mediaportrayal of adolescent boys as violent, troublemakers,sexually active, vulnerable to drugs and infected with HIV/AIDS! While the Planning Commission acknowledges theLess than one-third of adolescents(11-17 years) are in school. Yetthey receive inadequate attentionneed to focus on the education and development needs ofadolescent boys and girls, calling them “a tremendous forcefor change and reconstruction, yearning to be involved inwork and development,” the grim reality is that there are noprogrammes addressing issues of health, education, sexuality,livelihood, skill and leadership development in a holisticmanner within the broad frame of human rights anddemocracy (Planning Commission Working Group onAdolescents, GOI, 2001).The Poverty Of LearningWhy do certain children not go to school? Several studieshave cited teacher inertia, absenteeism, poor infrastructure,Table 9: Total Mean Household Expenditure Per Child Per Year On EducationPrimary Middle Secondary Higher Secondary TertiaryGovernment 328 709 1156 1978 2672Local Bodies 447 796 1216 2198 3404Private aided 1330 1449 1654 2623 3463Private Unaided 1642 2193 2766 3591 4024ALL 622 978 1395 2328 3078Source: NSS, 52 nd Round (Cited in Deepa Sankar et al, 2003)THE INDIA ECONOMY REVIEW41

Reliving TheGreatIndianDreamTable 10: Public Expenditure On Education In IndiaYearExpenditure oneducation (all,centre and state)CroreGovernmentexpenditure on allsectors CroreGDP at currentprices (at factorcost) base year1993-94 Crore% expenditureon education toexpenditure on allsectors% educationexpenditure toGDP1999-2000 74816.09 512519.33 1761838 14.60 4.252000-2001 82486.88 572160.14 1902998 14.42 4.332001-2002* 79865.70 619713.14 2081474 12.89 3.842002-2003* 85507.34 678548.31 2254888 12.60 3.792003-2004* 89079.25 743668.96 2543396 11.98 3.502004-2005*(RE) 104566.00 819231.00 2843897 12.76 3.68*: Provisional, Source: GOI, SES, 2006irrelevant curricula and a demotivating environment asfactors responsible for children being out of schools (Drezeand Gazdar 1996, PROBE 1999). They have shown a closelinkage between low family income/poverty and schoolingarguing that the economic dimension cannot be ignored.There is a cost incurred in sending children to school and,despite claims to the contrary, even in government runprimary schools, education is not free. Families spend asmuch as Rs.350-per child per year for uniforms, stationery,transport, and more if tuition is added, not a small amountfor poor families, (PROBE, 1999 and NCAER 1994, DeepaShankar 2003) as depicted in Table 9.Uncertainty Of ExistenceSeveral recent studies (World Bank 1996, Vimala Ramachandran2003 and 2004) show that children are more likely toEven poor families spend as muchas Rs.350-per child per year andmore if tuition is addeddrop out and their aspirations about life are likely to remainlow due to the uncertainty they face about their ability tocontinue with schooling. Often dropouts are engaged insome work, within the household or outside, and this work israrely conducive to schooling. While incentives such as freetextbooks, bags and uniforms make a big difference, recentevidence has shown that provision of a hot mid-day mealexerts a positive influence (Jean Dreze, personal communication2004). It is not that poor parents do not want toeducate their children; just that below certain thresholdincome levels they find it difficult to do so.Violence, Abuse And Corporal PunishmentThe recent Government of India, Ministry of Women andChild Development report on Child Abuse in India (WCD,GOI, 2007) based on interviews with 3,163 school-going childrenreleased startling figures:• Two out of every three children were physically abused• Out of 69 percent physically abused in 13 sample states,54.68 percent were boys;• Out of those children physically abused in family situations,88.6 percent were physically abused by parents;• Two out of three school-going children reported facingcorporal punishment;• 62 percent of the corporal punishment was in governmentand municipal schools;• Most children did not report the matter to anyone;• 50.2 percent children worked seven days a week;• The ratio of girls physically abused was higher in Kerala(55.61 percent) and Gujarat (54.61 percent);• The highest percentage of abuse among boys was reportedfrom Delhi (62.2 percent) followed by Madhya Pradesh(59.75 percent) and Maharashtra (55.75 percent).Expenditure On Education 12Until the 1990s it was commonly believed that shortage offinancial resources was one of the major reasons for India’s42 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 11: Public Expenditure On Education In IndiaYearExpenditure onElementary Crore% to GDP onElementary% to GDP onSecondary/HigherSecondary% to GDP on onAdult% to GDP onUniversity andHigher1999-2000 34068.78 1.93 1.44 0.01 0.862000-2001 39274.60 2.06 1.37 0.01 0.892001-2002* 40019.36 1.91 1.20 0.02 0.692002-2003* 41747.26 1.86 1.22 0.02 0.702003-2004* 44349.47 1.74 1.12 0.02 0.622004-2005*(RE) 53796.74 1.89 1.11 0.02 0.66poor educational achievements. No more. India’s economictrajectory in the last 15 years has made advocates of educationraise the issue of allocation of existing resources as aproblem area.It is all to do with political will. When the Eighth Five YearPlan was announced, it was announced that 4.9 percent ofthe GDP would be invested in education. Ironically, thepercentage share of education to GDP has declined (seetable below). It perhaps requires greater political commitmentto achieve the six percent of GDP target in the EleventhPlan. Following the 1990 Jomtien Conference therewas a palpable shift in favour of elementaryeducation (see table below). As Dr.Govinda and K. Biswal point out, from1999-2002, the share of expenditure onelementary education increased by alittle more than four percent, taking theCentre and the States/UTs together.Several Centrally Sponsored Schemes(CSS) were launched as a follow-up ofthe NPE in the area of elementaryeducation throughout the country. Butthe initiative for utilising the resourceswas with the state governments. Thistrend somewhat changed with theDPEP. Funds from the Government ofIndia were channelised through a StateImplementation Society created inevery state. The state governments wererequired to bear 15 percent of the totalexpenditure for implementation ofthe DPEP activities.Govinda and Biswal point out that the Central government’sflagship elementary education programme – Sarva ShikshaAbhiyan (SSA) — continued with this pattern in the NinthFive Year Plan. However, under the Tenth Plan, the Centralgovernment provides 75 percent of the additional expenditureunder the SSA to each state as compared to 85 percentearlier. Thus, “what was essentially a supportive role in theEighth Five Year Plan has got gradually transformed into amajor partnership in elementary education developmentbetween the Centre and the State.”THE INDIA ECONOMY REVIEW43

Reliving TheGreatIndianDreamIncrease Of State Share May Be InEffective (SSA)The Central government now seeks to increase the share ofstate governments to SSA from 15 percent to 50 percent bythe end of the Eleventh Plan. Given the existing unevennessin the financial health of different states and also given thatnot all states accord priority to basic education – this movemay actually reduce the quantum of resources spent on basiceducation in the coming years.Transparency Is A Big IssueFor the last four years the Government of India has beenlevying an education cess of 2 percent on income tax,corporation tax, excise duties and service tax. This is expectedto fetch almost Rs. 4,000-5,000 crore a year. Yet, there islittle transparency on how this has been allocated.IV. Strategies To Meet Challenges Of AccessAccess and quality are two sides of the same coin. It may,therefore, be more appropriate to use the term ‘meaningfulaccess’ – encompassing the continuum from enrolment,regular attendance of children and teachers, availability ofbooks and other learning materials, a learning environmentin a functioning school and finally a place where childrenlearn in a stress-free environment.Best Practice Models About Core PrinciplesA look at promising interventions from across the countryreveals certain principles at work: 13The unspoken belief was that theproblem was with the ‘people’ andnot the education system• A realistic assessment of ground reality regarding enrolment,attendance and learning outcome;• Addressing inequity through differential financial allocationand with empathy. Identifying the most deprived is a goodstarting point – in order to make sure that the system is ableto reach out to the last child first – and working one’s wayupwards to cover the less deprived.• Forging closer community, school and system linkagesthrough real devolution of powers (not just responsibility)and enabling empowered local action. There is a wealth ofexperience in the country, especially in the NGO sector, toempower communities to demand their entitlement andmonitor programmes meant for them;• Creating open communication channels between educationadministrators/implementers and local officials, teachers,parents and children. The strongest lesson internalisedfrom the Right to Information debate in the country wasthat creating a free flow of information becomes a powerfultool in the hands of people to access all levels in thegovernment as well as civil society;• Energising the school system through improved classroompractice and assessment processes; strengthening scienceeducation through labs, centres and related activities anduse of communication technology like the radio to reachout. The schools do not stand alone – creating a vibrantlearning environment in and around the school, using localas well as modern technology to make learning a creativeand exploratory exercise, can indeed turn the tide andenergise the school;• Providing academic resource support to teachers andteacher educators in a manner that fosters creativity andrespects teacher experience, skills and knowledge.Linear Process Vs. Spiral Of ChangeThe overarching message from this exercise is that interlockingelements formulate the education system and sustainabilityhinges on the ability of the pioneers to systematically weave inpractises and processes into the fabric of the system. Teachertraining alone cannot improve teaching and learning processes.Addressing administrative, personnel and other issuesalongside accountability systems could help us turn the corner.A systemic, not a piecemeal approach, is needed even thoughwe may start from one point. A virtuous process needs to beset in motion where an innovation – even if limited –demonstratestangible outcomes resulting in improvement in theinput processes in the next round and the initiative gathersgreater support within the system. The second round couldtake the practice to a higher level, further improving outcomesand gaining more champions in the system. This could – ifmanaged right – set in motion a virtuous spiral of change.Do Incentives Make A Difference?A popular argument in policy and development aid circles44 THE IIPM THINK TANK

A N INCLUSIVE INTENTthe world over is that incentives can help turn a difficultsituation around. Across India, where vulnerable, poorchildren lack access to a regularly functioning and a childfriendlyschool, and remain outside, drop out or are pushedout of the school system, where do incentives come in? Upto the mid-1990s it was believed that monetary and otherbenefits to poor children/families through targeted incentives(uniforms, school supplies and mid-day meals) couldturn the situation around. Poverty was seen as the mainbarrier. The unspoken belief was that the problem was withthe ‘people’ and not the system. A recent study by theEducational Resource Unit in the states of Andhra Pradesh,Karnataka, Rajasthan, Orissa and Maharashtra, haverevealed that this is not the case. 14Incentives Alone Not EnoughPerhaps the most important insight that we gained from thisstudy is that incentives – be it individual or to the school –may be necessary and useful in some situations (especiallyfor first generation learners) but are not sufficient inthemselves to enhance children’s access to quality education.Sponsored children and some of their siblings dobenefit and even complete high school. But the children leftbehind in the village continue to struggle with a dysfunctionalschool system. In one village two families that did notsend any of their children toschool said the school did notfunction and anyway they weretoo poor. In sharp contrast, inanother village, the governmentprimary school functionedregularly and almost all thechildren were enrolled. Thisvillage had an active villageeducation committee monitoringthe school.and children’s clubs, Bal Panchayats and other village levelforums for collective action gives teeth to the right toeducation of every child and promotes child participation.We found that almost all the children up to 14 years wereattending school, the mid-day meals were regular, theteachers more responsive and perhaps more regular becauseof a strong community involvement.One of the disturbing findings of this study was thatindividual incentives increased disparities. We met siblingsResearch demonstrates that thereis no alternative to working withmainstream schoolsof children studying in hostels or residential schools whohad dropped out from school. One family had persuaded theNGO to shift the sponsorship from their daughter to theirson. Sponsorship – either in the form of scholarships orstudy in a residential camp — may surely benefit the concernedchild. But it increases the distance between the childand her siblings in some cases and between the sponsoredfamily and other poor households in the village, creating adivide in the community.Creating An EnvironmentOf LearningOur travels in Maharashtra andKarnataka revealed that creatinga conducive environment forchildren’s education throughactive village level committeesTHE INDIA ECONOMY REVIEW45

Reliving TheGreatIndianDreamThe Poorest Need Benefits But Have Least AccessA related issue almost everywhere was the selection ofbeneficiaries. Extremely poor/marginalised households wereleft out in most of the villages visited. Families with clout orleadership positions in community-based organisations havegreater representation among the sponsored children.Working With Mainstream SchoolsMany NGOs run supplementary education centres/tuitionEGS and AS are becoming attractivemodels – especially when states arehard pressed for resourcesclasses, short-term accelerated learning programmes/campsor provide additional teachers to local primary schools.Most of them found it difficult to work with mainstreamschools. Funds from international donor agencies wereutilised to create parallel systems. Bypassing the formalschool system is an attractive option, especially for NGOswith alternative sources of funding. But evidence fromacross India demonstrates that there is no alternative toworking with mainstream schools. We met NGOs in Maharashtra,Karnataka and Andhra Pradesh who withdrewindividual incentives and turned their focus on the formalschool system. Their mantra: sustained community levelactivities; teacher support; working closely with localeducation department officials and teachers to ensure theproper functioning of the school and regular provision of themid-day meal; supporting children’s learning throughremedial education classes, village libraries, pre-schooleducation and children’s clubs/Bal Panchayats. It has beenseen that public activities like science fairs, reading andwriting contests, excursions and children’s clubs help createa positive environment for education. Coupled with sportsand cultural activities, such periodic events could enablechildren to explore their creativity and also hone theirmanagerial/organisational skills. They focus upon all thechildren in the village at the elementary level. These NGOssupplement the inputs provided by the government and donot duplicate them. Their work has proved that the key is toturn the system around and make the school more vibrantand responsive.Building A Strong People’s MovementIndividual or school-based incentives are only as effective asthe level of awareness about them. There is a popular sayingthat if we throw money only the strongest will pick it up! Inall the villages we came across extremely poor families in thesample villages who were not aware of individual or schoollevelincentives; they rarely participated in village levelmeetings. Building a strong people’s organisation/women’sorganisation, ensuring participation of thepoorest of the poor in the village anddisseminating information to all socialgroups is essential for the effective utilisationof either individual or group incentives.Further, community mobilisation has to befollowed up with strengthening Panchayatsand making them active agents in universalquality education, as well as creating villagelevel forums for regular and active participationof children and the parents in allsorts of decision making processes.Structured RelationshipsA structured relationship among the threeentities – community, school and children— can enable the community to both access46 THE IIPM THINK TANK

A N INCLUSIVE INTENTgovernme nt services/incentives(textbooks, uniforms for SC and STchildren, girls; scholarships/stipends, monitor quality (of themid-day meal) and the functioningof the school with the childrenplaying a key role in their educationand empowerment. In the educationallybackward regions, NGOsmust make sure that children gettheir entitlements and that statutorybodies like VEC or PTA (as thecase may be) are not just papercommittees. Ultimately, quality isabout being accountable to childrenand parents. Accountability andtransparency go together. Villageand child-wise date need to beplaced in the public domain like theGram Sabha (general body of the community at the villagelevel). A display board outside the school with basic informationabout the institution, the children, the teachers andavailability of government incentives and mid-day meals,would make a big difference. If measurement of learningoutcomes is accepted as a key determinant of quality thenthe measured results must be shared with children andparents, the outcomes analysed by teachers and the entireexperience fed into the planning process at the local level.Right To Education And Its ImplementationFollowing the 86 th Constitutional Amendment Act of 2002,the new Article 21A reads thus: “Right to Education – TheState shall provide free and compulsory education to allchildren of the age of six to fourteen years in such manner asthe State may, by law, determine.”This was a result of many years of concerted advocacy byNGOs and social action groups. The ministry of HRDdrafted a corresponding Free and Compulsory EducationBill, 2004 for consideration by the Parliament. and it underwentseveral modifications – right up to 2005. But a legislationto give the Right to Education legal teeth was neverenacted. The Central government circulated this draft to allthe states asking them to introduce appropriate bills/ordinances for effective implementation of the 86th Constitutionalamendment. While the draft provides safeguards toensure that formal schools cater to all children and that thetransitional arrangements are strictly short-term, thesituation on the ground tells a different story. Given thefinancial situation of most state governments, transitionalstrategies – meaning EGS and AS – are becoming thepreferred option. The EGS model of MP is here to stay(even though many EGS centres have been accorded thestatus of a formal primary school) and the previous CongressParty-led government took a decision that in future “Gurujis”would be appointed in place of formal school teachers.West Bengal and Rajasthan have also opted for contractteachers to meet the demands of an expanding elementaryeducation system. EGS and AS are becoming attractivemodels – especially when state governments are hardpressed for funds. Considering that during the Eleventh Planthe states are expected to provide 50% of the funds requiredfor the implementation of SSA, this is a worrisome trend.How effective can the right to education be in the absence ofadequate legal instruments to enforce it?Way ForwardFrom whichever angle we approach the issue of educationalaccess, quality and relevance we come back to three basicelements of a functioning and responsive education system:THE INDIA ECONOMY REVIEW47

Reliving TheGreatIndianDream• The government needs to shoulder the primary responsibilityfor providing basic educational services to all children inthe 6-14 age group;• Civil society organisations/people’s organisations need to bevigilant and ensure that the formal school system functionsoptimally and, wherever possible, strengthen structurescreated by the government to forge close community-schoolrelationships. Eternal vigilance is indeed the price we allhave to pay to sustain the democratic fabric of our society;• The elementary school system does not stand alone. Availabilityand effective functioning of backward linkages in theform of pre-school education, good nutrition and care inearly childhood need focussed and sustained attention.Equally, children and their parents view elementaryeducation as a stepping stone to greater knowledge oropportunities for further training / education and mostimportantly developing the confidence to negotiate theworld. Community-level initiatives that give young people ahope for the future and confidence in their ability to carve abetter future for themselves acts as the single most powerfulsuction pump that that can pull generations of youngchildren through the school system. We cannot depend onlyon the government to create the forward linkages – thelarger development community needs to sit up and thinkabout how we can give hope to children and their parents.Donors, funding partners (including Indian NGOs) and thegovernment need to come to a shared understanding on whatcould work and what is non-negotiable. Perpetuating essentiallyunequal models (like non-formal education, nightschools and so on) and creating parallel and part-time educationalopportunities effectively robs children of their fundamentalright to education, and is a mere escape route. Thereare no shortcuts. If we are really serious about achieving thegoal of UEE and making sure that the government systemfunctions, then the NGO and donor community needs toseriously reflect on the strategies that they may have promotedwhich negate the right to education. Public action, advocacyand hands-on work at the ground level are essential to turn theeducation system around and make it accountable to thechildren of India.Endnotes1Dr. Vimala Ramachandran, specialises in planning, design andmanagement of social sector programmes in India, with specificfocus on integrated child development, primary education,women’s education, rural livelihood, social security, primaryhealthcare and women’s health. She was the first NationalProject Director of Mahila Samakhya (1988-1993).2This has been adapted from Vimala Ramachandran, 19973Annual Report DWCD, MHRD, GOI, 20054GOI, SES, 20065NCERT 6th and 7th Educational Survey6GOI, SES, 20067The most exhaustive analysis of the situation of Muslims inIndia is a GOI, 2006. Social, Economic and Educational Statusof Muslim Committee in India – A Report. Cabinet Secretariat,GOI, New Delhi November 20068The 2002 household survey by Jha and Jhingran illustrates thatMuslim children are much worse off than even those from SC/ST categories. The comparison becomes yet more skewed andunfavourable in case of Muslim girls, particularly those fromlower castes. Whereas the aggregate figure for enrolment ofMuslim children is 50.7 per cent as compared to 67.3 per centfor SC and 59.8 per cent for ST, the enrolment for lower casteMuslim children falls to as low as 36 per cent. The lower casteMuslim children also record the highest percentage (32.6 percent) in the “never enrolled category”. (Jha and Jhingran,Manohar Publications, New Delhi, 2005)9(Source: http://www.nfhsindia.org/summary.html , March 2007)10Vimala Ramachandran et al, 2004. Snakes and Ladders11NCERT administered a written test on 88,271 Grade Vstudents in 4,787 schools in 105 districts of 27 states and 3 UTs(excluding Jharkhand and Meghalaya) in 2002 and the resultswere comparable to that of ASER 2005 and did not find anysignificant gender differences.12This section of the paper draws upon R Govinda and K Biswal2006. The author would like to gratefully acknowledge thesource of both the arguments and the data cited.13This section draws upon the Educational Resource Unitdocumentation of 17 good practices commissioned by ILO andDepartment of School Education and Literacy, GOI in 2006and Vimala Ramachandran (ed.) Getting Children Back toSchool – Case studies in Primary Education, Sage Publications,New Delhi, 2003.14Vimala Ramachandran, Nishi Mehrotra and KameshwariJandhyala: Incentives in Education – Do they make a difference?Unpublished Mimeo based on a research study commissionedby Plan International India on Incentives and the hidden48 THE IIPM THINK TANK

A N INCLUSIVE INTENTcost of education, ERU and Plan International India,New Delhi 2006.References1. Agarwal, Yash (1999, 2000, 2001); DPEP, GOI; Trends inAccess and Retention, NIEPA, New Delhi.2. Agarwal, Yash; (2000) How Many pupils Complete PrimaryEducation in Five Years, 2000, NIEPA New Delhi.3. Annual Report (1997-98), Department of Education, NewDelhi.4. De, Anuradha et.al, (2000), Role of Private Schools in BasicEducation, NIEPA and MHRD, Government of India.5. Dev, Mahendra and Jos Mooil. 2002. Social Sector Expendituresin the 1990s: Analysis of Central and State Budgets.Economic and Political Weekly. 2 March.6. Dreze and Amartya Sen (Eds.), 1996. Indian Development:Selected Regional Perspectives, OUP, New Delhi.7. Dreze, Jean and Haris Gazdar (1996): ‘Uttar Pradesh: TheBurden of Inertia’ in Jean Dreze and Amartya Sen (Eds.),Indian Development: Selected Regional Perspectives, OUP,New Delhi.8. Government of India, National Policy on Education (1986)and Programme of Action (1986), New Delhi, 1986.9. Government of India, National Policy on Education:Programme of Action 1992, New Delhi.10. Govinda, R (1997), Decentralisation of EducationalManagement: Experiences from South Asia, IIEP, Paris.11. Govinda, R. Ed., 2002. India Basic Education Report.Oxford University Press. New Delhi.12. India: Primary Education: Achievement and Challenges(1996), World Bank.13. Kaul, Rekha (2001), ‘Accessing Primary Education: GoingBeyond the Classroom’, Economic and Political Weekly,vol. XXXVI, No. 2, Jan. 13.14. Kumar, Krishna (1991), Political Agenda of Education,Sage Publications, New Delhi.15. NUEPA and Department of School Education andLiteracy, GOI, 2007: Elementary Education in India:Progress towards UEE, New Delhi.16. Pratichi (India) Trust: The Pratichi Education Report, NewDelhi 2002.17. Public Report on Basic Education: PROBE (1999), OUP,New Delhi.18. Ramachandran, Vimala. (Ed., 1998) Bridging the gapbetween intention and action Girls and Women’s Educationin South Asia, Editor the book and author of the Indianexperience, UNESCO-PROAP, Bangkok and ASPBAE,New Delhi, May.19. Ramachandran, Vimala. (Ed., 2003) Getting children backto school: case studies in primary education; Sage Publications,New Delhi.20. Ramachandran, Vimala. (Ed., 2004) Snakes and Ladders:Factors Influencing Successful Primary School Completionfor Children in Poverty Contexts; South Asian HumanDevelopment Sector Report No. 6, World Bank, NewDelhi.21. Ramachandran, Vimala. (2004) Hierarchies of Access:Gender and Equity in Primary Education Ed.; Sage Publications,New Delhi.22. Sanker, Deepa and Venkatesh Sundararaman. 2003.Equity in enrolment and completion in Elementary Schoolingin India. South Asia Human Development Sector reportNo 4, World Bank. New Delhi.23. Vaidyanathan, A. and P.R. Gopinathan Nair (Ed., 2001).Elementary Education in Rural India: A Grassroots View,New Delhi: Sage Publications.24. Vasavi AR et al, (1997), “Blueprint for Rural PrimaryEducation: How Viable?” Economic and Political Weekly,Vol XXXII, No. 50, Dec 13-19.25. Vasavi AR et al, (1997), “Blueprint for Rural PrimaryEducation: How Viable?” Economic and Political Weekly,Vol XXXII, No. 50, Dec 13-19.26. Visaria, Dr. Leela (2001): Primary Education in India:What do we know; in Vimala Ramachandran (Ed.) forthcomingreport on Gender and Social Equity in DPEP,ECEPO, New Delhi.27. World Bank. 2001. India Expanding and Improving UpperPrimary Education in India. Washington, D.C.: WorldBank.28. Govinda, Dr. R and K Biswal: Elementary Education inthe Tenth Plan: promise, Performance and Prospects,UNDP, New Delhi 2006.(The IIPM Think Tank, New Delhi graciously acknowledgesthe collective contributions of "Nine Is Mine" (NIM)campaign in general and their editorial support in particular,For more information about NIM, please do visit www.wadanatodo.net )THE INDIA ECONOMY REVIEW49

Reliving TheGreatIndianDreamPrimary Concern(s):Assessing EducationalExpenses In BudgetsPramod K. Yadav,Indian Institute of Management(IIM)-AhmedabadSetting The TonePerhaps the single most fundamental achievement of theKeynesian revolution was the shift in the paradigm throughwhich economists looked at the effects of governmentspending and activities on the economy. The Keynesianphilosophy that sticky wages make unemployment persistled economists to accentuate macroeconomic impacts ofgovernment spending .The paradigm shift becomes moreauthoritative for developing countries that are facing morepressing concern of sustainable development that aims atfeasible and practical socio-economic solutions for povertyeradication, increased literacy and better health conditions.The liberalizationprocess started off in India inthe early 90s, predominantlyrooted in neo-liberal reform, hasbrought India at the pedestal offastest growing nations. Therapid growth has also significantlyimpacted the social sector. Social indicators such asliteracy rate, morbidity and mortality rates have improved.Over the years, the budgeted outlays for social sector havealso increased in India. In this context, Union Budget canbe construed as the cornerstone of the direction of governmentspending and framework in which the governmentoffers to carry out its tasks during the following financialEmployment elasticity has notbeen able to match up withcurrent economic growthyear. In a predominantly welfare state like India, UnionBudget becomes relevant as it has a great bearing upon theconcerns of the poor and the disadvantaged. This papercritically examines and analyses the budgetary allocation ineducation which is considered to be an input to empowermentand social justice. It also raises the question ofeffectiveness of the allocations.Economic Growth And EducationThe socialist approach of Mahalanobis, heavily influencedby famous Harrod-Domar model, recognized the importanceof agriculture and social sectors in developmentprocess from the very first fiveyear plan. However, the paceof conversion of planned andnon-planned financial outlaysinto desired socio-economicoutcomes could not match upwith the required rate andresulted into much hyped version of an elusive economicgrowth.Tenth five year plan has witnessed an acceleratedgrowth of the economy in comparison to the Ninth Plan.The macroeconomic fundamentals have also remainedsound. Domestic savings rate has gone up and combinedcenter-state fiscal deficit has gone down.The increase in savings is attributable to progress in50 THE IIPM THINK TANK

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Reliving TheGreatIndianDreamimplementation of the fiscal responsibility and budgetmanagement act and higher savings from non-departmentalenterprises (Dsouza, 2007). The booming economy hassuccessfully sustained the sharp hikes in international oilprices. The state of current account clearly reflects therevival of investment and impact of soaring oil prices. Theforeign exchange reserves remain at a very comfortablelevel of $ 155 billion. The tax to GDP ratio has also movedin favorable direction. Despite reform and Indian GDPgrowth rate ranging from seven-eight percent in past andeight-nine percent in future, the social and sectoralinequalities have increased (Goswami, 2007). The employmentelasticity has also not been able to match up with theeconomic growth. Recently Indian planners once againhave recognized the importance of inclusive growth thataims not only at increase in growth rates but also atimprovement in standard of living of those below povertyline through various policies and employment generatingTable 1: Number Of Recognized Educational InstitutionsYearsPrimaryUpperPrimaryHigh/Hr. Sec/Inter/Pre. Jr.CollegesCollages ForGeneralEducationColleges ForProfessionalEducation@Universities/Deemed Univ./Instt. OfNational Importance1950-51 209671 13596 7416 370 208 271955-56 278135 21730 10838 466 218 311960-61 330399 49663 17329 967 852 451965-66 391064 75798 27614 1536 770 641970-71 408378 90621 37051 2285 992 821975-76 454270 106571 43054 3667 3276* 1011980-81 494503 118555 51573 3421 3542* 1101985-86 528872 134846 65837 4067 1533* 1261990-91 560935 151456 79796 4862 886 1841991-92 566744 155926 82576 5058 950 1961992-93 571248 158498 84608 5334 989 2071993-94 570455 162804 89226 5639 1125 2131994-95 586810 168772 94946 6089 1230 2191995-96 593410 174145 99274 6569 1354 2261996-97 603646 180293 103241 6759 1770 2281997-98 619222 185961 107140 7199 2075 2291998-99 628994 193093 112050 7494 2113 2371999-2000* 641695 198004 116820 7782 2124 2442000-2001* 638738 206269 126047 7929 2223 2542001-2002* 664041 219626 133492 8737 2409 2722002-2003* 651382 245274 137207 9166 2610 3042003-2004* 712239 262286 145962 9427 2751 3042004-2005* 767520 274731 152049 10377 3201 407Note:*Provisional Source: RBI and Indiastat.com52 THE IIPM THINK TANK

A N INCLUSIVE INTENTmechanisms. The Approach Paper on the Eleventh FiveYear Plan also clearly states the urgency of faster and moreinclusive growth in terms of multiple benefits flowingthrough better employment regime and more income tothose sections of society that have been bypassed by higherrates of economic growth achieved in recent years.Rhetorical Ambitions!Education is one of the most critical factors that empowerthe poor to participate in the mainstream growth process.Despite various successive five year plans assigning priorityto education, the average national literacy rate which hasbeen increasing over the years is still less than 70 percentTable 2 : Total Plan And Non-Plan Budgetary Expenditure On Education(Rs. n Lakh)PercentageStates/UTs Sector Central Sector Total (States/UTs+Central)Share OfStates AndCentreYearPlan Non-Plan Total Plan Non-Plan Total Plan Non-Plan Total State Centre1980-81 22086 292957 315043 6947 15443 22390 29033 308400 337433 93.4 6.61981-82 26244 328697 354941 8580 15494 24074 34824 344191 379015 93.6 6.41982-83 36783 409138 445921 12431 17827 30258 49214 426965 476179 93.6 6.41983-84 49800 460375 510175 13969 21304 35273 63769 481679 545448 93.5 6.51984-85 64804 533941 598745 20227 24305 44532 85031 558246 643277 93.1 6.91985-86 51344 641502 692846 24651 28200 52851 75995 669702 745697 92.9 7.11986-87 67636 712573 780209 30284 34539 64823 97920 747112 845032 92.3 7.71987-88 74973 847871 922844 77162 43013 120175 152135 890884 1043019 88.5 11.51988-89 108007 973314 1081321 88469 71082 159551 196476 1044396 1240872 87.1 12.91989-90 157687 1195529 1353216 83100 68105 151205 240787 1263634 1504421 89.9 10.11990-91 124805 1430240 1555045 88268 76053 164321 213073 1506293 1719366 90.4 9.61991-92 141318 1563033 1704351 95260 76146 171406 236578 1639179 1875757 90.9 9.11992-93 155557 1760011 1915568 100227 79503 179730 255784 1839514 2095298 91.4 8.61993-94 190336 1941341 2131677 121737 87896 209633 312073 2029237 2341310 91.0 9.01994-95 258747 2208166 2466913 165368 90933 256301 424115 2299099 2723214 90.6 9.41995-96 313426 2506528 2819954 219341 112362 331703 532767 2618890 3151657 89.5 10.51996-97 409748 2860204 3269952 249675 117536 367211 659423 2977740 3637163 89.9 10.11997-98 376182 3272437 3648619 326948 135366 462314 703130 3407803 4110933 88.8 11.21998-99 485198 4004994 4490192 399062 233272 632334 884260 4238266 5122526 87.7 12.31999-00 490196 4904685 5394881 440330 292932 733262 930526 5197617 6128143 88.0 12.02000-01 500901 4956380 5457281 484923 307601 792524 985824 5263981 6249805 87.3 12.72001-02 513141 5167932 5681073 555222 248476 803698 1068363 5416408 6484771 87.6 12.42002-03 435065 5512164 5947229 638003 270922 908925 1073068 5783086 6856154 86.7 13.32003-04 462622 5824118 6286741 737107 280641 1017748 1199729 6104759 7304488 86.1 13.92004-05 765514 6480281 7248795 1022415 300458 1322873 1787929 6780739 8568668 84.6 15.4(RE)2005-06(BE)916614 6872754 7789368 1524226 309477 1833703 2440840 7182231 9623071 80.9 19.1Note: BE=Budget Estimates; RE=Revised EstimatesSource: Department of Higher Education, Ministry of Human Resource Development, Govt of IndiaTHE INDIA ECONOMY REVIEW53

Reliving TheGreatIndianDream(11 th plan approach paper,2006). Every third illiterate inthe world is an Indian (Jha,2005). The severity of thetottering condition of education system in India is evidentby the fact that around 54 percent of all the women inIndia are literate (2001 Census). Female literacy in ruralarea is only about 47 percent reflecting a serious genderdisparity. The schemes such as Sarva Shiksha Abhiyaanand Mid-Day Meal Scheme have increased the number ofenrollments in primary schools. The number of educationalinstitutions in India has continued to grow (Table 1).However the quality of education offered to the students isstill poor mainly because of supply side constraints such asclassrooms, laboratories, teachers and etc.It is widely believed that during the last couple of decadesthere has been mushrooming of ill-equipped privateschools in large part of the country. It has also beennoticed that in many instances that even when a child isenrolled in a private school, he or she may be simultane-Figure 1: Public Expenditure At Different Levels As % Of GDPPercentage of GDP4.543.532.521.510.50Total EducationElementarySecondaryHigh and Tehcnical1981-821990-911992-931994-951996-971998-992000-012002-032004-05YearSource: Rajya Sabha Unstarred Question No.1997, dated 11.12.2006 from Indiastat.comously registered in a governmentschool as well as it has negligiblefinancial implications. This puts extraburden and overstates the conditionof education system in the country.Universalization of secondaryeducation is another daunting taskfor the eleventh plan and budgets.India’s 2007-08 Budget facilitatedfinancing of secondary education byproviding an additional cess of onepercent in order to increase access tosecondary education.Budgetary Responses AndActual AchievementThe share of education expenditurein national income is a global standardindicator of national efforts onthe development of education in an54 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 3: Capital And Revenue ExpenditureYear Revenue And Capital Expenditure As PercentageOf Center’s Total Expenditure On EducationRevenue (%) Capital (%)1993-94 99.56 0.441994-95 89.75 10.251995-96 99.49 0.511996-97 99.57 0.431997-98 99.68 0.321998-99 99.78 0.221999-00 99.76 0.242000-01 99.77 0.232001-02 99.74 0.262002-03 99.79 0.212003-04 99.73 0.272004-05 99.59 0.412005-06 99.52 0.48Source: Jha, 2005 .,Union Budgets., Various Issues Of Economic Survey ,GoIeconomy. It is widely believed that the public spending oneducation helps reduce inequality. In an unequal society avoter will opt for a higher tax rate to finance public educationwhich increases total human capital, its quality andrate of economic development. This has, however, dynamiceffects. The increase in human capital attempts to lowerthe relative wages between skilled and unskilled workersand thus reduces inequality. On the other hand betterquality of human capital leads to innovation and increasesefficiency which consequently leads to increase in demandof skilled workforce to absorb new innovation and technologiesand thus increases inequality. Higher level ofequality and substantial amount of public spending oneducation are the two most cited influential factors for theEast Asian Miracle. On similar lines, the Government ofIndia, on the recommendation of the Education Commission(1966), targeted the total public spending on educationdevelopment to reach around six percent of the totalnational income by the end of 1986. State and centralgovernments attempted to meet the goal of six percentthrough variety of channels and mechanisms. However, inFigure 2: Per Capita Expenditure On Different Levels Of Education By CentreRs (1993-94 Prices)100806040200ElementarySecondaryHigher and Technical1994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-05YearSource: Compiled From Union Budget, Across Different YearsTHE INDIA ECONOMY REVIEW55

Reliving TheGreatIndianDreamthe aggregate, the total public expenditure on educationdevelopment in India is still less than six percent. Totalplan and non-plan budgetary expenditure on educationhas increased over the years. The share of funds devolutionfrom union government in total expenditure oneducation has also been consistently increasing.The total public expenditure on education has remainedin the bracket of three to fourpercentage of total GDP(Figure-1). In comparison, alarge number of countries spendmore than six percent, someeconomies even more thaneight percent, and a few morethan 10 percent. This clearly shows that there seems to beno urgency in policy arena to scale up public spending inorder to meet the goal of universalization of education.Public expenditure on education grew faster in 1980s ascompared to 1990s and it has gone down during 2000-05.The share of education hasbeen hovering around fourpercent of total Union BudgetThe positive sign for the economy is that around half ofthe total expenditure is directed towards elementaryeducation. However the spending on secondary and highereducation need to be escalated to create a good androbust working population in India. The budgetaryallocations in recent years have continued to fall short ofthe recommendations of the Tapas Majumdar Committeethat had very distinctlyproposed the financial requirementfor the universalization ofeducation over a 10 year timeframe (1998-99 to 2007-08).Education being the responsibilityof both the central andthe state governments, it requires many well defined andarticulated financial plans from both union and stategovernments, in order that India achieves its educationalgoals.In the Union Budget, education share has beenhovering around four percent of total budget, and in the56 THE IIPM THINK TANK

A N INCLUSIVE INTENTstates’ revenue budget it has been stabilizing around 20percent for the last several years. The total seems to bestabilizing around 11 percent, declining from about 14percent in early 1980s to 11 percent in 1990s.An analysis of budgetary expenditure of the uniongovernment upon education sector, over the years, showsthat an overwhelming part of the total budgetary financialoutlay is directed towards revenue stream. This essentiallymeans that almost 99 percent of the total expenditure isused to meet the running expenses such as salaries andother various administrative engagements (Please referTable 3). This translates into lack of adequate and decenteducation infrastructure that is accessible to all sections ofsociety, particularly for India that is still trying to traversethrough the early phase of development. It also points outthe fact that budgetary support from the government atcenter for expanding educational infrastructure includingthe physical resources such as educational premises andother requirements like blackboards and laboratoriesalong with the facilities for sports has been at very lowlevel. The trend of per capita expenditure on differentlevel of education shows that the elementary educationhas witnessed maximum increase while secondary andhigher education have both witnessed mixed trend (Figure-2).This shows that budgetary increase in elementaryeducation has happened at the expense of secondary andhigher education. It can also be argued that this goes wellwith the union government’s policy of withdrawingsupports from secondary and higher education in anticipationof the same to come from private sectors. However,considering the income levels and rural-urban divide inIndia, the provision of secondary and higher educationunder private regime may pose substantial degree ofdifficulties to the rural and poor. This further gets complicatedby the fact that a large number of states have notbeen able to upscale the supply side resources as theirfinancial health progressively had been crippling.Travesty That Passes For EducationInadequacy of budgetary expenditure on education hasalready been discussed on several key dimensions. Thereare certain policy imperative that government urgentlyneeds to take into consideration while deciding thebudgetary outlays for different heads. A good quality ofeducation to all should be the first and foremost agendafor the union government. Opening new schools that areunable to retain students and impart a good quality ofeducation simply does nothing but allocate the publicresources in a sub-optimal fashion-the least desiredoutcome for a developing country that is short of finances.Practice of directing huge spending on programs that areinefficient should be abandoned. Such spending should bedirected towards other educational initiatives that canactually accelerate the rate of literacy. Curriculum needsto be such that helps students hone skills and relevantknowledge that facilitate them to have a decent level oflivelihood. The union government urgently needs to get itsact together and increase the expenditure on education.Moreover it should direct a higher proportion of totalspending to the capital expenditure on education so thatinfrastructural inadequacies which have emerged as one ofthe most severe impediments for expansion of educationcan be limited. The budget proposals for 2008-09 shouldsufficiently recognize the importance of supply side.References• Dsouza,E.,2007.The Budget,Outlays,and Inequalityhttp://www.esocialsciences.com/Articles/displayArticles.asp?Article_ID=419 Accessed on 23 Jan, 2008• GoI., 2006 .Planning commission 11 th plan approachpaper• GoI., 2004,.Human Development report. PlanningCommission ,New Delhi• GoI., 2004, 2005,2006, 2007; Economic Survey• GoI ,Union Budget of different years• GoI, Department of Higher Education, Ministry ofHuman Resource Development, Govt of India• Goswami,A.,2007; "Larger Market Role, ReducedGovernment Interventions: Is It A Misnomer"; TheIER, The IIPM Think Tank, New Delhi• Indiastat.com• Jha,P.,2005 .Withering Commitments and WeakeningProgress. Economic and Political weekly• RBI; http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=348, accessed on 19 th January,2008• Tilak,J B G.,2004.Education in the UPA GovernmentCommon Minimum Programme. Economic andPolitical Weekly (EPW), MumbaiTHE INDIA ECONOMY REVIEW57

Reliving TheGreatIndianDreamStatus Of Health ServicesIn India: An OverviewImrana Qadeer 1Centre of Social Medicine and Community Health, Jawaharlal Nehru University, New DelhiPeople's health can be definedas an outcome of the interplay ofsocio-economic, cultural, political,and technological forcesI. The Context: Where Do We Stand?Health evokes different images for different people. Oneperson might think of well equipped hospitals, primlydressed nurses and a smiling staff. You might think of afitness-conscious individual, the jogging sort who is carefulabout his diet, rest, and exercise. Some others might simplydream of shelter, food, safe drinking water and a secure job58 THE IIPM THINK TANK

A N INCLUSIVE INTENTan outcome of the interplay of socio-economic, cultural,political, and technological forces. This outcome varies,depending on gender and caste, class stratification, regionaland ethnic factors. Talking of health services then touchesupon only one aspect of the determinants of heath. This issomething that we don’t often fully appreciate, but we mustif we have to make headway in achieving health for all.Does this mean that health services are not important? Itdoes not mean that at all. The provision of health services isone of the most important welfare responsibilities of theIndian State enshrined in the guiding principles of itsConstitution. What it does mean, however, is that providersand planners of health must, above all, demand the otherinputs necessary for health instead of simply building theirempires as specialists.that ensures all of the above! It all depends on where westand in society. The pressures we face make us think ofhealth as something to do with the individual or society. Inother words, it is the perspective that one uses to examineissues around health that matters. Is health purely a functionof human biology or available technology — one thatstresses disease, diagnosis, cure or management of symptoms— known as the biomedical perspective? Is it afunction of our social reality as stressed by the socialperspective of health, or is it a combination of both as isstressed in a holistic perspective of health?Holistic View Of HealthThe holistic perspective not only takes into account existingtechnologies and their organisation, it also underlines theimportance of social determinants that contribute topeople’s well being — such as food availability and nutritionalstatus of populations, drinking water supply, housing,transport, education, employment and, last but not least,the status of women. People’s health can then be defined asVital Weave Of Services + Welfare InputsHealth services by themselves are a highly complex entity.They operate either as clinical or as public health services.Clinical health services are individualised services to thosewho seek medical attention, where the provider offers thebest technology available or within the means of thepatient. Public health services are, in fact, organisationallymore complex. They have several dimensions:a) They provide a mix of promotive, preventive, curative,and rehabilitative services. Health education and spreadof information promotes certain protective health behaviours,through immunisation, sanitation, and nutritionalservices. It also attempts to prevent occurrence ofdisease. Through clinical intervention the public healthsystem cures as well as protects those in society who areexposed to communicable diseases. Through rehabilitationit helps people cope with disability;b) Clinical interventions by public health services to arrestthe spread of communicable diseases remain the mostpotent means of control, prevention, or elimination ofthese major killer diseases as compared to non-commu-Health services by themselvesare a highly complex entity. Theyoperate either as clinical or aspublic health servicesTHE INDIA ECONOMY REVIEW59

Reliving TheGreatIndianDreamnicable diseases in India. Clinical medicine, to becomean instrument of public health, has to be modified suchthat instead of focussing on the individual, it attempts tooptimise effect in order to enhance coverage. It thusreduces the pool of infection to an extent that the spreadof disease is arrested and the vulnerable population isprotected. In doing so it changes the course and historyof disease in populations. Clinical medicine is thustransformed into a medical care system in public healthwhere even clinical services have an objective that goesbeyond focussing on individuals;c) Apart from integrating the promotive, preventive,curative and rehabilitative aspects of a disease controlprogramme, public health services demand integration atyet another level: between different programmes withcommon strategies. These programmes could be concernedwith condoms for family planning and protectionfrom AIDS, or immunisation for lowering the InfantMortality Rate (IMR) and Maternal Mortality Rate(MMR). Public health services have to then respond tothe need for personnel, shared monitoring, transport andtraining, among others. In other words public healthservices are conceived of as integrated programmes, bothvertically as well as horizontally;d) These different strands of services are provided througha hierarchical network. A network that offers the simplest,basic services (at primary level); and above itsupportive, secondary and tertiary level care. These tiersare integrally bound by a two-way referral link, crucialfor the success of health services. However, even themost efficient of public health systems can't achieve thebest possible results unless they are supported by thewelfare inputs: food availability and nutritional status,drinking water supply, housing, transport, education,employment and gender equality. In Third Worldcountries these are the most critical inputs without whichhealth systems play a minor role in preventing diseases.According to a WHO report,24 percent of the mortality indeveloping economies is due toenvironmental conditionsEnvironmental Conditions And MortalityThis realisation is reflected in the setting up of the Commissionon Social Determinants of Health by the WorldHealth Organisation (WHO). Its report on the environmentalcauses of diseases 2 shows that 24 percent of the mortalityin developing countries is due to environmental conditionssuch as diarrhoea, pneumonias, malaria, tuberculosisand malnutrition. This supports our contention thatservices need to be evaluated and assessed within a holisticperspective where health planning is constantly linked tolarger welfare inputs. This is necessary not only becausehealth is dependent upon them but also because access toservices and the nature of service itself is determined bysocio-economic and political realities.II. Public Health Today: Skewed And CrumblingIndia has a mixed system of services which includes modernas well as traditional systems. The health providers rangefrom modern-day medical professionals to practitioners oftraditional medicine and those with short training — theregistered medical practitioners (RMPs) — or no formaltraining and some work experience. Then there are theparamedical personnel and traditional providers — the‘dais’ or birth attendants. Modern medical services areoffered by the State as well as by the NGO and privatesectors. The traditional systems are said to have acquired asignificant space since the mid-1970s at all levels of services.Many of these personnel are being integrated intopublic health services, such as the AYUSH component(Ayurvedic, Unani, Siddhi, and Homeopathy) of theNational Rural Health Mission (NRHM).Though there are more medical care institutions in theprivate sector, the public sector continues to have a greaternumber of beds, despite its slow growth. By the end of the20 th century there were a total of 15,501 hospitals. Of these,10,848 were private institutions, an overwhelming majority.But the private hospitals had only 2,53,437 beds out of atotal of 6,81,643 beds. 3 This shows that the larger institutionsstill remained with the public sector. Or look at it fromthe rural-urban angle. According to the Health Informationof India 2004 report, there are 585 rural hospitals ascompared to 985 urban hospitals in the country. The urbanbias is very clear, with only the Community Health Centres(CHC) trying to make up for the gap in rural areas. If we60 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 1: Number Of Govt. Allopathic Hospitals And Beds In Rural And Urban Areas (Including CHCs)State/ UT/divisionCommunityhealth centerRural hospitalsOther ruralhospitalTotal ruralhospitaUrbanhospitalTotal(Rural+urban)hospitalsNo. beds No. beds No. beds No. beds No. bedsAndhra Pradesh 169 5114 75 2100 244 7214 122 25248 366 32462Arunachal Pradesh 21 168 0 0 21 168 14 1236 35 1404Assam 100 [C]3000 NR NR 100 3000 NR NR 100 3000Bihar @148 [C]4440 NR NR 148 4440 NR NR 148 4440Chattisgarh 116 3514 0 0 116 3514 22 2051 18 5565Goa 5 222 3 390 8 612 11 207 19 2619Gujarat 242 [C]7260 NR NR 242 7260 NR NR 242 7260Haryana 64 1920 7 223 71 2143 54 4845 125 6988Himachal Pradesh 66 1202 31 1566 97 2768 44 5003 141 7771Jammu division 25 [C]750 3 80 28 830 8 870 36 1700Kashmir division 33 990 0 0 33 990 [a]7 605 40 1595Jharkhand @ NR NR NR NRKarnataka *259 12130 0 0 259 12130 66 22357 325 34487Kerala 106 3485 60 7308 166 10793 27 14629 193 25622Madhya Pradesh 229 6884 0 0 229 6884 95 10818 324 17702Maharashtra 348 10628 348 10628 [d]1136 [d]75615Manipur 16 320 10 50 26 370 2 300 28 670Meghalaya 22 660 3 300 25 960 4 1167 29 2127Mizoram 12 376 4 120 16 496 5 673 21 1169Nagaland 21 600 7 240 28 840 8 850 36 1690Orissa 202 3044 104 1091 306 4135 97 8767 403 12872Punjab 117 3852 22 738 139 4590 21 4383 160 8973Rajasthan 287 10175 57 2749 344 12924 **28 5382 372 18306Sikkim 4 350 2 80 6 430 1 300 7 730Tamil nadu 128 3840 172 NR 300 3840 42 20141 342 23981Tripura 9 250 6 325 15 575 ***12 1656 27 2231Uttar Pradesh @310 [C]9300 NR NR 310 9300 NR NR 310 9300Uttaranchal @ NR NR NR NRWest Bengal 95 3418 15 3056 110 3475 119 36682 229 43156THE INDIA ECONOMY REVIEW61

Reliving TheGreatIndianDreamState/ UT/divisionCommunity healthcenterRural hospitalsOther ruralhospitalTotal ruralhospitaUrbanhospitalTotal(Rural+urban)hospitalsNo. beds No. beds No. beds No. beds No. bedsA&N island 4 201 2 154 6 355 4 1114 10 1469Chandigarh 1 35 1 15 2 50 5 2150 7 2200D&N haveli 1 30 0 0 1 30 1 75 2 105Daman & Diu 1 42 1 10 2 52 2 140 4 192Delhi 0 0 [b]105 20368 [b]105 20368Lakshadweep 3 [c]90 0 0 3 90 2 70 5 160Pondicherry 4 120 0 0 4 120 10 2944 14 3064Total 3168 9841 585 20595 3753 119005 938 197001 5479 380993Source: Health information of India 2004 pp- 151Notes: PHC, MCH/RCH centers, PPC, FWC, Municipal Corporation centers etc. are not included in hospitals though these facilities mayhave few beds attached to them. Government includes central government, state government and local govt. bodies.[a] 1leprosy hospital – bed strength not given; [b] in Delhi there no concept of rural / urban hospitals.[c] estimated @30 beds per one CHC ; [d] includes CHCs (348) & other rural as well as urban hospitals (788 with 64987 beds) for whichrural urban break up is not furnished.* includes 149 Taluk hospitals which also function as CHC; ** tertiary & super speciality hospital information not included; ***one superspeciality hospital (now outdoor for cardiology only); @ Prior to re-organization of states; NR: Not ReportedTable 2: Health Human Power Working In Rural Areas (Govt.)Type of functionarRequired[R]In position[P]Shortfall(R-P)Sanctioned(S)PHC doctor 22842 25724 2310 29689 3965Total specialists 12172 4124 7459 6617 2493Pediatrics 3043 440 2030 1019 578Physician 3043 704 1799 1305 601Obstetrician /gynecologist 3043 780 1699 1498 718Surgeon 3043 781 1698 1518 737Block extension educator 5708 6743 1053HA (male) 22842 19927 5452 23569 3642HA/LHV (female) 22842 19855 3889 23032 3257Vacant(S-P)MPW (male) 137311 71053 66902 84750 13697Pharmacist 25885 21118 6678 22972 2469Lab Technician 25885 13262 12661 15544 2368ANM / MPW (female) 160153 137407 24382 148151 10765Nurse Midwife 44143 27336 20842 32723 5495Source: Health Information Of India 200562 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 3: Number Of Registered Practitioners Under Alternative System Of MedicineYear Ayurvedic Unani Sidha Naturopathy Homeopathy Total1999 367528 41221 12915 388 1893612003 432625 42833 17550 201148 695024Source: Health information of India 2005include CHCs among hospitals, the total number of ruraland urban hospitals comes to 5,479 (Table 1). The sametable also shows the state-wise distribution of these institutions:at first glance the weak position of states like UttarPradesh, Bihar, Madhya Pradesh, Rajasthan and Chhattisgarhbecomes clear. According to the PlanningCommission, 4 the status of rural infrastructure in 2006 is asfollows: 3,344 CHCs; 23,236 Primary Health Centres(PHC); and 1, 46,026 subcentres.Missing Personnel In Health ServicesThe statistics hit you in the face. According to the HealthInformation of India 2004 report, out of the 6,39,729doctors registered in India, only 67,576 are in the publicsector; as many as 5,72,253 doctors are either in the privatesector or abroad. This creates a tremendous shortfall inthe states where a large number of posts remain vacant(Table 2). It is a similar story with general nurses andmidwives and Auxiliary Nurse Midwives (ANM). There are8,39,862 general nurses and midwives, 5,02,503 ANMs and40,536 health visitors and supervisors. Their availability inthe rural areas (Table 2) reveals the critical shortages ofeach of these personnel. To fill in this gap the government istrying to integrate manpower from available alternativesystems that constitute a significant number (Table 3).Unfortunately, however, they are replacing doctors from thePHC rather than complementing their work.Population Control And CutbacksTo see where this poverty of the public sector comes from,we need to examine the pattern of allocation of resources tothe health sector:• Through the 1980s and beyond, the allocation on healthand family welfare has not gone beyond 3.97 percent ofTable 4 : Patterns Of Allocation Of ResourcesPeriodTotal plan investment Outlay(all heads of Dept.)HealthFamilywelfareISM&H /AYUSHSub-totalSixth Plan(1980-85)109291.7(100.0)2025.2(1.8)1387.0(1.3)3412.2(3.1)Seventh Plan(1985-90)218729.6(100.0)3688.6(1.7)3120.8(1.4)6809.4(3.1)Annual Plan(1989-91)61518.1(100.0)960.9(1.6)784.9(1.3)1745.8(2.9)Annual Plan(1991-92)434100.0(100.0)1042.2(1.6)856.6(1.3)18988(2.9)Eighth Plan(1992-97)859200.0(100.0)7494.2(1.7)6500.0(1.5)108.0(0.02)14102.2(3.2)Ninth Plan(1997-02)148431.3(100.0)19818.4(2.31)15120.2(1.76)266.35(0.03)35204.95(4.09)Tenth Plan(2002-07)31020.3(2.0927125.0(1.83)775.0(0.05)58920.3(3.97)Source: Health Information Of India 2005 pp-79THE INDIA ECONOMY REVIEW63

Reliving TheGreatIndianDreamthe total allocation. Within this, health has never receivedmore than 1.8 percent of total Plan investmentexcept in the Ninth and Tenth Plans when it got slightlymore than the family welfare programme (Table 4). Thegovernment’s approach to health has always been a singleprogramme of population control against all otherprogrammes related to health;• When seen as a percentage of the Gross DomesticProduct (GDP), the current investment in health declinedfrom 1.3 percent through the 1990s to 0.9 percentin 1999 5 and has stayed there despite promises of anincrease in annual budget speeches;• The expenditure on national disease control programmeswithin the health sector (Figure 1) reveals a trend ofincreasing emphasis on AIDS control as against allnational vectorborne disease control (NVBDC) programmeslike leprosy and tuberculosis; 6• The Central budget has been starkly biased againsthealth. In the Tenth Plan it allocated Rs. 2,908 crore tohealth as against Rs. 6,424 crore for family welfare. Thisdistribution is consistent with the Eighth and Ninth FiveYear Plans where Rs.1,712 crore and Rs.5,118.69 croreIn the tenth Five-Year Plan,Government allocated Rs.2,908crore to health sector as againstRs.6,424 crore for family welfarewere allocated for health as against Rs.6,500 crore andRs.15,120.20 crore for family welfare. 7 These dataindicate the marginalisation of the health sector as it isnot only almost one third of the allocation to familywelfare in the planning of the Indian State 8 but alsocompares poorly with the first 20 countries in the HDIindex that allocate 5.4- 8.1% of their GDP to health. 9The explanation offered for expenditure cutbacks onwelfare is that the public sector is inefficient as compared tothe private sector. Hence, a shift in subsidies is rational. Butevidence from countries like the United States and Britaindo not support this logic. These two countries invest 12percent and six percent of their respective budgets inhealth. While the US runs its services primarily through theprivate market and insurances, the latter still depends onState to achieve universal coverage.However, indicators likeinfant mortality rate and mortalityunder five years of age are muchhigher in the United States. 10Unable To Serve The PoorWhen we compare the morbidityand mortality profiles in Indiaagainst the infrastructure andinvestments in health, the pictureis not very impressive. Marginaldeclines in morbidity and mortalityor stagnation seem to be the onlyachievement. In fact it seems to bean achievement fraught with poorrecording and misreporting. Takethe data on leprosy published bythe government. It shows that theestimate of the number of peoplesuffering from leprosy were muchlower as compared to the actual64 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 5a: Reported Morbidity And Mortality Due To Vaccine Preventable Diseases Vaccine PreventableDiseases1999 2004Diphtheria Cases 4216 8465Deaths 85 126Acute polio Cases 899 218Deaths 11 4Tetanus neonatal Cases 2792 1087Deaths 385 141Tetanus others Cases 1309 3743Deaths 1014 474Pertusis Cases 32939 32786Deaths 22 19Measles Cases 51001 51456Deaths 261 140A.R.I. Cases 16730509 25571757Deaths 3686 5223Health Information Of India 1999 & 2004Table 5b: Morbidity And Mortality Due To Important Communicable DiseasesDisease 1999 2000 2001 2002 2003 2004Malaria Cases 2284713 2031790 2085484 1842019 1647378 911293Deaths 1048 932 1005 973 943 399Diarrhea Cases 8215296 8870507 9289558 9441456 10510476 9575112Deaths 3594 2918 2787 3475 4709 2855Kala azar Cases 12886 14753 12239 12140 18214 19911Deaths 297 150 213 168 210 131J. E. Cases 3428 2593 2061 1765 2568 1529Deaths 680 556 479 466 707 344Dengue Cases 944 650 3306 1926 12754 2807Deaths 17 7 53 33 215 28Cases Targets 183345 183345 420925LeprosyCases Achievements 559938 617993 476000 367143DeathsFilaria Cases 0.35 0.54 0.66Deaths 0.77 1.22 1.17Source: Health Information Of India, 2004detections all through. The reason is simple: the programmeputs a stop to the treatment of individuals aftertwo years of medication. In official records that person iscured. So the estimated targets go down. But this two-yeartreatment simply reduces the severity of the disease; it doesnot necessarily lower its prevalence. The incorrect targetswere based on the assumption that India has succeeded ineliminating the disease when the truth lies somewhere else.THE INDIA ECONOMY REVIEW65

Reliving TheGreatIndianDreamTable 5c: Reported Morbidity And Mortality Due To Other Communicable Diseases.1999 2004Enteric fever Cases 379304 658301Deaths 382 805Viral hepatitis Cases 131798 203939Deaths 1322 1122Syphilis Cases 31684 56473Deaths 7 26Gonococcal infections Cases 95278 162946Deaths 11 210MeningococcalCases 7444 8999MeningitisDeaths 868 541AIDS Cases 16722 96978Source: Health Information Of India 1999 & 2004Table 6: Selected Health Status Outcomes In India And Major Indian StatesAreaLife expectancyat birth avaragefor 1992-96 yrsMMR(1998)IMRUnder 5 mortalityRates, 98-99 (Per1000 live biths)Totalfertiityrates 1997(pecent)Under weightChildren,98-99(percent)Andhra Pradesh 62 159 66 86 2.5 38Assam 56 409 78 90 3.2 36Bihar 59 452 67 105 4.4 54Gujarat 61 28 64 85 3.0 45Haryana 64 103 69 77 3.4 35Karnataka 63 195 58 70 2.5 44Kerala 73 198 16 19 1.8 27Madhya Pradesh 55 498 98 138 4.0 55Maharashtra 65 135 49 58 2.7 50Orissa 57 367 98 104 3.0 54Punjab 67 199 54 72 2.7 29Rajasthan 60 670 83 115 4.3 51Tamil nadu 64 79 53 63 2.0 37West Bangal 57 707 85 123 4.8 52Uttar Pradesh 62 266 53 68 2.6 49India 61 407 72 95 3.3 47Source: Better Health Systems For India’s Poor, World Bank 2002; NCMH Background Papers- Burden Of Diseases In India pp-8866 THE IIPM THINK TANK

A N INCLUSIVE INTENTSimilarly, vaccine preventable infections ofchildhood flourish. Dengue, pneumonia, entericfever, viral hepatitis and other infections havenot subsided either (Tables 5a, 5b, 5c), alongwith other communicable diseases. If we look atthe overall mortality, fertility and life expectancyindicators (Table 6) it becomes clear thatan IMR of under-60 per 1,000 live births is seenonly in five of the 16 states that were studiedand, in the absence of accurate data, maternalmortality remains high and continues to beindirectly assessed through estimates or throughsamples of population. Similarly, only in fourstates is the fertility rate 2.5 percent. And,except for Kerala and Punjab, 35-55 percent ofthe children below three years of age in all otherstates are underweight.Dismal PerformanceThis brief overview shows that achievements inhealth indicators have been far less promisingthan expected, both in terms of the presentstatus of health and reaching out to the poor aswell as in terms of building health infrastructure.Whatever has been achieved is due to theoverall socio-economic development over timethat has no doubt touched the lives of thepeople. To understand the inability of the healthservices to effectively deal with problems, we need tounderstand the historical trends in the planning.III. Trends In Health Planning For AllThe initial hope and commitment to provide health serviceswas reflected in the first comprehensive report prepared bythe Bhore Committee in 1946. It promised healthcare toall, irrespective of an individual’s paying capacity. Thereport also recognised that poverty and environmentalconditions hamper public health systems from achieving thebest possible results. It conceptualised a three-tier pyramidalstructure for each district to run an integrated healthservice. 11 This structure was to be further strengthenedthrough medical colleges and speciality hospitals in thecities. National disease control programmes were initiatedalong with family planning and nutritional programmes,and manpower training became an important part ofbuilding the health services.A Weak Start: Financial Crunch And Urban BiasA review after 10 years pointed out the problems of financingprogrammes in the health sector. It suggested building ahealth cess or a system of differential payments or a nationalinsurance system, but these were not heeded. 12 On thecontrary, the investment in the health sector over the FiveExcept for Kerala and Punjab,35-55% of the children belowthree years of age in all otherstates are underweightTHE INDIA ECONOMY REVIEW67

Reliving TheGreatIndianDreamPattern Of Investment In Communicable Diseases 1990-2006% Of Investment In Health18161412108642090-9191-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 2001-022002-032003-042004-052005-062006-07NVBDCAIDSSTDTBLEPROSYYear Plans declined and an urban focus emerged with theneglect of the rural sector.The emphasis on the family planning programme andother vertical programmes like malaria, leprosy and filarialed to the neglect of general health services. The failure ofthese programmes to sustain their initial impact by the1970s forced the system to reorganise. However, that onlyled to partial integration, domination of the family planningprogramme, and neglect of supportive programmes forimproving nutrition, sanitation, and availability of drinkingwater. All this weakened rather than improving the publicsector. There were many other factors at work too. The1970s witnessed economic turmoil due to the worldwide oilcrisis and the subsequent hike in oil prices. Added to thesewas the onslaught of the National Emergency that furthercut into welfare investments, the health sector in particular.The result was a total disillusionment among the peoplewho began to identify health services with coercion andforced sterilisations. This forced the new governmentformed in 1977 in the post-Emergency phase to talk aboutrevitalisation of the health system. In the late 1970s, it madean effort to put the health sector back on track by containingsterilisations, initiating the Community Health WorkerProgramme, the ICDS, and by signing the Alma Atadeclaration in which the government reaffirmed the needfor urgent action by all governments, all health and developmentworkers, and the world community to protect andpromote the health of all the people of the world. The68 THE IIPM THINK TANK

A N INCLUSIVE INTENTurban, hi-tech orientation of theservices, however, reinforced itselfand Primary Health Care was transformedinto Selective Health Care,focusing on programmes for whichmedical interventions were available.Family PlanningThe problems of infrastructure and ofidentification of epidemiologicallycorrect priorities in public healthcontinued in the 1980s. (Epidemiologyconcerns population-basedstudies to assess field level problems.)The Sixth Plan initiated a majorexpansion of health infrastructure. Itintroduced the concept of one CHCfor every 1,00,000 population, reducingthe coverage of Primary HealthCentres (PHCs) to 30,000 population from the earliercoverage of 1,00,000. The Sixth Plan also opened upmedical care to NGO and private sector providers. 13 Themuch talked of maternal and child health services that hadbecome a carrot for the achievement of family planningtargets were now converted into a ‘child survival and safemotherhood strategy’, a synonym for the same. In the 1990sthese were rechristened as Reproductive and Child Health(RCH) services, a new strategy for the same old familywelfare programme!Middle Class Push For PrivatisationThe rising aspirations of an expanding middle class andprofessionals belonging to it increasingly put pressure onthe State to demand the entry of the private sector in theprovision of care and tertiary care hospitals in the name ofinternational standards. The middle class already had at itsdisposal all the urban health services that are a part of basicpublic health services. It was the poor and the lower middleclass that lacked the basic amenities of life so crucial forhealth. Having had little experience of an efficient, workingbasic service, they did not protest against the privatisationtrend. Unopposed, the social pressure exerted by themiddle class gave a push to the forces demanding privatisationand penetration of the market into the health sector.The political and economic compulsions of the State led toa shift in its economic policies, from accepting relativelysmaller international aid to large loans in the name ofdevelopment from the International Monetary Fund andthe World Bank, among others, accepting in the process theconditionalities imposed by them.Taking People Out Of Health CareFor the international agencies acting on behalf of multinationalcorporations (MNCs), the twin forces of middleclass aspirations and the compulsions of the State became aconvenient means to push their agenda of trade in vaccines,drugs and equipment in the healthcare markets. Indiaopened itself to the entire gamut of health sector reforms(HSR) as part of the Structural Adjustment Policies (SAP),first informally and then formally in the 1990s. The healthsector reforms consisted of cuts in health sector investment,opening up of medical car to the private sector, opening upUnopposed, the social pressureexerted by the middle class gavea push to the forces demandingprivatisation of the health sectorTHE INDIA ECONOMY REVIEW69

Reliving TheGreatIndianDreamPrivate sector had no obligationto follow prescribed proceduresfor monitoring, data pooling andstandardised treatmentthe public sector healthcare institutions to private investment;introduction of user fees in public institutions (the feekeeps expanding into admission fee, pathological tests anddiets, among others, and the patterns are very differentacross states); casualisation of health personnel (personnelare taken on an ad-hoc basis rather than as permanent staffwith all attendant benefits); and a techno-centric focus inhealth services. 14Impact Of Reforms: Making The Poor ExpendableThese so-called reforms had long-ranging implications forbasic health services. These implications stemmed not onlyfrom the direct cuts in investment, but also because thestructural changes that were introduced, undermined theother key welfare inputs necessary for health, the mostserious being:a) Weakening of the food security system, unemploymentand loss of subsistenceundermined the inter-sectoralapproach to healthplanning;b) Primary health care wasreduced to primary levelcare thus excluding thesupportive responsibility ofsecondary and tertiary careinstitutions;c) Primary level care gotfurther narrowed down toessential clinical andessential public health care.Its components were definedby the World Bank whichhad little to do with assessingthe epidemiologicalneeds 15 ;d) A focus on reproductivehealth made women the agency for population control.Thus, reproductive technologies of fertility control andinfertility cure got a good boost;e) Medical care got into the hands of the private sector,which had no obligation to follow prescribed proceduresfor monitoring, data pooling and standardised treatment.It severly disrupted disease control programmes atnational level;f) Access to services due to rising costs as well as quality ofcare remained variable in the absence of any formalmechanism to monitor the expanding private sector – eitherlaid down by the private sector itself or by the State;g) Family welfare and AIDS control programmes acquireda major position in health planning that was now guidedby the priorities of donors;h) The leprosy, tuberculosis, and filaria control programmeswere verticalised instead of being integrated. Ineach programme medication became the main focus andsocioeconomic considerations were ignored. In thetuberculosis control programme, to get good results, onlythose who had permanent addresses and could comeregularly, were registered. This excluded those whoneeded help the most — migrants and daily wagers! Only50 percent of those diagnosed were given treatment; 1670 THE IIPM THINK TANK

A N INCLUSIVE INTENTi) Decentralisation of services was imposed and interpretedas provisioning by several independent providers and nota delegation of responsibility and answerability to acentral authority;j) Many national institutes lost their autonomy and becameover-dependent on those very donors who had distortedtheir organisational priorities;k) Public-private partnerships were seen as the answer tothe inefficiency of the public sector and the lack of socialresponsibility within the private sector, and promotedacross the length and breadth of the country.The effects of the so-called reforms were compounded onthe one hand by the inclusion of ill equipped, paid consultantsto chart out the project mode of planning and, on theother hand, by the multiplicity of planners and providers.The reforms that were supposed to have brought in efficiencyand equity in health services, have failed to do either.NRHM: The Answer To Health Sector Ills?The State too has been conscious of these trends. In 2005,it launched the National Rural Health Mission (NRHM) totarget the poor and provide relief. The main components ofNRHM are:• Train accredited social health activists (ASHA) toprovide essential healthcare at the village level and workunder the ANM and Anganwadi worker (a functionary ofthe ICDS);• Provide a fund of Rs.10,000 to the ANM to use as andwhen necessary;• Strengthen the sub-centres;• Strengthen all CHCs and also convert them into firstreferral hospitals;Table 7a: Public, Private Distribution Of Hospitalized Cases (Per 1000) With Type Of Ward For DifferentMPCE Classes In Rural AreasRuralPersonsM.P.C.EClassFreeWardPublic hospital + publicdispensaryPayingGeneralWardPayingSpecialWardAll(incl.n.r.cases)FreeWardType of hospitalCases of hospitalizationPrivate hospital Sample Percentageof the totalType of wardsamplePayingGeneralWardPayingSpecialWardAll(incl.n.r.cases)0-225 560 49 1 635 43 281 28 350 758 3.69225-255 510 52 0 563 15 388 35 437 571 2.78255-300 456 79 2 537 31 393 36 461 139 6.80300-340 439 51 0 491 41 408 54 503 1425 6.94340-380 409 71 6 485 52 428 35 514 1571 7.65380-420 460 52 3 515 18 404 63 485 1886 9.18420-470 349 84 5 438 23 464 75 561 1977 9.63470-525 371 57 4 443 31 437 89 557 2329 11.34525-616 345 46 3 395 25 484 93 602 2483 12.09615-775 264 64 4 332 17 532 119 668 2785 13.56775-950 375 48 16 339 27 493 140 660 1466 7.14950+ 173 55 15 244 9 467 281 756 1887 9.19All 350 60 6 417 26 453 104 532 20534 100Source:NSSO(2006): NSS 60 th Round (January –June 2004) n.r.: non reportingTHE INDIA ECONOMY REVIEW71

Reliving TheGreatIndianDreamTable 7b: Public, Private Distribution Of Hospitalized Cases (Per 1000) With Type Of Ward For DifferentMPCE Classes In Urban Areas.UrbanPersonsm.p.c.eClassFreeWardPublic hospital + publicdispensaryType of wardPayingGeneralWardPayingSpecialWardType of hospitalAll(incl.n.r.cases)FreeWardPayingGeneralWardPrivate hospitalType of wardPayingSpecialWardAll(incl.n.r.cases)0-300 483 70 26 579 22 532 67 421 310 2.56300-350 365 32 0 597 12 372 20 403 214 1.76350-425 487 68 9 564 26 359 49 435 620 5.11425-500 456 87 1 544 14 393 45 455 1156 9.53500-575 440 67 19 526 21 347 106 474 600 4.95575-665 317 59 10 386 15 510 89 614 1059 8.73Cases of hospitalizationSamplePercentageof thetotalsample665-775 342 75 5 422 10 451 98 578 1443 11.90775-915 301 79 11 391 9 448 151 609 1433 11.81915-1120 288 59 14 361 20 492 127 639 1672 13.781120-1500 203 66 12 281 14 447 257 719 1923 15.851500-1925 133 55 15 203 12 413 371 797 606 5.001925+ 100 50 20 170 14 366 450 830 1095 9.03All 304 67 11 382 16 433 169 617 12131 100Source:NSSO(2006): NSS 60 th Round (Jan –June 2004) n.r.: non reporting• Post additional public health and health managementpersonnel to bring about efficiency in work;• Develop national public health standards for each level.To complete the required numbers of specialists, doctorsfrom the PHC are to be mobilised for the CHCs. At thePHC, doctors from alternative systems would be posted toprovide services 17 . In the urban areas the entry of theprivate sector has been encouraged at all levels to ensurethat services are made available. However, there is noregulation of its price for the users.The Crucial PHC Is Not Important To PlannersWhat implications does this have for the functioning of theall-important PHC? Annual budget allocations give anindication of the official mindset:• Since 2005, revised annual allocations of Rs. 6,075.17crore and Rs. 7,190.37 crore and budgeted allocation ofRs. 9,839.00 crore have been made. Yet, resources at thePHC — the key peripheral institution for delivery andmonitoring of public health services — remain inadequateeven though they constitute the crucial linkbetween the CHC and the sub-centres;• A reduced number of doctors at this level means lessprofessional support for the work of ASHA and ANMsand reduced services for simple diseases that are manageableat the primary level;• Transportation of serious cases, nutritional services andcontrol of anaemia at the community level remain aserious problem. The burden on CHCs thus increasesand its focus on reproductive and child health may leave72 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 8: Place Of Delivery And Average Expenditure Per Birth For Rural Women Group For Different MPCE And Social Groupsm.p.c.eClasssocialgroupNo.per1000womenwho werepregnant atsome timeduring last365 daysChildbirthnot takeplaceStatus of pregnancy of ever marriedwomen on the date of survey(and place of childbirth)Child birth taken placeIn govt.hospitalRural All IndiaIn privatehospitalAthomen.r.TotalhospitalAverage expenditure onChildbirth (Rs.)GovthospitalPrivatehospitalEvery married women(15-19yrs). Whowhere pregnant atsome time duringlast 365 daysAt All Sample Percentageof the Total0-225 154 171 77 51 664 37 1000 765 2232 328 494 340 5.20225-255 142 215 76 52 642 16 1000 652 2886 418 606 261 3.99255-300 146 163 115 81 605 37 1000 990 1951 352 605 593 9.07300-340 133 247 139 64 532 18 1000 609 2801 444 679 583 8.92340-380 145 235 182 51 516 17 1000 607 3003 351 593 620 9.48380-420 119 241 125 117 509 9 1000 1234 2790 461 952 631 9.65420-470 126 241 165 109 480 5 1000 1231 3630 383 1037 664 10.16470-525 129 323 118 147 404 9 1000 1506 2825 462 1165 728 11.14525-615 115 320 146 153 367 14 1000 1432 4163 550 1573 718 10.98615-775 114 350 139 197 307 8 1000 1479 5505 433 2216 711 10.88775-950 118 373 119 237 257 13 1000 2343 7611 522 3616 381 5.83950+ 88 473 79 327 111 10 1000 2628 6087 570 4371 307 4.70All 127 267 131 119 467 10 1000 1183 4137 414 116 6537Social GroupST 131 131 45 45 599 8 1000 675 3082 264 498 946 14.47Sc 141 141 84 84 518 8 1000 935 3212 408 825 1303 19.93OBC 125 125 134 134 453 13 1000 1236 3673 446 1189 2605 39.85Others 119 119 158 158 382 32 1000 1485 5385 456 1819 1683 25.75All 127 127 119 119 467 16 1000 1183 4137 414 116 6537 100Source:NSSO(2006): NSS 60 th Round (Jan –June 2004THE INDIA ECONOMY REVIEW73

Reliving TheGreatIndianDreamTable 9: Place of delivery and average expenditure per birth for uural women for different MPCE classes and social groupsRural All Indiam.p.c.eClasssocialgroupNo.per1000womenwho werepregnant atsome timeduring last365 daysChildbirthnot takeplaceStatus of pregnancy of ever marriedwomen on the date of survey(and place of childbirth)Child birth taken placeIn govt.hospitalIn privatehospitalAthomen.r.TotalhospitalAverage expenditure onChildbirth (Rs.)GovthospitalPrivatehospitalEvery married women(15-19yrs). Whowhere pregnant atsome time duringlast 365 daysAt All Sample Percentageof the Total0-300 187 170 309 53 429 39 1000 671 4845 466 841 112 3.58300-350 153 197 321 192 290 0 1000 628 1799 614 903 95 3.04350-425 115 200 268 233 297 2 1000 724 3633 447 1469 206 6.59425-500 137 294 228 201 270 6 1000 790 3790 512 1543 428 13.69500-575 145 291 186 235 279 10 1000 928 3058 591 1508 202 6.46575-665 110 239 343 190 224 4 1000 781 3837 488 1462 306 9.79665-775 112 298 265 247 188 1 1000 1021 7280 614 3119 388 12.41775-915 103 274 251 392 129 14 1000 949 4754 666 2673 351 11.22915-1120 99 357 130 413 75 25 1000 2653 4926 530 3913 413 13.211120-1500 82 328 112 330 25 5 1000 989 6095 1566 3070 362 11.581500-1925 88 415 99 483 2 1 1000 1208 7976 1222 6807 127 4.061925+ 57 486 51 439 16 8 1000 1470 10471 79 9239 137 4.38All 107 296 215 298 181 10 1000 994 5480 552 2806 3127 100Social GroupST 143 218 357 162 252 11 1000 813 5458 388 1650 215 6.88SC 124 288 273 176 263 9 1000 737 5070 506 1741 499 15.96OBC 116 299 188 297 209 7 1000 852 5299 637 2691 1136 36.33Others 92 305 204 367 113 12 1000 1312 5719 472 3539 1277 40.84All 107 296 215 298 181 10 1000 994 5480 552 2806 3127 100Source:NSSO(2006): NSS 60th Round (Jan –June 2004)74 THE IIPM THINK TANK

A N INCLUSIVE INTENTout general health needs of the population;• The emphasis on public-private partnerships for secondaryand tertiary level care further undermines primaryhealth services for the poor. They are in no position topay the State’s private partners, whose charges arecompletely unregulated;• The use of AYUSH practitioners at PHCs for runningsome of its basic programmes also raises many fundamentalquestions about their training backgrounds, theappropriate use of their professional skills, and expandingchoices for people rather than substituting forunavailable allopathic practitioners.The issue then is, is NRHM the answer to the problemsof India’s health system? Should the trends initiated by thereforms be permitted to continue privatisation of healthcarealong with a further retreat of the public sector? Canpublic-private partnerships resolve the dilemma? Toexplore these questions we must examine some criticalaspects of services to highlight the importance of the Stateand its responsibility towards health, not only as an agencythat finances and facilitates but as one that provides, setsstandards, regulates, and ensures that contradictions withinthe overall system are minimised.IV. Challenges In Health Services: Reforming‘Reforms’/Making The Poor A PriorityAspects such as access and universality, subsidies, efficiencyand quality, and gender justice determine the extent ofequity in health services. Investments in health withoutthese may strengthen the business of health (by pushing thestates to accept aid and purchase drugs and equipments fornational essential services) but not necessarily the health ofthe poor people. The real reforms would be when the Statefrees the larger system from its urban bias, structuralinefficiencies, techno-centricity, an ill-developed manpowerpolicy and poor management. It is within the holisticTable 10: Cost Recovery In Medical And Public Health Services (Non-ESIS) (In Percent)Name of the state 1975-76 1980-81 1984-85 1988-89 Average15 major states 6.4 4.1 3.04 1.6 3.8Andhra Pradesh 2.9 3.4 3.8 0.8 2.7Assam 3.9 3.5 - 1.6 2.2Bihar 17.0 8.5 3.3 - 7.2Gujarat 3.7 5.0 1.9 2.6 3.3Haryana 6.4 3.9 7.7 1.5 4.9Karnataka 11.0 3.2 2.7 6.6 5.9Kerala 3.8 4.1 3.7 1.6 3.3Madhya Pradesh 4.9 2.4 6.4 2.4 4.0Maharashtra 12.9 3.5 1.7 1.7 5.0Orissa 2.6 3.0 4.3 1.1 2.8Punjab 15.6 5.6 4.3 5.4 7.7Rajasthan 4.0 3.9 2.5 0.8 2.8Tamil Nadu 4.0 3.9 2.5 0.8 2.8Uttar Pardesh 53 1.9 1.3 0.5 2.3West Bengal 2.2 2.1 2.1 0.8 1.4Source: Tulsidhar 1992, pp. 85. Cited in World Bank 1997 from Baru Rama “Private Health Care in India”, Sage 1998THE INDIA ECONOMY REVIEW75

Reliving TheGreatIndianDreamframework for understanding health, mentioned earlier,that we do so and not the narrow frame offered by theCommission on Macroeconomics 18 where health inputs areraised but within the frame of SAP. This means investing inhealth of the poor without making them a part of theproductive forces and thereby not enhancing their selfreliance,welfare, and productivity.Investments in health without these may strengthen thebusiness of health (by pushing states to accept aid andpurchase drugs and equipments for national essentialservices) but not necessarily the health of the poor people.Privatisation of services and the retreat of the State arepresented as ‘reforms’ by the Commission when these areactually adjustments to accommodate harsh and anti-pooreconomic policies. The real reforms needed by the largersystem to free it from its urban bias, managerial andstructural inefficiencies, techno centricity and an illdeveloped manpower policy are sidelined. Even theMillennium Development Goals (MDG) for health, whoserelevance for the poor has already been questioned, 19serve more as an instrument of expanding the business ofhealth for international corporations within the SAPperspective. MDGs reflect an approach to developmentthat curtails the notion of welfare to that which is possiblein the techno-centric frame of structural adjustment. Itemphasises the responsibility of the individual as againstthat of the State and holds them responsible for their ills.Correctives are thus fashioned less in terms of the socialand collective arena and more in terms of individualaction. This pushes for privatisation, deregulation,dismantling State provisioning of welfare services andinvestment in health for profits through expanded marketsrather than for the well-being of all. The poor are thustargeted and the State at best used as a purchaser oftechnology to provide for the poor or as one who makesthe third party payment for the poor in private insurances.In other words, MDG uses the poor for the expansion ofmedical business and very often the technologies itpromotes are not in their best interests.Access To Services: Priced Out By PrivatisationThree rounds of National Sample Survey (NSS) data from1986-87 onwards show that the utilisation of private sectorservices has been increasing over time. According to the2004 NSS, 20 for ailments not needing hospitalisation, 22persons per 1,000 use government facilities against 78 per1,000 who frequent the private sector. In the urban areasthe corresponding figures are 19 and 81 percent.The instant conclusion one draws from this is that:• People prefer the private sector• The private sector is more efficient.However, a deeper analysis throws up a differentpicture. Given the very high levels of marginalised populationsand sharp differentials between monthly per capitaincome groups (MPCE), overall and average figuresalmost always hide the truth. So, instead of looking at thetotal illnesses for which people seek help, when we lookonly at serious illnesses needing hospitalisation, a largerproportion of the population is seen using the services ofgovernment hospitals — 42 and 38 per 1,000 in rural andurban areas.This very distribution, when seen through the MPCEcategories, throws up a very different picture:• In the lowest MPCE groups — up to Rs. 300-340 thatconstitute 20 percent of the rural sample — 55.6percent use public hospitals where the use of paid bedsis negligible (five percent) (Table 7a);• The users of private hospitals in this class dependlargely upon free beds or paid general wards;• In contrast, in the highest MPCE groups — over Rs.775-950 — that constitute 16 percent of the sample, 70.8percent use private hospitals;• The urban population is not very different in the use ofpublic services by corresponding lower MPCE groups,but the use of private hospitals increases to 81 percenthere in the higher MPCE groups (Table 7b);• For the poor, utilisation of government hospitals was 60percent in earlier rounds. For services such as immunisation,ante-natal and delivery care, 69-94 percent ofthose below the poverty line used public facilities. 21It is also well known that illness is an important cause ofindebtedness in the rural areas where the burden oftreatment pushes people into marginalisation. The 52 ndround of NSSO data 22 shows that there is a major differencein the proportion of untreated cases in the lowestand highest rural MPCE deciles:• In the lowest decile 26% of the episodes are not treated• In the highest decile there are only 9% of such cases.76 THE IIPM THINK TANK

A N INCLUSIVE INTENTNon Treatment On The RiseIn the 60 th round of NSSO data however, there is an increasein these proportions across MPCE classes. The maincause for non-treatment remains economic, as people donot have the resources to afford treatment, and lack offinances as a reason for non-treatment increases from 10percent of the respondents to 26 percent across deciles. 23Non-availability of services is another key reason for notseeking services. The 60 th round of NSS confirms thequalitative insights that the poor try their best to save theirfamilies and often resort to private treatment, but their useof it is largely restricted to general wards and free beds thatare very limited. Other than health services, access to RCHservices of various MPCE groups in both areas (Tables 8and 9), also show patterns similar to that in health services:• In the lowest MPCE groups of up to Rs. 300-340 in therural areas that constitute 27 percent of the sample,about 75 percent of pregnant women gave birth duringthe survey – of them 61 percent gave birth at home, 10percent in government and 5 percent in private hospitals;• For the richest MPCE groups (Rs. 615 and above constituting22 percent of the sample) government hospitaldeliveries came down to 11 percent and home deliveriesto 18 percent while private hospital deliveries went up to32 percent out of the 60 percent deliveries during thesurvey of all the pregnancies identified.This is also true of the social classes where the ScheduledCaste and Schedule Tribe populations have much loweraccess to services. Their use of private services is even morelimited, both for the economically and the socially deprived.Similarly, the average expenditure per delivery inprivate and public hospitals is markedly different with theformer charging three or four times more. In urban areasthe deliveries at home have been seen to decline, the use ofgovernment hospitals is almost three times more than rurallower MPCE groups, while in the higher MPCE groups,private hospital services are used more frequently.No state has managed to mobilisemore than three percent of thetotal costs of a hospital exceptKarnataka and PunjabThe Politics Of User FeesOther than privatisation, the single largest cause of pushingaway the poor from public hospitals is user fees. User feeswere introduced with the idea that middle class users wouldrather shift to private hospitals if they had to pay a user feeat entrance to public hospitals. This would leave publicservices more for the poor. But the utilisation pattern showsjust the opposite trend. A study of the utilisation of freebeds based on NSS data of the 52 nd round shows that mostof the user fees collected by public hospitals are from therich, who also usurp their facilities:• The top 20 percent MPCE groups use 49 percent of allin-patient days and 46.5 percent of the free ward days;•The lowest 20 percent MPCE category use 26.6 percent ofall in-patient and 27.8 percent of the free ward days. 24User fees are actually preventing the poor from accessingthe only facilities that are somewhat within their reach.Many benefits of user fees are trotted out officially, onebeing that they contribute to resource mobilisation. Thefact is that they barely do so (Table 10). No state hasmanaged to mobilise more than three percent of the totalcosts of a hospital except Karnataka and Punjab where thefigures went up to 6.6 and 5.4 percent of the total cost.This simply shows that subsidies to public hospitals arelargely utilised by the rich. Therefore, the State not only hasto bear the cost, it also has to realise that, in the absence ofstrict monitoring, user fees distort rather than help theobjective of reaching the poor.First and foremost, there are no established norms aboutthe utilisation of the amount collected as user fees. In somestates the amount goes to the state treasury fully or partially,in others it is the Chief Medical officer who decideswhat is to be done with it. In some others it may be a widergroup of the hospital committee that decides. Nowhere dorepresentatives of different sections of the hospital staffcontribute to this decision-making process. The competingneeds of patient care, diagnostics, emergency requirements,facilities for attendants, and hospital sanitation are oftenoverlooked by the need to beautify the hospital or itsoffices. Hospitals that manage to collect substantialamounts are those that are in a position to offer goodservices. If at all they can reinvest, they further improvetheir services. This process completely bypasses thoseinstitutions that are resource starved, have poor finances,THE INDIA ECONOMY REVIEW77

Reliving TheGreatIndianDreamEven the best institutions in theprivate sector take no responsibilityfor coverage of population asprofits are their primary concernand are therefore not chosen by people who can pay. Thus,unless a system of sharing resources comes into being,institutions that function poorly shall continue to do so astheir user fees collection would remain negligible.Hospitals Shift To Paying ServicesYet another major issue is the tendency of hospitals to shiftpriorities to providing more paying services. Thus obstetriccare, orthopaedics, and cardiac care units are emerging asthe key components of services at the cost of basic careunits. The attempt at introducing differential user feessystem has also failed given the size of the country and thedifficulties in identifying economic status. Most states thatattempted to introduce identification card systems ended upgiving higher privileges to the elite who bribe and use theirsocial network.The introduction of user fees and relief to the middleclass in income tax, when put together, amounts to shiftingthe burden of health care on to the poor. Earlier, based onthe system of taxation according to economic ability,services were provided to the collective according to theirneed so that the poor were subsidised. Now, they fall sickmore and are expected to pay more often and the rest ofsociety is absolved significantly of its social responsibility.In short, privatisation, either by making services inaccessibleto the poor or through user fee and cut backs in investmentsin the public sector, pushes the poor from accessing78 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 11a: Average Total Medical Expenditure (Rs.) For Treatment Per Hospitalization Case By Type OfHospital And MPCE Class In Urban Areas.RuralPersonsM.P.C.E.Type of hospitalNo. of cases of hospitalizationclassGovernmenthospitalPrivatehospitalAll hospital(incl.n.r.cases)Sampletotal no.Sample%0-225 2530 5431 3598 702 3.60225-255 3173 4886 3931 553 2.83255-300 2087 5542 3686 1348 6.91300-340 2850 5777 4173 1367 7.00340-380 2586 5245 3945 1512 7.75380-420 2094 6895 4430 1806 9.25420-470 2884 6028 4674 1876 9.61470-525 3017 6781 5149 2216 11.35525-615 3508 6813 5532 2339 11.98615-775 4049 7327 5262 2641 13.53775-950 4192 9843 8001 1377 7.05950+ 6374 10349 9718 1785 9.14All 3238 7408 3695 19522 100Source:NSSO(2006): NSS 60 th Round (January –June 2004)Table 11b: Average Total Medical Expenditure (Rs.) For Treatment Per Hospitalization Case By Type OfHospital And MPCE Class In Urban Areas.RuralPersonsM.P.C.E.Type of hospitalNo. of cases of hospitalizationclassGovernmenthospitalPrivatehospitalAll hospital(incl.n.r.cases)Sampletotal no.Sample%0-300 1746 9576 5144 287 2.64300-350 1840 5357 2325 204 1.88350-425 2594 4852 3567 597 5.50425-500 2690 8258 5311 1078 9.93500-575 2365 6158 4171 550 5.07575-665 2984 5442 4528 975 8.98665-775 3011 10823 7883 1291 11.89775-915 4304 8074 6733 1275 11.74915-1120 5226 10149 8522 1461 13.461120-1500 5402 13758 11830 1668 15.361500-1925 8231 16433 15275 536 4.941925+ 15132 22918 21976 935 8.61All 3877 11553 8851 10857 100Source:NSSO(2006): NSS 60 th Round (January –June 2004)THE INDIA ECONOMY REVIEW79

Reliving TheGreatIndianDreamservices and thereby increases inequity rather than reducingit. Thus rising costs, user fees in public institutions, andpoor growth of public sector are the key factors in denyingthe poor access to healthcare facilities.Bogey Of Super Hi-Tech SpecialityAs pointed out earlier there are two uses of medical care— one for individuals and the other for community levelinterventions for disease control. The nature and definitionof quality for both differs. The ‘quality’ of clinical service isa complex concept, as it does not depend onlyupon diagnostic and curative potentials of the service eventhough these are the two basic ingredients of quality. It isalso dependent upon patient satisfaction, social skills of thephysician, and the necessary support available at theindividual practitioner’s level and team work in hospitals.Therefore, it brings in issues of referral facility, the rightmix of manpower, and creating conditions where eachperforms her/his best. While public sector services runthrough a range of institutions with a provision of referrallinkages, the majority of private practitioners and smallprivate institutions operate as isolated units without anyregular support. The system of informal linkages thatoperate become too expensive and force patients to finallyland up in the public sector at a late stage when complicationsdevelop.Quality AssessmentThe debates on quality are mostly restricted to the performanceof hospitals and their clinical outcomes. Yet, the toolsavailable for quality assessment are inadequate and inappropriate.For example, bed turnover as an indicator ofefficiency depends upon how quickly a patient is cured anddischarged. In most private hospitals opting for high-techsurgical interventions, very high bed turnover rates aremaintained to actually get more cases and profits which arenot necessarily in the interest of the patients.This then leads to another advantage for the privateinstitutions — their post-operative death rates may be loweras compared to public hospitals of the same calibre wheremore extended post-operative care is provided. The probablehigher deaths occurring in the public hospital thenhave more to do with the post intervention time spent ratherthan quality of care! The World Bank assumes higherefficiency levels of private sector but offers no evidence forthe same. 25 In the qualitative assessment of the other role ofmedical care — its preventive role — the issue of coverageof population has to be added to the list above. It is basic tothe notion of efficiency of programmes and institutions ofbasic health services, such as the national health programmes,CHCs, and PHCs. The case of tuberculosis is agood example to illustrate the importance of coverage.Unless the pool of infection is reduced in the population toan extent that the disease does not easily spread in thecommunity, the prevalence rates cannot be lowered. Thus,if a few institutions provide very good clinical care, it wouldbenefit a few individuals but will have no effect on diseasetrends and the status of tuberculosis in the population.Private Hospitals Don’t Care For CoverageAccording to experts a case finding rate of at least 75percent and a cure rate of at least 85 percent is necessary.Any programme, even the Revised Strategy for NationalTuberculosis Control Programme (RNTCP), is not able toachieve this coverage and therefore cannot be calledefficient. 26 Even the best institutions in the private sectortake no responsibility for coverage of population as profitsare their primary concern.A report on private hospitals written by Justice Qureshifor the government of Delhi (2001) notes that they did notmeet their agreement with the government to provide freetreatment to poor patients through 25 percent of total bedsin exchange for the subsidies provided. A serious problemwith corporate and hi-tech institutions is over investigationand intervention as the share holders — the doctors —compromise the need for ethical practice with the need forprofit. The Qureshi Committee Report in fact calls thecorporate hospitals “money minting machines”, 27 a sectorthat is certainly not interested in responding to the epidemiologicalneeds of the population.Thus effective clinical care, by a mutually supportiveteam that generates patient satisfaction and providesmaximum possible coverage, is the key to the quality ofservices. The private sector, given its variation, may at bestprovide clinical services of mixed quality but it does nothave the capacity to provide referral support or comprehensivecoverage to the majority. This is illustrated by the factthat, although highly interested in the Rs. 1,030 billion80 THE IIPM THINK TANK

A N INCLUSIVE INTENTWHO calls for an allocation of 7.5percent of the GDP for health andIndia today allocates less to healththan Bangladesh and Nepalmedical market of India, including the primary caremarket, the Confederation of Indian Industry (CII) insistson huge subsidies from the government to “stimulateprivate investment” and refuses to enter primary carewithout this and public-private partnerships. 28The other aspect of quality therefore, is reasonable costsfor the patient. These have increased consistently, particularlyso in the private sector. The stark difference betweenthe sectors in terms of average amounts paid by all classesas well as the specific amounts paid by different MPCEgroups to public and private hospitals forces the lowerexpenditure groups to stay largely with the public sector(Table 11a, 11b). The costs are increasing even in the ruralgovernment hospitals, especially for the poor. Thus in termsof effectiveness (cure rates), efficiency (higher level ofpopulation coverage at lower costs and optimum effectiveness),and efficacy (relative impact on health provided bynon-medical welfare inputs as compared to medical inputs),there is little evidence to show the supremacy of privatesector as its high-tech super speciality component is notmore than two percent of the total private sector and coversa relatively smaller section of the population. Its outreach islimited mainly to out-patient care for the poor and unlikethe public sector it does not integrate services with itswelfare policies.Role Of The State: Abdicating ResponsibilityIt is a given that the medical market primarily reflects thedemands of the rich in a situation characterised by persistentpoverty levels and high costs of treatment and diseaseprevention. In such a situation the Indian State wasexpected to adopt policies that would bring relief to themajority through universal basic healthcare. Instead it haschosen to opt for the ‘human capital’ approach thatpromotes individual initiative on the part of providers aswell as the users of healthcare while direct State investmentis rolled back.Decline In Health ExpendituresThis has led to a decline in expenditures on health since the1980s. How, is very clear:• The real per capita spending on health at state levelsshows an impressive increase since 1998, but the share ofhealth in the budget allocation has continued to decline.This simply means a neglect of the health sector; 29• At the same time, the Centre, despite its annual promisesto increase the health budget to three percent of GDP,has failed to do so. The public expenditure on health andfamily welfare has moved from 1.264 percent to 1.347percent of the GDP between 02-03 and 07- 08 (in thecase of total national expenditure the percentage movedfrom 1.27 to 1.38 percent between 02-3 and 06-07);• Over the Tenth Plan, though the Central allocation hasslightly increased, state allocations actually declined; 30• The current level of increase does not auger well forachieving the three percent level in the near future. TheWHO calls for an allocation of 7.5 percent of the GDPfor health. India today allocates less to health thanBangladesh, Nepal and Thailand. Brazil and SouthAfrica have already reached levels over three percent ofthe GDP, while western countries allocate six percentand above to their health sectors.Health Tourism Contributes To Ill-HealthThe Tenth Five Year Plan 31 and the Draft Approach Paperto the Eleventh Five Year Plan 32 emphasised the need forpromoting health tourism to earn foreign exchange and tofacilitate public- private partnerships.This distorted priority led to subsidy shifts from thepublic to the private sector through land subsidies for theconstruction of hospitals, cuts in import duties on drugsand equipments, inclusion of private institutions on governmenthealth panels, offering them space and profits inpublic hospitals by permitting private contracts of nonclinical services and investigations, and outsourcingservices. In addition, public-private partnerships werepromoted for providing services as well as for research andeducation and, apart from providing subsidised medicalgraduates to the private sector, medical education itself isnow open to private investment. Some idea of the extent ofexpected subsidies can be had from the Report of the CIIon Medical Care in India that puts forward its expectationTHE INDIA ECONOMY REVIEW81

Reliving TheGreatIndianDreamTable 12 : Comparative Statement On State Wise Information On The Institutional Deliveries And IMR asPer The N.F.H.S.III (2005-06),N.F.H.S. II (98-99), N.F.H.S.I (92-93)Name of thestateN.F.H.S. III(2005-06)InstitutionalDelivery rateI.M.R.(prov.)N.F.H.S. II(1998-99)InstitutionalDelivery rateI.M.R.N.F.H.S. I(1992-93)Sample%Uttar Pradesh 22.0 73 15.2 88.7 99.9Chhattisarh 15.7 71 13.8 NA NAGujarat 54.6 50 46.3 62.6 68.7Maharashtra 66.1 38 52.6 43.7 50.5Punjab 52.5 42 37.5 57.1 53.7Orissa 38.7 65 22.6 81 112.1Andhra Pradesh 68.6 53 49.8 65.8 70.4Assam 22.7 66 17.6 69.5 88.7Delhi 60.7 40 59.1 46.8 65.4Rajasthan 32.2 65 21.5 80.4 72.6Meghalaya 29.7 45 17.3 89 64.2West Bengal 43.1 48 40.1 48.7 75.3India 57 67.6 78.5Source:NSSO, NFHS I, II and IIIof State investment into the private sector for every step inits evolution. The Qureshi Committee Report gives aconcrete example:• Apollo Hospital got 15 acres of prime land in 1988 for atoken rent of one rupee per annum on condition that itwould provide free treatment to one third of its patients;• It also got Rs. 42 crore from the Delhi Government whenthe hospital was commissioned in 1996.This privatisation of services on the one hand gave ahandle to the World Trade Organisation to demand that thehealth sector be treated like any other trade or business andnot be given any privileges due to social services and, on theother hand, rationalised the emphasis on medical tourismeven by public sector hospitals. Secondly, it promoted thepractice of public sector doctors increasingly doing privatepractice. Thirdly, it promoted the expansion of tertiary careinstitutions within the public sector despite falling overallinvestments in the health sector. As if this was not enough,the district health sector reform projects taken up by theWorld Bank further distorted the picture. The Bankinvested heavily and resources were selectively allocated toareas that could promote trade and medicalcare. Thus civilworks, medicines, transport, equipments, and research werethe main focus. These were also the items with high foreignexchange value in all the states where projects were initiated— West Bengal, Karnataka and Punjab 33 .Manpower Casualisation: Prescription For DisasterReforms needed at the systemic level were again ignoredand casualisation of manpower in the name of cutting costsfurther undermined the services. The argument that 70-80percent of the expenditure goes on salaries of persons whodo not work is totally distorted. The same manpowerperforms when it shifts to the private sector, so there can benothing wrong with their ability.The problem is at the level of structure, management, andresources. A public health service cannot be effectivewithout well-trained permanent manpower that not onlyprovides but also monitors and can therefore preventepidemics. Their salaries are therefore the baseline over82 THE IIPM THINK TANK

A N INCLUSIVE INTENTwhich resources for other components of the service (drugs,equipment, building etc.) are to be added. Without that theinstitutions provide only clinical care and not public health.An important fallout of this significant but ill-understoodshift is that now a set of diseases remains uncontrolled, andservices for them have become permanent commodities.This transformation from service to commodity is perpetuatedso that those who run the medical market can benefitfrom it. The State, by encouraging these tendencies, hasaccepted the role of a steward who, withinthe framework ofSAP, in the name of good governance, social responsibilityof the private sector, partnerships and stakeholders,smoothens the way for the operations of an expandingmedical market at the cost of public health services. At thesame time, since targeting of the poor becomes a part of thestrategy, the State also acts as a client for MNC productsthat have been produced for trade with the Third World inthe name of fighting disease at the global level. Since Indiahas accepted the MDG it is bound to take loans for thecontrol of malaria, tuberculosis, and AIDS and follow theprescriptions that come with it.Distortions Created By Millennium DevelopmentGoals (MDG) Vertical ProgrammesFor AIDS alone, a $2.2 billion package from the WorldBank and its development partners (more than half ofwhich is for targeted interventions) is coming, with Indiainvesting an additional $1 billion of its own to mobilisefurther International Development Agency credits anddonor packets from the Department of InternationalDevelopment, UK and Bill Gates and Clinton Foundations34 . This is to be invested in the vertical programme andnot in the basic services whose weaknesses are at the coreof the problem of AIDS control, especially among thevulnerable populations. Not only are the diseases includedfor control in the MDGs, such as malaria, tuberculosis andAIDS, dealt with vertically, but also those that were coveredIncreasing distances of theCommunity Health Centres (CHC)from villages prevent the poorfrom accessing their servicesby the NVBDC such as filaria and kala azar.NRHM: No Integration Among Service LevelsOther than aid-dependent vertical programmes, theNational Rural Health Mission (NRHM) targets the ruralpopulation with the assumption that strengthening themedical care component — the CHC, and the RCH services— through ASHA, ANM and Anganwadi workers willdo the trick for the rural areas. The morbidity and mortalitydata presented in Table 5 and 6 do not show any significantimpact on diseases or mortality. The institutionalisation ofdeliveries has no direct relation with IMR declines betweenNational Family health Survey NFHS I and II. Also at leastfour states showed similar declines between first andsecond NFHS surveys (Table 12), when institutionaliseddeliveries were not being pushed. The neglect of the PHCsas the basic institution of public health and of the need tointegrate vertical programmes emasculates NRHM. ASHAis denied the support of an efficient PHC as an umbrellaorganisation and diseases that could have been tackled atthis level are now left to the CHC where the load increasesand also the proportion of complicated cases. At the sametime, the increasing distances of the CHC from villages preventthe poor from accessing their services. The otherproblem with this mission is that it does not create aneffective bridge between primary, secondary, and tertiarylevel public institutions, inevitably making secondary andtertiary care less accessible to the poor. Identification ofprivate institutions for first referral as well as user chargeshas further added to their deprivation.Thus, while much istalked about social security and protection for the poor, bytargeting them the State actually focuses more on a RCHstrategy for population control and on building its foreignexchange balance through aid and soft loans. For this it hasadopted the vertical strategies of technological interventionfor control in the three diseases identified by the globaldonors and their partner MNCs. 35 These are malaria, tuberculosisand AIDS.Achievements Of States: Different StrokesThe control of the Centre over resources through centralisedschemes has the power to influence state level planningas most states suffer from financial constraints. There arealso differences in state allocations to health and welfareTHE INDIA ECONOMY REVIEW83

Reliving TheGreatIndianDreamsector inputs, critical to health. The result is sharp differencesin the overall achievement of states. K. Seeta Prabhuuses a modified human poverty index that includes achievementindicators such as probability of dying, illiteracy rates,children not immunised, non-institutional deliveries, noaccess to health services, undernourished children underfour years of age, and develops a scoring system where thelowest scorer gets the first rank.According to her then, the best performing states scorethe least. These are Karnataka, Haryana, Tamil Nadu,Punjab and Gujarat. The second list includes Maharashtra,Assam, Kerala, West Bengal, Orissa and Andhra Pradeshand the poorest achievements are in Rajasthan, MadhyaPradesh, Uttar Pradesh and Bihar. The unexpected positioningof Kerala here is largely an outcome of its povertyand very poor achievements in supplying drinking water. Itneeds to be stated though that the data Prabhu uses is of theearly 1990s. 36 Any reconsideration of planning for healthwill have to pay attention to the differential needs of thestates where the North-east needs a special consideration asit is often left out of most analysis. The states may be smallbut have very special problems that must be addressed.Gender JusticeIn assessing the status of health and health services, thehealth status of women and their access to health servicesrequires special attention. Given the patriarchal structureof society and gender differentials in education, workopportunities, participation in labour and decision makingpowers, it is inevitable that when it comes to getting a shareof scarce family resources, women are invariably left out atcritical junctures. The low sex ratio of the girl child, highmaternal mortality (4-5/1,000 live births) and poor share ofwomen in health expenditure of the family as they mostly goto the traditional healer or local practitioner and less oftento the doctor, 37 makes it clear that special attention needs tobe paid by the health services to ensure their coverage.Health Services Perpetuate InequityThe health services, however, primarily focus on maternityservices, given their obsession with population control. Thedata showing causes of mortality from the Sample RegistrationScheme shows that the focus needs to be wider. Thedata shows that:• Maternal mortality constitutes only about two percent ofthe total female mortality (15- 45 years ), while girlchildren under 15 years contribute 30% of the deaths; 38• Even in maternal mortality, 20 percent of this mortalityis due to complications with systemic diseases thatrequire services other than maternity; 39• When we look at the prevalence of under-nutrition andanaemia, women again are the most vulnerable giventheir social roles and self-perception. Irrespective ofthese, the services focus only on maternal health, notrealising that the young carry their burden of undernutritionand ill health into their childbearing age.It is also a matter of concern that the focus on improvedantenatal care has been replaced by the present emphasison obstetric emergencies. In other words, restricted servicesto ward off death rather than extensive outreach to preventcomplications, detect potential dangers, and teach mothercare seem to be the current strategy.Last but not least, women are seen as the agency forpopulation growth and therefore, become the victim ofpopulation control strategies. The use of invasive andunsafe contraceptives and sterilisations and abortions arebeing pushed in Third World countries and, as if that wasnot enough, they are also the targets of global research thatmust be conducted to test new methods of populationcontrol. In this whole genre the latest is the New ReproductiveTechnologies (NRT) for creating designer babies, sexselection, and infertility treatment. In the name of ‘choice’it promotes women to allow the ultimate medical control oftheir bodies. 40Middle Class Agendas Dominate Health StrategiesIn the absence of basic health services to address issues ofill health of women and children and for the care of pregnancy,the introduction of NRT is yet again an example ofthe domination of middle class needs over the needs of themajority, as sterility among the poor is most often secondaryand calls for better delivery services, treatment ofobstetric complications and reproductive tract infectionsand not necessarily expensive NRTs.The data on place of delivery (Table 9) shows that eventhough hospital deliveries have increased across states, thenumber of home deliveries is still three times more in therural areas. This calls for a strategy to recognise the84 THE IIPM THINK TANK

A N INCLUSIVE INTENTAccording to HDR 2005, earnedincome of women was less thanhalf of men and their literacy rateremains as low as 47.8 percentimportance of birth attendants and integrate them into thehealth service delivery system.Gender Budgeting: Mere Lip ServiceWith a view to supporting the objective of strengtheningwomen’s social and economic status, women centredplanning (the 7 th Plan) and gender budgeting (the 9 th Plan)was introduced. This effort was seen as investing in programmespertinent for empowering women and the totalshare it received for 2007-08 was 4.8 percent of the GDPover 3.8 percent in the previous year.Unfortunately, the approach is limited to a programmaticinput irrespective of the nature of programmes and theirimportance for women. The importance of work, wages,welfare remains unrecognised and gender budgeting isdependent upon the overall perspective of a growth orientedeconomy where women are being pushed into theunorganised sector or as carers of the family or agency forpopulation control. At times even unrelated programmesare accounted for in gender budgeting as allocations forAIIMS and Safdar Jung hospitals 41 are shown under it. Italso suffers from that very patriarchal perspective in that itattempts to correct — so all inputs on contraception,population control, and child-care are seen as exclusive towomen. The poor impact of this strategy is visible in thecontinued lower position of India in the gender-basedhuman development index:• India stands 98 th among 140 countries;• According to the Human Development Report 2005,women’s economic activity was 50 percent of the activityof men even though they worked for 457 minutes per dayas compared to 391 minutes of work by men over a day.The earned income of women was less than half of menand their literacy rate remains as low as 47.8 percent.Gender justice then demands that women should not onlyget an equal share of all services including national programmesbut that a perspective of equality, justice and fairdistribution needs to be adopted. For women’s healthparticularly, RCH services need to be integrated into acomprehensive primary healthcare system as conceived bythe Alma Ata declaration.V. Strategies To Meet The ChallengesIf the objective is for India to move towards deepeningdemocracy and increasing equity and justice in the healthsector, then the public sector must retain its power to shapeservices and not become a steward for the private sector.This means:• Facing squarely the task of building infrastructure forpublic health in a way that comprehensive primaryhealthcare becomes a reality. This would mean developingan integrated health system that strengthens theprimary, secondary and tertiary level care and emphasisesinter-sectoral linkages such as food availability(public distribution systems), drinking water supply,sanitation, public transport, housing etc. Tertiary levelpublic services are critical not only to provide referralservices to the deserving but also to set up basic minimumstandards of tertiary care that are effective andefficient within the epidemiological requirements of thecountry. Without this monitoring or regulation of theprivate sector by the State is not possible;• Given the experience with user charges, it is clear thatthey harm the marginalised sections and do not improvethe overall efficiency of state institutions given their verylow proportion in the total resource requirement. Usercharges therefore must be removed;• The only way out is to increase the overall investmentlevels and not delay this already accepted principle.Instead of shifting subsidies to the private sector thesame could be used to strengthen the public sector. Foradditional resources, possibilities of health cess or anational insurance system need to be debated;• The epidemiological basis of many of the vertical programmesin existence need a thorough re-examination asevaluation studies bring out strategic weakness both interms of their technological choices and their structuralcoherence. In other words priorities need to be re-set;• The commitment to integration must be fulfilled,especially in the case of vector-borne disease controlprogrammes. Organisation and management accordingTHE INDIA ECONOMY REVIEW85

Reliving TheGreatIndianDreamto epidemiological need(s) must be the guiding principle;• Referral services need to be strengthened between differentlevels of services and this does need good public transportsystems to support patient movement. Innovative schemescould be tested in this sphere;• Making adequate quantities of essential drugs availableshould be yet another priority;• Given a vast private sector, its regulation and monitoring iscritical. Standardisation of treatment, its price, and compulsorypooling of data for national monitoring systems must bethe minimum requirement;• Public-private partnerships should be in response to epidemiologicalpriorities of the region and its people. Inclusion ofprimary providers of care in the referral and supervisoryumbrella of State institutions will provide an impetus toscientific practice and also reduce the burden of primary careon secondary and tertiary level public institutions. Partnershipswith corporate hospitals that focus on profits needto be curtailed;• Training and referral support to traditional dais and registeredmedical and untrained practitioners is yet anothermeans of expanding primary care for the poor;• The NRHM must work towards building an integratedservice as accepted by the Alma Ata declaration. That ispossible only with strengthening of the PHC, referralsystems, and linking up secondary hospitals with tertiaryinstitutions. The over-emphasis on tertiary sector withhi-tech services for diseases of the rich must not be allowedto hijack the system;• Gender sensitive policies are a must and gender budgetingmust come with a perspective wherein the patriarchal valuesand their penetration into programme strategies has to beconsciously eliminated;• For the implementation of the above mentioned measures, itis important to group states according to their achievementsin improving health indicators and social sector development.The Human Poverty Index Measure (HPIM) seems tobe a good tool to assess differential needs of these states.EndNotes1Dr. Imrana Qadeer is well known expert on Public Health. Sheteaches at the Centre of Social Medicine and CommunityHealth, Jawaharlal Nehru University.2Pruss-Ustun A. and Corvalan C., 2006: Preventing DiseaseThrough Health Environments: Towards an Estimate ofEnvironmental Burden of Disease, Geneva, World HealthOrganisation (WHO), pp. 11-12.3Government of India, 2002: Health Information of India 1999,CBHI, DGHS, Ministry of Health and Family Welfare, NewDelhi, pp. 1384Planning Commission, 2006: Report of the Working Group onPublic Health Services For the 11th Five Year Plan (2007-2012).New Delhi, Planning Commission.5Government of India, 2002: ‘National Health Policy’, Ministryof Health and Family Welfare, New Delhi.6Sagar A., 2006: ‘Health’, Alternative Economic Survey of India2005-2006: Disempowering Masses, New Delhi, DaanishBooks, pp. 251-2597Government of India, 2005: ‘Health Information of India 2004’CBHI, DGHS, Ministry of Health & Family welfare, NewDelhi, pp.80.8Government of India, 2005: ‘Health Information of India 2004’CBHI, DGHS, Ministry of Health & Family Welfare, NewDelhi, pp.370.9UNDP, 2004: ‘Human Development Report 2004’, OxfordUniversity Press, new Delhi pp. 156-15810Athreya, V.B. and Rao, M., 2006: ‘Education and Health inThe Draft 11th Plan Approach Paper’, Social Scientist vol.400-401, no.9-10 pp. 21-33.11Government of India, 1946: ‘Report of The Health Survey andDevelopment Committee’, (Bhore Committee Report), Vol. II,Ministry of Health, manager of Publications, New Delhi, pp. 17.12Government of India, 1962: ‘Report of The Health Survey andPlanning Committee’, (Mudaliar Committee Report), Vol. II,Ministry of Health and Family Welfare, Manager of Publications,pp. 78-80.13Government of India, 1981: ‘The Sixth Five Year Plan1980-85’, Planning Commission, New Delhi, pp. 366-387.14Qadeer I., 2000: ‘Health care Systems in Transition III. IndiaPart I. The Indian experience’, Journal of Public HealthMedicine, Vol.22.no.1, pp. 25-32.15World Bank, 1993: ‘World Development Report 1993:Investing in Health’, Washington DC, Oxford University Press,pp. 1-17.16Department of International Development, India, 1999: ‘AnInformed Approach: applying research to RNTCP: MainFindings, Unpublished Monograph, New Delhi.17Dasgupta, R, and Qadeer, I. 2006: ‘The National Rural86 THE IIPM THINK TANK

A N INCLUSIVE INTENTHealth Mission’(NRHM): A critical Overview’, Indian Journalof Public Health, Vol. 49,no. 3, pp. 138-40.18World Health Organisation (2001): Macroeconomics andHealth: Investing in Health for Economic Development:Report of the Commission on Macroeconomics and Health,WHO, Geneva, pp. 11-21.19Gwatkin, R. Davidson (2005) ‘How Much Would the PoorPeople Gain From the Faster Progress Towards the MillenniumDevelopment Goal for Health?’, The Lancet Vol. 365, pp.813-817.20NSSO, 2006: ‘Morbidity, Health Care and the Conditions ofthe Aged, NSS 60 th Round, Jan- June 2004’, Ministry ofStatistics and Programme Implementation, New Delhi.21Peters, David H., Yasbek, A., Sharma,R.R., Ramana,G.N.V.,Pritchett, L.H., and Wagstaff, A. (2002): ‘Better HealthSystems for India’s Poor: Finding Analysis and Options’, WorldBank, Washington D.C.’ pp. 133-149.22Government of India, ministry of Statistics and ProgrammeImplementation, 2000: ‘Note on Morbidity and Treatment ofAilments: NSS 52nd Round (July-June 1996)”, Sarvekshana,Vol. XXIII, No.3, Jan- March,pp. 43-78.23Athreya, V.B and Rao M., 2006: ‘Education and Health in theDraft 11th Plan Approach Paper’ Social Scientist, Vol.34 No.9-10, pp.21-34.24Mahal,A., Singh, J., Lamba, V., Gumber, A. and Selvaraja, V.2002: ‘Who benefits from Public Health Spending in India:Results of a Benefit Incidence Analysis for India’, SEO 2005,New Delhi, NCAER.25World Bank, 1993: World Development Report: Investing inHealth, NY, Oxford University Press, 1993.26Banerji, D. 1997: ‘Serious Implications of the World Bank’sRevised National Tuberculosis Control Programme for India’,Nucleus for Health Policies and Programmes, New Delhi.27Qureshi A.S., 2001: ‘High Level Committee for Hospitals inDelhi’ Unpublished Report of the Government of Delhi. NewDelhi.28Confederation of Indian Industries (CII) and Mc Kinsey andCompany, 2002: Medical Care in India, Report NewDelhi, pp. 6-7.29Seeta Prabhu, 2006: ‘Public Financing for Health Security inIndia: Issues and trends’, in Securing Health for All: Dimensionsand Challenges, New Deli, Institute for Human Development,pp. 401-41330Centre For Budget and Governance, 2007: Budget 2007-08:Dream or Despair? New Delhi, pp. 14-16.31Government of India, 2002: ‘The Tenth Five Year Plan- 2002-2007’, New Delhi, Planning Commission, pp. 81-163.32Government of India, 2006: Draft Approach Paper for the11thFive Year Plan, Planning Commission, New Delhi.33Baru Rama, 2001: ‘Health Sector Reforms and StructuralAdjustment: A State Level Analysis’, in Public Health and thePoverty of Reforms: The South Asia Predicament’, New Delhi.Sage, pp 211- 23434Chhabra Rami, 2007: ‘National AIDS Control Programme: ACritique’. Economic and Political weekly, Vol. XLII, no. 2, pp103- 108.35Buse Kent and Gill Walt, 2002: Globalisation and MultilateralPublic Private Health Partnerships: Issues for Health Policy” inHealth Policy in a Globalising World, editors Kelley Lee, KentBuse and Suzanne Fustukian, Cambridge University Press, pp.41-62, Cambridge.36Prabhu K. Seeta and Kamdar Sangeeta, 2002: “HumanPoverty and Income Poverty: Linkages and Implications” inReforming India’s Social Sector , editors, K Seeta Prabhu and RSudarshan, Social Science Press, Delhi, pp. 102- 128.37Gopal Meena, 1997: ‘Labour Process and its Impact on theLives of Women Workers; A study of the Bidi Industry inTirunelveli District’, Thesis submitted to the Centre of SocialMedicine & Community Health, Jawaharlal Nehru University,New Delhi. Pp. 360- 36138Qadeer, I., 1998: Reproductive Health: A Public HealthPerspective’ Economic and Political Weekly, Vol. 33, No. 41,pp.2675-2684.39World Health Organisation 1999: ‘Reduction of MaternalMortality: A joint WHO/UNFPA/World Bank Statement’,Geneva, WHO.40SAMA Team, ‘Assisted Reproductive Technologies, ARTS andWomen: Assistance in Reproduction or Subjugation?’ SAMAResource Group for Women and Health, pp. 5-1641People’s Budget Initiative, 2006: Back Ground Note: NationalConvention on Union Budget 2007- 2008,Centre for Budget and governance Accountability, New Delhi,pp. 46- 56.(The IIPM Think Tank acknowledges the collective contributionsof "Nine Is Mine" campaign in general and theireditorial support in particular)THE INDIA ECONOMY REVIEW87

Reliving TheGreatIndianDreamHealth BudgetsIn The ContextOf National RuralHealth Mission(NRHM)Ravi DuggalIndependent Researcher And Health ActivistIntroductionThe UPA government has a little over a year to go that is ifthey complete their term. They made a commitment in theirmanifesto that they would strive to raise public healthspending to 3% of GDP. When they formed the governmentat the Centre we were spending 0.8% of GDP on health andfor the current year the estimate is 0.9% of the GDP. This0.1% of GDP addition is largely the contribution of the UPAgovernment because the share of health in the Centralgovernment budget has almost doubled in the last four years,whereas that of the state governments has declined. This islargely due to the National Rural Health Mission (NRHM)which has seen an increased control over the public healthbudget by the Central government. But of course we mustnot forget that the commitment was to add 2.2% of the GDPto the public health kitty, the shortfall being an embarrassing244% of the current public health budget. Everyone knew88 THE IIPM THINK TANK

A N INCLUSIVE INTENTthat the target set was highly unrealistic but one had hopedthat if there was adequate seriousness and political will,reaching the halfway mark of 1.5% of GDP would not havebeen difficult. This would have been indeed substantial withthe GDP growing at 9% per year. With two more budgetsremaining for the UPA government to demonstrate itscommitment only a miracle can help them! Another concernin budget analysis is that there is a tendency to focus onallocations and expenditures alone. One generally ignoresthe revenue side except in discussions about reducing taxrates. For social sector budgets the analysis of revenues isequally important because often revenue increases for socialsector spending like health and education have to be metbeyond the traditional tax route. Innovative revenue mechanismslike sin taxes, Tobin tax (transaction taxes), earmarkedcesses and levies etc. are globally common for enhancingrevenues of health budgets. For instance Maharashtraintroduced 'profession tax' in order to raise resources for theinnovative Employment Guarantee Scheme and the resourcesraised were earmarked for EGS and cannot be divertedelsewhere. Similarly the surcharge on BEST bus tickets isearmarked for nutrition programs like ICDS etc.. The UPAgovernments commitment for higherallocations for health fails to identifyhow new resources will be raised andthis is hence part of the failure forNRHM to enhance public healthbudgets significantly. No revenuestrategy is discussed under NRHM.Even under the general budget theTax:GDP ratio has increased merely2.5% of GDP from 14.5% to 17%since the UPA government tookcharge. This in itself is grosslyinadequate to support largerallocations to social sector budgets.In contrast, the OECD countrieswhich have universal social security,including health and education, netin 35-45% of GDP as tax revenues.So there is a long way to go and wecan only progress in that direction ifwe also pay attention to the revenueside of the budget. Just to cite anThe tax:GDP ratio has increasedmerely 2.5 percent of GDP (from14.5 to 17 percent ) since the UPAgovernment assumed officeinstance, I was in Vietnam recently and was looking at theirbudgets, especially the revenue side and it was interesting tosee that for the development sector, Vietnam raises resourceslocally through local government taxes for specificpurposes as decided by the local government in terms oftheir needs. Thus if funds are needed for enhancing healthcarefacilities then a local tax/levy is charged upon allhouseholds to fulfill that requirement and with full accountabilityto the local community. Since this is a dedicated taxthe local community can also monitor it easily and demandaccountability for the resources they have provided. Asmentioned earlier we have such examples in India too butthey are sporadic and centralized. We need to devolve theprocess of revenue collection (as well and spending) to localgovernments so that it becomes easier for local communitiesto demand accountability from those who use those funds.THE INDIA ECONOMY REVIEW89

Reliving TheGreatIndianDreamNational Rural Health MissionThe mission begins with the statement, “The NRHM seeksto provide effective healthcare to the poor, the vulnerableand to marginalized sections of society throughout thecountry” (Chapter 1, section 2, page 3). Further, in rest ofthe document it keeps referring to 18 states as the focus area.One acknowledges that these groups need special supportfrom the public health system but the goal of the programcannot be selective because in doing so it distorts the design.If an increase of 24% in budgetwere to be divided among allPHCs, then each PHC will get anadditional eight lakh rupeesAnd it is well established today that anything designedspecifically for the poor or marginalized does not work inpractice. If universal access is not at the core of the missionthen it will never be able to achieve its goals.Since universal access to comprehensive primary healthcareand referral services, which the 1982 National HealthPolicy committed, is not stated clearly as a goal, the financingstrategy for NRHM also falls into the trap of “selectiveprograms for targeted populations”. Hence separateschemes like Rs. 10,000 for untied funds for the subcentres,Rs. 1,00,000 for rural hospital maintenance if Rogi KalyanSamitis are formed, Rs. 7,50,000 per block for trainingASHA’s etc. have been worked out, instead of determiningwhat resources would the proposed package of servicesrequire in order to implement it effectively. For instance, torun a good primary health program in rural areas goodpractice shows that at today’s prices we need about Rs. 200per capita. Thus if the PHC caters to 30,000 population thenwe need Rs. 6 million for such a PHC and these funds shouldbe given as a block fund to the PHC under the oversight ofthe local panchayats under whichthe PHC area of jurisdiction falls.Presently on an average basis, aPHC is getting Rs. 2 million and thattoo via a process which is riddenwith a lot of red tape. Similarly,good practice shows that a ruralhospital with basic specialties wouldrequire about Rs. 2,50,000 per bedto provide good quality services.This means that a 50 beddedhospital should receive Rs. 12.5million as a block fund again underthe oversight of the relevant panchayat.This is global experience offinancing healthcare in an effectiveand accountable way and theNRHM needs to learn this ratherthan making piecemeal grants for specific purposes andcreating an unnecessary confusion and envy within thehealthcare system. At this juncture, let us review briefly thefinancing of NRHM as per the budgets since 2005-06 whenNRHM was launched.For 2005-06, the mission document states that Rs. 6,713crore have been allocated for NRHM. If we look at the2005-06 Central Government Budget, we do not see NRHMfiguring as a separate budget item, though in 2006-07 aseparate header in the Budget is introduced for NRHM. Thereality is that NRHM is using funds of existing programs likeRCH-2, NDCP, Integrated Disease Surveillance Project andthe AYUSH program (Annex 5, page 3). NRHM is beingseen as an omnibus for the above programs (Chapter 3, page12). The budgets also reflect this. Thus in effect NRHM isonly a label for selected activities from amongst existingprograms. The only “new” component is the ASHA scheme,90 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 1: Demand For Grants Of Ministry Of Health And Family Welfare (Rs. Crore)Category Budget 2004-05 Budget 2005-06Medical And Public Health 3,103.12 4,253.84AYUSH 225.73 405.98Family Welfare 6,696.37 7,769.01Gross Total Health 10,025.22 12,428.83Grants To States and UTs 4,663.00 5,158.00Total Health Central Govt. 5,362.22 7,270.83Less Recoveries (-)1,587.10 (-)1,741.72Net Health Central Govt. 3,775.12 5,529.11Source: Budget 2005-06, Demand for Grants, Demand Nos. 47, 48, 49, Ministry of Finance, GOI, New Delhi, 2005which is actually a revival of the erstwhile CHV scheme of1978, which became defunct in the nineties in most states. Atthe national level today the Central and State governmentsspend about Rs.42,000 crore annually on healthcare (excludingwater supply and sanitation), which is just about onepercent of GDP. If these resources were to be distributed ona per capita basis equitably, then rural healthcare should getRs. 29,500 crore (@420 per capita) in contrast to about Rs.17,500 crore or Rs. 250 per capita it receives today. Ofcourse, this does not happen because the more expensivehospital services and the elaborate health bureaucracy arelocated in urban areas.There was great expectation that the Budget 2005-06 willmake a marked deviation using the NRHM as the peg for atTable 2: Demand For Grants Of Ministry Of Health And Family Welfare (Rs. Crore)CategoryBE2004-05Actuals2004-05BE2005-06RE2005-06BE2006-07BE2007-081. Central Health, FW andAyush2. Of which Grants to Statesand UTs including NEcomponent8,438.12 8,086.46 10,733.54 10,086.26 13,081.82 15,8564,487.77(748.10)[0.94]3,775.09[0.75]4,969.12(968.20)[0.97]3,780.15(880.00)[0.74]5,078.98(1,168.80)[0.90]5,196[0.75]3. Net Health Central Govt.(1-2)3,950.35[0.83]4,311.37[0.86]5,764.42[1.12]6,306.11[1.24]8,002.84[1.41]10,660[1.53]4. State/UT Govt. Health andFW (including 2)20,982.24[4.36]21,465.19[4.32]24,336.63[4.57]25,479[4.19]29,137[4.36]31,383[4.10]5. Total Health (3+4) as %GDP@24,932.590.8025,776.560.8230,101.050.8431,785.110.8937,139.840.9042,0430.90Figures in parentheses is NE (Northeast Region) component and in square brackets % to respective Total Govt. Budget or Expenditure. BE = Budget Estimate, RE= RevisedEstimate; *Estimated by author; @ GDP at market prices from RBI – Handbook of Statistics, RBI, Mumbai, 2007Source: Expenditure Budget Volume 1 2006-07 and 2007-08, (Demand Nos. 46 and 47) Ministry of Finance, GOI, New Delhi, 2006/2007. For 2004-05 BE from ExpenditureBudget Volume 1 2005-06 and actuals 2004-05 from Annual Financial Statement 2006-07. For State/UT governments from RBI – State Finances 2005-06, 2006-07, 2007-08,RBI, Mumbai, 2007/2008THE INDIA ECONOMY REVIEW91

Reliving TheGreatIndianDreamTable 4: NRHM Component Of The Union Health Budget Rs. CroreNRHM component of major headsRE2005-06BE2006-07BE2007-08Disease programs 648.59 755.64 884.06Ayush 45.00 65.00 108.00Family Welfare, including RCH 5,426.58 7,386.26 8,954.94NE region special scheme 668.04 891.53 1,387.50NRHM Totalof which Grants to states, UTs and NE6,788.213,410.759,098.434,496.2011,333.56Source: Demand for Grants Budget 2006-07, Ministry of Finance, GOI, New Delhi, 2006least launching a process for changing the political economyof healthcare in India. Unfortunately the only mention of theNRHM within the budget was in the Finance Minister’sspeech, “The National Rural Health Mission (NRHM) willbe launched in the next fiscal. Its focus will be strengtheningprimary health care through grass root level public healthinterventions based on community ownership. The totalallocation for the Department of Health and the Departmentof Family Welfare will increase from Rs.8,420 crore in thecurrent year to Rs.10,280 crore in the next year. The increasewill finance the NRHM and its components like training ofhealth volunteers, providing more medicines and strengtheningthe primary and community health centre system.” 1When we look at the expenditure budgets and demand forgrants of Budget 2005-06 we find that there is no mention ofNRHM as an item of expenditure. The Finance Minister saysthat the increase (Rs. 1,860 crore) over the previous budgetwill finance the NRHM component. This overall increase of24% in the budget appears substantial and if it were to bedivided equally among all PHCs then each PHC would getadditionally about eight lakh rupees, that is a 50% additionalityto what it averaged in 2004-05. However the budgetaryallocations belie this fact when we see that the increase forthe HIV/AIDS program is 105% from Rs. 232 crore in2004-05 to Rs. 476.5 crore in 2005-06. Similarly for the RCHprogram the increase is a whopping 94% from Rs. 710.51Table 3: Allocations For Selected Key Programs In The Union Health Budget (Rs. Crore)ProgramBE2004-05BE2005-06BE2006-07BE2007-08Hospitals & Disps. 240.75 309.79 263.25 261.40Medical education & Research 912.82 1,360.78 1,436.64 1,520.41AYUSH 225.73 405.98 447.89 563.88NACO–HIV/AIDS 232.00 476.50 636.67 719.50RCH 710.51 1,380.68 1,765.83 1,672.20Pulse Polio1,004.00 1,289.381,186.40 1,304.60Routine Immunisation 326.50 300.50FW services and contraception 1,948.71 2,412.41 1,942.61 2,295Area Projects 123.01 109.76 205.57 50.01NRH Mission Flexible Funds 1,530.88 2,682.72Source: Demand for Grants, respective Budget years, Ministry of Finance, GOI, New Delhi92 THE IIPM THINK TANK

A N INCLUSIVE INTENTcrore to Rs. 1,380.68 crore, for medical education also a highof 50% from Rs. 912.82 crore to Rs. 1,360.78 crore and asmuch as 80% for Indian Systems of Medicine and Homoeopathy(AYUSH) from Rs. 225.73 crore to Rs. 405.98 crore.Just these four programs account for Rs. 1,543 crore (or83%) of the increased amount of Rs. 1,860 crore. Thepattern of allocation remains the same in 2006-07 and2007-08 (Table 3). Thus the FM's statement in the budgetspeech is clearly a populist pronouncement and like all suchpronouncements of past budgets similar to the variousversions of health insurance packages of different financeministers, sickness assistance funds etc.. is pure hogwash andTable 5: Health Expenditure Of State Governments As A Percent Of Total Government Expenditure 1981-2008State/Year 1981 1987 1991 1996 1998 2001 2003 2005 2008Andhra Pradesh 5.80 7.88 5.53 4.65 5.44 4.74 3.96 3.53 3.3Arunachal Pradesh 5.91 9.77 4.89 4.66 5.04 NA 4.68 4.45 3.0Assam 3.96 10.21 NA 5.84 5.87 4.66 3.69 3.06 6.0Bihar 3.78 8.49 5.10 5.79 5.24 4.01 3.17 3.24 4.1Chhattisgarh - - - - - 4.13 3.99 3.74 4.7Delhi - - - - - 7.16 6.34 6.65 7.8Goa,Daman & Diu 7.19 13.45 8.70 5.39 4.89 3.90 4.02 3.27 3.7Gujarat 4.38 9.58 5.03 4.70 4.57 3.38 3.21 3.05 3.1Haryana 4.33 8.25 4.11 2.95 3.27 3.26 2.88 2.59 2.8Himachal Pradesh 6.63 13.50 3.32 6.16 7.04 5.64 4.50 5.08 4.5Jammu & Kashmir 3.79 12.50 5.56 5.50 4.97 4.89 5.30 4.78 5.1Jharkhand - - - - - NA 4.18 3.65 5.6Karnataka 3.79 8.23 5.40 5.28 5.85 5.11 4.17 3.49 3.9Kerala 6.56 9.85 7.21 6.53 5.68 5.25 4.74 4.71 4.6Madhya Pradesh 4.94 10.11 5.16 4.81 4.57 5.09 4.11 3.39 3.9Maharashtra 4.85 9.38 5.13 4.56 4.29 3.87 3.71 3.51 3.3Manipur 2.60 12.61 4.38 4.83 4.48 4.82 2.89 3.72 2.8Meghalaya 6.25 13.25 6.26 6.19 6.86 5.65 5.88 5.23 4.6Mizoram 7.89 11.85 3.50 4.18 NA 4.96 5.01 3.96 4.0Nagaland 5.39 10.88 5.96 5.95 5.68 4.87 4.65 4.68 4.8Orissa 5.17 8.50 5.13 5.16 4.82 4.15 3.75 3.90 3.6Pondicherry 9.05 10.01 7.82 0.03 0.04 NA NA 5.4 7.2Punjab 3.67 10.52 6.73 4.62 4.93 4.54 3.54 3.10 3.1Rajasthan 4.85 14.48 6.50 5.70 7.97 5.16 4.24 3.94 4.3Sikkim 4.49 6.44 7.89 2.72 1.92 3.67 2.03 2.56 2.6Tamil Nadu 6.18 10.04 6.91 6.29 6.28 4.86 4.10 4.20 4.2Tripura 2.51 7.37 5.18 14.74 4.79 4.04 3.79 3.79 5.8Union Government 0.22 0.29 0.56 0.46 0.52 0.77 0.76 0.83 1.53Uttar Pradesh 4.69 9.08 6.31 6.03 1.74 3.98 3.75 4.49 5.2Uttarakhand - - - - - 3.08 3.77 4.34 2.9West Bengal 6.30 9.73 8.37 6.43 NA 5.63 4.95 3.94 4.4Sources : Upto 1987 is Combined Finance and Revenue Accounts, Comptroller and Auditor General of India GOI, respective years; For year 2001 is State Finance A Study ofBudget, RBI, 2003; for 2003-2008 Public Finance, CMIE, 2005 and State Finances, RBI, 2008. Please note that 2005 and 2008 are budget estimatesTHE INDIA ECONOMY REVIEW93

Reliving TheGreatIndianDreamwill disappear as soon as the budget euphoria dies down. Theoverall budget of the Ministry of Health and Family Welfarefor 2004-05 (pre-NRHM) and 2005-06 is outlined in Table 1.The budgetary situation in subsequent years, that is2006-07 and 2007-08, has not changed significantly. We stillhave overall allocations for health in the state sector below1% of GDP (Table 2). Tables 2 and 3 also indicate recenttrends in public health spending. Table 2 reveals that Centralgovernment’s own expenditure is increasing rapidly (read asincreased Central control) whereas its grants to states haveshrunk, and that the state government health spending isstagnating and as a consequence the overall public healthexpenditure remains below 1% of GDP.Table 3 looks at some of the key programmatic allocationsin the Union Health Budget. Here we see that traditionalsectors like hospitals and medical education and familyplanning services are now receiving a smaller chunk of thehealth budget in comparison to the “new” sectors like RCH,HIV/AIDS, immunization (especially pulse polio). From the2005-06 Budget onwards, the NRHM has hijacked the RCHand Family Planning budgets giving a boost to rural healthallocations. But the question here is: Will enhanced ruralhealth budgets via NRHM address the demand side issues ofrural health provision which is primarily access to reasonablemedical care? The NRHM document and the NRHMbudget data in Table 4 do not provide any evidence for that.The focus of NRHM will continue to be what was under theold Family Welfare and Disease Control programs, that isfamily planning services, immunization, ante-natal services,and selected disease surveillance and epidemic control. TheNRHM along with RCH-2 adds a new focus on universalizinginstitutional deliveries and strengthening reproductivehealth services. The latter was also the goal under RCH-1but was not realized.As mentioned earlier the role of the Central Government,while having increased during this NRHM phase, is still quitesmall and if we are looking for a significant impact then stategovernments have to also contribute an increased share oftheir budget for public health. Trends in Table 5 are notpromising with large decline in fiscal support to the healthbudget precisely during the NRHM phase. This is perhaps anindicator that if the Centre steps up its budget to healthsector, the States will compensate by reducing their budgetsproportionately and hence the magical figure of 0.9% ofGDP for public health spending does not change despiteincreased resources being pumped by the Central governmentin the last few years.Another serious concern is the reluctance of both theCentral and State governments to devolve finances and therequisite authority to spend to local governments. Those indecision making positions at the Centre and State levels feelthat increased resources in the rural areas will not helpbecause there is limited “absorption capacity”. Hence,unwillingness on behalf of these decision makers for fiscaldevolution to the district and panchayat levels. This businessof absorption capacity is a façade.While governments have created the infrastructure, likehospitals, primary health centres, subcentres etc.., they havenot endeavoured to assure that the complete inputs for theefficient functioning of these are provided. The government’sown RCH Facility surveys highlights the pathetic conditionsof public healthcare facilities, which is largely due to inadequateresources being allocated, but very little has beendone to use this most valuable information inorder toimprove the public healthcare facilities.Thus this absorption capacity pretense has no meaning; itis sheer indolence that drives this belief leading to curtailmentand/or non-allocation of resources for peripheralhealth institutions. If autonomy is given to districts andpanchayats to use resources as per their local needs anddemands (within a defined framework and is as well open tosocial audit), then one will see a wide range of innovationsin setting up local healthcare delivery systems and provisionof healthcare for the people. Thus, the overall NRHMstrategy needs a drastic makeover and reoriented into auniversal access framework for which financial resourcesneed to be determined on the basis of needs and demands ofpeople, and this would be best met if resource allocations arebased on assessments of such needs and demands and givento local governments to plan their use autonomously. Toconclude, the NRHM should be used as an opportunity towork out a new health financing strategy, which devolvesfinancial resources to local governments and uses a socialaudit framework to monitor its eventual implementation.End Notes1Budget Speech 2005, http://indiabudget.nic.in/ub2005-06/bs/speecha.htm94 THE IIPM THINK TANK

AN ARINDAM CHAUDHURI & PLANMAN MEDIA PRESENTATIONAn exclusive account of how India was culturally,socially and economically integrated evenmore than 2,500 years agoonly18FEB-24 FEB2008Rs 10ASHUTOSH GOWARIKER 76Jodh Bai was married toJahangir, not Jodhaa BaiAISHWARYA BACHCHAN 78I have the ability to becomethe vision of the directorHRITHIK ROSHAN 79I play an Akbar who is stilldiscovering his visionThe making oft h e n a t i o n ’ s g r e a t e s t n e w s w e e k l yrediscoveryofan exclusive story of how the first free marketeconomy and urban culture of the world wasunveiled by archaeologists in orissaTHE ONL Y NEW S W EEKLY ON EARTH IN 13 LANGUAGESNO. 1INREGIONALREACHTHE NEW ADDICTION OF THESMART INDIANFor The First Time In Global Media History... A Newsweekly In 13 Languages!

Reliving TheGreatIndianDreamGenderBudgetingAndBeyond:EmergingIssues ForBudget2008-09Yamini Mishra &Bhumika JhambCentre for Budget andGovernance Accountability(CBGA), New DelhiThe budget is not just an aggregation of sub-totals andtotals. To the extent it is a political tool, it is as mucha tool for gender justice. A lot of energies haavebeen put in the previous decades to hammer in that publicpolicies also need to address gender inequalities in a concerted,direct and focused manner, rather than being “genderneutral”. And although equality to women has beenguaranteed by our constitution and by several other nationaland international instruments and conventions that India hassigned and ratified, non-discrimination against womencontinues to be a promise on paper that is yet to be translated.In every sphere—social, economic and political – discriminationis widely witnessed. The paper is divided intofour sections. Section I gives a quick snapshot of women’srealities. Section II is a brief on WCP Implementation andthe positive steps taken in Budget 2007-08 and also someconcerns emerging from the Budget, followed by Section IIIwhich gives the status of the promises made by the NCMP.96 THE IIPM THINK TANK

A N INCLUSIVE INTENTThe last section covers the a charter for the Union Budget2008-09, in a specific fashion.Section I: Where Women Stand Today?a. Discrimination At BirthThe skewed and declining child sex ratio presents one ofthe most gruesome forms of discrimination women face.Over the decades, the child sex ratio has declined from 962in 1981 to 945 and 927 in 1991 and 2001 respectively(Census of India).The 2003-05 sex ratio at birth is evenlower at 880. The child sex ratio for Muslims is much higherat 986, compared to 931 among SC/STs at 914 among otherHindus. It continues to fall and is below 900 in economicallyprosperous states like Punjab (793), Delhi (865),Haryana (820) and Gujarat (878). During the decade1991-2001, 70 districts in 16 States and Union Territorieshave recorded more than 50 points decline in sex ratio. Thelowest ratio recorded is 754 in Fatehgarh Sahib District inPunjab (2003, RGI Census Commissioner, India-missing-Mapping the Adverse Child Sex Ratio in India).Table:1 Female Work Participation (in percent)YearRuralUrbanFemale Male Female Male1972-73 31.8 54.5 13.4 50.11987-88 32.3 53.9 15.2 50.61996-97 29.1 55.0 13.1 52.12001-01 28.7 54.4 14.0 53.12004-05 32.7 54.6 16.6 54.9Source: National Sample Survey Organizationc. Women And WorkAlthough there has been a slight increase in the female workparticipation rate, both in rural and urban areas as can beseen in Table-1, critical concerns regarding women’s employmentstill remain.First, 97% of the female workforce is involved in theunorganized sector, agriculture being the main employer.b. Women And HealthAlthough the Maternal Mortality Rate has declined from398 in 1997-98 to 301 in 2001-2003 (Sample RegistrationSystem, 1997-2003), India still accounts for almost a quarterof maternal deaths in the world. States like Uttar Pradesh& Uttaranchal and Assam have MMRs as high as 517 and490 respectively - figures comparable to sub Saharan Africa.Further, according to NFHS 3, anemia in pregnant womenhas risen from 49.7% to 57.9% in pregnant women andfrom 51.8% to 56.2% in ever-married women within aperiod of seven years (1998-99 to 2005-06). This disturbingtrend has also exacerbated anemia in children by percentagepoints to 79.2%. There is also a growing feminization ofthe HIV/AIDS epidemic. NACO estimates that one in threepersons living with HIV in India is a woman. The burden onwomen is also distressing – an NCAER survey shows thatwomen account for more than 70% of the caregivers, 21%of whom are HIV positive themselves. A more dauntingfinding is that nearly 60% of HIV-positive widows are lessthan 30 years of age and live with their natal families as91% of them receive no financial support from theirmarital homes.THE INDIA ECONOMY REVIEW97

Reliving TheGreatIndianDreamTable:2 Literacy Rates by Sex (in percent)CensusYearSource: Census of India, 2001.Females Males Persons Male-FemaleGap InLiteracy Rate1981 29.76 56.38 43.57 26.621991 39.29 64.13 52.21 24.842001 54.16 75.85 65.38 21.702001 (SC) 41.90 66.64 54.69 24.742001 (ST) 34.76 59.17 47.10 24.41Second, around 57% of women fall into the category ofhome-based work due to lack of adequate training and otherconstraints. There is a consistent under representation ofwomen in higher level and higher paid jobs and representationin Parliament being as low as 9.1% in 2004. Importantly,women’s unpaid work continues to go unrecognized.d. Women And LiteracyOne of the rare statistics that gives a more comforting trendis the literacy rate. The 2001 Census recorded a significantincrease in literacy rates (from 52.21% in 1991 to 65.38% in2001) particularly female literacy rates which increased to54.16% (Please refer Table-2). For the first time, the absolutenumbers of illiterate women declined from 200.7 million in1991 to 190 million in 2001. Similarly, the Gross EnrollmentRatio (GER) for girls in Classes I – VIII has increased to89.87%, compared to 96.91% for boys. Women in highereducation has also increased from 13.6 lakhs or 33% ofstudents in 1990-91 to 34.4 lakhs or 40% of students in2004-05. Drop-out rates have also followed thesame encouraging trend and have reduced at alllevels of education. Nevertheless, drop out ratesremain high and the increase dramatically withlevel of education. While drop out rate for girlswas 25.4% at the primary level in 2004-05, theyare as high as 63.88% at the secondary level. Therates are substantially higher for categories likeSC and ST girls at 75.5% and 81.2%. Nonetheless,disparities in terms of gender, social categorieslike SC/ST, religions, rural-urban dividecontinue to be glaring.e. Women And ViolenceViolence against Women continues to be one ofthe most vivid manifestations of the genderinequality in our society. Statistics show thatalmost every form of violence against women hasbeen increasing, see Table-3. Worse still, theconviction rates for major crimes like abduction,dowry deaths, rape, molestation, cruelty byhusband and relatives etc. remain abysmally low.Rape statistics, for instance, reveal the truepicture of women’s vulnerability. Rape casesaccounted for 22% of total crimes against womenduring 2005. In 84-89% of the rape cases in theyears 2002-04, the victim knew the offenders. In9% of the cases, the offenders included the fatheror another family member or close relatives.98 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable:3 Crime Against Women, 2001 – 2005Year Rape Molestation Abduction Trafficking Dowry Death TotalIndia (2001) 16075(19.9)34124(42.3)14645(18.1)8796(10.9)6851(8.5)80491(100)(2002) 16373(20.9)33943(43.3)14506(18.5)6598(8.4)6822(8.7)78242(100)(2003) 15847(21.4)32939(44.6)13296(18)5510(7.4)6208(8.4)73800(100)(2004) 18233(22.4)34567(42.5)15578(19.1)5748(7.0)7026(8.6)81152(100)(2005) 18359(22.6)34175(42.2)15750(19.4)5908(7.2)6787(8.3)80979(100)Source: NCRB Crime Against Women-2001, 02, 03, 04 And 05Thus, the very notion of a household as a safe haven, ahomogenous unit, always working in the interest of itsmembers, stands totally challenged. Domestic Violencecontinues to be rampant. NFHS 3 data reveals that thepercentage of women, who happen to be the victims ofspousal violence, stands at 37%.Section II: Current Policy EnvironmentBudget 2007-08 saw the third Gender Budgeting Statement.It is important to emphasize that Gender Budgeting is not amere accounting exercise. The Mission statement - “Budgetingfor Gender Equity”, adoptedby the DWCD reinforces thatGender Budgeting is a processthat involves maintaining agender perspective at variousstages – from planning, policy,programmes and schemes, andassessment of needs, to allocationsand reprioritization of schemes. It is an initiative whichleads to the larger goal of gender mainstreaming. Unless anduntil the implications of the so called ‘gender neutral’ sectorssuch as defence, power, transport etc. on women are recognized,the skewed public expenditure towards women will notbe corrected in requisite fashion.Women’s Component Plan (WCP) as adopted in the NinthPlan was envisaged as the precursor to a much broader andprofound approach of Gender-Responsive Budgeting. Thedismal development on WCP so far is clearly evident fromthe Mid-Term Appraisal of the Tenth Plan. As envisioned,state governments had to draw up WCP, not limiting themselvesto quantify and earmark funds and benefits for women,but also extending the exercise to devise special programmeswhich directly benefit women. It is also important to mentionthat some Ministries such as Education, Health, FamilyWelfare, Rural Development, Social Justice and Empowerment,Water Supply and Sanitation and many more have thepotential to go beyond the figure of 30 percent in addition todevising and administering women related programmes. Theassessment indicated that the Ministry of Labour, which hadearlier reported a flow of 33.5percent of GBS to the WCP inthe Ninth Plan, has nowreported the same to be of ameager five percent in theTenth Plan. What demands immediateattention is the factthat certain Ministries/Departments which were earlier reporting on the WCP suchas Department of Agriculture and Cooperation, UrbanEmployment and Poverty Alleviation, Information andBroadcasting, Small scale and Agro related industries havenow stopped the process. The tying up of Gender Budgetingand WCP to ensure both preventive and post facto action asenvisaged, to enable women in getting their due share isimpossible without effective implementation of either ofthe two variants/facets.Apart from setting up Gender Budgeting Cells andNACO estimates that one inthree persons living with HIV is awoman, pointing out the growingfeminization of HIV/AIDS epidemicTHE INDIA ECONOMY REVIEW99

Reliving TheGreatIndianDreamTable :4 Progress So Farpreparation of incidence analysis from 2005-06 and inclusionof the same in the Ministries’/Departments’ Annual Reports/Performance Budgets/checklist, an instruction was givenspecifically to eighteen Departments/Ministries to bring outscheme wise provisions and physical targets benefitingwomen in their Annual Reports/Performance Budgets for2004-05 along with their DetailedDemands for Grants for2005-06. The performance ofvarious Ministries/Departmentscan be gauged from the tablesgiven in the appendix. (Note:Performance of only those Ministries/Departments has beenreported for which the documents were readily available.Detailed Demands for Grants have not been accessed).The comprehensive analysis and coverage of issues in otherMinistries/Departments (of which analysis has been done) isquite encouraging as done by the Ministry of Health andFamily Welfare, Ministry of Labour, Ministry of RuralDevelopment and Ministry of Social Justice and Empowerment.The Ministry of Health and Family Welfare has beenregularly carrying out Gender Budgeting exercises to assessthe flow of budgetary resources towards benefit of women.The guidelines of different programmes/schemes are beingcontinuously reviewed to increase the access to womencommunity. For instance,involving female communitylevel workers in LeprosyEradication Programme andwomen SHGs as DOTproviders in National TBControl Programme. Itprovides two tables – (a)Expenditure on women-specific schemes and (b) Expenditureon pro-women schemes in its Outcome Budget and alsoa chapter on gender issues in its annual report. Similarly, theDepartment of Rural Development, Ministry of RuralDevelopment in particular provides detailed account ofphysical targets benefiting women in its schemes withsubstantial proportion of women beneficiaries and itsOutcome Budget 2007-08 provides a separate GenderMinistry of Youth Affairs & Sportsdespite having various schemestargeting women, doesn't includea chapter on Gender BudgetingYearGB StatementPresented In2005-06No. Of DemandsIn Union BudgetCoveredYearsTotal AllocationsUnder Part-A OfThe Statement**Total AllocationsUnder Part-B Of TheStatement***10 2005-06 BE Rs. 14,378.68 Crore(Allocations were not divided in Part-A andPart-B that year)Total Magnitude OfGender BudgetRs. 14,378.68 Crore(4.74%*)GB StatementPresented In2006-07GB StatementPresented In2007-0824 2005-06 RE Rs. 8,273.88 Crore Rs. 15,966.63 Crore Rs. 24,240.51 Crore(4.77%*)24 2006-07BERs. 9,575.82 Crore Rs. 19,160.71 Crore Rs. 28,736.53 Crore(5.10%*)33 2006-07 RE Rs. 4,618.95 Crore Rs. 17,632.46 Crore Rs. 22,251.41 Crore(3.8%)33 2007-08 BE Rs.8,795.47 Crore Rs.22,382.49 Crore Rs. 31,177.96 Crore(4.8%*)* Proportion of Total Union Government Expenditure** Part A presents women specific provisions where 100% provisions are for women.***Part B presents women specific provisions under schemes with at least 30% provisions for women.Over the three year period, the number of Demands for Grants covered has grown and this could be an important factor in the increasing magnitude of the total allocation.Source: Gender Budgeting Statement, Expenditure Budget Vol. I, Union Budget - various years100 THE IIPM THINK TANK

A N INCLUSIVE INTENTDevelopment and Poverty Alleviation which includes such ananalysis only for SJSRY.Budget giving the Plan outlay, Financial outlay specific towomen, Projected outcomes, and processes/timelines.However, the analysis indicates that Ministry of YouthAffairs and Sports despite having various schemes targetingwomen, does not include a separate chapter on GenderBudgeting. The same holds for the Ministry of UrbanBudget 07-08: Positive Trends And New ConcernsWhen one looks at this year’s Gender Budgeting statement,both the expansion of the statement in terms of its coverageto various ministries/departments as well as its magnitudecaptures attention.• Gender Budget statement now covers 33 demands forgrants under 27 ministries/departments and five UnionTerritories and 50 ministries/departments have set upGender Budgeting cells. A charter has been issuedoutlining the role of these cells. The functions as specifiedin the charter include, identification a minimum of threeand maximum of six largest programmes (in terms ofbudget allocation) of each Ministry, so as to conductanalysis of gender issues, analysis of which will be reportedin the Ministry’s outcome/performance budget; conducting/commissioningPerformance Audit for tracking actualdelivery of services; identification of possibility of undertakinginitiatives to facilitate/improve access to servicesfor women by gender neutral sectors; dissemination ofbest practices followed by a Department/Ministry andpreparation of a chapter on Gender Perspective in theMinistry’s Outcome/Performance budget related to thesector/services and the impact of programmes/policiesbenefiting women.• The total magnitude of the Gender Budget has also goneup from Rs.22,251.41 Crore for 2006-07 (RE) to Rs.31,177 Crore in 2007-08 (BE). As a percentage of totalTable:5Sectoral Analysis Of Gender Budget StatementSectors 2006-07 RE Percentage 2007-08 BE PercentageWomen's Education 7513.7 38 8439.99 31Women's Health 3593.325 18 6483.03 24Women's Food Security and Nutrition 4321.77 22 5906.4 22Women's Livelihood 2444.35 12 3582.87 13Women's Housing 1498.39 8 2067.55 8Women's Protection 195.473 1 306.733 1Women's Awareness Generation and Others 153.41 1 177.43 1Total 19720.418 100 26964.003 100Note: Totals do not match with totals in the Gender Budgeting Statements because these have been corrected for anomalies identified in the previous section.Source: Compiled from the Gender Budgeting Statement, Union Budget, various years.THE INDIA ECONOMY REVIEW101

Reliving TheGreatIndianDreamUnion Government Expenditure, this constitutes a risefrom 3.8 percent to 4.8 percent.• Gender Budgeting has not remained confined to traditionallyperceived ‘women related’ ministries, but has beenable to extend to departments such as science and technology,biotechnology and industrial policy and promotion.• Several mistakes pointed out in the last year’s (2005-06)Gender Budgeting statement have been identified by theMinistry of Finance and also rectified. For instance, theICDS previously in Part-A of the statement has beenmoved to the relevant portion of the statement i.e. Part B.Equally important though is to draw our attention to theflip side of the gender budget exercise.• Although, an increase in the quantum of funds (for genderbudgets) cannot be denied, when we compare it as a % ofGDP at market prices, this turns into appallingly lowfigures. It was a mere 0.5 percent for the year 2006-07 and0.6 percent for 2007-08.• Impact of sectors such as water supply and sanitation forwomen cannot be overemphasized. Still, over the successivebudgets, one does not find any mention in the genderbudget statements. Another point worth mentioning isthat there has been a huge jump in the outlay for theMinistry of Minority Affairs, from a meager two crore(2006-07 B.E.) to Rs. 512.83 Crore (2007-08 B.E.).However, there is not even a single scheme/allocation inthe Ministry, specifically targeting womencommunity.• The Finance Minister this yearmade a special mention of the removalof errors in the Gender Budgetingstatement. Yet this year’s statement stillcontains some errors which range fromthose relating to calculations to lack ofconceptual clarity. More importantly,inclusion of contraception underMoHFW; and Indira Awas Yojana,Ministry of Rural Development, despite2.55 lakh houses in joint names ofhusband and wife and 1.47 lakh to men,are stark evidences of the patriarchalways of analysis. Also, under the Ministryof Labour and Employment, 100percent allocations under the head‘Improvement in Working Conditions ofWomen/Child Labour’ have been putexclusively for women, though thescheme has been put under Part B of thestatement. It is incorrect since theallocations for this head goes to twoschemes – National Child LabourProject (NCLP) and Indus Project,whereby the enrolment of girls in theformer is 56 percent and percentage ofexpenditure on women/girls in the latteris 44 percent. So, considering thescheme as exclusively meant for women102 THE IIPM THINK TANK

A N INCLUSIVE INTENTis incorrect.• Further in-depth analysis ofthe total Gender Budgetpool provides importantinsights into priorities andtherefore a clear indicationof the actions of thegovernment in the directionof it’s laid down commitments.An analysis has beendone by CBGA, New Delhito scrutinize the budgetfrom three very cruciallenses/facets:a) from the lens of differentsectors (sectoral)b) from the human rights lensc) from the lens of the mostdiscriminated/marginalized women (marginalization)In order to understand the sectoral allocations, the schemesunder Part A and B can be divided into Livelihood, Education,Health, Food Security and Nutrition, Housing, Protection,Awareness Generation and Others. Sectoral analysisfrom a gender lens reveals that still, allocations for sectorssuch as women’s protection, housing and awareness generationlargely remain neglected with the major chunk going towomen’s education, health, food security and nutrition andlivelihood. This is not to say that that the funds allocated tothese sectors are sufficient in any way, taking into accountdrop out rates, maternal mortality, and women living inpoverty. Meager allocations in the housing sector are despitethe fact that women perform two-thirds of the world’s totalworking hours and own less than one percent of the world’sproperty (Centre for Housing Rights and Eviction).Similarly, although the Civil and Political Rights (CPR) aswell as Economic, Social and Cultural Rights (ESCR) areindivisible and interrelated, it is important to ensure adequatebudgetary provisions for both. It is surprising to notethat 99 percent of allocations for women have gone to ESCRand a mere one percent to CPR. This is again not to disagreewith the very significance of ESCR taking into account theastonishing number of women living below poverty, neverthelessthe issue of almost negligible proportion for CPR iscritical. With alarming numbers of crimes against women,In the 2007-08 Union Budget, amere seven percent of the totalgender budget pool went to themost marginalized womenregistering nothing but increase over years and conversely noallocations still for implementation of the Domestic ViolenceAct, 2005 is a strong case in point.IDRC (2001) defines Gender Budget as: “Gender budgetstatements initiatives analyze how …The impact of governmentbudgets on the most disadvantaged groups of women isa focus of special mention.” Thus, it aptly recognizes thatwomen are not a homogenous group; unfortunately theUnion Budget 2007-08 does not. Various grids of power suchas rural/urban divide, caste, race, disability etc. have farreaching implications if not acknowledged. For 2007-08budget, a mere seven percent of the total gender budget poolwent to the most marginalized women. Thus, on the whole,the budget 2007-08, although has extended to more Ministries/Departmentsand has risen in magnitude, does not domuch in altering the status quo for women towards positivedirection. Consistent low Revised Estimates as compared tothe Budget Estimates raises the question of whether fundsever actually reach women.THE INDIA ECONOMY REVIEW103

Reliving TheGreatIndianDreamSection III: NCMP Promises Vs. RealityThe National Common Minimum Programme (NCMP) asdrafted by the UPA Government in 2004 is not just a policydocument but lays down very clearly the six very basicprinciples to promote good governance. Once of thoseprinciples mentioned in the charter of governance is: “to fullyempower women politically, educationally, economically andlegally”. It is indeed very important to look at where we standtoday in terms of the meeting the commitments made.As seen from Section I, astonishing percentage of thefemale workforce employed in the largely unregulatedinformal sector, and the formation of Export PromotionZones (EPZs), a comprehensive Social Securities Bill is astrong case in point. The same has been highlighted by therecent report ‘Conditions of Work and Promotion of Livelihoodsin the Unorganised Sector’ which clearly shows theincrease in employment registered in the informal sector (17percent) in contrary to nil increase in the formal sectoremployment. Also with astounding numbers of farmerscommitting suicides in the present eraof agrarian crisis, large numbers ofwomen engaged in agriculture arefacing hardships due to inadequateattention paid to their rehabilitation.Another issue to take note of is theprivatization of water under JNNURM,taking into account the vital link ofwomen and their accessibility to water.The UPA Government promised sixpercent of the GDP to public spendingon education which if actually implementedcould have profound implicationson women on too. However, theconsistent high drop-out rates especiallyat the secondary level is a stark evidenceof the failure of the Government tomeet its commitment. Similar is the casefor health with alarming numbers ofmaternal deaths.Several progressive initiatives havebeen recently undertaken including theDomestic Violence Act was passed in2005 (enactment of the act clearlystated in NCMP) taking cognizance ofthe rising numbers of crimes against women and also latelythe Hindu Succession Amendment Act, 2005 (HSAA, 2005)marking a significant step towards advancing women’s rights,although Muslim and tribal women are outside the purviewof this law. With the coming in of HSAA, the Hindu daughterwould be borne with the same right to ancestral propertywhich would include right to residence and right to partition.An amendment made in the discriminatory Hindu SuccessionAct of 1956, can have far reaching ramifications on the livesof women ranging from lowering the incidence of povertyamongst women, benefit to women acquiring small landholdings as much as to ones with large landholdings. It willalso dramatically lower the incidence of physical andpsychological violence. 1The evaluation of implementation of the Domestic ViolenceAct 2 after an year of its coming in the statute bookssuggests a mixed response. The number of cases filed varyfrom 3,440 in Rajasthan, 235 in Haryana to as low as 5 insome states. This variation reflects a combination of higher104 THE IIPM THINK TANK

A N INCLUSIVE INTENTlevels of violence coupled with greater awareness of the law.As envisaged, Protection Officers had to be appointed torecord incidents and support women in distress. However, asit stands today, either some states such as Rajasthan continueto rely on police, neglecting the multi-agency response orothers who have just passed the new hat to the healthworkers. Disappointingly, middle and upper caste womencontinue to be the main users of the law. Both the laws ascomprehensive and effective as they may seem cannot andwill not have the desired implications until and unless theyare brought outside the law books and reach women they areactually meant to reach. Several amendments from seeing itas ‘murder’ to enhancing the ‘glorification’ and extending thepunishment of the act to minimum of three years andmaximum of ten years have been proposed by the Ministry ofWomen and Child Development to strengthen the currentCommission of Sati Prevention Act, 1987. Most importantly,the amendments seek to clearly include immediate familymembers of a Sati victim, onlookers as well as the priest whoperforms the rituals as culprits. However, amendmentsproposed are facing resistance by several ministers. Inaddition, a very clear statement in the NCMP was the ‘UPAgovernment to take the lead to introduce one-third reservationsfor women in Vidhan Sabha and Lok Sabha’. After fourlong years, the failure of tabling and passage of the muchneeded Women’s Reservation Bill, comes as a deep disappointment,especially taking into account the dismal representationof women in higher echelons.Budget 08-09 – Call For A Gender Inclusive BudgetWomen’s contribution in several sectors of our economy needto be located in our policies.• Hence, it is important to prioritize universalisation ofGender budgeting (including gender audit) and Genderoutcome assessment in all Ministries/Departments atCentral and State levels.• Allocations need to be provided in the Union Budget forcapacity building of the Gender Budget Cells located in thedifferent ministries so as to strengthen them• The poor and even receding implementation of WCP aspointed by the Mid Term Appraisal of the Tenth Planwarrants special efforts at correction. There is urgent needfor implementation of the WCP across all ministries whichcould ensure at least a minimum resource allocationtargeted at women.• In the absence of sex disaggregated data, evaluation ofschemes through a gender lens or any effort at strengtheninggender dimensions of existing schemes poses a bigquestion. So, provision of such data should be prioritized.• The Union Government should devise a scheme to addressthe concerns of women and children in the militancyaffected regions on an urgent basis.• Adequate provisions need to be made for effective implementationof the Domestic Violence Act, 2005 and separatefund must be set up to gauge its implementation.• Union Budget should make special provisions to set upDistrict Level Women Commissions. Also the scope ofactivities of the existing national and state level womencommissions needs to be expanded.• With increasing women’s role in the care economy (bothpaid and unpaid), adequate resource allocations need to bemade to support women’s care roles. A committee needs tobe set up by the Central Government to devise a methodologyof accounting women’s unpaid work and thus recognisewomen’s central role to the care economy.• There is urgent need to introduce the Women’s ReservationBill in the Parliament.• Considering the huge gender disparities in land ownershippatterns, women’s access to land needs to be strengthenedimmediately. Union Government should provide allocationsin order to enhance legal awareness on inheritancelaws, provide legal support services, and provide subsidizedcredit to poor by encouraging group formation for landpurchase or lease by poor women.• In the light of the present agrarian crisis and the changingface of agriculture being highly gendered, the vulnerabilityof women in agriculture in particular needs attention in thelarger context of food security.(The article was originally published in the BackgroundNote prepared for the National Convention for the UnionBudget 2008-09, Centre for Budget and Governance Accountability,New Delhi)Endnotes1Home and the world: Revisiting violence; Bina Agarwal &Pradeep Panda; Indian Express August 7, 20032‘Staying Alive’, Lawyer’s CollectiveTHE INDIA ECONOMY REVIEW105

Reliving TheGreatIndianDreamAPPENDIXMinistry/Department Schemes referred Status RemarksMinistry of Youth Affairsand SportsMinistry of Rural Development1. Department of RuralDevelopment2. Department ofLand resources3. Department ofDrinking Water SupplyTable :1 Findings From The Annual Report 2006-07NSS, NYKS, Promotion of National Integration,Scouting & Guiding,National Service Volunteer Scheme, RashtriyaSadbhavana Yojana, Rural Youth & SportsClubs, Promotion of Adventure, Rajiv GandhiNational Institute of Youth Development,Scheme of Financial Assistance for the Developmentand Empowerment of Adolescent,Youth HostelSwarnajayanti Gram Swarozgar Yojana(SGSY), Indira Awas Yojana (IAY), NREGAIntegrated Wastelands Development Programme,Drought Prone areas Programme,Desert Development ProgrammeRural Water Supply and Sanitation Programme(ARWSP, Swajaldhara, Total SanitationCampaign)No specific chapter devoted toGender BudgetingOne paragraph on formationof a Committee on Sexual Harassmentof women employeesProvides detailed account ofphysical targets benefitingwomen in terms of all thethree schemesAbsence of reporting ofachievement of physical targetsbenefiting womenHad furnished twostatements relating toGender Budgeting (Oneon 100% componentand the other withschemes with 30% component)in the annualreport 2005-06Has many schemes withsignificant proportion ofmen and women such asthe centrally sponsoredNSS and many otherssuch as NYKS, NationalService VolunteersScheme, Scouting andGuiding etc.Provides an excellentexample of reporting ofphysical targets benefitingwomenMinistry of Tribal AffairsSupport to National/State Scheduled TribesFinance & Development Corporations,Scheme of PMS Book Bank and Upgradationpf Merit of ST Student, Scheme of Hostel forST Boys and Girls, Research Information andmass education on tribal festivals and others,Special Central Assistance to Tribal Sub-PlanProvides a good reporting of targetsachieved in terms benefitsaccrued to women. Disaggregateddata reported relating to thementioned schemes highlightedfor gender budgeting.Disaggregated data notavailable only in case ofResearch Informationand mass education ontribal festivals and others,Special Central Assistanceto Tribal Sub-PlanMinistry of SocialJustice & EmpowermentVarious schemesA separate chapter on GenderBudgeting providing accountof physical and financial outlayspecific to womenProvides Gender BasedProfile of Public Expenditurein pursuance ofthe order issues of theDepartment of Womenand Child Developmentin October 2004Ministry of Urban Development& PovertyAlleviationMinistry of Health &Family WelfareSJSRY, Basic Services to the Urban Poor, IntegratedHousing & Slum DevelopmentNo targets benefiting womenmentionedMany SchemesNo separate chapter on GenderBudgeting, however a chapteron gender issues giving a listof tables with their subject ongender issues.Contains a separate chapter onGender Budgeting giving genderdisaggregated beneficiariesMinistry of LabourImprovement in conditions of child/womenlabour, Indus Project, Welfare of SCs/STs andOBCs, Central Board for Workers Education106 THE IIPM THINK TANK

A N INCLUSIVE INTENTMinistry/Dpartment Schemes referred Status RemarksMinistry of Youth Affairsand SportsTable: 2 Findings From The Outcome Budget 2007-08NSS, NYKS, Promotion of NationalIntegration, Scouting & Guiding,National Service Volunteer Scheme,Rashtriya Sadbhavana Yojana, RuralYouth & Sports Clubs, Promotion ofAdventure, Rajiv Gandhi NationalInstitute of Youth Development,Scheme of Financial Assistance forthe Development and Empowermentof Adolescent, Youth HostelDoes not include schemewise provisions and physicaltargets benefiting womenAll the schemes mentioned are aimed atempowerment of both boys and girls. Neitherthe annual report nor the outcomebudget give the account of physical targetsbenefiting womenMinistry of Rural Development1. Department ofRural Development2. Department ofLand resources3. Department ofDrinking Water SupplySwarnajayanti Gram SwarozgarYojana (SGSY), Indira Awas Yojana(IAY), NREGAIntegrated Wastelands DevelopmentProgramme, Drought Proneareas Programme, DesertDevelopment ProgrammeRural Water Supply and SanitationProgramme (ARWSP, Swajaldhara,Total Sanitation Campaign)Provides a separate GenderBudget giving the Plan outlay,Financial outlay specificto women, Quantifiable deliverables/Physicaloutputsspecific to women, Projectedoutcomes, processes/timelinesAll three schemes reportphysical targets benefitingwomenTotal Sanitation Campaignmentions constitution of sanitarycomplex for womenProvides an excellent example of reportingof physical targets benefiting womenNational Rehabilitation Policy drafted in2006 recognising the absence of specialmention of care for weaker segments ofsociety especially members of SCs/STs,landless, women, destitute etc.Swajaldhara Programme Guidelines whichcovers ARWSP recognize the drudgeryof women in collection of water. So, hasreserved 1/3rd of membership for womenin Village Water & Sanitation Committees(VWSCs). However, no bifurcation interms of physical targets till now.Ministry of TribalAffairsSupport to National/State ScheduledTribes Finance & DevelopmentCorporations, Scheme of PMS BookBank and Upgradation pf Merit ofST Student, Scheme of Hostel forST Boys and Girls, Research Informationand mass education on tribalfestivals and others, Special CentralAssistance to Tribal Sub-PlanDoes not provide physicaltargets benefiting womenMinistry of SocialJustice & EmpowermentVarious schemesContains a separate chapteron Gender Budgeting includinga statement giving physicalachievements specificallyoriented towards womenbeneficiaries.For Ministry of Social Justice & Empowerment,Performance Budget 2006-07 wasconsulted.Ministry of UrbanDevelopment & PovertyAlleviationSJSRY, Basic Services to the UrbanPoor, Integrated Housing & SlumDevelopmentPhysical targets benefitingwomen available only forSJSRYVAMBAY and National Slum DevelopmentProgramme discontinued and subsumedunder , Integrated Housing & Slum DevelopmentMinistry of Health &Family WelfareMany SchemesContains a separate portionon Gender Budgeting providinga financial review toassess the flow of budgetaryresources towards benefit ofwomen. Provides two statements– Women Specific andPro-women schemes. Genderdisaggregated data availableon all major schemesTHE INDIA ECONOMY REVIEW107

Reliving TheGreatIndianDreamThe Politics Of Union BudgetAnd The Proletariats Of IndiaAnimesh NaskarDepartment Of Economics,Hans Raj College, University Of DelhiThe unprecedented high growth rate of above ninepercent coupled with booming Sensex and otherselect major economic indices can often prove to bemisleading. More often than not, incumbent governmentshave projected such a scenario as blissful and glorious inorder to boost their vote banks. Corporate giants too, havebecome more optimistic by this sort of macro economicperformance. However, seen through the perspective ofdevelopment economists, the qualitative aspect of this highgrowth rate is widely debatable and wholly specious. This108 THE IIPM THINK TANK

A N INCLUSIVE INTENTeuphoric GDP growth rate might be meaningful to the richersegment(s) of Indian population, but it fails to cater to theneeds of the major underprivileged sections. It disappointsthe poverty ridden proletariats in their aspiration of ahunger- free civilized life. Planners and policy makers havebeen underscoring the distributing aspect of growth sinceindependence. Since 50s, India has been a planned economyand it is universally acknowledged that the policies framedunder the aegis of five year plans activate their quantitativeaspect primarily through annual budget. Unfortunately,retrospective analysis of the Union Budgets shows that theyhave never been designed through proper economic planning;rather the concept of power conflict and vote bankpolitics has been overshadowing the prospective aspects ofeconomic development.Chronic poverty is widelyprevalent across the countryand is still following itscolonial legacy despite thefervent effort to suppress itsdigital growth throughstatistical jugglery. Due totrade liberalization, service sector is growing very fast ascompared to the manufacturing sector, while the growth rateof agriculture is on a steady decline. Decline in publicinvestment on agriculture seems to be the most significantfactor contributing to stagnation in the sector. The totalinvestment in agriculture as a proportion of GDP hasdeclined from around 2.2 % in 2000-01 to 1.7 % in 2004-05.This leads to the high growth of unemployment in urbanareas which has resulted into excessive congestion in the nonagricultural unorganized labour market. Lower skill, surpluslabour, scope for easy violation of labour laws and absenceof trade unionism have made the unorganized labour marketmuch more flexible comparing to organized one and forthese the remuneration received by the unorganized labouris very low. As a consequence, this class is trapped into thevicious circle of lower income as well as relegated to theconfinement of unskilledness. Planners and policy makershave been adopting different policies for employmentgeneration but skill development has never been prioritizedin course of all the Five year plans. The benefits of boomingservice sector are accruing to the highly educated skilledTotal investment in agriculture, asa proportion of GDP has declinedfrom around 2.2 percent in 2000-01 to 1.7 percent in 2004-05labour. The demand for high skilled labour coupled withtheir high pay structure widens the inequality betweenskilled and unskilled labour. This paper attempts to addressthe plight of unskilled wage labour in the phase of highgrowth rate and how much this crucial issue has been beingundermined in the Union Budget since early 90s (i.e., postliberalization period onwards).Unorganized labour in India has been defined as, “thoseworkers who have not been able to organize themselves inpursuit of their common interests due to certain constraintslike casual nature of employment, ignorance and illiteracy,small and scattered size of establishments, etc”(UnorganizedLabour, Annual Report 2004). In this paper, this specificlabour community is termed as proletariat (In Marxiantheory, the proletariat is thatclass of society which doesnot have ownership of themeans of production;Proletarians are wage-workers).Majority of this unskilledlabour communitybelongs to the most backwardclasses, other backward classes and dalits. Thesecommunities are again termed as social proletariats in India.As per direct estimation done by the National Commissionfor Enterprises in the Unorganized Sector, the total numberof employment in both organized and unorganized sector inthe country was 395 million in the year 2004-05. Near aboutTHE INDIA ECONOMY REVIEW109

Reliving TheGreatIndianDream86 percent of the total workforce are engaged in this sector.Of this, agriculture accounted for 64 percent and rest ofthem are employed in non-agricultural sector. Employmentin non-agricultural sector rose from 32 percent to 36 percentbetween 1999-2000 and 2004-2005. This might be an indicationof increasing demand in this specific sector. However,the quality of workforce entering the labour force is not verypromising. Consider this: over 200 million students enroll forschool in Class-I each year and only 20 million of them areable to finish Class-XII. In other words, 90 percent of theschool students drop out at different stages. Only 2.5 tothree million vocational education and training institutescater the whole country and these institutes are mainlyconcentrated in few developed states. The number of schooldropouts is largely found in backward areas and the labourforce which consists of school dropout population (in theseareas) is not getting any sort of benefit or necessary educationand vocational skills. The situation seems to be moredepressing in case of the cross country comparison. Table-1indicates that India’s position is relatively very poor amongfew developing as well as developed countries. The sustainabilityof high growth and the country’s low skill profilecontradict each other. To maintain nine percent growth theperformance of manufacturing sector is much more reliablethan the service sector. High growth of service is partly dueto the outsourcing of jobs from the foreign countries and thenature of these jobs is much more volatile comparing tomanufacturing sector. The share of manufacturing was 16.10percent of Indian GDP, while in China this sector contributed39.41 percent of GDP (in 2004) and it goes withoutsaying that China has progressed much more than India. Thereasons behind this meagre contribution of manufacturingare partly due to inefficiencyof unskilled labour andrelatively lower growth oftechnical progress. Thisinfact has placed this sectorat a lower comparativeadvantage in the worldmarket. As noted earlier, thedeclining growth in agriculture coupled with stagnation oflabour intake in manufacturing sector have painted a ratherbleak picture of the unemployment scenario.Unemployment rates rose since 1993-94, much moreCountryAccording to NSS 61 st Round,graduates had the highestunemployment rates, while theilliterate had the lowest ratesTable 1: Proportion Of Vocationally Trained YouthIn Labour Force (International Comparison)AgeGroupVocationally Trained(% Of Those InLabour Force)India 20-24 5.06Developing CountriesBotswana 20-24 22.42Colombia ( 1998) 20-29 28.06Mauritius (1995) 20-24 36.08Maxico (1998) 20-24 27.58Developed CountriesAustralia(1998) 20-24 64.11Canada(1998) 20-24 78.11France(1997) 20-24 68.57Germany (1998) 20-24 75.33Israel(1998) 18-24 81.23Italy (1997) 20-24 43.88Japan (1997) 15-24 80.39Korea Republic (1998) 20-24 95.86New Zealand (1997) 20-24 63.03Russian Federation (1998) 20-24 86.89Singapore (1998) 20-24 66.24United Kingdom(1998) 20-24 68.46Source: Report Of The Task Force On Employment Opportunities Set Up ByThe Planning Commission (Computed)sharply after 1999-2000, in all the segments of the workforce,(rural and urban men and women). The female unemploymentrates are reported to be significantly higher than maleunemployment rates, thoughthe difference between thetwo has narrowed down overtime. The rate of unemploymentfor workers of all ageswas typically much higheramong the educated thanamong those with lowerlevels of education (NSS 61 st Round, 2004-05, Employment-Unemployment Survey). Graduates had the highest unemploymentrates, while the illiterate had the lowest rates. Thereasons might be the fact that poor illiterate is much more110 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 2: Scheme Wise Allocations For Rural EmploymentYear SGRY JGSY NFWP/EAS NREGS Total RuralEmploymentAs % of TotalExpenditureAs % of GDP1999-00 RE 1689 2040 3729 1.3 0.192000-01 RE 1345 1453 2798.4 0.9 0.132001-02 RE 3425 0 800 4225 1.2 0.192002-03 RE 8642 0 860 9502 2.3 0.392003-04 RE 9639.99 0 9639 2.0 0.352004-05 RE 4590 0 1818 6408 1.3 0.212005-06 RE 7650 0 4050 11700 2.3 0.332006-07 BE 2700 0 0 10170 12870 2.3 0.33Source: Expenditure Budget Volume II (Various Years) and reproduced from Response to Union Budget 2006-07(CBGA)flexible in choosing any kind of low paid job, but the personswith higher education cannot do the same because of theirhigher reservation price and greater capacity to wait forwork suitable specifically for them. The other reason isperhaps due to the inequality in the level of educationbetween public and private sectors.In urban India, unemployment rate is higher among theilliterate sections, while the educated sections face higherunemployment rate in the rural areas. This could mean(over)crowding of the market, with easy availability ofunskilled labour in the urban area. This is partly due tomigration from rural and semi-urban areasa and leads toexcess supply. In rural areas there is perhaps a lack ofsufficient demand for skilled labour, very often leavingeducated workers with no gainful employment. Variousschemes of Central Government for skill developmentprogrammes are highly insufficient to cater thebulk labour force. Considering an accentuating needfor skilled labour (consequent upon sustained highgrowth), it can be suggested that Governmentshould focus upon vocational education with greateremphasis. Greater policy focus needs to be given to'out-of-school-youth' particularly, from the semiurban and rural areas. This is for the simple reasonthat the employment opportunities are limited forthese particular sections when compared to theirurban counterparts, all over the Indian economy.The services which are rapidly growing requirehigher skill and this skill is concentrated in smallsection of highly educated (elitist) people. This implies thatthere exists high inequality in the level of education acrossall the section of the society. The skill heterogeneity hasbecome not only an economic problem but also a social one.It creates a vicious circle of unskilledness for a particularsegment of the society and unfortunately dalits and mostbackward classes are the victims.Budget making is more of a political process rather than apure technical calculation and the political element is clearlymanifested in case of resource allocation amongst differentsectors. The priority sector is decided through the bargainingpower of the political lobby, which dominates the incumbentgovernment. It is really unfortunate for a country like Indiathat the public spending on social sectors by the UnionGovernment has varied from one-third to half of it's expend-THE INDIA ECONOMY REVIEW111

Reliving TheGreatIndianDreamiture upon defence services in the recent past. Thishas happened in spite of the concrete efforts made inimproving the bilateral relations with its neighbouringcountries. This was the case in 2004-05 and2005-06 Budget proposals. Although, the revenueexpenditure on Social Services in comparison torevenue expenditure on Defence Services has beenwell above the halfway mark, the capital expenditureon Social Services has been grossly inadequate whencompared to its counter part on Defence Services.This departure (significant increase upon thedefence spending) has been witnessed in the backdrop ofmomentous verdict given by the people of this country in2004 General Elections. The United Progressive Alliance(UPA) came to power and set for itself a well-meaningcomprehensive agenda in the form of National CommonMinimum Programme (NCMP) to govern the country forthe next five years. For the last three Budgets, we havehardly seen the UPA government moving in the direction offulfilling its commitments made in the NCMP, except for afew half-hearted steps such as National Rural EmploymentGuarantee Act, Bharat Nirman, National Rural HealthMission, etc. Public expenditure by the Central Governmentupon Social Services (as a proportion to GDP and at marketprices) when compared to that on Defence Services, reflectsthe policy orientation and also pinpoints as to where thepriorities of this Government actually lie.The rate of growth unemployment in rural and urbanareas could imply that the allocation of funds for employ-ment generation was highly inadequate in the budgets of thelast eight years. This bleak picture has been clearly reflected inthe allocation of funds for employment and skill developmentof the unorganized labour in the Union budgets of last onedecade. Table-2 indicates that expenditure on differentschemes for rural employment generation was very meager inall the budgets of last eight years. The allocations for urbanemployment generation under SJSRY dramatically reducedin 2001-02 (Please do refer Table-3). It can be plausible toargue that the facet/issue of employment generation waspartly ignored during the BJP government. This governmentgave much emphasis upon the defence sector and adoptedharsh measure to check fiscal deficit. This engendered acuteunemployment problem in urban areas. The increasing trendin the proportion of expenditure on general education andthe relatively lower percentage of money spent on technicaleducation (Table-4) in last five year budgets might havemade the accessibility of technical education difficult to poorTable:3 Allocations For Employment Generation Programmes In Rural And Urban AreasRural EmploymentUrban Employment (Swarna JayantiSahri Rojgar Yojana)Source: Expenditure Budget Vol-II; RE- revised estimates, BE- budget estimate; Reproduced from Response to Union Budget 2006-07(CBGA)Total Employment GenerationProgrammes1998-99 RE 3690.02 162.28 3852.301999-00 RE 3727.30 126.35 3853.652000-01 RE 2801.22 95.03 2896.252001-02 RE 4591.39 45.50 4636.892002-03 RE 9870.56 105.00 9975.562003-04 RE 10129.18 105.00 10234.182004-05 RE 7118.00 122.00 7240.002005-06 RE 11700.00 159.99 11859.992006-07 RE 12870.00 250.00 13120.00112 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 4: Revenue Expenditure On Education, Sports, Art And Culture (1996-97 To 2006-07)YearRevenueExpenditureOn GeneralEducationRevenueExpenditureOn TechnicalEducationRevenueExpenditureOn Sports AndYouth ServicesRevenueExpenditureOn Art AndCultureTotalRevenueAccountExpenditureOn GeneralEducation As% Of TotalExpenditureOnTechnicalEducationAs % OfTotal1996-97 2509.63 511.92 98.31 194.57 3314.43 75.7 15.41997-98 3481.6 582.25 124.56 250.48 4438.89 78.4 13.11998-99 4771.49 804.72 159.82 280.06 6016.09 79.3 13.41999-00 4912.89 980.05 180.81 317.16 6390.91 76.9 15.32000-01 5128.6 1064.9 209.58 350.1 6753.18 75.9 15.82001-02 5368.28 1185.25 273.43 431.62 7258.58 74.0 16.32002-03 7330.91 1364.38 278.99 526.21 9500.49 77.2 14.42003-04 8420.13 1368.71 290.5 524.28 10603.62 79.4 12.92004-05 11265.61 1396.92 369.3 556.89 13588.72 82.9 10.32005-06 RE 13342.03 1390.83 395.13 614.79 15742.78 84.8 8.82006-07 BE 18670.26 1681.39 551.02 712.08 21614.75c 86.4 7.8Source: Reproduced from Response to Union Budget 2006-07(CBGA); The table was computed from Annual Financial Statement of Central Government- for various years andEconomic Survey 2005-06, GOI.proletariats. The unemployment rate in urban areas reportedlyincreased from 0.49% p.a. in the period 1983-1993 to3.45% in the period 1993-2000. Based on the current dailystatus, NSS 60 th round estimates the unemployment rate in2004, to be at 9.0 % for males (up from 5.6 percent in1993-94) in rural areas and 8.1 % (up from 6.7 percent in1993-94) in urban areas. The corresponding figures forfemales were 9.3 percent (up from 5.6 percent) in rural areasand 11.7 percent (up from 10.5 percent) in urban areas. Overthe years, the government has in fact announced severalschemes and popular programmes for employment generationboth in rural and urban areas. Many schemes have beenstopped in between or clubbed with other ongoing schemes,but the overall approach towards employment generationhave been the same across governments over the years.Table-5 gives a trend of allocations for employment generationboth for rural and urban areas. There was an increase inunemployment rate among the youth in the age group 15-29over the period 1993-94 to 2004-05 (Table-5). In 2004-2005,women in the age group 20-24 years, in urban areas had thehighest unemployment rates compared men and women inrural areas and men in urban areas. In general, the unemploymentrate has been high among the urban men andwomen compared to the youth in the rural areas (by usualstatus), as is clearly reflected in Table 5. The share of ruraldevelopment expenditure in the total expenditure of thegovernment has increased marginally (Table 6). Such pitiful(small) increase has stagnated development process in allrural areas. However, there have been many promisedallocations through extra budgetary route. In his speech, theTHE INDIA ECONOMY REVIEW113

Reliving TheGreatIndianDreamTable 5: Unemployment Rate Among The Youth, 15-29 Years, 2004-2005Unemployment RateAge Group 1993-94 1999-00Usual Status (ps) Usual Status CWS CDS Usual Status Usual Status CWS(adj.)(ps)(adj.)Rural Male15-19 4.7 3.3 5.6 9 6.5 5.5 9.120-24 6.7 4.9 7.2 10.3 6.2 5.2 7.925-29 3.2 2.3 4.4 7.7 3.2 2.6 5.615-29 4.8 3.5 5.8 9 5.1 4.3 7.3Rural Female15-19 3.3 1.9 5.1 8.3 3.1 3.2 9.120-24 4.5 2.8 5.9 8.2 4.9 3.5 8.225-29 1.9 0.9 3.5 6.5 2.4 1.6 415-29 3.2 1.9 4.8 7.6 3.7 2.7 6.8Urban Male15-19 13.4 11.9 13.4 16.2 15.4 14.2 16.220-24 13.9 12.6 14.6 17 13.9 12.8 14.625-29 6.7 5.7 7.3 9.3 7.5 7.2 8.515-29 10.8 9.6 11.4 13.7 11.5 10.8 12.4UrbanFemale15-19 16.8 12.8 15.7 18.6 15.5 13.2 15.320-24 27.7 21.7 25.8 28.5 22.6 19.4 23.125-29 12.9 9.7 12.9 15.5 11.5 9.3 11.115-29 19.4 15 18.5 21.2 16.6 13.9 16.6Source: Computed from data of NSS 61st Round, 2004-05, Employment-Unemployment SurveyTable: 6 Allocations For Rural DevelopmentYearAs % of Total As % of GDPExpenditure1999-00 RE 2.43 0.372000-01RE 2.73 0.432001-02RE 2.93 0.472002-03RE 3.68 0.622003-04RE 3.29 0.562004-05RE 2.79 0.442005-06RE 4.20 0.612006-07BE 4.26 0.61Source: Expenditure Budget Vol-I Annexure-I, Various yearsFinance Minister have mentioned of creating a corpus of Rs.4,000 crores under Rural Infrastructure Development Fund,a credit disbursal of Rs. 4,863 crores for the SHGs andearmarking of Rs. 150 crore for the national horticulturemission. However, all these proposals for the year 2006-07are based on the assumption of an increased private publicpartnership in these sectors. The above analysis has made itclear that the proletariats of our economy are not able toreap the benefits of the high growth. They are trapped intothe vicious circle of inadequate education, poor skills andlow income. The meager increase in allocation for theirsocio-economic development will again be ineffective tobreak this vicious circle. In education, specifically in highereducation, the affirmative policy of reservation should beadopted and continued for at least one decade or so and in114 THE IIPM THINK TANK

A N INCLUSIVE INTENTCDSUnemployment Rate2004-05Usual Status(ps)UsualStatus (adj.)CWSCDS13.1 7.9 5.9 9.3 1511.7 6.2 4.7 8 12.99.2 2.3 1.6 4.2 8.811.1 5.2 3.9 6.9 1212.8 6.7 3.6 7.2 12.612.1 9.3 5.7 9.2 14.97.7 5.2 3.2 6 10.710.6 7 4.2 7.5 12.719 14 12.1 14.6 18.417.1 12.5 11.1 13.1 15.810.3 5.8 4.9 7.2 9.514.7 10 8.8 11 13.718 15.6 11.1 13 16.425.9 25.8 19.6 23.5 27.313.1 15.8 12.6 15.6 18.119.1 19.9 14.9 18.3 21.5this manner, the historical backwardness can be eradicatedfrom the society.The proponents of anti-reservation have claimed thatreservation in government jobs and direct transfer paymentsto the underprivileged section for their economic developmentfor longer period of time may make the system veryinefficient. Without fair competition, efficiency in economicactivities cannot be achieved. But it should be kept in mindthat fair competition in every field (education, jobs) ispossible only when all the section of the society gets equalopportunities. It is mentioned earlier that in the era of tradeliberalization, rapid growth of service sector has infactwidened the income gap between skilled and unskilledlabour. From society’s point of view, inequality has increasedbetween poor social proletariat and upwardly mobile classes.This phenomenon is getting reflected in all aspects of thesociety. In the field of education, demand for high skilled labourand allowance of private players raise the cost of education,especially vocational education by manifold. Lower middleclass and poorer sections are getting affected in an adversefashion. Both central and state governments have takendifferent policies to develop this proletariat class but because ofpoor implementation and sheer negligence of political parties,majority of them have failed and has caused social tensions. Inmy opinion, the percentage of expenditure on education (intotal expenditure) should be increased by significant amount.The widely celebrated campaign ‘India Shining’ would cease tobe merely a myth and transform into a reality only when eachand every section of the society are adequately represented andincluded in India's growth story.References• Banga Rashmi, “Critical Issues in India’s Services-ledGrowth”, INRM Policy Brief No. 2, 2006, IndiaResident Mission. Policy Brief Series• De Prabir & Raychaudhury Ajitava, “Trade in Servicesin India: Implications for Poverty and Inequality”,UNESCAP Research Workshop, 2007.• Fan Shenggen, Hazell Peter & Thorat Sukhadeo,“Linkages between Government Spending, Growth,and Poverty in Rural India”, Research Report 110,IFPRI, 1999.• Gordon James and Gupta Poonam, “UnderstandingIndia’s Services Revolution”, IMF Working Paper,WP/04/171, 2004• Islam Rizwanul, “The Nexus of Economic Growth,Employment and Poverty Reduction: An EmpiricalAnalysis”, Issues in Employment and Poverty DiscussionPaper 14, International Labour Office, 2004• “Understanding the politics of the budget: What driveschange in the budget process?”DFID Practice Paper,August 2007• “Whose Side Are You On, Mr. Finance Minister?Response to Union Budget 2006-07”, CBGA 2006• Report on Conditions of work and promotion oflivelihoods in the unorganized sector, NCEUS, NewDelhi 2007.• Union Budget 96-97 to 06-07, accessible at www.indiabudget.nic.inTHE INDIA ECONOMY REVIEW115

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A N INCLUSIVE INTENTTurning ‘Inclusive Intent’To Real Time Inclusion:Will To Actualize Schedule CasteSub-Plan And To Challenge Exclusion InThe Private SectorN.Paul Divakar,Dr.Sadanand Bag,Semmalar.T,Umesh Babu & Ashutosh Kumar VishalNational Campaign On Dalit Human Rights(NCDHR)Budget is not just a financial statement of the government;it reflects the economic and social policy of thegovernment deciding and directing the socio-economiccontour of the nation. Hence the continuous thrust fromcivil society all over world to have a say in the process ofbudget making. In India too there is serious concern amongcivil society to demystify the budget, make it more understandableto common people and do public advocacy so that thevoices of common mass reach out to the policy makers.However there is little debate or discussion on the budget withrespect to Dalits. The present article focuses upon the Budgetfrom Dalits’ perspective, i.e., the Scheduled Castes (SCs). Itfocuses on the Scheduled Caste Sub Plan (SCSP), its lacuna,the problems of non-allocation and non-implementation andthe hurdles blocking the entry of Dalits into the productiveeconomy of the country and the market. India needs aneconomy which believes that the Dalits and the Adivasis andother marginalized communities have been contributing to itsgrowth and that they will contribute more substantively bybreaking down the walls of exclusion.BackgroundCaste system based on the principle of inequality and selectiveprivilege is the basic feature of Indian society around whicheconomic, political, educational and socio-cultural life revolve.It regulates the economic life of India. The economic organizationof the caste system is based on the division of thepopulation into a hierarchical order of social groups thatdetermines the economic rights of members, which aredetermined by birth and are hereditary in the strictest sense ofthe term. 1 Dalits who have been pushed to the last rung in theladder of hierarchy are excluded from the mainstream ofsocial and economic life on the basis of the caste system. 167million Dalits in India known and publicly identified as“Untouchables” or “Depressed Classes” till a few decades agoare recognized as ‘Scheduled Castes’ in the Constitution. Inmore recent times, various social movements that fightuntouchability and caste-based discrimination have promotedthe name ‘Dalit’ (broken and oppressed people) as a commonidentity to bring together the various sub-caste communities.While the term in some context is used to denote ‘all oppressedpeople’ in common, it is used here to refer to peoplewho are considered ‘untouchables’ owing to their birth.‘Untouchables’ meant and ‘Dalits’ continues to mean todaythat the touch, sight and approach defile those who are notpart of them. A community based system of enforcementTHE INDIA ECONOMY REVIEW117

Reliving TheGreatIndianDreamregulates caste privileges by means of social ostracism,violence, and economic penalties that find their justification inelements of Manu-dharmic culture primarily in the Hindureligion. This specific cultural trait has also permeated otherreligions like Buddhism, Sikhism, Christianity and Islam.Constitutional Safeguards And DevelopmentThe Indian Constitution provides certain provisions to protectas well as provide ample opportunities to SCs to achievedesired progress. These provisions are Equality before law(Article 14); prohibits discrimination on grounds of religion,sex, places of birth, race and caste and also empowers the stateto make special provision for the advancement of any sociallyand educationally backward classes of citizens or for the SCand ST (Article 15). 2Upon the economic front, the Constitution not only prohibitsany form of forced labour (Article 230) and makes specialprovisions to provide reserved posts in various governmentdepartments, both at the centre as well as states and unionterritories (Article 16,320 and 335). Article 46 of the Constitutionoffers to promote with special care the educational andeconomical interests of the weaker sections of the people, andprotection from social injustice and all forms of exploitation. 3The Government of India has been introducing and implementingvarious welfare schemes that are particularly aimed atthe welfare and development of Dalits. Planned efforts for thedevelopment of SCs began in the First Five Year Plan. In thefirst two Five Year Plans, welfare programmes were drawn upand implemented for improving the educational and economicstatus of SCs. The policy measures were largely confined toeducational facilities, allotment of waste-land and reservationin government services. 4 The third plan laid stress on trainingin the villages for small scale industries and introduction ofimproved techniques in the traditional crafts. 5SCSP: Leveling The Playing Field 6When it was noticed that these measures were not able tomake desirable changes in the socio-economic conditions of118 THE IIPM THINK TANK

A N INCLUSIVE INTENTthe SCs, the then Prime Minister Smt. Indira Gandhi whileaddressing the Conference of State Ministers in–charge ofBackward Classes Welfare in April 1975 emphasized theresponsibility of government in executing the programmesrelevant to the SCs, “who were suffering from dual disabilitiesof severe economic exploitation and social discrimination”,and who, “while constitute only 15% of the total population ofthe country, accounted for a much larger proportion in thepoverty groups in the country”. The conference of the stateministers adopted a resolution “calling for the quantificationof efforts made by each sector”, and of benefits from schemesin each general sector for development of the SC’s. It washence declared “in accordance with the accepted strategy forthe development of SC’s in the fifth five year plan, the mainthrust of development will be provided by the general sectors.The beginning was made in thepreparation of Special ComponentPlan (SCP) for the SCs in1979-80 with specific directionthat “this SCP has not only to beimproved quantitatively andqualitatively but should also beimplemented satisfactorily. Itwas felt that the strategy for thedevelopment of this disadvantagedgroup should be based on comprehensive economic andhuman resource development efforts so that this section of thesociety could attain the ability to utilize the fruits of thegeneral economic development. During the 6 th Five-Year Planperiod (1980-85), the government of India introduced theconcept of Special Component Plan (SCP) {now beingrenamed as Scheduled Caste Sub Plan (SCSP)} to ensureadequate benefit to the SC population. It envisages allocationof funds out of the total plan outlays, proportionate to thepercentage of SC population represented in the states/UTs. Itgives thrust to family oriented income generating schemes forthe economic development for SCs. It was emphasized thatthe funds under SCSP should be made non-divertible. SCSP isan integral part of the annual and Five Year Plan. Accordingto Mrs. Indira Gandhi, the former Prime Minister of India,“An optimal SCSP for the SCs be expeditiously prepared byMinistry, as part of your Annual Plan as well as the Five YearPlan. 7 Dr. Manmohan Singh, the present Prime Minister, inthe 51 st National Development Council Meeting (held on 27 thSCSP and TSP should be anintegral part of Annual Plansas well as Five Year Plans,making provisions therein nondivertibleand non-lapsableJune, 2005) has emphasized that “SCSP and TSP should be anintegral part of Annual Plans as well as Five Year Plans,making provisions therein non-divertible and non-lapsablewith the clear objective of bridging the gap in socio-economiccondition of the SCs and STs with in a period of ten years …” 8Willful Negligence Of The GuidelinesClear guidelines have been issued through various departmentOrders and other directives to ensure earmarking of funds forSCSP from total Plan outlay, at least, in proportion to the SCpopulation of the State/UT, making the social welfare departmentas the nodal department for formulation and implementationof SCSP, placing the funds earmarked for SCSP at thedisposal of the nodal department concerned with the SCwelfare and development, which in turn will reallocate thefunds to the sectoral departmentsfor implementingschemes directly relevant to SCdevelopment. Accountingprocedures have also beenissued to place the fundsearmarked for SCSP underseparate budget head/sub-headfor each department implementingSCSP. There are alsoguidelines to constitute State and District/Block level MonitoringCommittees to monitor the implementation of variousschemes under SCSP and to review implementation. MonitoringCommittees to include MPs and MLAs, prominent SCpersonnel/social worker, representative of NGOs and SCmembers of village Panchayats may also be included in theState/District/Block level committees. The District/Block levelMonitoring Committees may be made responsible for identifyingthe developmental needs of SCs living in various Panchayatareas. Any lapse on the part of field level implementationagencies in timely utilization of funds and proper implementationof the schemes may be viewed seriously. There is to be anevaluation to assess the impact of economic developmentschemes implemented under SCSP. Originally, SCSP wasstarted in 1980-85 and all the Departments and Ministrieshave been instructed to start allocating funds for SCs accordingto their population. While the plan has consistently beenun/under-allocated and further under-spent, the Union budgetin 2005-06, does not mention SCSP in the Budget Books andTHE INDIA ECONOMY REVIEW119

Reliving TheGreatIndianDreamreports of different Ministries/Departments. The Governmentfor the first time presented a statement i.e., Statement No. 20in Expenditure Budget Vol.1, which indicated the magnitudeof allocations for various programmes/schemes (under fiveDepartments) that was expected to benefit SCs/STs in asubstantial fashion.Denial & Diversion Of Dalit FundsThe total budget allocation under Plan Expenditure for theyear 2007-2008 is Rs.2,05,100 crore and under the SCSP theGovernment of India should have allocated Rs.32,816 croreexclusively for SCs (16 percent of the total plan budget). Asagainst this only Rs.12,535.75 crore has been allocated or inother words SCs have been deprived of Rs.20,280.25 crore in asingle year. Only 6 Ministries /Departments have allocatedfunds under the SCSP, nine Ministries/Departments havemade some notional allocation and other 49 Ministries/Departments do not evenmention any SCSP allocation.The Departments who haveallocated more than 10% areMinistry of Social Justice &Empowerment, Ministry ofLabour & Employment,Department of Women & ChildDevelopment, Department ofSecondary Education & Higher Education (Ministry ofHRD), Department of Elementary Education & Literacy(Ministry of HRD) and Department of Health & FamilyWelfare. However, when we look at the pattern of theirallocations, the priorities mismatch with the basic principle ofSCSP which clearly states that it will target the individual andfamily welfare and economic development of Dalits. Forexample, the government has allocated a huge sum of Rs.5,756crore under SCSP for school education and literacy where asallocation for higher education it Rs.1,660 crore only. Thetechnical and professional enhancement is left out. Health andFamily Welfare department has allocated Rs.2,557 crore forSCs and STs which goes to general health programmes like TBcontrol, Leprosy Eradication, control of blindness, etc. Thus,many of the allocations do not fulfill the goal of equippingDalits, reducing economic inequalities and in enhancing theireconomic position. Many of these sections/segments aregrossly under and out of sync with the great economic growthwe witness in the country today.A research study found thatdiscrimination causes 15%lower wages for SCs/STs ascompared to equally qualifiedothers in labour marketDalits In An Empowered EconomyWhen the overall allocation pattern is analysed, it is obviousthat Dalit development is still perceived as handouts andwelfare measures at subsistence levels. The departments whichearmarked SCSP are traditional departments which in one orother form have been focusing on SC welfare and the departmentsplaying important role in the development of countryare negligent. The Ministries/Departments which share themajor chunk of the plan budget like Dept. of Commerce(Rs.1,475 crore), Dept. of Urban Development (Rs.2,336crore), Ministry of Tourism (Rs.953 crore), Dept. of RoadTransport & High Ways (Rs.12,499 crore), Ministry of Power(Rs.5,483 crore), Dept. of Land Resources (Rs.1500 crore),Dept. of Drinking Water Supply (Rs.7,560 crore), Dept. ofScientific & Industrial Research (Rs. 1,070 crores), AtomicEnergy (Rs.4,596 crore),Ministry of Environment &Forest (Rs.1,351 crore) andothers like coal, transport, etc.have not devised any scheme orpolicy to include Dalits intotheir development plans andpolicies. Information Technology,Industry, Civil Aviationand other Ministries and Departments that can bring revolutionarychanges in the life of SCs are not inclusive at all forSCs. Although present economic policies have opened lots ofopportunities in service sectors and communications, etc.,there is no planning from the perspective of SCs and are notinnovative at all.Hurdles To InclusionThis phenomenon of non-allocation is not a story of a year ortwo both at the Union and state budgets. There has been atotal impunity which has been condoned with utter carelessness!This willful negligence and violation of the guidelines hasbeen going on for the last 27 years ever since this principle wasaccepted. Dr. Manmohan Singh, the then Member-Secretary,Planning Commission in 1981, mentions the negligence ofministries 9 “Ministries had so far not identified schemes andquantified outlays, which would benefit the SCs and STs”.Apart from the non-acceptance of the States to follow the120 THE IIPM THINK TANK

A N INCLUSIVE INTENTprinciples of SCSP, the performance of SCSP ismarred by several deficiencies. Some scholars haveobserved that the plan has the merit of drawing publicattention as to how limited a share of publicoutlays is allocated to poor people. On the otherhand it is doubtful that such a blanket approach canever be much more than a noble aspiration. Theplanning and implementation mechanisms for sucha policy are simply not in place. 10This has been reiterated by Shri N.R. Ranganathan,Member-Secretary, Planning Commission, “…In fact in the central ministries, there is no propermechanism for preparation and implementation ofSCP and TSP. The system of monitoring andevaluation is either non-existent or even where itexists; it cannot be taken as effective. Despite ourrequest, the Ministries/Departments are yet to openseparate budget head under SCP and TSP … 11 Ministry ofFinance circulated a directive to all Ministries/Departmentsfor opening a separate Code 789 for SCSP allocation andexpenditure in their plan budget. But very few ministries/departments in the States/UTs as well as Central Ministries/Departments have opened this code. 12 The non codification of789 as minor head under themajor heads opens up space todivert the SCSP. The NationalCapital Territory (NCT) ofDelhi is one of the exampleswhose Budget Link Book doesnot mention the code of SCSP(789). Government of Delhiclaims to have earmarked fundunder SCSP in proportion to SC population which amounts toRs. 965 crore in the year 2006-07 and Rs. 1,534 crore in theyear 2007-08. However, the expenditure pattern shows thathardly 0.5% of the allocated fund is spent on SCs welfare and99.5%has been diverted.Demand For New Approach Towards EmpowermentAnd OwnershipDevelopment when understood from the point of view ofindividual connotes her/his ability to translate his/her capabilityinto a claim for assets to lead a dignified living. Developmentfor Dalits means the overall development which helpsThe system of monitoring andevaluation in SCP and TSPis either non-existent or evenwhere it exists, it cannot betaken as effectivethem realize their full potential which has been denied tothem. What has been lacking in the development measurestaken by government is that they consider Dalits to be onlybeneficiaries of schemes related to livelihood. The Union andState Government planners have not included the roles ofinstitution holders, skilled professionals, managers etc forDalits in the overall productiveeconomy of our country. Onlytraditional departments likesocial justice, education andhealth have been making SCSPallocations. The emergingeconomy of our country, theservice sector, IT and powersectors, infrastructure andindustrial production had not consciously created spaces forinclusion of Dalits and Adivasis into the economic sphere.This growth and change in these sectors are not reflected inthe planning and allocation of budget under SCSP. Thisbecomes more serious as recent studies shows that market alsokeeps Dalits out. The social exclusion and discriminationrestricts (formal and informal) entry of Dalits into the marketthrough selective inclusion with unequal treatments. Labourmarket discrimination transpires in the domain of hiring, inwages, in working conditions and opportunities for upwardmobility. 13 The Planning Commission Working Group onEmpowerment of SCs 14 is of the opinion that a fresh classifica-THE INDIA ECONOMY REVIEW121

Reliving TheGreatIndianDreamtion of Ministries into regulatory and service oriented shouldbe undertaken. Within service oriented Ministries, thoseengaged in activities, which are divisible in nature, should bemade to strictly comply with the guidelines for formulationand implementation of SCSP. Modalities should be workedout for earmarking of resources for such service orientedMinistries/Departments which implement infrastructurerelated projects. The challenge forward is that if the SCSP is tobe implemented properly and fully it ought to be both throughthe State mechanisms with the government and the publicsector as well as through engagement with the private sector.The reason behind this is that IT, power, infrastructure, servicesectors who are directly linked to the private sector and themarket deny Dalits their due share most. What is required isto interlink the SCSP with the market. In the sectors likeinfrastructure, energy, natural resource Dalits could be givenopportunity to play the role of contractors, managers andothers. Access to the market needs to be facilitated by providingskill development, loan at low interest, protective measuresand others.Recognizing Exclusion In The Private Sector:In 2005, the Human Rights & Business Project 15 in Denmarkconducted a Country Risk Assessment (CRA) on India. Theobjective of the CRA in India was to identify the main humanrights risk areas from a corporate perspective. The riskassessment showed that caste-based discrimination constitutesa wide-ranging human rights problem, which affects the livesof over 250 million people in India and that companies are atgreat risk of violating the human rights of Dalits while operatingin or sourcing from India.A series of Economic and Political Weekly (EPW) articlesbrought out in 2007 16 gives empirical evidence of caste-basedexclusion in the private sector. The study by Thorat andAttewell, 2007 , examines the prevalence of discrimination inthe job application process of private sector enterprises inIndia. The study is based on a field experiment where authorsreplied to job advertisements in major English dailies withthree applications to each call – as an upper caste Hinduapplicant, as a Dalit and as a Muslim. Using statistical analysisthey assess the data and find that discriminatory processesoperate even at the first stage of the recruitment process. Thefindings of this study, “suggest that social exclusion is not just aresidue of the past clinging to the margins of the Indianeconomy, nor is it limited to people of little education. On thecontrary, it appears that caste favouritism and the socialexclusion of Dalits and Muslims have infused private enterpriseseven in the most dynamic and modern sectors of theIndian economy.” The other study by Madhaveswaran andAttewell, 2007 17 examines the wide gap between higher castesand the Scheduled Castes/Tribes in the regular salaried urbanlabour market. The findings of the research study are asfollows: “(a) discrimination causes 15% lower wages for SCs/STs as compared to equally qualified others; (b) SC/STworkers are discriminated against both in the public andprivate sectors, but the discrimination effect is much larger inthe private sector; (c) discrimination accounts for a large partof the gross earnings difference between the two social groupsin the regular salaried urban labour market, with occupationaldiscrimination – unequal access to jobs – being considerablymore important than wage discrimination – unequal pay in thesame job; and (d) the endowment difference is larger than thediscrimination component.Challenging Exclusion In The Private SectorThere is a mindset that needs to be changed. Dalits andAdivasis have been major contributors to the economy of the122 THE IIPM THINK TANK

A N INCLUSIVE INTENTcountry and not just recipients of the Government largesse.There is the need to redefine SCs as ‘entrepreneurs’. That ispossible only when Dalits are able to challenge the exclusionand discrimination in the market and the private-sector. It isdisheartening to see that no class of contractors, businessmen/women has evolved from Dalit and Adivasis communities.This does not mean that there are no administrative andmanagerial skills among the Dalits and Adivasis. Their talentsdo not have the seed capital required to match the labourcapital they possess. The Dalit bureaucratic class and thepolitical leadership were unable to become a class in themselvesto turn it into a social capital of the community as theupper castes have done. 18In India, about 94% of the enterprises were owned by theprivate sector in 1998. However these enterprises are notequally distributed across social groups and regions. The SCsand STs report low ownership of Private Enterprises (PEs). Toelucidate, the SCs population owned 10.2% PEs in India, incomparison to 5.84 % owned by STs, 40.8% owned by theOBCs and 43.2% owned by the others. 19 Most of the enterprisesheld by SCs are ‘own account enterprises’ which areregarded as residual sector activities providing livelihoodsupports. The ownership disparity is also coupled with the lowemployment generating features of the enterprises by SCs.Access to credit determines the size of the enterprises, abilityto hire workers, output etc. the inability to get institutionalfunds makes these enterprises vulnerable to market, nongrowth and limited to the household enterprises. NationalCommission for SCs and STs, 1997-1998 also opines thatemphasis should be given forthe promotion of entrepreneurship.They should be encouragedto take up self employmentin all sectors of economicdevelopment through training,education and provision offinancial and other facilities. 20Economic empowerment ofDalits through raising the sharein corporate equity, creating job opportunities, asset creation,low interest payment, skill development, education on entrepreneurshipand others should be the major tools to makeDalits a valuable player in the economy. The political rightsgained through the age long struggle will translate into realCaste favouritism and thesocial exclusion of Dalits andMuslims have infused privateenterprises even in the mostdynamic and modern sectorsfreedom for Dalits only when the democratization of capitaltakes place. The notion of citizenship will get institutionalizedonly when Dalits share all forms of national wealth equitably.From Broken Promises To Real-Time InclusionTime is ripe for wrestling through innovative solutions that willcontinue to democratize capital and the economy and ensureactual inclusion of hitherto excluded communities to furtherdrive economy through participation of the excluded andimplementation of a proactive policy from both the state andthe private sector. Some of the suggestions below need to betaken up on an urgent basis before the political-economy ofour country becomes precarious:1. Union Budget And Scheduled Caste Sub Plan:There should be Pre-Budget consultation on SCSP by thePlanning Commission/Prime Minster/Finance Minister/StateGovernment as it is being practiced for other sectors. Thecategorization of the Departments/Ministries as ‘non-divisible’or ‘divisible’ is against the fundamental principle of ScheduledCastes Sub Plan and therefore we strongly resolve that theplanning commission, union government and state governmentsmust desist from classifying a department as ‘non-divisible’and divert the funds from Schedules Castes’ development.The Union Planning Commission (UPC) should have anexclusive Deputy. Chairman for SCSP and the memberlooking after SC progression be made an exclusive MemberSecretary. Similar arrangement should be placed in the StatePlanning Commissions (SPCs). In addition, at the ministeriallevel there should be a separateMinistry for development ofSCs- ‘Ministry of Progression ofScheduled Caste’ both at theCentral Level as well as in theStates/ UTs for the welfare anddevelopment of SCs. Thereshall be a Joint Secretary in thePrime Minister's Office (PMO)exclusively devoted to SCSP.The unspent provisions, if any, in any sector should notlapse, but automatically be credited to a Revolving Fund.Because the gross diversion of funds, on an average Rs. 15,000crore annually for the last 25 years (Rs. 3,75,000 crore), isnothing but an extension of ‘untouchability’ and ‘exclusion’ ofTHE INDIA ECONOMY REVIEW123

Reliving TheGreatIndianDreamSCs from the resources which rightfully belong to them. Thisneeds to be monitored with a strong political will. Again thereare clear and categorical data that out of 75 Departments /Ministries 22 Departments/Ministries have unilaterallydecided that their schemes are indivisible, i.e., there will notbe any special Component for the weaker sections especiallyfor the SCs/STs. This goes against the Constitutional Provisionsfor SCs/STs. Hence, it is recommended that the Departments/Ministries be directed to allocate the funds for thespecial provision for the SCs/STs or else punitive measuresshould be taken against them.The Nodal Ministry shouldoutsource the expertise of atleast 11 advisers (for the 11Sectors in vogue during 2006-07) and distribute amongst themthe 70 ministries/departments ofthe Centre for consultativeinteractions with respectiveDepartments and for innovatinginclusive programs. In the economy (formal and informal),women communities are also contributing equally, thereforein all areas in proportion to the populations of women,budgetary allocations should be undertaken in a special way.Special focus needs to be assigned to entrepreneurship, health,education, skill development, land and resource managementand social security of women.2. Regulatory Roles- Ensure Inclusion And ChallengeDiscriminationState Needs To Enact Laws And Ensure Strict Adherence ToProtect From Discrimination And Exclusion: State needs toplay the regulatory role in ensuring the equal opportunitiesand anti-discrimination through Enactment of Equal OpportunityLaws & Non-Discrimination Laws. Legal Safeguards inthe form of Equal Opportunity Laws (including EqualEmployment Opportunity laws) or Non-Discrimination Lawand should have provisions of Anti-discrimination law inlabour, land, capital, consumer goods, education, housing etc.In the Private Sector, industrial-service-corporate employment,the government should use both provisions of Antidiscriminationlaw and supplement it by reservation in termsof quotas in proportion to population. In case of Privateagriculture sector, given the selective discrimination in hiringSC/ST workers arediscriminated against both inthe public and private sectors.Discrimination effect is muchlarger in the private sectorand wage payment, legal provisions in the form of Anti-DiscriminationAct should guarantee legal protection againstlabour market discrimination to Dalits/Adivasis in hiring andwage payment. State then has to monitor the mechanism thathave been created in the form of Equal Opportunity Commission.Anti-discrimination law also needs to address discriminationin renting of houses to Dalits and discrimination in spacefor construction of houses in the residential areas mainlydominated by dominant castes as well as discrimination in saleand purchase of agriculture land and leasing of Land.Reservation Where ItDiscriminated Need Protection:There needs to be reservationin Defence Services,Judiciary, Police, CentralReserve Police and similarservices where at present thereis no provision of reservation.This should also apply torecruitment and representationin UN, organisations like UNDP, UNICEF, WHO,UNIDO,World Bank, IMF and etc. Quotas in proportion topopulation to ensure fair participation of Dalits/Adivasis andto give share to Dalits and Adivasis in private employment,private business or capital, access to agricultural land, marketinputs, product-market and consumer goods-market andeducational institutions.Capital Market Reservation And Compensatory Measures:Participation of Dalits/Adivasis in business and the privatecapital in industry is to be increased using the SCSP. Thereservation and other policy instruments should be developedas compensation for denial of right to business and capital.Government needs to develop policy to increase the share ofDalits/Adivasi employees in share capital of private andcooperative sector.Credit is a critical aspect which nurtures enterprise andgrowth and it has to be anti-discriminatory. The Private Sectorbanks and financial institutions need to have a certain proportionin lending and finance to Dalits/Adivasis business. Againthis could be the support role of State through SCSP and TSP(Tribal Sub Plan).Diversity: There needs to be a reflection of the diversity inContracts of Government and Private Sector. Many countrieshave this policy to balance the entrepreneurial opportunities124 THE IIPM THINK TANK

A N INCLUSIVE INTENTacross the population. There needs to be a proportion topopulation to Dalit/Adivasi business people in purchases ofseveral goods and commodities by the government and privatesector. Quotas in Agricultural Products by State and PrivateSector for Dalit/Adivasis business/farmers in the purchase ofagricultural products like milk, vegetables, fruits and eggs bygovernment as well as Private companies/ businesses. Alsothere needs to be a specific share for the Dalits/Adivasis in allvarious government and private contracts.Democratise The Access To Knowledge: State needs todevelop a reservation policy foradmission to private educationalinstitutions, and to supportthe Dalit/Adivasi students toover come hurdles to access.The literature produced by theDalits in Humanity, Arts andLiterature should be included inthe curricula of schools,colleges and universities. Inthese particular emphasis should be given to the contributionby social reformers like Dr. B.R. Ambedkar.Land To Be Democratised: The government should create a‘pool of state land’ which should be acquired under ceiling andother public land like waste land, free of legal problems, to beplaced under the control of a specific authority. This land fromthe ‘State common land pool’ should be distributed to thelandless Dalits/Adivasi households as compensation for denialof right to land resources.Share In Executive, AdministrationAnd Governance. We reaffirm our faithin Dr. Ambedkar’s observation, “just asit is necessary that the DepressedClasses should have the power toinfluence governmental action by seatsin the Legislature, so also it is desirablethat the depressed classes should havethe opportunity to frame the generalpolicy of the government. This they cando only if they can find a place inexecutive, bureaucracy and governance.”Merely representing the ‘interests’of Dalits is not enough andtherefore there needs to be clearOccupational discrimination– unequal access to jobs isconsiderably more importantthan wage discrimination –unequal pay in the same jobprovision to ensure the interests of discriminated communitiesto be meaningfully protected by their own participation indecision making process at all levels.3. DDC – A Self-Assessment Tool For CompaniesUsing ‘The Ambedkar Principles’ as the basis, a self-assessmenttool for companies, named Dalit Discrimination Check(DDC) 21 was developed by the Danish Institute for HumanRights and the International Dalit Solidarity Network to takenote of the impact of the policies on Dalits. The DDC willserve as a support tool forcompanies that have signed upto the Ambedkar Principles orin other ways obliged themselvesto conduct business in aresponsible manner. The DDCwill deal with Dalit discriminationin the company’s ownpractices as well as in the supplychain. It contains approximately25 questions in the following categories: 1. EmploymentPractices: deals with the rights of the individuals employed bythe company or seeking employment within the company. 2.Operational Practices: deals with the rights of the individualsemployed by the company or seeking employment within thecompany. 3. Utilities and Services: deals with the rights ofindividuals using essential goods and services which areprovided by the company, such as educational, housing, andTHE INDIA ECONOMY REVIEW125

Reliving TheGreatIndianDreammedical facilities. 4. Supply Chain: deals with supply chainissues of India Inc.4. Adoption Of The Ambedkar Principles – A StepForward For InclusionInternational Dalit Solidarity Network (IDSN) and the DalitSolidarity Networks in the UK, Germany and the Netherlandsalong with the National Campaign on Dalit Human Rights(NCDHR) and the Indian Institute of Dalit Studies began tolook at the impact of the caste-based exclusion of Dalits in theeconomy of the country, especially the private sector, with afocus upon India Inc. Learning from the ‘Wood-SheppardPrin¬ciples in the UK’ and the‘MacBride Principles’ inNorthern Ireland – relating toracial and religious discriminationrespectively - and theSullivan Principles drawn up inthe 1970s to address apartheidin South Africa, a tool for inclusionwas developed. Theframework of UN Global Compact was also engaged tosharpen the tool. As a result ‘The Ambedkar Principles:Employment and Additional Principles on Economic andSocial Exclusion Formulated to Assist All Foreign Investorsin South Asia to address caste discrimination’ were formulatedin 2005. As is evident, it is named after the Icon of Dalitliberation who advocated a holistic view of Dalit emancipation.While the Ambedkar Principles are voluntary, currentlythere is a big movement in the country for a compulsoryreservation of jobs in the private sector. This movementsurely will grow in intensity. There is a global legitimacyalready established for this affirmative action in the privatesector. In our country, the government is still considering itsoptions. Most corporate houses and organizations like theConfederation of Indian Industry (CII) and the Federation ofIndian Chambers of Commerce and Industry (FICCI) areagainst mandatory quotas, but Dalit organizations will notrelent. Amidst all these there is an agreement that Dalitsshould get more opportunities in the labour market of the‘organized sector’ of the economy. The Ambedkar Principlesare meant to achieve this and more. In the internationalseminar with Dalit Solidarity movements and MNCs in UK,the opinion that emerged was put as follows “forced by law orBoth Indian and foreign firmsoperating in India cannotafford to behave in a way thatis detrimental to Dalits andother socially excluded groupsnot, companies, both Indian and foreign operating in India –if they want to be considered as socially responsible - cannotafford to behave in a way that is detrimental to Dalits andother economically and socially excluded or exploited groups.They cannot continue to deny them the opportunities thatmany other people in India increasingly have”. 22Though very small in number, a few corporate CEOs havebegun to see relevance of Ambedkar Principles. The CEO ofLloyds TSB, opined at a seminar in UK.23 “Dalit SolidarityNetwork UK is seeking to fight caste discrimination via theadoption of the Ambedkar Principles and National CampaignOn Dalit Human Rights (NCDHR) proffer congratulationswith respect to all the effortsthey have made to further theopportunities of those who aredeprived and discriminatedagainst”. Richard Stockdale,CEO Lloyds TSB, India. Thereare ten principles include thefollowing: a statement ofemployment policy a referenceto the unacceptability of caste discrimination and a commitmentto seeking to eliminate it, to develop and implement aplan of affirmative action, a guarantee that the company andits suppliers comply with all national legislation, particularlyin relation to bonded labour, manual scavenging and childlabour, pay specific attention to the role that caste relationsmight play in legitimising or covering up such forms of labour,and contribute actively to the implementation of existinganti-caste laws such as the Civil Rights Act and the Preventionof Atrocities Act; use fair recruitment, selection andcareer development processes, with clear objective criteria,and ensure that these processes are open to scrutiny fromDalits themselves as well as other civil society groups; takefull responsibility for their workforce, both direct and subcontracted,including the supply chain, in seeking to detectand remedy any caste discrimination in employment conditions,wages, benefits or job security; evolve comprehensivetraining opportunities for employees and potential recruitsfrom Dalit communities (integrated with other staff wherepossible, but separate where ever it is not possible), designatea manager at a sufficiently senior level to carry out the policywho will aim, in the context of meeting business needs, tomaximise the benefits of a diverse workforce and ensure that126 THE IIPM THINK TANK

A N INCLUSIVE INTENTthe policy, its monitoring and the related practices are carriedthrough; develop effective monitoring and verificationmechanisms of progress at the level of the individual company,and also co-operate in monitoring at the levels of sectorand the state, involving Dalit representatives includingwomen in these mechanisms; publish annually a report onprogress in implementing these Principles - preferably inrelation to an appropriate section of the Annual Report; andappoint a specific board member with responsibility foroversight of this whole policy area. Investors who support theAdditional Principles will encourage increasingly wideownership of land and capital, and broaden opportunities forskills development, in the context of social and economicrights. The Principles should be a vital element in any socialand/or environmental audit prior to investment. ‘Sociallyexcluded com¬munities’ refers primarily to Dalits but inparticular contexts may include tribal peoples, women andreligious minorities.The Last WordDalits are expanding the rights horizon to include economicrights essential in the realization of all rights, starting fromthe ‘right to life’ with dignity. The principles has been laid inthe Constitution itself and progressively expanded in policies,plans and strategies. However biased and narrow perceptionon Dalit development and citizenship has resulted in lack ofcreativity, negligence, manipulation and non-implementationof these principles and practices. Solutions to caste-basedexclusion and exploitation cannot be found through the samehierarchical and exclusionary principles. Effective andcreative implementation of the SCSP, a democratic andresponsible role by the market forces and a clear regulatoryrole by the Government in cases of discrimination andexclusion will go a long way in enhancing a robust growth anddevelopment of the nation apart from an inclusive andequitable growth of all the citizens.End notes:1Akerlof, George, “The Economics of Caste and Rat Raceand Other Woeful Tales”, Quarterly Journal of Economics,Vol.4, November 1976.2Constitution of India3ibid4Second Five Year Plan, GOI, Planning Commission(1956-61)5Third Five Year Plan, GOI, Planning Commission (1961-66)6Sixth Five Year Plan, GOI, Planning Commission (1980-85)7No. 280-PMO/80,12,March, 1980,Letter to the Ministers ofconcerned Central Ministries8DO. No. M-13054/2/2005-BC, 10, January 20069D.O.No.M-13016/1/81-CDN,12,November,198110Mendelsohn and Marika Vicziany, The Untouchable,Cambridge University Press, New Delhi,200011D. O. No. 11014/4/95-SCD.V20, October, 199512Ministry of Finance, Letter No. T-14018/25/95-Codes/336dated 01.09.1995 with the correction slip No. 251 dated16.01.1995 to All Ministries/Departments13National Conference on Social Exclusion and InclusivePolicies, Indian Institute of Dalit Studies, 200714Planning Commission Report of XI Five Year Plan WorkingGroup on the Empowerment of SCs,200715The Human Rights and Business (HR&B) Project wasestablished in as cooperation between the Danish Institutefor Human Rights (DIHR), the Danish Confederation ofIndustries (DI, which has about 6000 companies as members)and the Danish Industrialization Fund for DevelopingCountries (IFU), to address the challenge of making humanrights operational in a company context.http://www.humanrightsbusiness.org16Sukhadeo Thorat, Paul Attewell, “The Legacy of SocialExclusion: A Correspondence Study of Job Discrimination inIndia”, Economic and Poitical Weekly, Oct 13, 200717S.Madheswaran, Paul Attewell, “Urban Labour Market:Evidence from the National Sample Survey”,18Economic and Political Weekly, Oct 13, 200719Ilaiah , Kancha , “The Bhopal Dalit Declaration” , PUCLBulletin, April 200220Fourth Economic Census, 1998 and National conference onSocial Exclusion and Inclusive Policies, Indian Institute ofDalit Studies, New Delhi21National Commission for SCs and STs ,1997-199822Human Rights and the Responsibility of Companies, 2006,Marie Busck, Danish Institute for Human Rights23The Ambedkar Principles And Their Development, GerardOonk, India Committee of the Netherlands (ICN), 200624Leveling playing Field – Caste Discrimination and AmbedkarPrinciples, July 2006, by Dalit Solidarity Network-UK andLondon School of Economics, UKTHE INDIA ECONOMY REVIEW127

Reliving TheGreatIndianDreamBudget For The Excluded:Special Focus On TheDalits And AdivasisSakti Golder,Centre for Budget andGovernance Accountability(CBGA), New Delhi128 THE IIPM THINK TANK

A N INCLUSIVE INTENT"Democracy and development mean nothing for thosewho are not touched by the hand of progress. That’swhy the architects of our Constitution placed specialemphasis on the empowerment of the ScheduledCastes, Scheduled Tribes and other weaker sections ofsociety. In 60 years, we have seen many people climbthe ladder of progress and social mobility. Yet, thereare millions who still need our support and assistance.We are committed to the economic, social, politicaland educational empowerment of SCs, STs, OBCs andminorities."-Prime Minister's Speech On Independence Day, 2007In the whole post-independence era, for the first time,India has continuously maintained an impressive growthrate starting from the middle of the 1990s. Although inthe 9 th Plan period (1997-98 to 2001-02), the GDP growthrate was moderate (5.5% per annum), the economy acceleratedin the 10 th Plan period (200-03 to 2006-07) to an averagegrowth of 7.6% per annum, which is the highest in any planperiod so far. The growth rate in the last four years of thePlan has averaged 8.6% making India one of the fastestgrowing economies in the World (11 th Five Year Plan Document).Along with this tremendous success story, the mainstreammedia is continuously highlighting every movement ofthe booming share market. In the last year, a couple of weeksbefore the presentation of Union Budget, the FinanceMinister called the combination of higher growth and surgingSensex a “heady-mix.” Undoubtedly these achievements areindeed praise worthy.But amidst these significant achievements in some sectorsand in some dimension of development, the grim realities inIndia are the existence of low Human Development Index(which also reflects the extensive nature of human deprivations),acute agricultural crisis, increasing unemployment,deep-rooted poverty, malnutrition, illiteracy etc. A veryrecent report of the National Commission for Enterprises inthe Unorganised Sector (NCEUS) exposes that the dailyconsumption of about 836 million people is less than Rs 20per day. The Chairman of the NCEUS, Dr. Arjun Senguptarightly said that the "high growth rate of 9% had bypassed77% of the population" (The Times of India, 1 Feb 2008).Therefore, it is plausible to conclude that State has massivelyunsuccessful to include a large group of marginalizedpopulation as an integral part of the outstandinggrowth process; that is there is not enough “trickledown.” And the exclusion ofthese poor, marginalizedand deprived groupsand communitiesfrom the fruits ofeconomic,social andhumanTable: 1 Child Mortality And Nutrition Among SCs/STsMORTALITY SCs (%)(2004-05)STs (%)(2004-05)All IndiaInfant Mortality 83 84 68Under 5 Mortality 119 126 95RateNUTRITIONChildren under 3 44.1 44.3 38.4years stuntedChildren under 3 20.5 25.7 19.1years wastedChildren under 3years underweight52.2 56.7 45.9Source: Sachar Committee Report.THE INDIA ECONOMY REVIEW129

Reliving TheGreatIndianDreamTable: 2 Educational Attainments Among SCs/STsEducation SCs/STs All IndiaLiteracy Rates Total Male Female Urban Rural Total Male Female Urban RuralMean Years OfSchooling (MYS)(7-16 Years)Source: Compiled From Sachar Committee Report.52.2 64 38.4 66 45 65.4 75.3 53.7 79.9 58.73 Years 6 Months 4 Yearsdevelopment is the biggest failure of the Government. The 11 thFive Year Plan document also explicitly acknowledges the factthat “the growth is not perceived as being sufficiently inclusivefor many groups, especially SCs, STs, and minorities.”Among these socially disadvantagedgroups, the scheduled castes (SCs/ Dalits)and scheduled tribes (STs/ Adivasis) arethe most excluded which reflects throughthe lower attainments of various developmentindicators among these groups.According to the Census 2001, Dalits andAdivasis constitute respectively 16.23 and8.2 percent of total population. In thepost-independence era, successive governmentshave formulated laws, legislations,special programmes and policies forreaching these excluded. In spite ofdecades of planning and a sizeable amountof public resources being channelised inthe name of welfare of Dalits/Adivasis(SCs/STs henceforth), the actual benefitshave hardly reached these groups. Therefore, it is notsurprising that even after sixty years of independence, theDalits and Adivasis are disadvantaged and below par, whenTable: 3 Employment Status Of SCs/STsSource: NSSO (Compiled from Sachar Committee ReportAbout 25 percentof childrenbelonging to SC/ST communitieshave either neverattended schoolsor have droppedoutcompared to the others in all aspects of development.Among all social groups, SCs/STs suffer from highest infantand child mortality rates. As can be seen, the percentage ofchildren belonging to SCs/STs who are stunted, wasted andunderweight is much higher than thenational average (see Table 1). Althoughthere is some respite when one gauges theimprovements in literacy levels over thetime period between 1965 and 2001registering a rise in the levels at a muchfaster rate amongst SCs/STs than in anyother social group. But the figure forfemale literacy of STs (34.76%) is of graveconcern. Actually the tribal women aredoubly excluded groups. It is worthmentioning that, among SCs/STs, theliteracy rates for persons between 18-22years and 23 years and above is as low as65% and 36.5% as compared to thecorresponding figures of 91.4 and 74 forgeneral category (NSSO 2004-05). About25% of children belonging to SCs/STs have either neverattended schools or have dropped out. The children whohave never attended schools are highest for SCs/STs. DataEducation SCs/STs All IndiaLiteracy Rates Urban Rural Male Female Urban Rural Male FemaleWork Participation Rate 58 74 85 55 34.6 39.1 53.6 21.5Self-employed 36 44 58 48 46.2 60.9 51.4 56.1Casual Workers 26 50 46 45 15.6 32.7 23.7 24.6Regular-employed 40 5 13 7 38.1 6.3 24.8 19.6Unemployment Rate 10.5 10 10.2 9.9 8.3 8.2 7.8 9.2130 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable: 4 Incidence Of Poverty Among SCs/STsPoverty SCs/STs All IndiaUrban Poverty Incidence 36.4 22.8Rural Poverty Incidence 34.8 22.7Mean Per Capita Urban (Rs.) Rural (Rs.) Total (Rs.) Urban (Rs.) Rural (Rs.) Total (Rs.)Expenditure800 Approx. 420 520 1150 579 712Source: Compiled from Sachar Committee Reportcompiled by the Sachar Committee Report shows that only39% SCs and 32% STs are likely to complete primaryeducation as compared to 62% in case of upper caste Hindusand other religious groups excluding Muslims. Only 23% SC/ST students are likely to complete college education aftercompletion of secondary education. There is a marginaldifference between the share of student and its correspondingtotal population for all social groups in the smaller agecohorts. Table 2 below also highlights some wide gap ofeducational attainments among SCs/STs.As far as employment and incidence of poverty areconcerned, it also shows a very dismal picture (Table: 3 & 4).A larger section of SCs/STs are engaged in casual workcompared to the all India figures, with the share of workersespecially low in salaried work. Both in rural and urban areas,the incidence of poverty is highest amongst SCs/STs. There isalso a significant gap when mean per capita expenditure istaken into account. As a whole, very large section of the SC/STs, suffer on account of severe socio-economic deprivationarising out of poor asset base, dependence on wage labour,subsistence level of farming, engagement in scavenging andother unclean occupations and related social evils. Consideringthe entire dismal scenario among the SCs/STs, there is anurgent need for affirmative actions as development andempowerment of socially disadvantaged groups and bringingthem at par with the rest of the society is a commitmentenshrined in our constitution. It is also necessary for ensuringremoval of disparities, eliminating exploitation and suppressionand providing protection to the disadvantaged groups. Itis well evident that SCs/STs are economically the mostbackward groups. Therefore, for their socio-economicdevelopment, a substantial resource supports from theCentre as well as from the States are required. Since theindependence, almost all the State andTable: 5 Status Of Implementation Of SCSP By The Central Govt. Union Governments have politicallyarticulated the agenda of reaching outTotal Central Plan OutlayExcluding Central Earmarked For SCs By All Plan Allocation OfCentral Plan Allocations Proportion Of Totalto these excluded groups.Assistance For State &UTPlans (In Rs. Crore)Departments/ Ministries(In Rs. Crore)The Central Govt.EarmarkedFor SCs (In %)In 1979-80 (during the 6 th Five YearPlan) a special strategies of SpecialComponent Plan (SCP, which has been2006-07 (BE) 2007-08 2006-07 2007-08 2006-07 2007-08 renamed as SCSP at present) and(BE) (BE) (BE) (BE) (BE)Tribal Sub Plan (TSP) were initiated.134757 154939 7056 12516 5.2 % 8.1 %These involve earmarking populationproportionateSource: Analysis done by CBGA and NCDHR; Expenditure Budget Vol. I & II of Union Budget 2006-07 and 2007-08.funds from the generalTHE INDIA ECONOMY REVIEW131

Reliving TheGreatIndianDreamTable 6: Status Of Implementation Of TSP By The Union Government In 2006-07 And 2007-08Total Central Plan Outlay excludingCentral Assistance for State & UTPlans (in Rs. Crore)Central Plan Allocations Earmarkedfor STs by all Departments/ Ministries(in Rs. Crore)Proportion of Total Plan Allocation ofthe Central Govt. Earmarked for STs(in %)2006-07 (BE) 2007-08 (BE) 2006-07 (BE) 2007-08 (BE) 2006-07 (BE) 2007-08(BE)134757 154939 4999.71 7554.37 3.71 4.88Source: Calculated from Expenditure Budget Vol. I & II of Union Budget 2006-07 and 2007-08.development sectors for the overalldevelopment of SCs/ STs and raisethem above the poverty line. TheCentral Standing Tripartite Committee(CSTC) reviews the implementationof SCSP and TSP andguides the nodal Ministries ofSocial Justice and Empowermentand Tribal Affairs in ensuringearmarking of funds by the serviceorientedMinistries/Departmentson the basis of the SC/ST population.According to the guidelines ofthis strategy, it is mandatory for allthe State governments’ departmentsas well as Central Governmentministries. The SCSP/TSP forSCs/STs expected “to facilitate easyconvergence and pooling ofresources from all the other developmentsectors in proportion to the population ofSCs/STs and monitoring of various developmentprogrammes for the benefit ofSCs/STs”. Therefore it would be worthwhileto scrutinize the allocations forSCSP/TSP from various GovernmentDepartments/Ministries.Only from the year 2005-06, UnionBudget provides the separate data on theallocations earmarked for SCs/STs fromdifferent ministries. In a joint study byCBGA and NCDHR, it was found that theproportion of total Plan Allocation of theCentral Government earmarked for SCs inThe proportionof total planallocation of theCentral Govt.earmarked forSCs in 2006-07(BE) was only5.2%2006-07 (BE) was only 5.2% and itincreased to 8.1% in 2007-08 (BE).According to the SCSP norms itshould be around 16% of the totalas per the scheduled caste populationof our country.The picture is also quite similarfor the Tribal Sub Plan (TSP).Although, proportion of total planallocation of the Central Governmentearmarked for STs hasincreased from 3.71% in 2006-07(BE) to 4.88% in 2007-08 (BE), itis also grossly inadequate consideringthe proportion of ST populationin total population of the country,i.e. roughly 8 %, which is clearly theviolation of the strategy of TribalSub Plan (TSP) for STs.Table 5 & 6 show the dismal scenario interms of the allocations earmarked for theSCs/STs of the centre. Out of more than100 Central Government Departments/Ministries, only a few have some plannedallocation earmarked for SCs/STs.Allocation of most of these departments/ministries are notional instead of clearearmarking. Although, proportion of totalplan allocation of the Central Governmentearmarked for SCs/STs has increasedin 2007-08 (BE) over the previousyear, it is also grossly inadequate consideringthe proportion of SC/ST populationin total population of the country. It is132 THE IIPM THINK TANK

A N INCLUSIVE INTENTThe proportionof total planallocation ofthe CentralGovernmentearmarked for STsis a mere 4.88%in 2007-08 (BE)evident that the budgetary allocations earmarked for STs arestill far below the norms of SCSP/TSP, in spite of someattempts to increase allocations in the Union Budget 2007-08. In summary, the central allocations are not yet matchingto the demand (requirement as in implementation of variousschemes/ programmes under the Tribal Sub Plan).It has also been reiterated in the 10 th Five Year Planmid-term appraisal report. It shows that both the Centre andstate governments have not earmarked adequate SC/STpopulation-proportionate funds under their SCSP and TSP,as required. According to the report of the Ministry of SocialJustice and Empowerment, the performance of States such asBihar, Haryana, Maharashtra, Tamil Nadu and Uttar Pradeshin earmarking allocations under the SCSP has been good.Whereas other States/UTs do not present a satisfactorypicture on the earmarking of allocations under SCSP for thedevelopment of SCs. The details of the total State planOutlay, flow to SCSP as reported by States/UTs for the firstthree years of the 10 th Plan shows that the percentage ofallocation under SCSP in the first three years of the 10 th Planhas not been in correspondence with the 16.23% share of theSC in the total population.So, all these expenditure figures indicate that the budgetaryallocations for the welfare of SCs/STs both from Central andState Governments are grossly inadequate in terms of SCSP/TSP guidelines. Along with the inadequacy of funds, properaddressing of the problems and faulty policy designing andimplementation create problems to reap the full benefits ofvarious programmes/schemes for the welfare of SCs/STs. Inthis context, it would also be worthwhile to talk about theNational Common Minimum Programme (NCMP) of UPAgovernment, which promised the following policies for thewelfare of Scheduled Castes and Scheduled Tribes. TheNCMP envisaged various policies, viz. (a) to make legislationfor conferring ownership rightsTable: 7 State Plan Outlay, Flow To SCSP As Reported By States/UTs in respect of minor forestYearproduce to all those people fromTotal State Plan Outlay SCSP Outlay % of SCSP Outlay(Rs. in Crore) (Rs. in Crore) to State Plan Outlay the weaker sections who work in2002-2003 88591.83 10177.54 11.49the forests (b) to launch a2003-2004 85757.97 10373.95 12.10comprehensive national programme2004-2005 95518.76 12057.43 12.62for minor irrigation ofall lands owned by SCs/STs andBackground Note: Working Group for the formulation of Eleventh FiveYear Plan (2007-2012): B. Schemes for Welfare and development of Scheduled Castes.to endow lands to landless SCs/THE INDIA ECONOMY REVIEW133

Reliving TheGreatIndianDreamSTs through implementation of land ceiling and land redistributionlegislation (c) to develop more effective systems ofrelief and rehabilitation for tribal and other groups displacedby development projects and interventions(d) to take all measures to reconcile theobjectives of economic growth and environmentalconservation, particularly as far astribal communities dependent on forestsare concerned (e) to take the affirmativeaction, including reservations, in the privatesector (f) to discontinue the forcefuleviction of tribal communities and otherforest-dwelling communities from forestareas, among others. Considering thenature of problem faced by the people ofthe SC/ST communities, the NCMP policiesare praiseworthy, as some of those policieswould serve the basic foundation for theireconomic empowerment. Unfortunately,except for the Tribal Rights Bill 2006, mostExcept the TribalRights Bill 2006,most of thepolicies are yet tobe implementedeven in the thirdyear of the UPAGovernmentof the developmental policies are yet to be implemented evenin the third year of the current UPA Government.The 11 th Five Year Plan document also restates those issueslike rehabilitation, giving rights to the SCs/STs along with issues of education, completeelimination of the abhorrent practice ofmanual scavenging through effectivemeasures of liberation and rehabilitation ofscavengers, abolition of bonded labourpractices. It also envisages for properimplementation of the two strategic policyinitiatives of Special Component Plan(SCP) for Scheduled Castes and the TribalSub-Plan (TSP) to secure overall developmentof the SCs/STs and to remove allsocio-economic and educational disparitiesbetween them and the rest of the population.It admits that “it is disturbing to seethat both these schemes have not beenimplemented with a full sense of commit-134 THE IIPM THINK TANK

A N INCLUSIVE INTENTment and involvement, either by the Central or the StateGovernments.” 11 th Five Year Plan also envisages the realizationof 50% of total irrigation potential in tribal areas by theend of the plan period and total potential by 2020. It hearteningto see that the vision of inclusiveness of the 11 th Five YearPlan foresee to “go beyond the traditional objective ofpoverty alleviation to encompass equality of opportunity, aswell as economic and social mobility for all sections of society,with affirmative action for SCs, STs, OBCs, minorities andwomen.” It is well known that the policy priorities of variousgovernments clearly reflect in the way the governmentallocates its resources in various purposes, that is in theannual budgets. Therefore, it is expected that the policiesmentioned in the NCMP and 11 th Five Year Plan should alsobe reflected in the budgets. In fact, sustained and high levelsof economic growth in recent years provide a unique opportunityand momentum for faster social sector developmentincluding the overall development of the SCs/STs. But fortheir development, firstly there is a very urgent need toreverse the declining resource allocation to this specificsector. As far as the Union Budget 2007-08 is concern, therewas some increase in the allocation for SCs/STs and also insome scheme where at least twenty percent of benefits wereearmarked for SCs/STs. There was some announcement inthe budget to enhance the allocation for post-metric scholarships.But there was very little attention to fulfill the NationalCommon Minimum Programme promises. Simultaneously, itshould also be kept in mind that only the availability ofresources will not guarantee faster development SCs/STs.Identification of the problems of SC/ST people, properparticipatory planning to address the problems, efficientimplementation of the programmes and adequate resourcesall are equally important. On the backdrops of all these,priority should be given to the following issues in the forthcomingbudget for the welfare of SCs/STs.• The Scheduled caste Sub Plan (SCSP) and Tribal Sub-Plan(TSP) are the strategic policy initiatives to secure overalldevelopment of the SCs/STs and to remove all socio-economicand educational disparities between them and therest of the population. However, only a few central governmentministries have some allocations earmarked for SCs/STs although allocations are far less than the populationproportionateamount, which should have directed towardsthe welfare Scheduled Tribes. Therefore, all the ministriesmust fulfill the allocation norms of SCSP/TSP in theforthcoming budget.• As the main occupation of the SC/ST people is agricultureand most of them are landless; there is an urgent need forland reforms. It was also in our NCMP and mandatory forthe economic empowerment of the landless people. Thecoming budget must ensure allocation in this purpose.• Also proper initiatives, allocations or schemes must beincluded in the coming budget to fulfill the other NCMPpromises in a time bound manner.• Education is one of the most effective instruments of socialempowerment and is vital for securing horizontal andvertical equity. Considering the lower educational attainmentsamong SCs/STs, adequate resources must beprovided and budget should ensure this.Lastly, we must recognize that empowerment of SCs/STsrequires that they get their due share in economic growth andwealth creation. The approach towards development of SCs/STs needs to be an Entitlement-based/ Rights-based approachrather than that of Charity/ Placation. In this regard, acomprehensive review of the existing approach, strategies,priorities of the ongoing policies and programmes and theirimplementation for the development and empowerment ofSCs is required on an urgent basis.References:• 11 th Five Year Plan Document• CBGA’s Response to Union Budget 2006-07 & 2007-08.• Expenditure Budget Vol. I & II for 2006-07 & 2007-08.• Mid-Term Appraisal Report of 10 th Five Year Plan.• NSS Report 2004-05• Sachar Committee Report• ‘Reaching the Excluded,’ Amitabh Behar, Subrat Das andDebdulal Thakur; A Symposium on Planning for India’sChildren.• ‘Scheduled Caste Sub Plan: The Status So Far’, SaktiGolder & Bhumika Jhamb; Budget Track Vol. 4 Track 3,October 2007, CBGA’s Quarterly Journal.(The author acknowledges the collective contributions ofCBGA in general and particularly Ms. Bhumika Jhamb andMr. Subrat Das for their support in doing this research andcollecting various facts used in this write up. The viewsexpressed here not necessarily of CBGA as an institution)THE INDIA ECONOMY REVIEW135

Reliving TheGreatIndianDream136 THE IIPM THINK TANK

A N INCLUSIVE INTENTBudgeting ForChildren In IndiaBharti AliHAQ: Centre for Child Rights, New DelhiToday India is counted among one of the fastestgrowing economies and many predictions havebeen and are still being made as to how Indiawould exceed other developed countries in coming times.Scaling up estimates of the country's prospects in itsOctober 2003 research paper widely known as the BRICsreport, Goldman Sachs writes, ‘Productivity growth willhelp India sustain over 8% growth until 2020 and becomethe second largest economy in the world, ahead of the US,by 2050. 1 ’ Indeed, over the last fifteen years, with its neweconomic policies, India has been able to enlist its namein the race for gaining economic super power. At the sametime, India is also listed number one in the world in termsof largest number of child labour, highest number ofmalnourished children, and largest number of sexuallyabused children.It is in this context that it has become very critical toseek accountability from the government as to how it isensuring the rights of its people, especially the mostvulnerable. And in the last decade we have seen manypublic campaigns and movements trying to set accountabilitymeasures through Right to Information, publicauditing, organising more public hearings etc. In factmany groups have also been looking into the government’sbudget, to see how much is actually allocated forthe social sector and human resource development as wellas how is it being utilised.HAQ: Centre for Child Rights, a pioneer in undertakinganalysis of budget for children (BfC) in India, beganwith a decadal analysis of the Union (National) Budget from achild rights perspective in the year 2000. Since then HAQ hasbeen involved in the analysis of children’s share in bothallocation and expenditure in the Union Budget. For HAQ,BfC is yet another indicator for assessing fulfilment of children’srights as well as a tool to advocate for a more effectiveresponse from the government. Since 2003, HAQ also startedanalysing budget for children in the states to gain an in-depthand holistic understanding of the budgetary process in theCentre and the states, and also to monitor the investmentsmade by the centre and states towards translating theirpolitical commitments to the children into reality. . Presently,HAQ is doing BfC analysis in the states of Andhra Pradesh,Himachal Pradesh, Orissa, Uttar Pradesh, West Bengal,Assam and Jharkhand.In a recent study by HAQ, which spread across sevenfinancial years (2000-01 to 2006-07), it has been found that ofevery Rs. 100 allocated in the Union Budget, an average of Rs.3.10 p has been allocated for children.Is this investment really enough for the children whoconstitute more than 40 percent of the country’s populationand carry the burden of economic growth? Consider this:• 79.2 percent of the children in the age group 6-35 monthsare anaemic• Only 43.5 percent of children within 12-23 months are fullyimmunised• Only 40.07 births in India are institutional• According to the 2001 Census Report, amongst all personsliving with disability, 35.9 percent (46,38,26,702) areTHE INDIA ECONOMY REVIEW137

Reliving TheGreatIndianDreamchildren and young adults inthe 0-19 age group.• Of every 100 children, 19continue to be out of school.Of those who enrol, almost 53percent drop out beforereaching Class VIII.• 16 percent women get marriedin the age-group 15-19 years• More than one million childrenare working in Indian brothels• According to the NationalCrime Records Bureau, crimesagainst children have increasedby an average of 12.97 percentduring the period 2002-2005.The latest release of NCRB2006, shows 18,967 crimescommitted against children.Sectoral analysis further reveals that within the Budget forChildren (BfC), education has received the major share (63.09percent) as compared to other sectors. 2 With 0.99 percent, thechild protection sector 3 has got the lowest share. Even in thestates that have been studied so far, the child protection sectorseems to be the least of all concerns (Table 1).Allocation for child health in 2000-01 to 2006-07 is 0.61percent. As it is, 80 percent of the total health care costs aremet through private expenditure and most of the privateexpenditure is out-of-pocket (nearly 97 percent). It is thereforeimperative and fair to ask what impact this meagreTable-2: Sectoral Allocation In BfC As PercentageOf Union BudgetYear Health DevelopmentEducationProtectionBfC2000-01 0.54 0.36 1.47 0.02 2.392001-02 0.47 0.41 1.41 0.03 2.322002-03 0.51 0.45 1.45 0.04 2.442003-04 0.5 0.50 1.47 0.03 2.52004-05 0.65 0.42 1.64 0.03 2.752005-06 0.76 0.66 2.63 0.03 4.082006-07 0.84 0.83 3.53 0.04 5.24Average 0.61 0.52 1.94 0.03 3.10Figure 1 Budget For Children (BfC) As PercentageOf Union BudgetAverage Allocation (BE) 2000-01 to 2006-07BfC3.10%96.90%Other than BfCallocation for child health will have on a family’s expenses?From the figures in Table1, it is evident that there has been amajor increase in the share of budget for children in 2005-06.While it was a little more than two percent in the years2000-01 to 2004-05, it suddenly shot up to 4.08 percent in2005-06. This can be attributed to the raised allocation in theSarva Shiksha Abhiyaan (SSA), the flagship programme of theUPA government, as also in the Mid-day Meal Programme(MDM) and the Integrated Child Development Scheme(ICDS) due to large scale agitation and a series of SupremeCourt directions on nutrition and implementation.The massive increase of 134.89 percent and 79.75 percentrespectively in the allocation (BE) for SSA and MDM in2005-06 as compared to its allocation in 2004-05 has increasedthe share of education in the Union budget from 1.65 percent138 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable-1: Budget For Children As % Of State Budget & Sectoral Allocation Within BfC As% Of State BudgetStateBudget for Children aspercentage of the StatebudgetSectoral allocation within BfC as percentage of the State BudgetDevelopment Health Education Protection2000-01 to 2005-06Andhra Pradesh 12.27 0.54 1.5 10.1 0.16Himachal Pradesh 14.5 0.49 0.17 13.77 0.07Orissa* 13.25 1.33 0.14 11.75 0.032004-05 to 2007-08Assam 8.79 0.67 0.13 7.99 0.01West Bengal 13.12 1.17 0.36 12.61 0.03Himachal Pradesh 15.01 0.63 0.01 14.3 0.07Andhra Pradesh 13.58 1.84 0.18 11.44 0.15Note: * The duration for the study in Orissa was 2001-02 to 2005-06Source: Detail Demands for Grants of various concerned Departments, for the years mentioned in the table, Government of HP, AP,Orissa, Assam and West Bengal.in 2004-05 to 2.63 percent in 2005-06. This increasing trend isbeing observed in the next year as well. There was an increaseof 42.04 percent, 54.2 percent and 77.28 percent respectively inICDS, SSA and MDM programmes in 2006-07 over thebudget estimates of 2005-06.However, this enhanced allocation in ICDS in 2006-07 wasnot enough to meet the Supreme Court of India’s directive ofuniversalisation of ICDS in all seventeen lakh habitations.There was a shortfall of 10.08 lakh Anganwadi Centres at thestart of the Financial Year 2005-06 with only 6.92 lakh operationalAnganwadi Centres 4 . These facts only reiterate thatallocations are seldom made withoutlooking into the real need or actualsituation on ground.Another interesting thing to note is themuch hyped education cess on elementaryeducation 5 . A close look at the Budget forSSA and MDM points to the fact that theincrease in allocation for SSA and MDM islargely on account of money collectedfrom the extra tax burden put on thetaxpayers as education cess rather than byway of any substantial increase in what thegovernment was initially allocating for SSAand MDM, when the cess did not exist.Further, any proposed budget for afinancial year should be higher than theRevised Estimates of the previous year. The Revised Estimatesfor MDM and SSA in 2004-05 was Rs. 6261.13 crore.Therefore, the Budget Estimates in 2005-06 ideally shouldhave been Rs. 6261.13 (RE in 2004-05) + 5010.00 Crore(money collected through the education cess to be spentexclusively on SSA and MDM) i.e. Rs. 11271.13 crore. Inreality however, the combined allocation for SSA and MDM,after utilising the additional Rs. 5010.00 crore raised throughthe Education Cess, was only Rs. 10140.31 crore, therebyfalling short of expectation by Rs. 1104.37 crore (11271.13 –10166.76).THE INDIA ECONOMY REVIEW139

Reliving TheGreatIndianDreamEnhanced allocation cannot always beappreciated if there is no consistencybetween what has been allocated and whatis actually being spent. If we all agree thatbudget is not merely an economic documentbut an indicator of nation’s prioritiesand intent, to understand the priorities andintent one therefore has to study the threestages of budgeting – Budget Estimates(BE), Revised Estimates (RE) and ActualExpenditures (AE). HAQ’s analysis hasfound huge disparity in the three stages ofbudgeting as far as BfC is concerned. Andthis is equally true of both the UnionBudget and the state budgets. The overallincreased allocation in BfC during 2005-06and 2006-07 is a welcome step by the Centralgovernment,but the differences between Budget Estimates (BE),Revised Estimates (RE) and Actual Expenditure (AE) speak alot about the overall strategic intent.Conventionally, revised estimates or supplementary grantsare considered to be a reflection of bad budgeting. Indiafollows a budgeting process that first reflects a proposedbudget presented by the Finance Minister in the Parliamentand passed by the Parliament, which later in the year getsrevised based on an assessment of what has been spent andwhat would realistically be required. The difference in BE andRE is also a self-explanatory comment on the planningprocess 6 . Besides revealing the gaps between commitment andimplementation in terms of the difference between estimatesand expenditure, generally speaking, the difference in BE toRE and AE is an indication of the performance of schemes.Figure 2 : BE, RE and AE in BfC30000250002000015000100005000Rs Crore02000-012001- 2002-02 032003-042004-052005-06YearsBE RE AE2006-07Between 2000-01 and 2003-04, the actual spending has beenless than the budget estimates (Please refer Figure: 2).The increase in AE over BE in 2004-05 is due to 24.13percent increase in actual expenditure in budget for theeducation sector and 14.23 percent increase in expenditure inthe development sector. This is again due to large investmentin SSA, MDM and ICDS. Health sector has the highest underspending in BfC between 2000-01 and 2004-05 - 22.41 percent.This is due to under spending (of 22.27 percent) in RCHProgramme (Including National Immunisation programme).We must not forget that RCH constitutes 95 percent of totalhealth sector allocation for children. Protection, which has thelowest allocation, shows 15.22 percent under spending(AE-BE) even in the little that is allocated to it.One important thing to be mentioned here is that there arevery few explanations available within the governmentmechanism about the actual money that is being utilised or notTable 3: Average Sectoral Difference Within BfCBE, RE And AE(2000-01 To 2004-05)(Per cent)Year AE-BE RE-BE AE-REEducation 4.90 0.42 4.46Development 2.80 -4.65 7.89Health -22.41 -20.04 -2.97Protection -15.23 -11.21 -4.52140 THE IIPM THINK TANK

A N INCLUSIVE INTENTWithin the Budget for Children(BfC), child protection sectorgot the lowest share, with amere 0.99 percentutilised against the set allocation. Appropriation Accounts 7though mentions about the unspent balances head wise, theexplanations lack details.High dependence on external financing also deserves specialattention. This has to be seen against the fact that debtservicing as a proportion of gross external current receipts are10 percent and India has been eighth in position among theten debtor countries in 2004. This does not include fundingsupport received for protection sector, since the funding forChild labour elimination programmes, that receive externalfunding are through direct partnerships between the fundingbodies and implementing agencies or state governments anddo not find reflection the budget of the National Government(Union Budget). On an average, as much as 24.1 percent ofthe allocation for children between 2000-01 and 2006-07 isthrough external financing. The financial dependence onexternal sources has increased from 19.18 percent in 2000-01to over 28.4 percent in 2003-04, falling to about 22 percent in2005-06. If analysed sectorally, 11.4 percent of the allocationsfor child development, 19 percent of education and 51 percentof health is from external sources.If the funding pattern between the central government andthe state governments for the major centrally sponsoredschemes is going to change, with the states having to sharegreater burden, the impact is likely to be negative either byway of further deterioration in the already poor implementationof these programmes and schemes or by way of greaterreliance on international agencies and the private sector. Inthe Eleventh Five Year Plan this is already visible in the caseof SSA, causing great concern for advocates of child rights.Many states have already started wooing the internationalagencies directly for investing in elementary education. Insuch cases it would be a real challenge to set accountability.Monitoring government’s performance is surely easier asagainst having to monitor the private sector funding. It is timefor us to decide whether we tread along a path of growth thatis based on reducing the scope for accountability and lessertransparency or that which is truly democratic and gives thepeople the power to hold the state responsible as the primaryduty bearer.EndNotes1'India to overtake United States by 2050: Report', Times ofIndia, 24 January 20072For analysis, HAQ Centre for Child Rights segregates all theprogrammes and schemes specifically available for childreninto four sectors viz. development, health, education andprotection.3This sector consists of the programmes and schemes relatedto child labour, street children, physically or mentally challengedchildren, child prostitutes/sex workers, children in needof adoption, and children in conflict with the law within thepurview of the juvenile justice system.4Annual Report 2004-05, Department of Women and ChildDevelopment, Ministry of Human Resource Development,Government of India, Pg. 189. This Department is now beenmade into a full fledged ministry.5What does Union Budget 2006-07 have for Children? HAQ:Centre for Child Rights, Delhi6Budget for Children, 2007. (This is a study of Budget forChildren in India and in the states of Andhra Pradesh,Himachal Pradesh and Orissa over the period 2000-01 to2006-07)7Soon after the Lok Sabha passes the demands for grantsunder Article 113 of the Constitution of India, the Govtintroduces an Appropriation Bill under Article 114 to providefor appropriations out of the Consolidated Fund of India(CFI). The Appropriation Act passed by the Parliamentauthorises the Government to appropriate specified sumsfrom the CFI for specified services. Parliament can alsosanction supplementary or additional grants by the subsequentAppropriation Acts in terms of Article 115 of the Constitution.The Appropriation Acts include the disbursements, whichhave been voted by the Parliament under various grants interms of Articles 114 and 115, and the disbursements, chargedon the CFI in terms of Article 112 (3) as well as Article 293(2)of the Constitution. The government prepares AppropriationAccounts every year indicating the details of the grossamounts on various services actually spent by the governmentvis-à-vis those authorised by the Appropriation Acts.(www.cag.nic.n)THE INDIA ECONOMY REVIEW141

Reliving TheGreatIndianDreamInformal Economy: A Thought ForThat India Which Is Yet To ShineU.K. SrivastavaEx-Professor, IIM Ahmedabad and Honorary Director, National Institute ofCooperative Management, Gandhinagar142 THE IIPM THINK TANK

A N INCLUSIVE INTENTLast two decades have witnessed the globalization ofthe World economy. This involves six distincteconomic processes: a) The expansion of internationaltrade in goods and services; b) The free flow oftechnology; c) Expansion of foreign direct investment; d)Free movement of persons across national boundaries; and f)the development of international institutions of governancesuited to the globalize world. The Indian economy has alsobeen passing through a process of economic reforms andliberalization [Vijay Joshi on IMD Little, Indian EconomicReforms 1991-2001]. During the process, mergers, acquisitions,integration of various firms within the industry, upgradation of technology and other innovative measures havetaken place to enhance competitivenessof the output (both interms of cost and quality). Theeconomy is growing rapidly ataround 9%, foreign exchangereserves have been rising, capitalmarkets have been buoyant. Theeconomy has attracted FDI asnever before and there is all-round vibrancy. The salaries ofskilled manpower have been rapidly rising year after year.Recently National Knowledge Commission has recommendedsetting up of 150 new universities to bring theenrollment ratio of relevant population to 15% by 2015[National Knowledge Commission, 2006] and it's report uponthe school education reforms is eagerly awaited. It goeswithout saying that the current poor state ofschool education swells the unemployablelabour force in the informal sector.However, the globalization process andongoing economic reforms have hardlybenefited the informal sector in thecountry. The so-called expected `trickledown’ benefit of market led growth has notmaterialized for informal sector. Accordingto a report published by Confederationof Indian Industries (CII) in November2006 over the next 20 years there will bearound 300 million new entrants into thelabour force of India where the demand forunskilled labour is likely to decrease anddemand for skilled labour would rise. A lotAccording to a reportpublished by CII, over the next20 years there will be around300 million new entrants intothe labour forceof them are school dropouts or with no schooling. They havelittle chance to get employment unless they acquire skillsthat are relevant for self employment or employment in theinformal as well as formal /organized sector. They are part ofinformal sector because there is no other place for them togo. The organized sector has failed to provide adequateopportunities to increasing workforce due to a mismatch ofskills needed by them and the skills available with theinformal sector labour force [Dr. Tongroi Onchan (Eds)2004]. The National Rural Employment Guarantee programmeis one of the most important government interventionto help the poorest households. This programme hasbeen operational in nearly 200 districts. In the forthcomingbudget, perhaps this will beextended to the entire country.This programme is extremelyvital but the benefits to poordepend on the effectiveness ofrespective State machinery.Comptroller and AuditorGeneral of India (CAG) hasrecently submitted a draft report on the programme and thisreport has indicated many deficiencies and irregularities inthe programme implementation. This programme generatesassured wage employment for poor and we hope the deficienciespointed out by the CAG will soon be rectified. However,this programme needs to be supplemented by vocationaltraining for self and wage employment for the informalTHE INDIA ECONOMY REVIEW143

Reliving TheGreatIndianDreamsector population on self sustained basis. The informalsector economy is also classified according to employmentcategories: [The Informal sector, Bangkok 2006]I. Non-Wage Workers (Independent, Self- employed)• Employers, includingOwners of informal enterprisesOwner operators of informal enterprise• Self employed, includingHeads of family businessesOwn-account workersUnpaid family workersII. Wage Workers: (Dependent)• Employees of informal enterprises• Domestic workers• Casual workers without a fixed employer• Home workers (also called industrial out workers)• Temporary and part time workers• Unregistered workers.These informal sector units typically operate at low-levelorganization, with little or no division between labour andcapital as factors of production and on a small scale. Labourrelations, where they exist, are based mostly on casualemployment, kinship or personal or social relations ratherthan contractual arrangements with formal guarantees.Production units in informal sector are not constituted asseparate legal entities independently of the hour hold orhouse hold members that own them and for which nocomplete set of accounts are available which would permit aclear distinction of the production activities of the enterprisesfrom the other activities of the owners. The owners oftheir production units have to raise the financial resources attheir own/personal risk and are personally liable, withoutlimit, for any debts or obligations incurred in the productionprocess. Expenditure for production is often indistinguishablefrom household expenditure [ Dr.G Ravindran May2006, Jeemol UnnI, May 2006].In India,the informal sector employs up to 92%of thenational work force and contributes 60% of the GrossDomestic Product (GDP). But the vast majority of informalworkforce may not have acquired formally recognized skills.Only 5% of the Indian labour force in the age group of 20-24has received vocational training, where as percentage inindustrialized countries is much higher varying between60% and 80%. Here lies the crux of the problem for informalsector labour force. The illiterate and literate up to primarylevel of education constitute nearly 67% of the workforce.With the globalization and export opportunities, there ispressure on organized sector to be competitive. Capitalintensification has led to a reduction in workforce or evenjobless growth. The so-called labour intermediaries haveexpropriated bulk of the earnings from the employmentgrowth in the organized industry during thereform period. Several of these organized sectorenterprises outsource to Informal sector certainprocess of products through the middlemen whoare responsible to distribute the work to individualhouseholds and delivery of same back factory [P.K Gold begard and N. Pavnik 2003] .Forexample, firms involved with garment manufacturingoutsource their work to informal sectorthrough middlemen/intermediaries. A significantInformal sector employs upto 92 percent of the workforce and contributes 60%of GDP. Majority doesn'thave any formal skills144 THE IIPM THINK TANK

A N INCLUSIVE INTENTpart of the job work, -stitching, hand embroidery, finishingprocess is done in homes under highly exploitative conditions.Organized sector firms attempt to avoid strict labourlaws and reduce labour cost by taking recourse to outsourcingto informal sector. There is a broad consensus thatinformal activities and employment relations take placeoutside the formal/institutional/ regulatory framework [Maitreyi Bordia Das, 2003].The question is whether Union budgetary allocation canbe strengthened to create enabling environment for theinformal sector (both wage and non wage workers) to alsobenefit from the shining India and be more aware of theopportunities and possibilities that are available to them. Asthe informal sector is very diverse, there is a need to designdifferent interventions for different groups and also there isa need to coordinate and consolidate the efforts of variousGovernment Departments., NGOs, Banking system, particularlythe micro finance sector through Self- Help Groups(SHGs), and other relevant agencies.As most of the existing constituents of the informal sectorand also the new entrants to labor force are school dropoutsor without any schooling skill development program need tobe initiated on a large scale. The existing skill developmentInstitutions like ITI with their present Syllabus and workingcannot undertake this task. The labor in informal sectorcannot get any meaningful skill development and vocationaltraining without de-linking the training from the basiceducational requirement and specially designed relevantshort duration vocational courseswhich are flexible to suit theparticipants work pattern (so thatthey do not loose earnings duringthe training period). This problemis even more important in organizingtraining programmes forwomen. Flexibility in the trainingsuch as part time short term courses or time schedule forclasses suitable for the women could help the women to overcome and adjust to their personal situations. The trainingplaces for woman also need to have crèches and lady teachersso that women are even permitted by their families[ M Singh 2003].There is an emerging opportunity for primary skills likemasons, carpenters, electricians, sales boys in retail industry,automobiles, mechanics, drivers, outsourcing work intextiles, desktop printers, painters in advertising industryand so on. ITI kind of entryrequirement and syllabus is nothelpful to those in need of help.Several state Governmentson their own have initiated thetask of training the youth toconnect them to marketstream. For example Gujaraturban Development Mission (GUDM) has designed schemeto train one lac poor youth in three years. The training willenable them to be employed in large numbers in malls, callcenters, desktops, publishing units and other small and bigenterprises. The cost of providing six months training hasworked out to Rs 4,000 per head. Of this the trainee willhave to pay Rs 500 , the government will pay Rs. 1,000 theurban local body Rs 1,000 while rest of the cost will be5% of Indians in the agegroup of 20-24 has receivedvocational training, where asin industrialized economiesvaries it is over 60%THE INDIA ECONOMY REVIEW145

Reliving TheGreatIndianDreamborne by the stake holder.The scheme is based on a model developed bySaath, an Ahmedabad based NGO which hasbeen training urban slum youth with the help ofAhmedabad Municipal Corporation (AMC) forthe last one year. Under the new urban employmentguarantee scheme the stakeholders wouldbe required to spell out their manpowerrequirement. Based on the stakeholdersrequirement GUDM in association with Saathand other NGOs working in slum areas, wouldprovide training to the target youths, At the endof the training programme the stakeholderswould have to absorb the trainees.[ Times ofIndia December 5 , 2006]Then there are artisans, craftsmen, weaversinvolved in handicrafts and cottage industriessector. They go on producing the same productswith no quality up gradation or marketlinkages. Handloom commissioner and CottageIndustry departments have several schemes butthese are only somewhat effective in developingi) market linkage and ii) skill development to match themarket requirements. Artisans are hardly aware of theinternational standards on child labor use and hazardoushome based work (e.g beedi making, agarbatti rolling etc)and organized sector is trying to connect chain byoutsourcing such work to them and avoid the glare ofinternational buyers.The question is- can more and more ‘out of box’ thinkingbe done on creating relevant vocational; training facilities–say rural ITIs which not only provide relevant skills but alsobasic tools Kits and job linkages [ World Bank, Report No.1369, GH 1995]. As industry is finding it difficult to get readytrained manpower for expansion, such new initiatives can beunder public private partnership basis. Industry players inretail, construction and real estate, automobile sector andtextiles would be too happy to join if such attempts are madeon at large scale. All the traditional handicrafts, handloomproducts along with other products like forest-based productsrequire more value addition and strengthening for aweek linkages with the markets. This sector in-fact needsmost use of IT enabled services to show case their waresacross the world. Off course, up gradation of their productiontechnology and proper packaging needs attention. Lackof access to credit is also the most important constraint intechnology up gradation and in attaining a meaningful scale.Some Tribal Cooperative Marketing Federations have donewonderful work in processing and packaging the forest based/herbal produce of the tribal which really fetches the highprices from the buyers across the country and abroad.The informal sector workers do not always have a streamof income; they cannot afford to pay for life and healthinsurance for themselves and their families. In case of anyeventualities, the families become destitute. At present a fewCentral Government Schemes are in operation but thesecover a very small segment of the informal sector enterprises.The question is can these workers be financially andlogistically be supported to have access to both life andhealth insurance? There is no dearth of gross root efforts byvarious organizations. For example, Agriculture ProduceMarket Committee, Unjha in Gujarat has given accidentinsurance cover to all the farmers in their area free of costand it has also seen to it that if accident occurs, the farmersare also assisted in getting the claims.The Informal sector workers also need legal protection in146 THE IIPM THINK TANK

A N INCLUSIVE INTENTseveral ways [ Martha Alter Chen et al.2001].• Registration, licensing, legal recognition processes andhawking zones• Reorganization of street vendors as an integral part of thedistribution system• Relief measures in situations/events of disaster andnatural calamities• Protection and expansion of vendors’ existing livelihoods.The Government of India has already passed several Acts toimprove the conditions of work of informal sector workers.Like I) Bonded Labour System (Abolition)Act 1976 ii)Childlabour (Prohibition and Regulation)Act 1976 iii) The employmentof Manual scavengers and Construction of DryLatrines(Prohibition)Act 1993 iv) Minimum Wages Act, 1948 [NCEUS draft 2007]. The experience of implementation ofthese Acts is not up to the desired standards. Now a new billhas been placed in the parliament called `Unorganizednon-farm agricultural sector workers (Conditions of work andlivelihood Promotion) Bill 2007 [ NCEUS Draft 2007]. ThisBill is intended to provide minimum conditions of work forthose unorganized non-agricultural workers who are wage andhome workers in the unorganized non-agricultural sector, aswell as other non-agricultural workers whose minimumconditions of work are not regulated by any other legislation. Italso provides a mechanism for dispute resolution for suchworkers, as well as for protection and promotion of livelihoodsof workers in the unorganized non-agricultural sector. The billneeds to be passed for the protection of the unorganizedsector workers.In conclusion, there is a need for more budgetary support forvocational training institutions\support to NGOs with assuredabsorption by the industry. Private sector is also makingseveral such efforts. More recently Career Launcher is planningto set up 'Skill Schools' all over the country. There is aneed to support such efforts on a large scale. Government ofIndia taken up the modernization of ITIs and set up 22 newITIs. It has also launched a “Skill Development Initiative.”This has been in operation for the last two years and there isnow a proposal to set up a `National Skill DevelopmentMission’ to provide more impetus to these efforts. ThisMission has to launch the skill development effort addressingthe peculiarities of the informal\unorganized sector on thescale of National Rural Employment Guarantee Programmeto make a major impact.Higher access to micro credit facilities to the informalsector is crucial for non-wage workers. Vocational Trainingand audit delivery if the informal sector is also to shine alongwith the other shining India help to promote household andTiny enterprises for self employment . The sustainable household and Tiny enterprise as necessary [Maitreyi Bordia DasSept 2003]. Legislative attention is needed to protect the India,which is yet to shine, from exploitation and destitution.References1. Dr. G. Ravindran “Estimation of Informal employment inIndia expert group on informal sector statistics” May 2006.2. Dr. Tongroi Onchan (Ed. ) Non Farm Employment in Asia,Asian Productivity Organization, 20043. International Review of Education 6(6),2000 pp 599-620.4. Jeemol Unni, Informal Employment : Estimating homebased and street-based workers in India Expert group onInformal sector statistics May 2006.5. M. Singh “ Combining work and Learning in the Informaleconomy; implementation for education, training and skillDevelopment"6. Maitreyi Bordia Das, "The other side of self-employment :Household Enterprises in India Social Protection Unit",Human Development Network, World Bank, Sept 2003.7. Martha Alter Chem, Renan Jhabawala and Frances Lund“Supporting workers in the Informal Economy- A policyFramework,” Paper prepared for ILO Task Force onInformal Economy, November 2001.8. National Policy on Urban Street Vendors ,GOI May 20069. “New Job Scheme for slum youths”, Times of IndiaAhmedabad (Gujarat Edition) Deecember 2006.10. National Knowledge Commission(NKC)- A Note OnHigher Education, November 2006.11. P.K Gold Berg and N. PaveniK, “ The Response of theinformal sector to trade liberalization,” Journal of DevelopmentEconomics, Vol 72(2) 2003 pp.463-496.12. The Informal Sector –Regional office of Asia and thePacific ,Bangkok December 200613. Unorganized non- agricultural sector workers ( conditionof work and lively hood promotion) Bill 2007, NCEUS draft22/2/200714. World Bank, Republic of Ghana, Vocational skills andInformal sector support Project ( Report no 13691-GH), 1995THE INDIA ECONOMY REVIEW147

Reliving TheGreatIndianDreamNCMP, Development Goals AndPublic Expenditure: A Study OfFiscal Responsibility And BudgetManagementSiba Sankar Mohanty 1 , Development Economist, Centre forBudget and Governance Accountability (CBGA), New Delhi148 THE IIPM THINK TANK

A N INCLUSIVE INTENTThe National Common Minimum Programme (NCMP)that was announced by the United ProgressiveAlliance (UPA) government as a charter of developmentin the new regime, it raised many hopes. The NCMPwas an expression of the beginning of progressive prioritisationof the government, especially for the social sector. Basedon the six guiding principles of governance around socio-economicjustice and welfare of the people, NCMP was characterizedas an agenda that recognized the need for bridgingdevelopment deficits in our country. It is imperative tocontextualize the evolution of Common Minimum Programmein the overall political paradigm. This is not for the first timethat a common minimum programme is floated in India. In1996 too with the United Front Government, a commonminimum programme was announced under the title “CommonApproach to Major Policy Matters and a MinimumProgramme (CAMPMMP) 2 ”. Approach Paper to the NinthFive Year Plan (1997-2002) wasfinally based on the major policydirection given by the governmentin CAMPMMP. 3 At this stage ofour discussion we may just statethat the earlier programme wasjust an extension of the prevailing neo-liberal agenda pursuedby the Narasimha Rao regime with rhetoric on pro-peopleissues. Our primary objective in thispaper is to assess the role of NCMP ofthe UPA government in addressing thedevelopment needs and shaping thebudgets of the government in last fouryears. The interesting links betweenboth the common minimum programmesare Mr. Chidambaram as theFinance Minister and the left front as apassive supporter. While the formerensured that the development trajectoryof the country goes along the pathsof neo-liberal ideas i.e., a primarilymarket driven and export led growthstrategy, the later pushed in a numberof pro-people memo into the arena ofdevelopment planning. The net resultsof such contradictions were veryobvious. While the pro-people rhetoricNow, even many states havedeficit control mechanisms inplace along the lines of UnionGovernment's FRBM Actraised the aspirations of the people, in reality the governmentswere apparently more committed towards retaining theconfidence of their fiscal masters (emphasis ours) through aself-controlling Fiscal Responsibility and Budget ManagementAct (FRBMA).NCMP is a set of promises made by the government to thenation. Many promises made in the texts of NCMP arecorollary to the Millennium Development Goals (MDGs) thatour government was a signatory to along with 188 othernations during the UN Millennium Summit in September2000 5 . Table-1 presents a brief comparison between NCMPsand MDGs that are relevant for India. Four years have passedsince the UPA government assumed power and an NCMP as aguide to budget making is in place. Let us make an assessmentof whether such a guide has played any role in shaping ourbudgetary policies and more so in shaping the fate of themillions of toiling masses in India.The FRBMA In TheContext Of NCMPOne of the first tasks performedby the UPA government afterassuming power in 2004 was toendorse and enact a Fiscal Responsibility and Budget Managementlegislation that contained the principles of deficitTHE INDIA ECONOMY REVIEW149

Reliving TheGreatIndianDreamTable-1 NCMP And The MDGs: A ComparisonMillennium Development GoalsNational Common Minimum Programme (NCMP) AnnouncementsGoal 1: Eradicate extreme povertyand hungerGoal 2: Achieve universal primaryeducationGoal 3: Promote gender equalityand empower womenGoal 4: Reduce child mortalityEmployment GuaranteeStrengthening the PDS particularly in the poorest and backward areasAntyodaya cards for all households at risk of hungerSpecial schemes to reach foodgrains to the most destitute and infirm to be launchedA national scheme for health insurance for poor families to be introducedCommitment to universalise access to quality basic education.Nobody is denied professional education because he or she is poorNutrition programmes, particularly for the girl child to be expanded on a significantscaleTo fully empower women politically, educationally, economically and legallyUniversalisation of the Integrated Child Development Services (ICDS)Goal 5: Improve maternal health Part of a comprehensive health policy that later came in as the National Rural HealthMission (NRHM)Goal 6: Combat HIV/AIDS, malariaand other diseasesGoal 7: Ensure environmentalsustainabilityGoal 8: Develop a Global Partnershipfor DevelopmentThe UPA to step up public investment in programmes to control all communicabledisease and also provide leadership to the national AIDS control effort.To take all measures to reconcile the objectives of economic growth and environmentalconservation, particularly as far as tribal communities dependent on forests areconcernedThe UPA government to give the highest priority to building closer political, economicand other ties with its neighbours in South AsiaMajor Targets Set under FRBM Act• Elimination of Revenue Deficit by March 2009• Reduction of Fiscal Deficit to an amount equivalent to 3 % of GDP by March 2008• Reduction of Revenue Deficit by an amount equivalent of 0.5 percent or more of the GDP at the end of eachfinancial year, beginning with 2004-05.• Reduction of Fiscal Deficit by an amount equivalent of 0.3 percent or more of the GDP at the end of each financialyear, beginning with 2004-05.Source: Economic Survey 2007control and expenditure reduction as core of the fiscal governancein the country. FRBMA set long-term fiscal targets forthe economy as well as rolling annual targets for the governmentto be abided by. Box-1 presents the basic targets setunder FRBMA. Our argument is simple. The goals set underNCMP are not achievable under a regime of FRBMA. Anyrational government can not respect to promises made underNCMP while following the principles of FRBMA.Major Targets Set Under FRBM Act• Elimination of Revenue Deficit by March 2009.• Reduction of Fiscal Deficit to an amount equivalent to 3 %of GDP by March 2008.• Reduction of Revenue Deficit by an amount equivalent of0.5 percent or more of the GDP at the end of each financialyear, beginning with 2004-05.• Reduction of Fiscal Deficit by an amount equivalent of 0.3percent or more of the GDP at the end of each financialyear, beginning with 2004-05.Our policy makers guided by IMF and IBRD adoptedFRBM as a principle of fiscal governance. Since 1991, internationalforums like IMF and World Bank had been imposing150 THE IIPM THINK TANK

A N INCLUSIVE INTENTconditionality on reducing fiscal deficits in their loan agreements.IMF country report in 2003 held that ‘high fiscal deficit’was the number one problem facing Indian economy. It hasalso been argued by the proponents of FRBM Act that highdeficits lead to inflation, itreduces consumption, result in acrowding out of the privatesector, rising unemployment andfalling living standards of thepeople. Owing to these concernsover the deficit syndrome inIndia, the FRBMA was legislated at the central level in 2003by the NDA government and later on endorsed by the UPAgovernment as one of the basic principles of fiscal governanceFRBMA was legislated in 2003by the NDA and later onendorsed by the UPA, for fiscalgovernance and controlduring days to come. Along the line of IMF and IBRD, theGovernment of India also started imposing conditionalitiesrelated to endorsement of FRBM Act for State Governmentsas a precondition to avail resources from the Centre. Now,many states like Karnataka,Kerala, Tamil Nadu, Punjab,Uttar Pradesh and Maharashtrahave a deficit control mechanismsin place along the lines of UnionFRBM Act.In general, the FRBM in Indiahas largely been an instrument for government retreat fromwelfare activities of the state. The Union Government aims toeliminate revenue deficit by 31 st March 2009 - in turn leadingTable-2 Specific Promises In NCMP That Has Budgetary ImplicationsEmployment Guarantee for 100 daysA National Fund for support of unorganized sector.Revamping Khadi and Village Industries Commission (KVIC) through new programmes.Rapid expanding credit facilities for small-scale industry and self-employment. Achieving potential growth of the servicessectorPublic investment in agriculture, rural infrastructure and irrigation to be stepped up in a significant manner. Irrigation toget highest investment priorityFlow of rural credit to double in the next three yearsSpecial programme for dryland farming in the arid and semi-arid regions of the country. Watershed and wastelanddevelopment programmes to be taken up on a massive scale.Raise public spending in education to at least 6% of the GDPRaise public spending on health to at least 2-3% of the GDP over the next five yearsUniversal food securityAntyodaya cards for all households at risk of hungerAdequate funds to the National Minorities Development CorporationHighest priority to the development and expansion of physical infrastructure like roads, highways, ports, power, railways,water supply, sewage treatment and sanitation.Public investment in infrastructure to be enhanced, even as the role of the private sector is expanded. Subsidies will bemade explicit and provided through the budget.Massive expansion of social housing in towns and cities, paying particular attention to the needs of slum-dwellers.All existing irrigation projects to be completed within three-four years.Household electrification to be completed in five years.The UPA Government to make a comprehensive assessment of the feasibility of linking the rivers in the countryEnd to the acute drinking water shortage in cities.Overseas investments in the hydrocarbon industry to be actively encouraged.Source: Compiled from the text of NCMP available at < http://pmindia.nic.in/cmp.pdf >THE INDIA ECONOMY REVIEW151

Reliving TheGreatIndianDreamTable-3 Development Expenditure Of Centre And State As % Of GDP to revenue account surplus, andpossible progressive reduction ofCentre States Combined capital account liabilities. Eliminationof revenue deficitrequires aNonNonNonDevpbalance in revenue accounts,Devp Total Devp Devp Total Devp Devp TotalExp Exp Exp Exp Exp Exp Exp Exp Exp which can be done by reducingPre FRBM Periodrevenue expenditure drastically1989-90 11.1 8.4 19.5 10.9 3.9 15.7 18.3 11.1 29.8 (Back Loaded Method), or by2002-03 7.5 9.9 17.4 9.3 6.2 17.1 14.6 13.8 28.7enhancing receipts to fill the gap(Front Loaded Method), or by tryingboth (Uniform Method). ThePost FRBM Period2003-04 7.1 8.8 15.9 9.9 6.0 18.7 15.1 13.4 28.8Government can substantially2004-05 6.9 8.4 15.3 9.4 6.0 18.3 14.2 13.3 27.8reduce revenue expenditure if a2005-06 6.4 8.1 14.6 9.5 5.4 16.1 14.5 12.4 27.2reduction is at all possible in those2006-07 RE 6.3 8.1 14.4 10.4 5.5 17.2 15.2 12.6 28.2items, which constitute a major2007-08 BE 7.8 7.8 15.6 10.8 5.6 17.7 17.0 12.4 29.8part of total revenue account. ForNote: The combined figures do not match the total of state and centre figures due to existence of substantial amount of expenditureon state account under ‘other expenditure’ head.example, interest payment aloneSource: Mohanty, Siba Sankar and Singh, Ramgati (2007) “FRBM- A Review”, Centre for Budget and Governance Accountability,New Delhi. Available at < http://www.cbgaindia.org/publications/books_reports/FRBM%20-%20A%20Review.pdf >takes away around 30 percent ofthe total expenditure. But unfortunatelyit is charged on theConsolidated Fund of India. The government, in no significantway, can actually reduce this expenditure. In fact, the highinterest rate regime has led to an increase in interest expendituresduring recent times. So if the government of the day iskeen on reducing expenditure it may do so in crucial sectorslike social services and some of the economic services only.This will affect the all-round development of the country andfurther aggravate the fiscal situation. 6The NCMP articulates major budgetary targets in the formof social sector investments. Table-2 lists some of the NCMPpromises that have significant budgetary implications. Even ifwe forget everything else and consider public investment onlyin case of education and health, it comes to around ninepercent of GDP. Such an amount is huge as the total combinedpublic expenditure (made by the Union and State governmentstogether) through budgets is around 28 percent of GDP(see Table-3). However, it should be remembered that thedevelopment expenditure (that comprises of all social servicesand economic services) through budgets is only around 17percent pf GDP. Now, if the government wants to keep itspromises under NCMP, it has to increase substantially itsexpenditure on development expenditures. Currently, thegovernments spend less than five percent of GDP (an overestimate)on education and health together. If the government152 THE IIPM THINK TANK

A N INCLUSIVE INTENTwants to increase its expenditure on education to a level at parwith NCMP promises in education and health (all othersectors considered irrelevant), then the government needs toincrease its development expenditure by at least four percentof GDP. This is simply not possible with the given resourcecapacities of the government, ifproblem that is overcome with attainment of an equilibriumbalancing the tenets of maximization with a budget (orstructural) constraint. In the present case, while the NCMPmay be considered as a maximization problem, the FRBMAmay be considered as a budget (or structural) constraint. Hadour approach towards FRBMAthe government operated under Ideally, the targets underbeen ‘front loaded’ our governmentswould have tried to meetthe premises of deficit control asFRBM Act must be metper the FRBMA. Our firstthe deficit targets throughthrough resource expansionargument is, therefore, theincrease in revenues through allgovernment should abandon than expenditure reduction possible ways. It is surprising toFRBMA on order to respect itspromises to the nation or make necessary amendments inFRBMA in order to address the development needs anddeficit control may not be treated as a guiding principle ofdevelopment planning. Again, we are not arguing that evenwith FRBMA, some of the targets of NCMP are not achievable.It is possible to make significant initial inroads intodevelopment targets under NCMP, even with the FRBMA inits present form. Imperatives are mentioned hereunder: one,to have a strong political will to make FRBMA front loaded,i.e, the targets under FRBMA is met through resourceexpansion than expenditure reduction and two, to viewnote that the government hasforegone huge sums of tax revenues through different kinds ofexemptions. It is estimated that potential tax revenues to thetune of around seven percent of GDP are lost every year onaccount of different exemptions in the central tax system only(See Table-4). The opportunity cost of such a loss is huge. Asdiscussed earlier, in order to achieve the NCMP targets foreducation and health the government needs an incrementalexpenditure of around four percent of GDP whereas, thegovernment is losing around seven percent of GDP on accountof these exemptions. This clearly shows the extent of commitmenttowards its own promises to the people.the targets under NCMP as equally important as theFRBM targets.In economic theories we often come across with a choice-An Assessment Of NCMP In The FRBM EraThe NCMP made it clear that it would try to resolve the fiscalimbalance in the economy through a comprehensiveTable-4 Tax Revenue Foregone In Central Tax Systemdeficit reduction strategy. In fact thegovernment after adopting FRBMA had2006-07 2005-06tried to achieve this goal to a satisfactoryRev. Lost (in Crore Rs.) 288959 244290level. The key deficit indicators were keptRev. Lost % of GDP 7.0 6.8under the targets set in FRBMA. Table –5Combined Fiscal Deficit ( Crore Rs.) 264506 239323shows that the recent years have not onlySurplus left over after financing Deficit (Crore 24453 4967 witnessed a spectacular growth of nominalRs.)GDP and the Tax-GDP ratio, but also shownCombined Deficit as % of Tax Rev. Lost 91.5 98.0a reduction in deficits of all types to matchSubsidies 18.5 19.5the FRBM targets. One needs to assessCombined Interest Payments as % of Rev Lost 80.3 84.2 whether such increase in GDP and a moreCombined Interest Payments + Subsidies as % of 99 104 than corresponding increase in tax proceedslosshave helped the government in keeping theRev Lost As % of Cent. Budget Exp. 49.7 48.3NCMP promises or not. In other words, it isRev Lost as % of Gross Tax Collections 61.76 66.7imperative to see whether an increase in theSource: Mohanty, Siba Sankar and Singh, Ramgati (2007) “FRBM- A Review”, Centre for Budget and GovernanceAccountability, New Delhi. Available at < http://www.cbgaindia.org/publications/books_reports/FRBM%20-%20A%20Review.pdf >spending capacity of the government hasresulted in a corresponding increase in theTHE INDIA ECONOMY REVIEW153

Reliving TheGreatIndianDreamTable-5 Achievements Through FRBM: Key Fiscal Indicators As % Of GDPGrossFiscalDeficit ofCentreRevenue Deficitof the CentreCombined (State+Centre) FiscalDeficitCombined(State+Centre)RevenueDeficitAnnualGrowth Rate ofNominal GDPCombined TaxGDP Ratio of theUnion and StateGovernment1986-87 8.37 2.5 9.8 2.42 11.90 18.11998-99 6.47 3.8 9.0 6.32 14.67 15.72002-03 5.90 4.4 9.6 6.63 7.76 16.8FRBM Era2003-04 4.46 3.6 8.5 5.76 12.51 17.82004-05 4.02 2.5 7.5 3.67 13.06 18.72005-06 4.11 2.6 6.7 2.66 14.09 20.42006-07 RE 3.69 2.0 6.4 2.05 15.66 20.52007-08 BE 3.39 1.6 5.8 1.22Source: Compiled from RBI (2007), Handbook of Statistics on Indian EconomyTable-6 Total Revenue Expenditure By All States As % of GDP2002-03 2004-05 2005-06 2006-07 (RE) 2007-08 (BE)TOTAL EXPENDITURE 13.647 13.065 12.280 13.016 13.366Developmental Expenditure (A + B) 7.346 6.924 6.762 7.367 7.602A. Social Services 4.537 4.224 4.164 4.556 4.723Education, Sports, Art and Culture 2.539 2.269 2.191 2.298 2.334Medical and Public Health 0.568 0.508 0.492 0.520 0.535Family Welfare 0.097 0.082 0.077 0.085 0.087Water Supply and Sanitation 0.226 0.222 0.237 0.214 0.213B. Economic Services 2.809 2.700 2.597 2.811 2.879Agriculture and Allied Activities 0.667 0.638 0.588 0.617 0.643Rural Development 0.478 0.492 0.493 0.537 0.554Special Area Programmes 0.024 0.020 0.023 0.031 0.029Irrigation and Flood Control 0.476 0.318 0.319 0.370 0.387Energy 0.574 0.702 0.595 0.601 0.539Industry and Minerals 0.106 0.093 0.107 0.113 0.129Note: GDP at market prices for 2007-08 extrapolated.Source: State Finances: A Study of Budgets, various yearsdevelopment spending in the economy or not. With suchachievements at the fiscal front, one would expect that thegovernment would substantially increase its expenditure incritical social and economic services. However, it is disturbingto note that public spending on critical sectors as proportion ofGDP has declined in the FRBM era. As described in Table-3,the total development expenditure by the Central Governmentas a proportion of GDP has declined from around elevenpercent to less than seven percent in most of the FRBMAperiod. Though in recent years, the Union Government has154 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable-7 States’ Capital Expenditure And Central Transfers supply and there can be higher inflation withlow, zero or even positive fiscal accounts. 7 ThisState Capital States Budget Grants to Grants on may happen because of excessive spending byExpenditure Expenditure States & Uts Capitalthe private sector over and above its earnings,as % of GDP as % of GDP Plans as % Account toof GDP States & Uts as was the case with many South Asian countriesPlans as %of GDP before the currency crisis. There is nothingwrong in maintaining large fiscal deficits if2003-04 5.36 19.02 1.80 0.86 resorting to public debt is made only to meet2004-05 5.05 18.11 1.66 0.73 investment requirements as long as their social2005-06 3.60 16.06 1.01 0.15 rate of return is higher than the rate of interest.2006-07 RE 3.98 17.19 1.12 0.14 Deficit per se is not bad as the Indian economyis a demand-constrained economy. Due toNote: GDP at market prices for 2007-08 extrapolated.Source: Compiled from RBI (2007), Handbook of Statistics on Indian Economyexistence of underemployment of resourcesand production at much less than its optimalmade efforts to increase its allocations in sectors like educationand health, it is far below the NCMP requirements. Themost alarming impact of the new policy regime has been onthe state finances. The available information shows that inalmost all sectors of social and economic services, the allocationmade by state government has declined substantially inthe FRBM period. If for the time being we ignore the figurespertaining to 2006-07 and 2007-08 as these are estimates only,the revenue expenditure as a proportion of GDP (as shown inlevel, the economy can actually sustain a high level of fiscaldeficit up to around 7-8 percent of GDP. Even in case ofrevenue deficit, if it is properly managed will help pumping inpurchasing power to the economy and boost domestic demand.In India, it is not the problem of growing deficits, whichdeserves concern but the composition for these deficits andthe way these are being financed. There are many othercountries like USA, Canada in the developed world andArgentina, Peru, Brazil among the emerging market econo-Table-6) has declined in total social and economic sectorallocations in general and sectors like education, health, familywelfare, water supply, agriculture, rural development, irrigationTable-8 Inflation In India(Annual Growth In Consumer Price Index)etc, in particular. The phase also witnessed a drastic fall inStates’ capital expenditure, and central transfers to states as YearIndex (Average of months)grants (See Table-7).Industrial of Urban AgriculturalWorkers which Non-manual LabourersFrom the above analysis, it is clear that the government of theFood Employeesday is more committed towards the targets under FRBM Act.Pre FRBM PeriodThe Act is based on the presumption that the fiscal deficit is1999-00 3.38 0.22 4.45 4.44the key parameter adversely affecting all other macroeconomicvariables. The proponents FRBMA argued that lower fiscal2000-01 3.74 1.57 5.40 -0.33deficits lead to higher as well as sustainable growth and higher2001-02 4.28 2.87 5.12 1.31fiscal deficits apparently lead to inflation. They also argued 2002-03 4.10 2.36 3.85 3.24that large fiscal deficits may lead to huge accumulation ofFRBM Periodpublic debt. However, many development economists believe 2003-04 3.73 3.77 3.70 3.76that if the fiscal deficit is dominantly in the form of capital 2004-05 4.00 2.22 3.81 2.72expenditure, it contributes to future growth through demand 2005-06 4.23 4.15 4.59 3.82and supply linkages, and in fact can create so much demand inthe economy that private investment may crowd-in to supplementautonomous investment. As far as inflation is concerned,it results from an excess of aggregate demand over aggregate2006-07 6.83 9.11 6.58 7.65Source: Mohanty, Siba Sankar and Singh, Ramgati (2007) “FRBM- A Review”, Centrefor Budget and Governance Accountability, New Delhi. Available at < http://www.cbgaindia.org/publications/books_reports/FRBM%20-%20A%20Review.pdf >THE INDIA ECONOMY REVIEW155

Reliving TheGreatIndianDreamTable-9 Increasing Significance of Cess and External Assistance In Central Allocations ForElementary EducationYearEducationCessTotal(2003-04REAllocation+ CessCollected)TransferstoPrambhikSikshaKoshExternalSupportforElementaryEducationAllocationsforlementaryEducationandLiteracyCentralGovernmentAllocationsforElementaryEducationafterAdjustingEducationCessDirectContributionof theCommonCitizensfor UEE(i.e.,Contributionof Cess inFunding forUEE) in %Contributionof the CentralGovernmentin UEE afterdiscountingfor ExternalAid andEducationCess in %01-02 RE 1212 3755 3755 0.0 67.705-06 RE 7490 11597 1997 12243 4753 61.2 22.506-07 RE 8949 20546 8746 1647 16895 7946 53.0 37.307-08 BE 10424 30970 10393 1678 18629 8205 56.0 35.0Note: RE: Revised EstimateThe Cess figures for the year 2006-07 RE and 2007-08 BE does not include the extra 1 percent cess for Higher EducationSource: Expenditure Budget Vol. 2 and Receipt Budget for various yearsmies have such fiscal responsibility legislations. However, theyoften try to reduce their deficit through front loaded mechanisms.Still, many countries sustain their huge fiscal deficitwithout compromising on the development expenditure front.Expenditure Management Ideas For Budget 08-09The development deficits in our country are manifold. Ourrural economy that largely depends on the growth of agriculturalsector is in a precarious condition. The growth in GDPdoes not reflect the true picture of our economy. It has beenestimated that the per capita real income of agriculturedependant population was virtually stagnant between 1994-95and 2003-04 when the per capita real income for the countryas a whole increased at a rateof more than four percent onan average during the period.The per capita absorption offood grains has declined byaround 22 kilograms between1995-98 and 2000-2003,indicating a further exposure of the poorer sections of ourpopulation to food vulnerability, hunger and malnutrition. 8The situation of rural indebtedness is worse than ever. As peran estimate by the National Crime Records Bureau (NCRB),Prices of essential commodities isnot merely a fiscal or monetaryphenomenon. Rather, it is afundamental governance issueover 17,000 farmers committed suicide 9 across the countryonly during 2006. Though the Government in its recentlyannounced five year plans have recognised the issue as amajor challenge and evolved new mechanisms like interestsubvention, the efforts seems inadequate. The need of thehour is to provide a comprehensive debt relief package for thefarmers and a comprehensive agro-marketing programme forlong term sustainability of the sector.The country in the recent past has witnessed unprecedentedprice rise in essential commodities. Table-8 indicates that varioussections of our population were exposed to high inflationduring recent years, the same in case of food items beingunsustainably higher. The price rise faced by agriculturallabourers in 2006-07 isaround eight percent comparedto much lower levels inthe pre-FRBM period. Thereis a need to revamp the pricecontrol mechanisms followedby the government. The issueof prices of essential commodities in India is not merely afiscal or monetary phenomenon. Rather it is a governanceissue. The government in its coming budgets should try tomake the public distribution system more effective by making156 THE IIPM THINK TANK

A N INCLUSIVE INTENTit universal. This may require further expansion of foodsubsidies in order to address the issues in procurementoperations and universalisation of PDS. The resourcesrequired for the same may be generated through reducingexemptions available in the central tax system.Inflation In IndiaAs shown in Table-6 and Table-7, there has been a decline incrucial social and economic sector expenditures by the stategovernments. It is necessary that the Union Governmenttakes necessary steps to increase the overall expenditure inthese sectors, especially in health and education. More untiedgrants should be given to states to enhance the capacity of thestate governments to spend in these sectors. From thefinancial year 2007-08, the government has started collectingan additional 1% cess on account of secondary and highereducation. The government should make proper us of thesecess proceeds and should not treat these proceeds as substitutesfor government’s own commitments. It is worthwhile tonote that the burden of more than half of the financialcommitments made by the Government for Universalisationof Elementary Education in India is currently borne by thecommon people only through education cess collected on alltaxes. While, introduction of an education cess was a welcomemove by the government, it was expected that the proceedswould complement the government’s own initiatives ratherthan substituting the same. However, if adjustments are madefor the external support as well as education cess, the contributionmade from the resources of the union governmentitself has in fact declined from around 68 percent in the year2001-02 RE to around 35 percent in 2007-08 BE (See Table-9).Many of the initiatives undertaken by the governmentas part of its promise through NCMP were made in a slapdashmanner. The programmes for Bharat Nirman were announced,but the progress is slow. NREGS was introducedbut it is yet to cover all the districts in India. A social securityprogramme for unorganized sector, a comprehensive expansionof the ICDS programme, NRHM, National NutritionMission, etc are all taken up in a very unsustainable manner.Unless the government enhances allocations towards the criticalminimum requirement in each scheme and ensures theirproper implementation through suitable monitoring mechanisms,all the rhetoric have no meaning for the welfare ofthe people.Notes and References1The author is greatly indebted to the direct and indirectacademic inputs provided on the relevant issues by Dr.Praveen Jha, Mr. Ram Gati Singh, Mr. C. Saratchand, Mr.Deepak L. Xavier and colleagues at (CBGA). The necessarydata support provided by Network for Social Accountability(NSA), Bhubaneswar is acknowledged.2CPIML, (1996) “United Front’s Common MinimumProgramme: A Review”, July 1996 3Annual Report of the Planning Commission 1996-97,available at < http://planningcommission.nic.in/reports/genrep/arep9099/ar96-97.htm >4Since the days of Balance of Payments crisis in early 1990s,our governments have tried to follow a path of policyformulation as dictated by international donors and thebusiness lobby, in the form of policy adjustments towardsdeficit management, expenditure control and limiting therole of government in essential sectors and services.5See Millennium Development Goals at < http://www.undp.org/mdg/basics.shtml >6Mohanty, Siba Sankar and Singh, Ramgati (2007) “FRBM-A Review”, Centre for Budget and Governance Accountability,New Delhi. Available at < http://www.cbgaindia.org/publications/books_reports/FRBM%20-%20A%20Review.pdf >7See for more details, Chandrasekhar C. P. and GhoshJayati, (2004) “Fiscal Responsibility and DemocraticAccountability” available at < http://www.macroscan.com/the/poverty/jul04/print/prnt260704Fiscal_responsibility.htm >,Ghosh Jayati (2004) “Fiscal Responsibility Versus Democracy”available at < http://www.cpim.org/pd/2004/0808/08082004_eco.htm >, and Chandrasekhar C.P. and Ghosh Jayati (2005) “Budget 2005-06: Stage-managedhumaneness” available at < http://www.thehindubusinessline.com/2005/03/08/stories/2005030802630900.htm>8Jha Praveen and Negre Mario (2007) “Indian Economy inthe Era of Contemporary Globalisation: Some CoreElements of the Balance Sheet” < http://www.macroscan.com/anl/may07/pdf/Indian_Economy.pdf >9NCRB (2007), “Accidental Deaths and Suicides in India-2006”, Ministry of Home Affairs available at < http://ncrb.nic.in/ADSI2006/Table-2.11.pdf >THE INDIA ECONOMY REVIEW157

Reliving TheGreatIndianDreamRural Infrastructure AndLivelihoods: Moving Ahead WithThe New Poverty AlleviationProgrammes158 THE IIPM THINK TANK

A N INCLUSIVE INTENTAmir Ullah Khan andAarti BhardwajThe India Development Foundation, GurgaonTHE INDIA ECONOMY REVIEW159

Reliving TheGreatIndianDreamThe Indian ExcitementIndia’s GDP growth now is estimated to be 9% for the year2007-08. During the same time, the US economy will grow at3.2%, Japan at 2.6%, UK at 1.9% and the European Union at1.7%. There are countries like Azerbaijan and Angola, whichare growing at more than 20%, but this is sporadic andunstable growth. An increase in GDP of a country is generallytaken as an increase in the standard of living of its inhabitants.Over long periods of time, even small rates of annual growthcan have large effects. A growth rate of 2.5% per annum willA growth rate of 8 percent perannum (as currently experiencedby Indian economy) will lead to adoubling of GDP within nine yearslead to a doubling of GDP within 28 years, whilst a growth rateof 8% per annum (experienced by India now) will lead to adoubling of GDP within 9 years.This growth has been attributed to a whole host of factors,including the focus on economic reforms, a young populationthat India currently enjoys due to its demographic transitionand a large pool of human capital – young, talented andwell-educated workforce. Rapid strides in knowledge-basedindustries, especially information technology, biotechnologyand pharmaceuticals, and resurgence in exports have madeIndia one of the fastest growing economies in the world.Opening of the economy and the growing economies of scaleand scope for Indian enterprises, access to ‘modern’ technology,especially information technology, and the growth inentrepreneurship have made India a sought-after destinationfor foreign investments. However rural India has stayedbehind, and this is a matter of concern.What Characterises Rural India?Rural India is at the centre-stage of all growth in the future.However it continues to suffer from lack of basic infrastructure.Caught in the vicious poverty-cycle, rural India, inabsence of adequate infrastructure, rural India finds it difficultto undertake activities that can accelerate economic growth.Home to close to 65 percent of India’s total population, ruralIndia faces the daunting task of providing sustainable incomeand employment opportunities to a major section of thepopulation, especially the lower-income households. Inabsence of infrastructure facilities, there is lack of marketaccessto rural population, slow growth in organised retail andthus, limited livelihood opportunities, stagnation in agricultureand aggravation of rural poverty-levels. Absence ofinfrastructure also makes rural markets fragmented, characterisedby high costs of transactions and high informationasymmetry. The retail sector offers unprecedented opportunitiesfor rural India, and the only thing that can hold this sectorback is the lack of infrastructure.Two-thirds of India’s consumers live in rural areas and alittle more than half the national income is generated here.Therefore it is not surprising that that rural markets form animportant part of the Indian market. In more than 635000villages, there are almost twice as many 'lower middle income'households in rural areas as in the urban areas. At the highestincome level there are 2.3 million urban households as against1.6 million households in rural areas. Middle and high-incomehouseholds in rural India are expected to grow from 80 millionto 111 million by 2008. In urban India, the same is expected togrow from 46 million to 59 million 1 . The size of the rural160 THE IIPM THINK TANK

A N INCLUSIVE INTENTmarket therefore willsoon be more thandouble the size of theurban market.Numerous studiesthe world over haverevealed that investmentsin rural infrastructureis one of themost potent tools thatgovernments can use toenhance growth andreduce poverty in ruralareas. Investments inroads, tele-communications,power supply,drinking water facilities,schools and healthcare facilities have apositive effect on thequality of life in ruralareas. However, therehas been stagnation in the level of public investment in ruralinfrastructure in India, as well as in most developing countries.Even post-reforms, in the period of 1993-94 to 2002-03, therehas been a decline not only in the share of budgetary expenditureon all rural development and poverty alleviation programmesfrom 2.08 to 1.87 percent, but also the share of ruralinfrastructure development in all social services and povertyalleviation programmes has declined from 32 percent to 25percent 2 in a significant fashion.The decline in public investment in rural infrastructuredevelopment has been on account of the fact that totalgovernment expenditure has been curtailed due to the‘structural adjustment programmes’, and also due to the lowpriority attached to rural infrastructure by most governmentsin developing countries (Fan et al. 2000). In absence ofcomplementary and supporting infrastructure from thegovernment, even private investments in infrastructure in ruralIndia have also not really taken-off 3 .India’s reforms concentrated on industry and services, whilethe sectors that have been left untouched are agriculture, land,labour and retail. Leading the pack of problems that havebeen left unsolved is, ironically, the sector where a bulk ofIn absence of complementary &supporting public infrastructure,even private infrastructuralinvestments haven't really taken-offpopulation resides. The rural sector in India got completelysidelined by the reform process. In India, rural is synonymouswith agricultural and therefore, with the exception of a fewissues that are non agricultural, the rural tragedy is indeed theagricultural tragedy. In the twentieth century, agriculturalgrowth stagnated as a result of a series of droughts andfamine. The Green Revolution in the 1960s raised productivitylevels on the one hand, but was rather harshly criticized forwidening income disparities between rich and poor farmers onthe other. The late 1960s and early 1970s witnessed a modernizedagriculture with new equipment and farm technology.New fertilizers led to high yielding varieties, tractors replacedcattle and the immediate result was that the production ofcrops such as wheat and rice increased remarkably. Butgrowth was far from uniform.In this context, it is important to take a look at some of theTHE INDIA ECONOMY REVIEW161

Reliving TheGreatIndianDreamIn course of rural employment, theproportion of laborers increasedfrom 20 to 27% and cultivatorsdeclined from 50 to 32%critical areas of concern where the farmer and agriculturegrowth are concerned. Firstly, it is important to focus on theskewed nature of agriculture production in India. Despiteoft-repeated declarations of intent on the importance of cropdiversification, the agriculture sector is heavily dependent onfood grains. The relationship between foodgrains and foodsecurity is so strong that effectively nothing is done towardsdiversification. As food crops suffer because of monsoons andprices, the economy suffers. On the other hand stocks pile upand lead to some embarrassment for the policy maker.Productivity levels continue to stagnate putting greaterpressure on land and other resources. Intensive agriculturegives way to an extensive route and yields do not show anygrowth. Secondly, there is a need to look at the rural employmentscenario, an issue much neglected so far. The pattern ofemployment as it has emerged is indeed a cause of concern. In1951, 70 percent of the total work force was engaged inagriculture and has dropped to 54 percent. The proportion oflaborers increased for20 to 27 percent andcultivators declinedfrom 50 to 32 percent.However these figurespale in comparison tothe developed world. InAustralia, six percentand in France, onlyseven percent of thework force is engaged inagriculture. In the USand UK, the percentagesare three and twopercent respectively.Even in Egypt, the workforce in agriculture isless than 35 percent.Third is the disturbingtrend in exports. IndianAgriculture, according to Tenth Plan estimates, contributesonly 14.7% to total export earnings. What is worse is thatalmost all of this is due to export of primary goods and verylittle produce is processed. Even within this, there is a predominanceof just five or six crops namely, tea, rice, oilseeds,tobacco, spices and sugar. If overall export growth rate shouldbe taken to the target of 25 percent per annum, it is imperativethat agricultural exports are increased and that processed foodreplaces primary farm commodities in the export basket.The Two InitiativesPoverty, as an issue, has been one that India has grappled withsince independence. Various programmes and schemes havebeen run through the years to address this problem. The twoschemes, which are in various ways new and unique, areBharat Nirman and National Rural Employment GuaranteeAct (NREGA), both started in the year 2005. While BharatNirman was envisaged as a business plan to set up ruralinfrastructure, the NREGA was introduced to provideguaranteed wage employment to every household who maywant to participate. The objective of both these schemes wasto ensure a basic standard of living for the rural population.The focus areas under Bharat Nirman were irrigation, roads,electrification, water supply, housing and telecommunication162 THE IIPM THINK TANK

A N INCLUSIVE INTENTconnectivity. Construction activities would be undertaken on alarge scale to enable the objectives of Bharat Nirman. Thesewould require large numbers of unskilled, semi-skilled andskilled labour. The NREGA was envisaged as a facilitator forthe supply of atleast the unskilled labour required therein.This would create the much needed infrastructure in the ruralareas, thus further fuelling the growth of the economy.Under Bharat Nirman, annual targets were laid out for eachof the focus areas. Overall, 1,46,185 Kms road length wasproposed to be constructed by 2009. This would benefit 66,802unconnected eligible habitations in the country. To ensure fullfarm-to-market connectivity, it was also proposed to upgrade1,94,132 kms. of the existing routes. In the case of roads,almost 95% of the overall target for India was achieved in theyear 2005-06. This decreased to 75% in the following year and27% in the year 2007-08. The achievement of targets, however,was very varied across states. While states like HimachalPradesh achieved nearly 300% of their targets in the year2005-06, other states like Goa and Tripura achieved less than5% of their targets in the same year.The Ministry of Power has the responsibility of providingelectricity to the remaining 1,25,000 villages (as per the 2001census) through the programme instrument of Rajiv GandhiGramin Vidyutikaran Yojana. A total of 78 million householdswere to be electrified under this scheme. As per the MIS forthis scheme, a total of 69902 villages and 2191375 householdshave been electrified till date. This amounts to 55% of thetargeted number of villages but only 2.8% of the targetedhouseholds. The Ministry of Rural Development, Departmentof Drinking Water Supply was made responsiblefor providing safe drinking water to alluncovered inhabitations in partnership withState Governments. The programme instrumentof the Government of India is a CentrallySponsored Scheme of Accelerated RuralWater Supply Programme under implementationsince 1972-73. Since 1972, over 37 lakhhand pumps and 1.5 lakh pipe water supplysystems have been set up to provide safe waterto over 15 lakh habitations in the country at acost of over Rs 50,000 crore. An estimated55,067 uncovered habitations were to becovered by 2009 under Bharat Nirman. Inaddition, all habitations which have slippedback from full coverage to partial coverage due to failure ofsource and habitations which have water quality problemswere to be addressed. The original document lays out thefollowing norms for coverage: fourty litres per capita per day(lpcd) of safe drinking water for human beings, 30 lpcdadditional for cattle in the Desert Development ProgrammeAreas, One hand pump or stand post for every 250 persons.The water source should exist within 1.6 km in the plains andAgricultural sector contributes only14.7% to total exports. Even withinthis, there is a predominance ofjust five or six cropswithin 100 metres elevation in the hilly areas. Though 172% ofthe target was achieved in the year 2005-06, this graduallyslipped to only 44% in the year 2007-08.The Bharat Nirman document states that the Ministry ofWater Resources in collaboration with State Governmentswould be responsible for creation of additional 10 millionhectares of irrigation capacity by the year 2009 through major,medium and minor irrigation projects complemented byground water development. Here too, the achievement oftargets has dwindled over the years. Jammu & Kashmir,Uttaranchal, Himachal Pradesh, Punjab and Maharashtraachieved more than 200% of their targets in the year 2005-06,but the corresponding number for the subsequent year wassignificantly lower. Only Uttaranchal achieved a little overTHE INDIA ECONOMY REVIEW163

Reliving TheGreatIndianDream90% of their targets in 2006-07. The state of Tamil Nadu is theonly state which achieved in excess of 100% of its targets inboth the years. Thus though the schemes under BharatNirman have made a significant mark in terms of the targetslaid out at the outset, there clearly is a long way ahead.The NREGA aims at providing employment to all adultmembers of a rural household who may apply for employmentand are willing to do unskilled manual work. A jobcard would be issued (bearing the photographs of all adultmembers of the family) and employment would be providedWorks under NREGA can beexpanded or better still completelydecentralised. Panchayats are freeto decide on local prioritiesto job card holders within a fortnight of their demand;conditional on a minimum of fifteen days of employment.In case that employment is not provided, the state would beobliged to pay unemployment allowance. Further, womenwould have to be at the least a third of the work force. Also,the wages provided would be disbursed on a weekly orfortnightly basis and in compliance with the minimum wagelaws. The works undertaken under this scheme would haveto fall under the following broad heads: Water Conservation,Drought Proofing (including plantation and forestation),Flood Protection, Land Development, Minor Irrigation,horticulture, land reform beneficiaries, and ruralconnectivity. In the first phase, 18.6 million job cards wereissued thus covering about 84.5% of the households thatregistered under this scheme. Only 17% of the people whoregistered under this scheme demanded employment underthis scheme and 90% of these people were providedemployment. However, only 2.7% of the households thatdemanded employment completed 100 days of work underthis scheme. Over 68% of the work undertaken under thisscheme is in progress while 9.5% of the work has beencompleted. Only nine out of the twenty seven states haveutilized more than 80% of the funds allocated to themunder NREGA. Since the employment under this scheme isprovided on demand, this implies that there wasn’t enoughdemand for employment in the states that funds have notbeen utilized.ConclusionThe paper makes the point that programmes like the NREGPand Bharat Nirman have far reaching implications and shouldbe evaluated in their entirety. They have large socio economicimplications that any simple evaluation would not capture.This budget ought to look at how monitoring and evaluationcould be done to take these forward in more meaningful ways.It is also recommended that the works under NREGA beexpanded or better still completely decentralised so that thepanchayats are free to decide on local priorities. The implementationof these programmes has now thrown up issues ofleakage and corruption and this needs to be plugged bymaking the implementation truly decentralised and based onself selection by wage earners. The impact of monsoons andrains on infrastructure like roads and check dams needs to bestudied too to enable a more sustainable asset development.Maintenance of structures that are built with is another aspectthat has been ignored and could fritter away the benefits.There is also a hunch that food processing sectors would getbenefitted and this would result in greater up stream activity.This too needs to be studied and the resultant policy issueslooked at as this sector is among the most regulated ofindustries in India. There is also a feeling that as cash transfersincrease disposable incomes, village economies tend to getinflationary and this might provoke resentment. The inflationeffect, the need to integrate markets so inflation does notoccur and the time lag for equilibrium effects to show up needto be studied.Endnotes1Estimates from the National Council of Applied EconomicResearch2Source: Das Keshab (2001), ‘Endowments and Rural Infrastructure:Issues Today’, India Infrastructure Report: Issues inRegulation and Market Structure, Oxford University Press,New Delhi3Source: Fan, Shenggen, Peter Hezell and S. K. Thorat (2000),‘Impact of Public Expenditure on Rural Poverty in India’,Economic and Political Weekly, Volume 35, No. 40.References1. Ahluwalia, Montek (2000), “Economic Performance ofStates in Post Reforms Period”, Economic and PoliticalWeekly, May, pp 1637-1648.164 THE IIPM THINK TANK

A N INCLUSIVE INTENT2. Atkinson, A. 1970. On the measurement of inequality.Journal of Economic Theory 2: 244–263.3. Ballard, C. 1988. The marginal efficiency cost of redistribution.American Economic Review 78:1019–1033.4. Brahmananda, PR and VR Panchamukhi (ed), TheDevelopment Process of the Indian Economy, Delhi,Himalaya Publishing Company.5. Canning D. and Bennathan E. (2000), ‘The Social Rate ofReturn on Infrastructure Investments’, Policy ResearchWorking Paper Series, World Bank.6. Coady, D. 2003. Alleviating structural poverty in developingcountries: The approach of PROGRESA in Mexico.Background paper to 2003 World Development Report.Washington, D.C.: World Bank.7. Coady, D., and E. Skoufias. 2004. On the targeting andredistributive efficiencies of alternative transfer instruments.Review of Income and Wealth 50 (1): 11–27.8. Das Keshab (2001), ‘Endowments and Rural Infrastructure:Issues Today’, India Infrastructure Report: Issues inRegulation and Market Structure, Oxford UniversityPress, New Delhi9. Dollar, David and Aart Kraay, 2001, “Growth is Good forthe Poor”, World Bank Policy Research Working Paper2587, April.10. Drèze, J., and N. Stern. 1990. Policy reform, shadow pricesand market prices. Journal of Public Economics 42: 1–45.11. Fan, Shenggen, Peter Hezell and S. K. Thorat (2000),‘Impact of Public Expenditure on Rural Poverty in India’,Economic and Political Weekly, Volume 35, No. 40.12. Government of India (2001), Approach to Tenth Five YearPlan, Planning Commission, New Delhi.13. Harris, R. 1999. The distributional impacts of macroeconomicshocks in Mexico: Threshold effects in a multiregionCGE Model. Trade and Macroeconomics DivisionDiscussion Paper No. 44.Washington, D.C.: InternationalFood Policy Research Institute.14. India 2007 a reference annual: Chapter 23-Rural Development,Publications Division, Ministry of Information andBroadcasting, Government of India15. Jalan J. and M. Ravollion (2002), ‘Geographic PovertyTraps? A Micro Model of Consumption Growth in RuralChina’, Journal of Applied Econometrics.16. Kurian, N. J. (1999), “State Government Finances”,Economic and Political Weekly, May, pp 1115 – 1125.17. Morley, S. and D. Coady. 2003. From social assistance tosocial development: A review of targeted educationsubsidies in developing countries. Center for GlobalDevelopment and International Food Policy ResearchInstitute, Washington, D.C.18. National Sample Survey (NSS), 58th Round, Report 487,Central Statistical Organisation, Government of India,New Delhi.19. Newbery, D., and N. Stern, eds. 1987. The theory oftaxation for developing countries. Oxford: ClarendonPress.20. Prahalad, C. K. and Stuart L. Hart (2002), “The Fortune atthe Bottom of the Pyramid”, http://www.strategy-business.com/media/pdf/02106.pdf21. Ravallion, M. 1993. Poverty comparisons: A guide toconcepts and methods. LSMS Working Paper 88. Washington,D.C.: World Bank.22. Sen Amartya K. (1999), “Development as Freedom”,Oxford, Oxford University Press.23. Sharma, A. N. (1997), Trends in Structure and Pattern ofEmployment and Unemployment in India, IEG WP No.E/188/97.24. Singh Nirvikar and T. N. Srinivasan (2002), “IndianFederalism, Economic Reform, and Globalisation, Paperfor Comparative Federalism Project, CREDPR, Stanford.25. Skoufias, Emmanuel. 2001. PROGRESA and its impactson the human capital and welfare of households in ruralMexico: A synthesis of the results of an evaluation byIFPRI. Washington, D.C.: International Food PolicyResearch Institute.26. Virmani, Arvind (2004c), Economic Reforms: Policy andInstitutions, Some lessons from the Indian experience,ICRIER Working Paper No. 121, January 2004.27. Williamson, John and Zagha, Roberto, (2002), From theHindu Rate of Growth to the Hindu Rate of Reform,Working Paper No. 144, Center for Research on EconomicDevelopment and Policy Reform, Stanford University,USA, July, 2002.28. World Bank (1989), India-An Industrializing Economy inTransition, A World Bank Country Study, Oxford.29. World Bank (2000), India: Reducing Poverty, AcceleratingDevelopment, A World Bank Country Study, Oxford.30. World Bank. 1997. World Development Report 1997: TheState in a Changing World. Washington, D.C.THE INDIA ECONOMY REVIEW165

Reliving TheGreatIndianDreamAgenda For Inclusive Growth InUrban DevelopmentIndu Rayadurgam, Institute of South Asian Studies, Singapore166 THE IIPM THINK TANK

A N INCLUSIVE INTENTThe Indian Constitution has accorded the rights ofUrban Development to the respective states, andhas left the centre with only an advisory role. Thisexplains the lack of a national urban policy for India. Therefore,any reflections of the Central budget on Urban Developmentwill be indirect, since it is not constitutional for thepolicies to be imposed on the state or the respective localgovernments. The Central Government had introduced theJawaharlal Nehru National Urban Renewal Mission (JN-NURM) in 2005, a reform based process for India’s urbanareas, currently covering approximately 60 cities acrossIndia. This first quarter of 2008 is very appropriate to discussand peruse the reform measures and highlight the challengesfaced by the Central Government vis-à-vis urbanization. Thispaper evaluates the JNNRUM measures and argues that theconcept of inclusive growth can be addressed through themechanisms of inter- linkage in sectoral policy making andbudget allocation. Hence, the focus will be on the JNNURMcities and their current and future growth trajectory, analysingthe effectiveness of the JNNURM and the impact ofbudget on the reforms process.Any Indian Urban agglomeration will typically have twodifferent faces. One part of it will contain reasonable qualityinfrastructure, mostly buildings and other spaces, the otheraspect will be rundown buildings and shanty dwellings. Thelatter part of is mostly confined to relatively lesser portionsof population, though in cities like Mumbai, almost 50percent of the population live under insufficient infrastructuralconditions. 1 It has also been stated that urban developmentis a horizontal slice that cuts across almost all othersectors and is not a vertical sector by itself. 2 This means thatthe issues in any sector cannot be viewed in isolation. ForExample, India’s Energy Conservation policies and UrbanResidential and Transport sectors should be taken forwardtogether due to the immense energy savings potential inthese areas. This might have a direct geopolitical effect, ashigh standards of energy conservation might help in acquiringinternational recognition and better access to resources.But it is not within the scope of this paper to discuss thevarious sectoral inter-linkages. It would still be useful toremember this for further analysis.MethodologyThis paper will list out the JNNURM cities based on theregions, population and economic activity. This is in order toevaluate the selection process by the JNNURM based onthe regions, population and economic activity and incomegenerated by the respective cities. Regional groupings ofcities will reflect on the selection of cities based on the levelof urbanization in the region. Hence, it is an approach tocritically examine the criteria used by the Central Govern-THE INDIA ECONOMY REVIEW167

Reliving TheGreatIndianDreamincreased from US$ 1.13 billion in 2006-07 to US$ 1.23billion in FY 2007-08. Also, the Eleventh Plan allocated US$ 1.73 billion for infrastructure and water resources. Apartfrom JNNURM, the Rajiv Gandhi Drinking Water Missionhas been allotted US$ 1.44 billion for the financial year2007-08. In addition to this, the central budget also allotsseparate funds for Sanitation in various states and cities. 3With 23.6% of the urban population in the country beingbelow the poverty line and 14.1% living in slums, providingBasic Services to the Urban Poor (BSUP) is the objective ofthe second sub-mission under JNNURM. 4 The 12 th FinanceCommission recommends that atleast 50 percent of thegrants provided to the Urban Local Bodies be allocated forSolid Waste Management Schemes. It has also excluded thesix cities of Delhi, Mumbai, Kolkata, Chennai, Bangaloreand Hyderabad due to their capacity to generate revenuesfor this purpose. The Ministry of Urban Development andPoverty Alleviation announced a resource gap of Rs 76,896crore for all the states for 2005-10 for Urban Areas wrt civicservices. The ministry had requested the Twelfth FinanceCommission(TFC) to fund this deficit as grants-in-aid. 5Subsequently, the Twelfth Finance Commission recommendedthat population be assigned 40 percent weight forthe allocation of grants, followed by Geographical Area (10Table1: Urban Sector Investment RequirementUnder JNNURM (Rs. Crore)ment towards the selection of the JNNURM cities and alsoto determine the advantages and limitations of the same.Finally, the analysis will factor in the validity of selectionprocess of JNNURM cities and also evaluate their growthbased on economic activities.Central Budget And The JNNURMThe JNNURM was started as an offshoot to continue the74 th constitutional amendment introduced in the 1990s,which was aimed to strengthen the role of the local governmentbodies, mostly to improve Urban Infrastructure. The63 cities chosen by the Central Government were selectedbased on populations and the criteria of urban investmentRequirement of the cities(as outlined in Table 1). This canalso be referred to as the eligibility criteria for a JNNURMcity. The Centre's budgetary allocation to JNNURM hadCategoryNumberof CitiesInvestment Requirement(over7 years starting2005-06)AnnualFunds RequirementCities with 7 57143 8163.3over 4 millionpopulationCities with 28 57143 8163.31-4 millionpopulationSelected Cities28 6250 892.9with lessthan 1millionpopulationTotal 63 120536 17219.5Source: JNNURM Toolkit, Government of India,http://jnnurm.nic.in/toolkit/Overview. pdf, accessed on February 5, 2008168 THE IIPM THINK TANK

A N INCLUSIVE INTENTpercent), distance from the highest per capita income (20percent), index of deprivation (10 percent) and revenueeffort(20 percent). 6 The criterion for selection of the citiesfor participation in theJNNURM process has beenlisted out by Table 1. Thecities have been uniformlychosen from various regionsof India (Table 2). Also, afour city index to determinethe projected population growth of various cities in everycategory reveals that the rate of growth of population islikely to be the same for the data set. The mega cities ofTable 2 : Region Wise RepresentationOf JNNURM CitiesRegionNumber ofCitiesProportion ofCities to thestatesWest 9 3:1North and Central 32 1.6:1East 3 1.5:1South 11 2.75:1North East 7 1:1Source: Calculated based on the cities listed in the JNNURM websiteAccording to NIPFP, New Delhifive major cities in India wouldcontribute approximately 15percent to the National GDPMumbai, Delhi and Kolkata have been excluded from thesecalculations due to the variations in the current and projectedpopulations between the three cities and the sample dataset. But the problems ofinfrastructure and citydevelopment remain thesame for all the urban areas.In terms of city wiseperformances, in India onlythree variables, namely, theFDI per capita, GDP per capita and GDP growth ratebetween 1991 and 99 had some major differences betweenthe mega and the smaller cities. 7 But another significantvariable is the poverty ratio which is quite high in the megacities as compared to the medium and small urban areas.Studies conducted at the National Institute of PublicFinance and Policy (NIPFP) reveals that five major cities inIndia would contribute approximately 15 percent to theNational GDP. 8 But, at present, the contribution of India’surban sector to its gross domestic product (GDP) is in therange of 50-60 percent. By 2011, this share is expected toincrease to 65 percent. 9 But, the percentage of people belowthe poverty line is higher in India's cities than in the countryside,which puts a slightly different spin on the argument thatcities are engines of growth. 10 Contrary to this, 5 percent ofthe population living in the five biggest cities (together 54.49THE INDIA ECONOMY REVIEW169

Reliving TheGreatIndianDreamTable 3: Four City Index InVarious City CategoriesCategory A Population Four City Index2005 2015 2005 2015Ahmedabad 5120 6298Bangalore 6462 7939Hyderabad 6115 74200.4 0.4Chennai 6916 8280Category BPatna 2029 2578Faridabad 1298 1685Vadodara 1675 2077 0.5 0.5Nagpur 2350 2885Asansol 1257 1584Category CGuwhati 932 1174Bhubaneswar 790 1020Ranchi 989 1247 0.4 0.4Thiruvananthapuram 926 1118Inclusive Growth As A Key Development GoalThe concept paper on the Eleventh Five Year Plan "Towardsfaster and more inclusive growth" 12 reflects the need to makegrowth "more inclusive" in terms of benefits flowing throughmore employment and income to those sections of societywhich have been bypassed by higher rates of economicgrowth witnessed in recent years.Few models based on Spatial Economics and Productionnetworks discuss the optimal allocation of resources tovarious areas. The General Equilibrium Model enumeratesthe specialization of cities in order to achieve a balancedregional development. Further specialization will help tostreamline employment and consumer services to the marketin a more methodical approach. In India, the NationalCapital Region (NCR) comprising Delhi and the surroundingareas can be considered in this regard. Delhi’s income ispredominantly from Trade, Commerce and Services (25.31+27.83). There are 2.3 lakh retail enterprises offering employ-Note: Four Prominent cities in every category of JNNURMlisting was chosen for this calculation. The Four City Indexhas been calculated as P1/(P2+P3+P4), with P1…Pk representingpopulations in various cities. Selection of cities also based on dataavailability from the source database.Source: Calculated by the Author based on Population statisticsfor cities obtained from World Urbanization Prospects 2005,The UN Revision Population Database.million people) generates 15 percent of the Indian GDP.Similarly at the state level, only a handful of states are majorcontributors to the Economic Growth. Thus, the Indianeconomic growth is mostly driven by few clusters or regions.A snapshot of some of the prominent medium and smallerJNNURM cities reveal that in Nagpur, almost 40 percent ofpopulation are living in Slums and 50 percent of the totalpopulation was below the poverty line in 2005. Asansol, amajor industrial area in West Bengal with mining, trade andcommerce as major economic activities also has a substantialproportion of population in slums. In Jharkand state,32.91 percent of urban people are poor. In the city ofThiruvananthapuram, 16.16 percent of the populationsbelong to the poor sections. 11 Therefore, inclusive growthbetween regions is very important to ensure a balanced andsustainable urban future. The following section will evaluatethe performances of the cities under JNNURM and also thetype of ranking they enjoy under various studies.170 THE IIPM THINK TANK

A N INCLUSIVE INTENTment to 5.4 Lakh people. 13 In the Mumbai MetropolitanAgglomeration of economicactivities in the core regionsenables easier access toemployment and goodsRegion (MMR), the share of manufacturing sector employmenthas declined from 36% in 1980 to 28.5 percent in 1990.In the same period, the share of trade, finance and serviceshas increased from 52.1 percent to 64.3 percent. Similarly,the Southern cities of Hyderabad and Bangalore are establishingSoftware and Services as the priority sectors, whereasChennai is reflected asboth services and a manufacturingbase. Thesetrends indicate generalspecialization of cities,irrespective of the governmentpolicies or theavailability of natural resources and other endowments.Another trend of literature argues for Agglomeration ofeconomic activities in the core regions, thus enabling easieraccess to employment and goods.Any approach to inclusive growth, however perceived andimplemented has to contain two important strategies. One isto create sustainable growth through economic opportunitiesand the other aspect is the social inclusion and equalopportunities. But, at the national level, inclusive growth canbe viewed as the policy affiliation of the Central Governmenttowards its regions and the local governments. Datareveals that the government has chosen cities with representationfrom all regions of the country and with a reasonablysimilar population growth rates. Therefore, the importantaspect to be analysed here iswhether the current selectionprocess will hold good for asustainable future. In order toevaluate this, the followingsection will give an overviewof the current rankings andresearch done on cities and states based on infrastructure,growth and investment.FICCI- Ernst and Young Report in 2007 for the first timeranked cities based on the following indices: City ProsperityIndex, Urban Governance, Business Environment, Infrastructureand Quality of Life. It has concluded that elevenIndian cities apart from the top-8 are experiencing rapidTable 4: Ranking Of Indian CitiesCity/State Population FDI Per CapitaPer Capita InvestmentPoverty(%Population)InfrastructureIndexHuman DevelopmentIndexHyderabad 5.53 1875 21447 15.77 93.1 0.416Ahmadabad 4.52 4080 33875 14.07 121.8 0.479Surat 2.81 4080 33875 14.07 121.8 0.470Bangalore 5.69 4628 24775 20.44 94.3 0.478Mumbai 16.37 5780 17556 25.02 111.3 0.523Pune 3.75 5780 17556 25.02 111.3 0.523Chennai 6.42 3989 26292 21.12 138.9 0.531Calcutta 13.22 1237 7113 27.02 90.8 0.472Delhi 12.79 27423 47441 NA NA NAFaridabad 1.05 1940 9201 8.74 137.2 0.509Jaipur 2.32 589 6763 15.28 83.9 0.424Lucknow 2.27 311 3304 31.15 103.8 0.388Kanpur 2.69 311 3304 31.15 103.8 0.388Capital Bold In millionPeopleRs Rs Percent Index IndexYear 2001 2004 2005 2004 2004 2004Source: Meine Peter van Hijk14THE INDIA ECONOMY REVIEW171

Reliving TheGreatIndianDreamgrowth due to Information Technology, improving infrastructureand urban governance, knowledge industries and risingprosperity. The report has listed Surat, Ludhiana, Chandigarh,Nagpur, Vadodara, Vishakapatnam, Jaipur, Thiruvananthapuram,Kochi, Nashik and Indore as the rapidgrowth cities with reasonable infrastructure standards. Alsoresearch by Finance Commission and a few other academicscan be summarized in Table 4.Both the FICCI report and the above table have estimatedthat the Infrastructure Index of many cities is above 100,except the cities of Hyderabad, Bangalore, Calcutta andJaipur. In addition to this, the Central Finance Commissions,beginning from the 10 th finance commission, undertook thetask of constructing Infrastructure Index for states, in orderto determine an optimal allocation of taxes and excise duties.This index has been calculated based on varied criteria ofCommunications, Transport and Power. Based on thisranking, it is predominantly theSouthern and the Western Statesthat have found a place in thetop-10. Table 4 lists out theInfrastructure Index of specificcities. Few of the cities in Northand Central India like Faridabad,Lucknow, Kanpur are projected to have higher infrastructurefacilities. Hence, the differences in the state and thecity infrastructure could be solely based on the type ofeconomic activities and other characteristics of the city.Typically, it is the agricultural, manufacturing or the servicessectors, or a combination of the three that drives theseeconomies. Few cities like Chennai and Delhi have a strongmanufacturing base in the outer regions, combined withupcoming services industries in the core regions. Therefore,when calculating investment costs, it is important to considerthese two components: direct investment costs (primarily thecapital costs of urban services such as shelter, water, sanitation,electricity and social services etc) and the economiccosts off infrastructure and growth management. 15 Here, thedirect investment costs are the costs of creating new jobs andmaintenance of the same. The intra-urban infrastructurecosts are the costs of accommodating new population,maintenance and slum improvements. The infrastructuralinvestments will also depend on the type of economy a city isplanning to emulate.Cities like Asansol, Jamshedpur and Nagpur are establishedindustrial centers. Their main focus will be the manufacturinggrowth. Therefore, the plans and investmentrequirements will be tailor made to suit such objectives plusthe natural resource endowments. Also, the floating populationin urban areas highlights the importance of marginal costof adding another family/person to the city. The cost estimatescan be based on whether the current standards aremaintained or provision of lower standards for every additionalperson with the same investment estimate.With the vibrant growth of the Indian economy, differentregions/states are carving out a niche for themselves, be inmanufacturing, services or agriculture. Any sectoral initiativewill demand specific infrastructural capabilities. The maininfrastructural facilities necessary for any developing economycan be listed as Water, Solid waste Management, HinterlandConnections, Technology, Communication networks,Public transport, Logistics,energy policy andeffective governance. Thepriorities of every city willchange based on theirniche areas. Therefore,allocation of resources forurban development solely based on population and investmentrequirements might not have the desired impact in thelong run. Rather, the concept of inclusive growth in UrbanDevelopment should deal with the planning of economicactivities in cities and allocation of funds based on theircompetitive advantage. Therefore, the budget allocation forsuch reform measures needs to address the processes ofinter-linkages in policy making in urban areas. According tothe 12 th Finance Commission report, the demands andsuggestions forwarded by the states include rewards andgrants for implementing the 73 rd and 74 th amendments andother features, including the increase in tax structures. But nomention of economic activities carried out by the states or themunicipal corporations. The concept of reforms is to let themunicipal corporations function independently of the statesand the central governments, getting financial assistance onlyduring natural calamities etc.In conclusion, the JNNURM cities have been solelychosen based on populations and subsequent investmentrequirements of the cities. The selection process does justiceResource allocation solely basedupon population and investmentrequirements might not have thedesired impact in the long run172 THE IIPM THINK TANK

A N INCLUSIVE INTENTto the regional variations across the country, but they do nottarget any specific economic growth patterns. The megacitiesof Mumbai, Delhi and Kolkata are projected to havevery high population growth, and also poverty ratios, thusmaking labour very cheap in these urban centers. But thesecities are phasing out manufacturing growth and generateincomes through trade, commerce and services. Therefore,only an increase in the allocation of funds for the reformbased is important, but more significant should be thefactoring in of economic activities and the income generatingcapacity of the cities. The Eighth Five Year Plan justifiedthe allocation of Urban Development to the states as ‘theidentification of regional urban systems was suggested on thebasis of regional characteristics and the needs and functionsof each town in its regional context’. In this current contextof economic growth, this should be changed to regionaleconomic characteristics. Thus, a framework for involvingall cities under the JNNURM should cater the allocation offunds according to each cities economic advantage, ratherthan the ‘one rule fits all approach’. Such an approach wouldfacilitate the faster and sustained development of India’surban areas. Also, it would be important to stress on thesubsequent elevation of JNNURM to a performance basedmechanism. The raise in allocation for Urban RenewalReforms by the Union Budget is a positive step, but the hikehas to factor in the discussed issues to enter a path ofsustainable future.References• Harry W.Richardson, ‘The Cost of Urbanization: A FourCountry Comparison’, Economic Development andCultural Change, Vol 35, No.3, April 1987, pp 561-580,http://links.jstor.org/sici?sici=0013-0079%28198704%2935%3A3%3C561%3ATCOUAF%3E2.0.CO%3B2-F• Meine Pieter Van Dijk(2007), The Contribution of Cities toEconomic Development: An Explanation based on Chineseand Indian Cities, Inaugural Address at the Institute ofSocial Studies, The Hague, The Netherlands, www.iss.nl/content/download/7270/68923/file/vandijk.pdf• Nirmal Mohanty, Study on State Infrastructure, http://www.fincomindia.nic.in/12reports.htm• Approach to Spatial Planning for Improved Employment inUrban Centres (2007), Seminar by Italian Chamber ofCommerce and Industry and the South Indian Chamber ofCommerce and Industry• Finance Commission, the Ministry of Finance, Governmentof India,• http://www.fincomindia.nic.in/• JNNURM Toolkit, Government of India, http://jnnurm.nic.in/toolkit/Overview.pdf, accessed on February 5, 2008• World Urbanization Prospects, The 2005 Revision PopulationDatabase, esa.un.org/unup• India Brand Equity Foundation, www.ibef.orgEndNotes1Approach to Spatial Planning for Improved Employment inUrban Centres(2007), Seminar by Italian Chamber of Commerceand Industry and the South Indian Chamber ofCommerce and Industry2Harry W.Richardson, ‘The Cost of Urbanization: A FourCountry Comparison’, Economic Development and CulturalChange, Vol 35, No.3, April 1987, pp 561-580,http://links.jstor.org/sici?sici=0013-0079%28198704%2935%3A3%3C561%3ATCOUAF%3E2.0.CO%3B2-F3Data collected from previous budgets, Government of India4http://www.indiatogether.org/2006/jul/gov-jnnurm.htm5From the budget estimates of the Ministry of Urban Developmentand Poverty Alleviation, Government of India.6From the Finance Commission reports, Ministry of Finance,Government of India7Meine Pieter Van Dijk(2007), The Contribution of Cities toEconomic Development: An Explanation based on Chineseand Indian Cities, Inaugural Address at the Institute of SocialStudies, The Hague, The Netherlands, p228Ibid p229http://www.ibef.org/artdispview.aspx?in=75&art_id=16265&cat_id=788&page=210http://www.indiatogether.org/2007/dec/gov-urbanage.htm11Data collected from the City Development Reports and theMunicipal Corporations of the various cities.12Planning Commission, Government of India13Economic Survey of Delhi 2001-0214Ibid Meine Peter van Dijk15Harry W.Richardson, ‘The Cost of Urbanization: A FourCountry Comparison’, Economic Development and CulturalChange, Vol 35, No.3, April 1987, pp 561-580,http://links.jstor.org/sici?sici=0013-0079%28198704%2935%3A3%3C561%3ATCOUAF%3E2.0.CO%3B2-FTHE INDIA ECONOMY REVIEW173

Reliving TheGreatIndianDreamGreen The BudgetAnd Guard TheLeft OutS. P. Udayakumar"Our efforts and our commitment, while pursuing the goal ofhigh growth rates, should be to ensure that all people of ourcountry benefit from it. Our pledge will remain unfulfilled until,as Gandhiji had said - we have wiped every tear in every eye.”- President Pratibha Patil in the59 th Republic Day address, 2008Although the statistical estimate of poor Indiansvaries from 300 to 400 millions, the HindustanTimes reported on October 14, 2007 that a study bya government institute revealed that 77 percent of the Indianpopulation, i.e. some 836 million Indians, live on less thantwenty rupees a day. India’s National Commission forEnterprises in the Unorganized Sector reveals that 320million workers live on less than twenty rupees a day. Theabove-mentioned Hindustan Times article quoted a study onworld famine carried out by the International Food PolicyResearch Institute (IFPRI) according to which 40% ofunderweight children under the age of five live in India.Mumbai based DNA newspaper reported a government studyon September 17, 2007 that claimed 46 percent of Indianchildren were underweight. In Mumbai, a city of 14 millioninhabitants, where trading on the stock exchange reachedunprecedented heights in 2007, 40 percent of children areunderweight. According to the DNA, in spite of nine years ofsustained economic growth, famine has declined by only onepercent in India. 1The National Crime Records Bureau (NCRB) has recorded1,66,304 farmers’ suicides in a decade since 1997. Of thesesuicides, 78,737 occurred between 1997 and 2001 and 87,567farmers took their lives between 2002 and 2006. There were17,060 farmers’ suicides in 2006 alone across India. All thesemean that there has been one farmer’s suicide every 30minutes since 2002. 2 According to Forbes, which publishes anannual report on the world’s richest people, in 2006 Indiabecame the Asian country with the highest number ofbillionaires (36 billionaires with a cumulative fortune of 191billion US dollars, thus displacing Japan with its 24 billionairestogether worth some 64 billion US dollars). Of theworld’s richest people, Lakshmi Mittal ranks fifth. According174 THE IIPM THINK TANK

A N INCLUSIVE INTENTxxxx data for 1987 and 1996 hadshown a decline of over 30 % inthe patients seeking health care inpublic health instixxxxxxxto data provided in October 2007 by the popular financialpress, the Indian billionaire Mukesh Ambani had overtakenLakshmi Mittal and may be in a position to vie for the firstplace (currently held by the Mexican Carlos Slim) or thesecond place (currently held by Bill Gates) in the world’swealthiest line-up. 3 So what we see here is not just the all toofamiliar division of India into haves and have-nots but thesystematic perpetuation of ‘will-have’s and ‘will-not-have’s.However, the Finance Minister wants us to believe that wewould get rid of poverty “if not in my lifetime, in the lifetimeof my children.” Positing that knowledge and entrepreneurshipact as the key to success and progress these days, theFinance Minister points out that “60 per cent of the world’soutput of goods and services would come from …[China andIndia] by the year 2020.” 4 He does not explain how the poorand the marginalized in India would excel in knowledge andentrepreneurship, participate in the future production ofgoods and services and get rid of their poverty in the lifetimeTHE INDIA ECONOMY REVIEW175

Reliving TheGreatIndianDreamof his children. In all fairness, the union government hasopted for “faster and more inclusive growth” in the 11 th FiveYear plan period from 2007 to 2012. And one of the mostimportant tools to achieve this larger goal is planning theannual budget.But the tenets of Chidambaranomics are all well-known bynow. In fact, the singular goal of not just the union FinanceMinister but also most state finance ministers is to please alldifferent powerful sections of the society such as industrialists,big business houses, the salaried class and others mostlyat the cost of the poor. Although the economic foundations ofthe country are getting stronger and stronger, the poor tendto lag even further behind. The over all economic reformsthat seek to reduce the budget deficit and enhance fiscalrestraint end up reducing social expenditures and increasingthe prices of basic commodities and services. Presenting the2007-08 budget, the Finance Minister maintained that all newprograms in the budget 2007-08 were targeted towards the“aam aadmi”. He wondered at the customary post-Budgetpress conference: “What is there in it that is not for the aamAadmi? If I offer scholarships, social security and insuranceschemes, is it not for the aam aadmi? I don’t look at it as towhat is in it for you but for the national good.” 5 The point isthe interests of the “aam aadmi” and the “national good” arenot necessarily congruent. This ‘common man-national good’Non-communicable diseasessuch as cardiovascular diseases,diabetes, cancer, stroke and etc.accounted for 53% of all deaths(10,363,000) in 2005divergence has got mired in broader ideological confusiontoo. India has thus far shunned both the extremes of asocialist revolution and cut-throat capitalism to achieveeconomic salvation for Indians. Our studied methodology hasbeen planned economy and parallel markets with privateenterprises and public undertakings. Compromising ourvalues and principles such as living in harmony with Nature,appropriate technology, sustainable development and so forthand surrendering our global leadership to provide an alternativepath to development, we have opted to be ‘little Americans.’Even the hard core leftist party, the Communist Partyof India (Marxist), has acknowledged that it “knows fully wellthat in States where the Left is in government, they cannotbuild socialism but undertake some alternative policies withinthe capitalist system.” 6 Even the ‘Socialist’ tag inserted in thePreamble to the Constitution as per the 42 nd Amendment hascome to be challenged now.The capitalistic preceptsand practices favor the‘national good’ designed anddefended by the socioeconomic-politicalelites overthe ‘aam aadmi’ interests.For instance, India makespurchases worth over Rs.40,000 crore for its armedforces every year. We alsospend a considerable amounton national R&D andproduction of militaryhardware such as missilesand nuclear weapons. Theformer Indian PresidentAbdul Kalam justified theIndian missile program bysaying: “If you need develop-176 THE IIPM THINK TANK

A N INCLUSIVE INTENTment, the country should witnesspeace and peace is ensured bystrength. Missiles were developedto strengthen the country.” Whenquestioned about the need toinvest crore of rupees on themission to the Moon, he justified itby saying: “Certain uniquematerials are available on themoon, and these need to bestudied.” 8 If an ‘aam aadmi’ wereto look closely at the peacestrengtheningand moon-studyingprojects, s/he would know thetruth. Taking a dig at the inefficiencyand wastefulness of theDefence Research and DevelopmentOrganisation (DRDO),President Pratibha Patil chidedrecently that the time framerequired for development of technology, production andsubsequent induction of weapon systems into the armedforces needed to be compacted. 9 As if answering the President,DRDO officials argued that they had “funds, but notenough good scientists for several key projects.” 10 The‘national good’ expenditure is growing substantially with theoverall goal of achieving a superpower status with weapons ofmass destruction, permanent seat in the UN Security Counciland so forth. The economic forecasts also tend to be favorablefor such a development. For instance, the stockbrokerspredict that stocks in infrastructure and engineering, energy,financial services, healthcare and food might do well over thenext few years. Despite the rising crude prices and rupeeappreciation, foreign direct investment does not seem to slowdown. However, the US slowdown, the American presidentialelection, and the general elections in India in 2009 could offersome challenges. But nothing destabilizing is in the offing.However, what ‘aam aadmi’ wants is increased social spendingjust as Amartya Sen has prescribed. A quick overview ofsome of the policy pronouncements in education, health,housing and agriculture would point out the serious shortcomingsthat we face.The Prime Minister has described the 11 th Five Year Plan as“a National Education Plan” that would see a five-foldincrease in spending on education and establishing newCentral universities, IITs, IIMs, Indian Institutes of ScienceEducation and Research (IISERs) and Indian Institutes ofInformation Technology (IIIT). India already has some ninemillion science graduates, two million post-graduates and100,000 doctorates. But a World Bank study has estimatedthat only 10 to 25 percent of general college graduates aresuitable for employment. 11 The “quantum jump in scienceeducation and research” the Prime Minister talks about isonly going to result in producing more unemployable graduatesand resource wastage. We need to think about enhancingthe overall quality of education and not about creating moremediocre institutions. The Deputy Chairman of the PlanningCommission, Montek Singh Ahluwalia says that the governmentwould increase the Gross Domestic Product (GDP)allocation for health to two percent from the present oneIndia has some nine millionscience graduates, two millionpost-graduates and 100,000doctorates. But a mere 10-25% ofthem are employable in industryTHE INDIA ECONOMY REVIEW177

Reliving TheGreatIndianDreampercent in the 11 th Five Year Plan. With non-communicablediseases such as cardiovascular diseases, diabetes, cancer,stroke and chronic lung diseases accounting for 53 percent ofall deaths (10,363,000) in the country in 2005, 12 and communicablediseases such as chikun gunya and dengue fevercreating havoc all over the country, we need to put moremoney into prevention of diseases, better nutrition, and R&Din diseases, medicines and public health issues.Similarly, the union commerce minister argues that Indianeeds to build world class infrastructure and housing facilityto sustain nine percent growth in the 11 th Five Year Plan.According to him, “private sectorparticipation [in housing] is aimed atbringing technical and managerialexpertise in delivering good qualitymass housing projects” and hence thegovernment has to look at demands ofthe construction industry for a cut induties and taxes on building material. 13The housing shortage to be met duringthe 11 th Plan is 26.53 million units, butthe actual deficit would be even higherif the existing stock of poor qualitydwellings and the growing urbanization-drivendemand are taken intoconsideration. The new housing andhabitat policy suggests repealing landceiling acts, amending rent acts,relaxing building rules like the floorarea ratio and promoting integrated townships. 14 Preventingurban sprawl, promoting low-cost sustainable housing, andkeeping the prices of building materials under check shouldbe the urgent concerns. But the government’s preoccupationis with supporting the construction industry with tax cuts.While offering tax cuts to industries, the government toyswith the idea of taxing the farmers. The Associated Chambersof Commerce and Industry of India (ASSOCHAM) hasadvised the Finance Minister to bring agriculture into the taxnet as part of its pre-budget proposals. When small andmarginal farmers struggle to make ends meet, some 96percent of the farmers in India own less than two hectares ofland and most of the farmers are mired in debt by borrowingloans from non-institutional sources at exorbitant interestrates varying from 30 percent to 170 percent, it would befoolish to tax them and weaken them further. 15 So what wesee here in education, health, housing and agriculture ismisplaced notions, skewed priorities and wrong approaches.The former Finance Minister of the BJP government,Yashwant Sinha, has said that the Congress-led governmenthas missed many golden opportunities in the last four yearsto put India on a high growth path on a sustained basis.According to him, “somehow the trend will not only continuein this budget, but chances are that it will be accentuated.” 16The saffron brigade would have been even worse. Given theWestern euphoria over the ‘triumph’ of capitalism, anycriticism of "free trade" will only meet with ridicule orresistance. The mainstream economists may also rebut byasking if communism, or state control, or pastoral simplicityis the answer. But can the whole world have wasteful Westernmiddle class luxuries? Can the Earth sustain that? Is thewhole world dumb? Aren't there people who are wiseenough to foresee the impending doom of capitalistic freetrade and refuse to take part in this final annihilation of lifeon the Earth? There are people who refuse to buy intoconsumerism, hedonism, urbanization, westernization andlarge-scale destruction of the Earth. And there are alternativesto "free trade" of which “green economics” is just one.We need to green the budget and this greening effort shouldseek to build on the 3.5 percent growth in the farm sector.The farmers’ interests have to be safeguarded with actual178 THE IIPM THINK TANK

A N INCLUSIVE INTENTinput from the farmers themselves and not the globe-trotting,high-flying, English-speaking, fake farming experts. Weneed to safeguard and create more ‘green-collar’ jobs, i.e.manual labor jobs. These jobs are disappearing so fast inconstruction, manufacturing and service industries becauseof mechanization, automation and the absence of professionalsafeguards. Given the huge national population, highrate of rural unemployment, looming environmental problemssuch as climate change, we must perpetuate green-collarjobs with adequate organization, job security and betterwages for the workers. After all, perpetual production,consumption and servicing is neither possible nor good forthe environment and the Earth. All the environmental illsand health hazards that humanity faces today have resultedfrom that process. To persist with the same mistake would befoolhardy. The National Rural Employment Guarantee Act(NREGA) of 2005 that guarantees 100 days of employmentper household at minimum wage is a good step taken in thatright direction. As the Prime Minister urged the Indianbusinessmen to “think big” in order “to face the brave newworld of globalization,” 17 We could think big in some sectors.But we must think small and green in other sectors such asgenerating clean energy, building irrigation dams and soforth. Such small projects alone will bring about more localparticipation, autonomy and empowerment. These greendevelopment projects reduce corruption and wastagesubstantially and enhance the efficiency and endurance.We need to devise a green approach to policymaking andprogram implementation. The President of India threw achallenge in her recent Republic Day address: “The government… has several flagship programmes like Bharat Nirman,the National Rural Employment Guarantee Programme, theNational Rural Health Mission, the Jawaharlal Nehru NationalUrban Renewal Mission and the Sarva Siksha Abhiyan.These are designed to improve the lives of the people. Buttheir implementation remains a challenge. A question that weneed to ask is how effective are our delivery mechanisms andwhat are the weaknesses? We have to find the appropriateremedial answers.” The answer lies in involving the people indesigning the programs, delivering them, and delineating theresults. A green touch alone can help. We also need topromote green or grassroots organization. As President Patilhas pointed out in her Republic Day speech, “there is a lack ofawareness among beneficiaries about schemes meant for theirwelfare and development. This means that they are unable toavail of the benefits meant for them. This situation needs to berectified through awareness programmes. We need a band ofcommitted social workers and civil society members to spreadawareness and to share the onus of implementation by joininghands with the government.” Green-minded organizers andactivists can do that job effectively. So by greening the Budgetand our economic growth plans, we can guard those who havebeen left out.Endnotes1 Éric Toussaint, “China and India: Two Models?” Belgium:CADTM, 20082 P. Sainath, “17,060 farm suicides in one year,” The Hindu,January 31, 2008.3 Op Cit, Note 1.4 “Right policies will end poverty: Chidambaram,” The Hindu,February 4, 2008.5 “For aam aadmi, asserts FM,” Tribune News Service,February 28, 2007.6 “Karat defends Jyoti Baus’s remarks on capitalism,” TheHindu, January 8, 2008.7 “’Socialist’ tag in statute challenged,” The Hindu, January 9,2008.8 “Kalam defends Chandrayaan,” The Hindu, January 20,2008.9 “Pratibha: DRDO must keep deadlines in mind,” TheHindu, January 2, 2008.10 “DRDO has funds but not enough manpower,” The Hindu,January 5, 2008.11 “Oh, for quality education” (editorial), The Hindu, January9, 2008.12 “Health ill get 2 per cent allocation: Montek,” The Hindu,January 5, 2008.13 “India should perk up core sector: Nath,” Deccan Chronicle,January 8, 2008.14 “What affordable housing takes” (editorial), The Hindu,January 3, 2008.15 Ramadhar, “Move to bring farming into tax net ill-advised,”The Hindu, January 24, 2008.16 “Sinha warns of bad times,” The New Indian Express,January 17, 2008.17 “PM to India Inc: Think Big,” Deccan Chronicle, January14, 2008.THE INDIA ECONOMY REVIEW179

Reliving TheGreatIndianDreamUnion Budget 2008:For Once, Let Us Have A Budget For FarmersDevinder SharmaAgricultural Economist and Trade Policy Analyst, New DelhiGeneral elections are around the corner. It is thereforemore of a political compulsion than therequirements of a prudent fiscal policy that shouldhave automatically diverted public funds for the ailingagrarian sector. Unfortunately, the game plan all these yearshas been to ignore agriculture and instead pamper thebloated rich of big business to grow richer. No Budget iscomplete without the Finance Minister reminding thecountry, with possibly a catchy phrase thrown-in, the Herculeantask his budget will perform in addressing the agrariancrisis. After all, sixty percent of the population is still directlyengaged in farming. Mr.P Chidambaram is no exception. Heoften quotes a couplet from the writings of some of thebest-known poets, saints and thinkers of south India. That hasin fact been his only contribution to the farm sector.His predecessors were equally good with words. This author180 THE IIPM THINK TANK

A N INCLUSIVE INTENTremembers that, when Mr. Jaswant Singh presented theInterim Budget 2004-05 he spared no efforts to sing to theempty tunes. “In India, agriculture is not just an economicactivity; it is a way of life.” A year earlier, he had said thatagriculture is the life-blood of our economy. Two years beforehim, Yashwant Sinha had romanticized agriculture, sayingthat his Budget was aimed at ensuring freedom of the farmer-- “kisan ki azadi”. Despite all these efforts to rescue agriculture,the annual Budget has truly been a carnival for the richand beautiful. As the veteran economist Kamal Nayan Kabrareminds us: “ Indeed, the corporate income tax foregone bythe government is trivially less than the total amount spent byboth the central government and the twenty eight stategovernments on all rural development schemes.” Accordingly,in 2004-05 Rs. 2.06 lakh crore was the revenue loss fromthe numerous tax concessions, exemptions and incentives, thetotal excise, customs and personal income tax and corporateincome tax exemptions. In 2005-06, these exemptionsamounted to Rs. 2.35 lakh crore.For the debt-ridden farmers, and despite reports of farmerssuicides regularly pouring in from various parts of thecountry, the Finance Minister will gloat while announcingthat he has managed to meet the target of providing Rs.2.25lakh crore as farm credit in 2007-08. Ironically, this is lessthan the total revenue loss of Rs.2.35 lakh crore incurred ayear earlier from tax exemptions for India Inc. Isn’t it thereforestrange economics? What millions of farmers get issimple gratitude (and credit), whereas a few hundred richwalk away with almost an equal amount as direct income(money saved by way of tax exemptions is like money earned).I have often wondered as to how do the economist justifymore credit to farmers who are already reeling under theburden of non-repayment of credit. Well, everyone knowsthat farmers are committing suicide because they cannotrepay back the loans. Mounting indebtedness is the reasonbehind the death toll on the farm. Why can’t the FinanceMinister make an honest effort to pull these farmers from thecredit trap? Why can’t the Finance Minister actually providefarmers with more steady and assured monthly income? Afterall, like all of us what the farmers too needs is a monthlytake-home income package.The first step that needs to be taken is to write-off theoutstanding dues of small and marginal farmers owing lessthan five acres of land in irrigated areas and 20 acres inThe revenue loss from total taxexemptions and concessionsamounted to Rs.2.35 lakh croreun-irrigated regions. There is already a talk of writing-off Rs.65,000-crore, including Rs.25,000-crore, which the nationalisedbanks fear would be the non-performing asset. Theaccumulating losses that the farm sector has been incurringyear after year are much higher than this amount. Such baddebts need to be immediately struck off so as to provide a newlease of life to the debt-ridden farmer. In fact, the UPAgovernment should have done this soon after it came intopower in May 2004. At the same time, lowering the interestrate for farm loans to four percent across board is alsorequired. In China, the interest rate for credit to smallfarmers has been abolished. Along with this, what is moreimportant and does not require any fiscal outlay is the need toabolish the draconian law that was enacted during the BritishRaj. Between 1904 and 1912, the British had framed PublicDemand Recovery Act, under which farmers could be jailedfor defaulting the State for a paltry sum. So much so that eventhe jail expenses were to be borne by the farmers. The bankshave very cleverly used the same provisions for debt recoveryin case of Indian agricultural system.Striking out the bad debt needs to be accompanied by aradical farm policy that guarantees against making this arecurring exercise. Unless the government ensures that theNational Food Security Mission and the Rs.25,000-crore fundit has set aside for agriculture as per the recommendation ofthe National Development Council are diverted to a nationwideLow External Input Sustainable Agriculture (LEISA)programme, the cycle of mounting indebtedness and thenwriting-off loans will not end. Replacing the current system offertiliser subsidy wherein the government reimburses theindustry for production expenses can make a beginning.Fertiliser subsidy, which is expected to touch Rs.50,000-crorein near future, should in future be provided directly tofarmers. What is acting as a roadblock for implementing thisrecommendation is the lack of political consensus. Moreover,instead of hankering over subsidising balanced use of nutrientsand micronutrients, farmers should be encouraged toTHE INDIA ECONOMY REVIEW181

Reliving TheGreatIndianDreamutilise this subsidy for shifting to organic means of production.Such an initiative will drastically reduce the cost ofproduction, rejuvenate the soils, provide income to farmersSuccessive Budget proposals haveonly helped the corporate takeoverof Indian agricultureand also reduce the emission of greenhouse gases.However, on the contrary successive Budget proposals haveessentially been geared at laying out the infrastructure forcorporate takeover of Indian agriculture. The idea being toprovide support for the Indo-American Knowledge Initiativeon Agricultural Research and Education that sets the agendafor collaborative farm research and development is beingdesigned to bring in the multinational corporations. Two of theglobal giants – Wal-Mart and Monsanto – are on the board ofthe collaborative initiative thereby making it clear that thegovernment is actually trying to introduce the American farmmodel into the country. Privatization of mandis, opening offood retail trade to foreign direct investment andpushing aggressively the highly controversial ‘contractfarming’ is part of the agricultural reforms beingundertaken. Budget support to the States undertakingsuch reforms has already been spelled out. Let memake it very clear. Such measures have failed toresurrect sustainable farming and have failed to stopthe spate of farmer’s suicides. Isn’t it enough of anindication that the reforms being spelled out is not forthe benefit of farmers but for the agribusiness industry?As long as the government goes on providing Budgetsupport for such programmes, the accumulation of croploans, growing farm indebtedness, and the striking offof outstanding loans will become a regular feature ofthe budgetary exercise. Regarding the farm incomes, Iam aware that the government actually wants to doaway with the procurement prices. If you read theBudget 2005-06 in conjecture with the EconomicSurvey 2005-06 it becomes obvious. Strengthening theexisting apprehensions, the Economic Survey categoricallyasked for dismantling the Minimum Support Price(MSP) for farmers and the procurement based systemof food subsidy. In other words, the Congress-led UPACoalition now appears all set to remove the two major planksof India’s ‘famine-avoidance’ strategy that enabled the countryto assiduously build food self-sufficiency over the years.The Agriculture Produce Marketing (APMC) Act amendmentallowing the private companies to make direct purchasefrom the farmers is actually a medium term initiative to phaseout the procurement prices in the long run. Unfortunately, thisis coming at a time when the farm incomes are falling drastically.Bulks of Indian farmers are somehow surviving aroundthe poverty line, with a significant proportion living below thepoverty line. It is high time the government starts contemplatinga process to provide direct income support to farmers.There is no other remedy for the bleeding farm sector. We allknow that the most crucial aspect in budgeting is politicalcourage. If the government can muster political courage inproviding tax exemptions to the rich and powerful to the tuneof Rs.2.35 lakh crore a year, there is no reason why it cannotdivert this money towards the more pressing needs of monthlyfarm income Any government, which musters courage, to do sowill not be faced with the recurring incumbency factor ingeneral elections.182 THE IIPM THINK TANK

B & E A W A R D S S P E C I A L2 1 f e b 2 0 0 8only Rs. 10i n d i a ’ s mos t in fluen ti a l b usines s andec onomyma ga z i n eIndia’s No. 1Business &EconomyMagazineNANOMETTLEHe’s suave, smart and decisive.And he’s the financial brain behindthe numerous takeovers that hisfather, L. N. Mittal, is known for.At 31, he’s the best in the YoungCorporate Turks categoryAN EXCLUSIVE INTERVIEWWITH ADITYA MITTALALSO EXCLUSIVE INTERACTIONS WITHUB GROUPVIJAYMALLYAGOOGLE INDIASHAILESHRAOHDFCRENUKARNADUNION MINISTERPRAFULPATELGUJARAT CMNARENDRAMODI

Reliving TheGreatIndianDreamA Level Playing FieldFor The Small FarmerM RajivlochanPanjab University, Chandigarh184 THE IIPM THINK TANK

A N INCLUSIVE INTENTIntroductionReportage on the current crisis in agriculture and the epidemicof farmer suicides tends to portray Indian farming as anunviable economic proposition and the Indian farmer as anobject of pity who needs various crutches to keep him alive.Among the various ameliorative measures being discussed is aproposal to write off farm loans amounting to Rs. 70,000 crore.The Indian peasant even when working in adverse conditionsmanages to pay off his loans 90% of the time. The data availablewith the Indian government shows that this is very far fromthe truth. Figures from the NABARD show that of the grossadvances extended to agriculture in the year ending March2003, 89.5% were returned and 10.5% were NPAs while it wasthe small scale industry sector which showedNPAs of the order of 19.2%.At the sametime, the figures regarding agrarian distressand farmers suicides are very real. And thephenomenon of farmer suicides is nowreported not just from Maharashtra,Andhra Pradesh, Karnataka and Punjab butalso from Bundelkhand in Uttar Pradesh. Such distress is anindicator of the falling incomes in the farm sector. If the Indianpeasant still manages to return his loans most of the time, it is atribute to his resilience and hardiness and a traditional belief,perhaps rooted in Indian culture, that a loan once taken needsto be repaid. Those to the left of the spectrum have heldglobalisation of the market and removal of protective tariffsresponsible for the present situation. We presume that globalisationis a process that cannot now be turned back, nor even isthere a need to do so. However, we submit that integration withthe world market would improve the Indian farmer’s incomeonly if government agencies make a comprehensive effort toenhance his productivity, lower his production costs, improvequality and improve access to the market. After all it wasprecisely such an effort that resulted in the gains of the GreenRevolution four decades ago. A similar effort needs to be madetoday. There is only one problem: that the majority opinion inthe government seems to be that the industry and service sectorled model of development would produce far more profits thanan agenda led by farm based growth and agri business. But towrite off the farmer in this manner fails to take any account ofthe millions of farmers in this country. With our population andoccupation profile, for us to ignore the farmer as incapable ofproducing profit is a self-defeating exercise which can only putbrakes on economic growth and increase misery. In this paperwe argue that it is time to rethink our growth strategies and tore-look at Indian farming sector not as a drain upon theeconomy but as a potential driver of economic growth, providedthat we stop paying lip service to our farmers and provide themwith real time and tangible support.Much attention has been devoted to the causes of thesuicides. The reasons attributed range from non-availability ofaffordable credit, to poor quality of agriculture inputs tounremunerative farm prices. We suggest that this endless searchfor causation is a red herring which diverts attention from thevery real issue of addressing the distress adequately. Whateverthe reasons in the specific cases, one thing that remains clear isThree fourths of farmers are dependent uponother farmers and private salesmen for theirknowledge about modern inputs & practicesthat the Indian farmer is unable, in the present institutional setup of agriculture, to earn enough to meet his sustenance needs.For this situation, before looking for a foreign hand, we need toset our own house in order. The reasons for low productivityand poor market access are not hard to find: lack of supportservices by way of agriculture extension, pathetic marketinginfrastructure, poor quality of seeds and other agricultureinputs. Since the 1990s, agriculture extension has more or lessceased to exist in most states. A number of surveys show thatthree fourths of Indian farmers are dependent upon otherfarmers and private salesmen for their knowledge aboutmodern inputs. Absence of support services in respect ofimproved farm technology, health care, marketing for farmproduce in combination with lack of any security net create alife-threatening situation for them. So far the solutions thathave been suggested have been so comprehensive that one hasa sneaking suspicion that those who propound them are onlypaying lip service to the farmer in distress. Those to the left ofthe spectrum insist that the only solution lies in turning back theclock on globalisation and returning to protectionism, those onthe right insist that the small farm is no longer a viable propositionand that these small holders need to be shifted to urbanoccupations so that the business of farming can be conducted bylarge corporations which are better suited to the task. WhatTHE INDIA ECONOMY REVIEW185

Reliving TheGreatIndianDreamwill happen to the small farmer in the interim is anybody’sguess. The one lacuna in all these attempts, well meaning andotherwise, is a failure to factor in the present institutionalstructure of Indian agriculture, its strengths and weaknesses.What the management gurus call as SWOT analysis is what wesuggest as a much needed exercise for Indian planners. Yet, themore our policy makers discuss the processes of economic liberalizationand of integration with the world economy the morethey identify the small land holdings as a major weakness. Thepresumed solution following from such beliefs focuses onincreasing the size of land holdings by shifting those withpresumably unviable holdings to non-farm occupations.Given that for India, the processes of economic liberalizationand of integration with the world economy by now seem inevitable,is it possible that an appropriate solution might lie in thatold hat formula from management schools that suggests thatwhen in grave trouble try to convert your perceived weaknessesinto your strength. In this paper we suggest that to be the case,especially, we suggest, the time has come to think out of thebox, as it were, and make use of our extremely large mass ofsmall and marginal farmers to rejuvenate our agriculture. If forA mere 8% of the farmers across the countrywere aware of WTO and a only 29% wereaware of the Minimum Support Pricethat it is important that we re-tool the skills of these farmers tocope with the changing circumstances then that is an optionthat we as a society and our government will simply have to takesince there is no other viable and humane alternative.Over 114 million of India’s 127 million farmers operate smallfarms. On each of them some five persons, (their immediatefamily) are dependent. That is some 635 million people.Howsoever much as our planners might want it would beimpossible to relocate them to some industrial gulag. Themajority of these farmers practise dryland farming. Many ofthese farmers have some skills in agriculture but not enough toenable them to move away from the production of low valuecereals and pulses to market gardening and other high valueagri-products. There are two constraints here, one, that mostfarmers have little access to improved farm technology andknowledge services. Two, that there are virtually no infrastructurefacilities available for storing perishable commodities. Arough estimate suggests that almost 40% of all such produce inIndia – including foodgrain-- simply perishes before it gets outof the hand of the farmer and there is further loss before itreaches the end market.Need For Knowledge ManagementFarming we need to remember, was the first industry in theworld. Over the years it has evolved continuously in terms oftechnology such that today, being a successful farmer means bydefinition considerable knowledge of “sunrise” crops, seedvarieties, crop rotation cycles and appropriate farming techniques.Farming requires as much skill as any industrial enterprisebut the small farmer of today is not necessarily in theprofession of his ancestors. Over the years there has been ahuge change in the composition of the farming community withmany of those belonging to the ranks of the balutedars or oflandless labour or pastoralists moving into farming for lack ofalternative occupations. These new entrants into farming areseverely handicapped by their lack of adequate knowledge. Inthese days of the internet, the urban consumer takes availabilityof information for granted. He certainlydoes not depend on the government toprovide him with information. The television,the newspapers and magazines, all goout of their way to educate the city dwelleron various things that are pertinent to urbanliving. There is no such source of informationfor the farmer. The 59 th round of the NSSO survey says thatthe farmer is mostly dependent on informal and unreliablesources of information for getting knowledge about farmingoperations. Only 18% of the farmers across the country wereaware of things like bio-fertilisers; only 8% were aware ofWTO, only 29% were aware of the Minimum Support Price,only 5% were members of self-help groups, 71% did not belongto any cooperative. No wonder we find that the farmer oftengets seduced into buying a faulty product by companies thatwish to make a quick profit and that his ability to make a quickbuck in the market place is so limited. After all, one’s ability tomake use of opportunities would be substantially dependent onthe quality of knowledge with which one works.While knowledge of modern techniques is important forproducing high quality farm produce, it is even more importantfor obtaining a good price for the produce. Produce that is186 THE IIPM THINK TANK

A N INCLUSIVE INTENTproperly dried, graded and packed would get a much betterprice but information on such parameters of quality is rarelyavailable either with sellers or even with buyers. A study onmarkets in the four states of Orissa, Maharashtra, Tamil Naduand Uttar Pradesh says that “the current value chain fornon-staple crops in India provides a basic service, focusing onquantity rather than quality.” The absence of any externalcertification agencies is a basic problem in the Indian agricultureset up. Absence of certification and poor documentationfor agri-products automatically limits farmer access to internationalmarkets. The point is not to fight the protocols forproduction of agri-products being established by agencies suchas the EUREP [Euro-Retailer Produce Working Group(EUREP), a working group of the major European retailerswhich has developed a framework for Good AgriculturalPractice (GAP)] but to coach Indian farmers into knowingabout these and upgrading production standards.Capital And Infrastructural NeedsAll the above is linked to the poor state of markets in Indiatoday. Basic infrastructure facilities such as telephone, internetconnections, electronic rather than mechanical scales, storagefacilities are missing in the majority of Indian markets. This inturn means that farmers often get cheated, that they are unableto obtain better prices in the absence of relevant information.Inviting private investors to build better market infrastructurewould certainly help to improve the existing situation.Contrary to what many of the doomsayers propound, theentrance of the MNCs might help the farmer. Minimally thesecompanies would lessen the stranglehold which a large varietyof middlemen have on the agriculture marketing system inIndia at present. At the same time, unless we can equip thefarmer with the knowledge inputs he needs to benefit from aglobalized market, there is little prospect that such globalisationwould lead to a significant improvement in his economic status.Involvement of private capital in infrastructure development,whether it is storages, market yards, roads, agri-processing isboth possible and desirable. But the use of such agencies forlarge-scale contract farming in the hope that these agencies willthen make the necessary effort to upgrade the skills of thefarmer and thereby obviate the need for public investment inextension and research is likely to produce a cure worse thanthe disease. The very quality that guarantees the efficiency ofbusiness, the need to make a profit, also means that duesafeguards against cupidity need to be put in place. The massivemisuse of fertilisers, pesticides and sundry other agriculturalinputs in large parts of the country should be sufficient to alertus to the dangers of unregulated private enterprise. The misuseof these chemicals is only partly due to the ignorance of thefarmer; a significant part of the blame also lies in the marketingnetworks of fertiliser, pesticide and seed companies whichpatently misguide the farmer into over using these inputs to theextent that they become a bane rather than a boon. In thepresent case, all that the government really needs to do by wayof safeguard is to provide the farmer with agriculture extensionservices, improved marketing infrastructure and better healthservices. Globalisation is by no means coterminous withprivatisation of all these. Rather privatisation of these serviceswould ensure that the farmer remains in no position to profitfrom global economic processes. Selling off a loss making PSUor privatising the scavenging services of a municipal corporationis a very different proposition from privatising extensionand health services in rural areas. Many of the votaries ofprivatisation seem blind to the fact that private providers areable to provide mild satisfaction in urban communities mainlyon account of the readiness of the urban consumer to demandvalue for money and also the availability of a number of optionsto choose from. Farmers do not have such luxuries. The greathesitation of private banks and telephone companies to haverural customers is an important pointer. The government hasnever been able to enforce the so-called Universal ServiceObligation (USO) on anyone. The consistent reluctance ofqualified doctors, teachers, engineers and other professionals toserve in rural areas merely reinforces a point that is consistentlyignored. A model based on complete privatization of servicesTHE INDIA ECONOMY REVIEW187

Reliving TheGreatIndianDreammight work in a Western country with a high literacy rate and aworking legal system. However given that the majority of ourpopulation is dependent on agriculture, that literacy levels arelow and that the legal system is dysfunctional for all practicalpurposes means that we need to look at adequate safeguardsfar more seriously than we do at present. Our legal system is soweak that a complete dependence on private capital may wellmean a mere change of masters from the trader to say a privatecompany like the ITC or Reliance. In the European Union(EU) as also the USA, constant competition prevents theemergence of market monopolies and the legal system is themain bulwark for helping that competition. Behemoths likeStandard Oil in the past and Microsoft Corporation today havehad to restructure as a result of legal verdicts in Anti-Trustlitigation. A similar scenario in India is well nigh unthinkablefor the next few decades.A Practical SolutionUnder such circumstances what can be done? In order toensure that growers get some benefits from integration with theworld economy, we need to ensure that they get some part ofthe value chain or at least an option on it, without selling all of itoff to the multinational and then hope that it will show a littlegoodness of heart and pass on some benefits to the farmer.Such a belief in the milk of human kindness is unrealistic to saythe least. Any practicable solution needs to take account of allthe above and also to ensure due community participation andownership so that expenditure is dictated by local needs and notby a few centralised schemes, packages and/or ideas. Thefollowing measures would take care of the most pressing needsof farmers today:1. Provide knowledge inputs through an agriculture extensionworker, perhaps one for every 2,500 farmers, with the workerbeing located at the headquarters of the group gram panchayat.He would be paid by the village panchayats for whomhe works while the funds for this would be reimbursed by theGovernment. Some provision of this variety already exists inmany of the schemes/interventions of the Ministry of RuralDevelopment and the Ministry of Agriculture. It only needsto be extended to all panchayats.2. Provide health inputs through a nurse or paramedical staff,in a ratio of one for about 500 population. Currently thenurse to population ratio in rural areas in India is about1:2198 which is about seventeen times lower than the USnurse to population ratio of about 1:129. Even if the Indianratio were to be increased to 1:500, this would still be aboutone third of what obtains today in most developed countries.The National Rural Health Mission (NRHM) provides amuch needed emphasis in preventive health care but doesnot address the issue of curative health. Curative healthservices by the government are so skeletal that the majorityof expenditure on health is today in the private sector. Wealso need to remember that health indebtedness is one of themajor reasons for farmers’ suicide. We submit that without188 THE IIPM THINK TANK

A N INCLUSIVE INTENTgoing into any elaborate schemes for health insurance, themere presence of diagnostic services at village level canindeed make a tremendous difference.3. Make these functionaries directly accountable to and paid bythe local panchayats, the government merely being a fundingagency. The principle of subsidiarity which states thatfunctions should be handled at the lowest level possible,needs to be followed.4. Use information and communication technology tools tostrengthen these knowledge and health services and tofacilitate access to market information for farmers. Acombination of newspapers, radio, television, telephoneand the internet could be used. The only word of cautionneeded is about avoiding a one-size-fits-all solution. Forstates with good infrastructure and resources, internetkiosks may be a viable option but states like MadhyaEven if 90% of farmers were to be given asubsidy of Rs.5000 per hectare, it would stillbe less than 10% of agricultural GDPPradesh faced a major revenue generation problem with themodel of a Common Service Centre / internet kiosk. Howto provide this information to the farmer should take intoaccount specific local conditions instead of the details beingdictated by some centralised norm.5. Ensure a free, competitive marketing system instead of thepresent system that is heavily weighted in favour of themerchants. Provide e-markets and electronic auction hallswhich are connected to the national/international marketplacein each district for the sale of farm produce. The useof such marketplaces would considerably improve prices forproduce; they would also improve traceability, taggingsystems which are so important for supply chain management.Another option could be to set up such modernmarket places in select urban centres and to connect thesewith collection centres in each district.6. Allow the creation of storage, grading and product handlingfacilities thereby ensuring that the percentage of produceutilised increases. This would mean more investment inwarehousing and better transport facilities.7. Provide direct cash subsidies to farmers to replace thepresent system of offering subsidy to companies (whetherfertiliser, electricity or irrigation companies) in the name ofthe farmers. This would imply allowing the farmer to takehis own decision about how to use the subsidy rather thanthe government taking the decision for him. If all farmerswith a landholding of up to ten acres (which means over90% of all farmers in India) were to be given a subsidy ofabout Rs.5,000 per hectare, it would constitute a tidy socialsecurity net. This would still be less than 10% of Indianagricultural GDP.ConclusionSmall farms, if provided the requisite knowledge inputs, couldwell be the key to an economic upturn in the fortunes offarmers. Much however would depend on the availability ofthese inputs and on the willingness of the government toprovide these. Given the present institutionalconstraints, policy makers in Indianeed to look at concrete options to enablesmallholders to survive not only with dignitybut as constructive units in the economy. Allfield experience shows that it is entirelypossible to increase productivity of smallfarms, provided that due policy support is available. Thisprovison is a crucial one. It also reflects a basic difference in theunderlying assumptions of the strategies proposed. The presentstrategy which focuses on big business, the private sector andcontract farming as a solution to the knowledge gap and settingup of big irrigation projects by government as a solution to theinfrastructure gap, sees the farmer as a foot soldier who canhave no resources or initiative. All resources are to be providedby big brothers, whether in the government or outside. Thealternative solution suggests that all we really need to do is toempower the farmer by providing knowledge and health inputsand enable him to find his own solution meansm, giving up thebig brother role. This is something the government will have todo. We hear much discussion about the need to have a levelplaying field for the private companies. Perhaps it is about timethat we provided a level playing field for our farmers too.The author has long experience in the field of rural developmentand community empowerment and his latest book“FARMERS SUICIDE: FACTS AND POSSIBLE POLICYINTERVENTIONS”, is published by Yashwantrao ChavanAcademy of Development Administration (YASHADA), Pune.THE INDIA ECONOMY REVIEW189

Reliving TheGreatIndianDreamNeed To Take A Re-look AtCentral Non-Merit SubsidiesPradeep.S. Mehta & V.V. Singh,CUTS International, Jaipur“We need to address the problem of mounting subsidies infood, fertilizers and now, in petroleum which is a recentphenomenon. Over one lakh crore rupees are going to bespent this year alone on these three items. I would like mycabinet colleagues and the Planning Commission to reflecton what these mean for our development options and whatdevelopment options these subsidies are shutting out. Dothey mean fewer schools, fewer hospitals, fewer scholarships,slower public investment in agriculture and poorerinfrastructure? It is important that we restructure subsidiesso that only the really needy and the poor benefit from themand all leakages are plugged”.Prime Minister Dr. Manmohan Singh at the full PlanningCommission meeting, November 2007These words are indicative of the serious concern of ourPrime Minister about subsidies acting as a hurdle to thedevelopment of infrastructure. The government (bothCentral and State) provides private goods and services inaddition to public goods. Subsidies arise when the cost ofproviding private goods and services exceeds the pricerecovered from the users of these goods and services. Thussubsidies are the unrecovered costs of publicly providedprivate goods and services Subsidies have a tendency to selfperpetuate and create political vested interests. By divertingeconomic resources away from areas (like infrastructure)where their marginal productivity would have been higherto lower productivity areas, subsidies result in inefficientresource allocation and unintended economic effects. Inaddition to this, non-merit (generalised and less justifiable)subsidies waste resources and provide greater benefit to thebetter off people. The Subsidies Report of 2003 1 categorisedsubsidies in terms of their desirability as follows:Merit I: These subsidies are characterized by a greaterexcess of social benefit over personal benefit than thatprovided by Merit II subsidies. These include subsidiespertaining to elementary education, primary health care, preventionand control of diseases, social welfare and nutrition,soil and water conservation, ecology, and environment.Merit II: Examples of these subsidies are those relating tonon-elementary education urban development, small andcottage industry, roads and bridges etc.Non Merit: These subsidies do not provide any socialbenefit over and above personal benefit. Examples of theseare, irrigation, electricity, industry, transport subsidies.It is the last group of subsidies which are the focus of thispaper as these subsidies provide benefits to consumers whogenerally do not need them. Therefore, these subsidies canbe classified as inefficient expenditure. Subsidies claim asignificant portion of resources, but remain hidden as only asmall portion of them is explicitly shown in the budgetdocument. In addition to subsidised charges for variousservices hidden subsidies also include bonds issued by thegovernment to Food Corporation of India, fertilizer companies,Oil Marketing Companies etc. The estimated off budgetliability of the government is around two percent of GDP.The soft budget syndrome and the need to adhere to theFRBM Act have resulted in the postponement of the paymentof food, fertiliser and petroleum subsidies even thoughthey have accumulated. The total subsidy burden in the year2007-08 is expected to be one lakh crore rupees out of whichalmost half is going to be off budget. The government cantake credit for containing the fiscal deficit but in the long run190 THE IIPM THINK TANK

A N INCLUSIVE INTENTxxxx data for 1987 and 1996 had shown a decline of over 30 % in thepatients seeking hf over 30 % in thad jkjfkljfklsjlkffjsdlkxxxxxxxTHE INDIA ECONOMY REVIEW191

Reliving TheGreatIndianDreamsuch accumulation may be counter productive.Justification For Providing SubsidiesIn India we find subsidy support for various goods andservices like food, fertiliser, petroleum, energy, irrigation,education, drinking water etc. The simple justification forsuch support is that the cost of providing these goods andservices is so high that the common man cannot afford them.Politicians who oppose a cut in subsidies always argue that ina welfare state the maximization of aggregate consumerwelfare is facilitated through the subsidization of goods andservices which benefit the poor. But unfortunately, themajority of subsidy benefits go to the rich and non-deservinginstead of the poor. In addition to this, subsidies in agricultureare also supported on the grounds that Indian productsout of subsidies but the results are not encouraging. Theissues related to these sectors are discussed below:Food SubsidyFood subsidy has been a highly sensitive issue and thereforereducing or removing it constitutes a tough challenge for anygovernment. There are distortions and inefficiencies in thedelivery of food which lead to huge subsidy bills withoutbenefits reaching the target beneficiaries. Food subsidies(only budgeted) have gone up from Rs.9,100 crores in1998-99 to Rs.24,204 crores in 2006-07 and Rs.25,696 croresin 2007-08 (almost half of the total budgeted subsidy) 2 .Food subsidies fall in two classes: production subsidieswhich relate to minimum support pricing (MSP) and consumptionsubsidies which are provided through the publicFood subsidies have increased from Rs.9,100 crores in 98-99 toRs.25,696 crores in 07-08, almost half of the total budgeted subsidyneed to compete in the international market with the heavilysubsidized products from US and EU.It cannot be argued that subsidization of goods andservices is necessary for the maximization of social welfareand for providing an impetus to economic growth. Disadvantagedpeople, areas and sectors certainly need governmentsupport and subsidies, which has some economic justification.Thus, we cannot do away with subsidies altogether in awelfare state like India. What is worrying is that their sharein government expenditure has been increasing over time.Even when the original reason for putting a subsidy in placeno longer exists the government simply does not have thecourage to remove/reduce it for fear of losing politicalsupport. It is essential to select products to be subsidisedwith caution. Subsidies should also be time bound andreviewed periodically. Instead of trying to subsidize themajority of the population which leads to a thin spread oflimited resources a better targeting of subsidies is importantto ensure that benefits reach the really needy and resourcesare available for essential services such as universal primaryeducation, rural health, water and sanitation. In India muchof the subsidy expenditure is on food, fertiliser and petroleumproducts. Various initiatives have been taken torationalise subsidies in these sectors including the phasingdistribution system (PDS) for foodgrains. Given that theburden of these subsidies on the exchequer has been increasingit might be advisable to try and achieve the welfareobjectives of these subsidies by an alternative route – thatprovided by the introduction of competition in agriculturalmarkets. Presently the food subsidy policy uses MSP-PDSoperations to serve the conflicting objectives of ensuringremunerative price to farmers and providing foodgrains tothe poor at affordable prices. This entails a huge gap betweenthe purchase price and the issue price, and consequentlya very large subsidy burden. In the future this burdenmight rise as a rising MSP is not going to be accompanied byan increase in the issue price in the same proportion. Procurementof foodgrains was introduced with the objectives ofmaintaining a buffer stock against price fluctuations andmeeting the requirements of PDS. In the globalised worldwhere required quantities of foodgrains can be arranged atshort notice, keeping a huge buffer stock is not an efficientsolution. This is where the government could use competitioni.e. government can procure foodgrains on the basis ofcompetitive bidding, and thereby maximise the value formoney. In this manner it can reduce the budgetary burdencaused by food subsidies. The PDS is also almost out of reachof the poor as it suffers from considerable leakage and192 THE IIPM THINK TANK

A N INCLUSIVE INTENTmanagement inefficiencies such as poorforecasting capabilities, outdated storagefacilities, cost inefficiencies, poor quality offoodgrains, harassment of customers,corruption and poor rural coverage. Thus,benefits derived by the poor are negligible.Moreover, administrative efficiency is sopoor that the administrative costs amount toalmost 85 percent of the total expenditure. Toimprove the inefficient system of delivery offood grains to the poor and thereby reducethe government’s budgetary burden foodvouchers/stamps can be employed. Suchvouchers/stamps can be issued to Below thePoverty Line (BPL) families through thePanchayati Raj system/local governmentbodies for use in the open market. This wouldalso improve consumer choice.Support pricing as it exists today is bereftof utility to the nation as it not only imposes aheavy burden on the exchequer but createsregional imbalances as the major portion ofassociated subsidy goes to foodgrains (wheatand paddy) producing states. Moreover, thesubsidy goes to the middle and large farmerswho produce for the market and distorts theincome distribution against small andmarginal farmers who produce only to meet part of theirsubsistence consumption. For such farmers, support pricingand related procurement only serves to create an artificialshortage of food grains in the open market which in turnimplies that they have to face higher prices in the openmarket. As the coverage of the PDS in rural areas is poorthese small and marginal farmers have to meet the gapbetween their subsistence consumption and their ownproduction through purchases in the open market at highprices. The entire system of support pricing needs a rethinki.e. from the point of economic theory support pricing shouldexist only in cases where the market does not lead to theproduction and consumption of the socially optimal amount.This happens when there are positive externalities associatedBudgetary Subsides On Fertilizer (in Rs crores) 4Item 2002-03 2003-04 2004-05 2005-06 2006-07(Revised)2007-08(Budget)Indigenous (Urea) 7,790 8,521 10,243 10,653 11,400 11,400Imported (Urea) - - 494 1,211 2,704 2,704Sale of decontrolled farmers 3,225 3,326 5,142 6,596 8,348 8,347with concession to farmersTotal 11,015 11,847 15,879 18,460 22,442 22,451THE INDIA ECONOMY REVIEW193

Reliving TheGreatIndianDreamwith consumption. As a means of ensuring income distributionsupport pricing has proved to be a failure; coupled withthe poor rural coverage of the PDS it has led to regressivechanges in the income distribution.In India the government has not been successful indeveloping free and transparent markets. The absence of alink between the farmer and consumer provides opportunitiesto intermediaries to dominate the market and exploit thefarmer as well as the consumer. Much of the justification forthe total cost of inputs in agriculture being high, only largefarmers get significant benefits from subsidies as they arethe ones who incur a large expenditure on agriculturalinputs. Fertilizers are not used in large quantities by poorfarmers due to their low purchasing power. Out of a total ofeleven crore farmers in India, eight crores are small andmarginal farmers who benefit very little from fertilizersubsidies. The budgeted subsidy is continuously rising anddoubled between 2002-03 and 2006-07. The budgetedsubsidy at Rs.22,451 crores for 2007-08 is a grossly underestimatedamount and the actual amount is estimated to bearound Rs 50,000 crores. So far, Rs. 36,000 crores, includingbonds worth Rs. 7,500 crores have been released by thegovernment. The fertilizer subsidy is further expected toincrease to Rs. 70,000 crores in 2008-09. The major part ofthe subsidy is provided to urea which is being sold at Rs.4,830 per tonne, much lower than the imported price of Rs.16,000 per tonne. The table titled ' Budgetary Subsides OnFertilizer' shows the details of rising fertilizer subsidy (onlybudgetary). The main argument for justifying fertilizersubsidy is that it ensures an increase in agricultural productivity,the benefits of which are shared both consumers andThe total subsidy burden in the year 2007-08 is expected to be onelakh crore rupees out of which almost half is going to be off budgetsupport pricing of foodgrains would weaken if the governmentcan bring the farmer closer to the ultimate consumerthrough better communication and transport facilities. Thiswould enable farmers to get a higher price for their produce.Fertilizer Subsidy“These subsidies are larger than necessary as domesticmanufacturers of urea are given a cost plus price under theRetention Price Scheme. This provides very little incentive todomestic manufacturers to cut costs.” 3One of the claims made by the government is that fertilizerscannot be afforded by small and marginal farmers andhence needed to be subsidised. However, the fertilizersubsidy is indirect and the majority of benefits accrue to theindustry and large farmers rather than small and marginalfarmers. The Finance Minister in his Budget of 2007 promisedto provide the subsidy directly to farmers but nothinghas happened in this direction. The share of fertilizer cost inproducers. However, recent data demonstrate that productivitygrowth has been declining and the real prices offoodgrains are rising faster than the overall Consumer PriceIndex ( CPI). The major portion of the subsidy goes to thefertilizer industry and encourages it to be inefficient. A goodsign is that the government is slowly increasing the price ofurea and trying to reduce the subsidy burden. However, nosteps have been taken to make the fertilizer industry competitiveand self-reliant. This can be another means ofreducing the required per unit fertilizer subsidy which is thedifference between industry price and the price eventuallypaid by farmers. Another step which would lead to a reductionin the budgetary burden caused by such subsidy as wellas more social equity is to provide direct subsidy only tosmall and marginal farmers.PetroleumThe petroleum subsidy has become a political issue. LPG and194 THE IIPM THINK TANK

A N INCLUSIVE INTENTkerosene continue to be heavily subsidised. This subsidybenefits largely the higher income groups and proves to beregressive. Diesel subsidy can be considered to be an exceptionbecause of its use in agriculture and public transport butincreasingly the higher income groups in urban areas areconsuming diesel for the operation of passenger cars andgensets. At present diesel sales are four and a half times thatof petrol. Diesel sales have risen by 6.37 million tonnesduring 2002-2006, while petrol sales have increased by only1.74 million tonnes.As a matter of policy, the government has authorised the OilMarketing Companies (OMCs- IOC, BPCL and HPCL) tochange the price of oil when international prices change,keeping only LPG and kerosene on the sensitive list. However,this policy directive is not being implemented inpractice as whenever there is a price rise in the internationaloil market the government requests the OMCs not toincrease the price for social reasons. In fact there are strongpolitical reasons hidden behind these so called social reasons.Our consumer prices have been fixed ever since theinternational price of oil reached $60 a barrel The OMCshave been absorbing the burden of a sudden spurt in theglobal oil price, which has now reached around $100 a barrel(January 2 nd , 2008). Thus, companies are selling petrol at aloss of Rs. 9.20/litre, diesel at a loss of Rs. 10.95/litre andkerosene and LPG at losses of Rs. 19.90/litre and Rs. 331.25/cylinder respectively. Therefore, it is being estimated thatOMCs will lose around Rs.69,753 crores in this financialyear 5 . This loss has gone up by almost three and half times inthe last three years (Rs.20,146 in 2004-05). The highest losshas been due to sale of diesel followed by kerosene, LPG andpetrol in declining order of magnitude. The government, tocompensate these losses, issues oil bonds to the OMCs. Thisact might provide relief to OMCs but it is a further off-budgetliability for the government. By doing this the governmentis just postponing the liability, which will create problems inthe future. The postponement of the issue of increasing thedomestic petroleum prices implies an additional interestcost. The fact is that this cost is to be borne by the futuregeneration who will not derive benefits from the currentsubsidy. It is a paradox that on the one hand petroleumproducts are highly taxed while on the other hand they arehighly subsidised. Taxes constitute up to 58% of the totalprice of the petroleum products--the highest in the world. InWest Bengal, petrol at the refinery gate costs Rs.20.39 perlitre while the price at the pump is Rs.46.86 per litre. Thisincludes Rs.14.70 per litre as excise duty and education cesslevied by the central government and Rs.9.97 per litre assales tax and cess levied by the state government 6 . The onlyway to come out of this paradox is to take tough decisions ofallowing the OMCs to increase the price in phases and reducethe tax burden on them.ConclusionOnly merit subsidies (those which have social benefitsexceeding personal benefits) are justifiable. In addition theseneed to be transparent, well targeted and well implementedin order to benefit the poor. However, in India subsidies,especially those on petroleum, food and fertilizer have beenmarked by leakage and wastage in implementation. Thus, thereally needy and poor people are not benefited. This isrealised by the government but political interest forces thegovernment to continue with its old subsidy schemes. Withgeneral elections approaching there is not much hope forchange. One way of reducing the subsidy burden is to abolishor at least reduce the magnitudes of subsidies across theboard and let the market do the rest. In the long run efficiencyand equity also requires proper targeting of subsidies.Proper targeting is easier to achieve if we move away fromindirect subsidies to direct income support. Thus, providingvouchers/stamps (for food, kerosene, education etc.) to theneedy will be a better option which will increase the choice ofthe consumer and hence consumer welfare. Another way inwhich the subsidy burden can be contained in the long run isthe discontinuation of the current government practice ofpostponing the payment of food, fertiliser and petroleumsubsidies through off budget channels.End Notes1“Central Government Subsidies in India- A Report”,Ministry of Finance, Government of India. March, 20032Expenditure Budget Vol. 1, 2007-2008, Government ofIndia.3Expenditure Reforms Commission 20004Expenditure Budget Vol. 1, 2007-2008, Government ofIndia.5The Hindu Business Line, January 3, 20086The Financial Express, January 6, 2008THE INDIA ECONOMY REVIEW195

Reliving TheGreatIndianDreamAnalytical Aspects Of PublicDebt Management In IndiaIndrajit MallikCentre for Studies in Social Sciences, KolkataIntroductionIn our country the Fiscal Responsibility and Budget ManagementAct, 2003 (henceforth FRBM) arose out of a great concernabout rising public debt. The concern shall be addressed in thispaper. Issues that arise naturally in the short run budgetarymanagement will not concern me here. Nor shall I take a longview of the matter. The heart of the matter lies in the commonpath of the common man in the medium run. The analysis will bebased on this exclusive principle.Theoretical Reflections On Public DebtSome economists like to view the public debt as a residual thatarises out of the fiscal activities of the government. According tosuch a view, the stock of debt cannot be a fiscal instrument butthe government will have some leverage through the controlover the composition of the debt in terms of maturity, liquidity,risk and reward. But it is also true that through prudent expenditureand taxation policies, the net increase in public debt duringa fiscal period can be curbed. In fact the latter view has beendominating in recent years and we shall examine it more deeplyin the next section. But before doing so, it is helpful to review the(different) answers to some questions about the positive andnormative issues surrounding the design, management andimpact of public debt.196 THE IIPM THINK TANK

A N INCLUSIVE INTENTOne question is whether the design of public debt really lies inthe hand of the government and to what extent public opinionshapes it. Another question is whether the dynamics of debt ismanaged optimally. The third question will surface later.Does an increase in public debt affect real economic activity?How? Does it affect nominal variables like the rate of inflationand the nominal rate of interest? How? In an economy withunderutilized resources like labor, land and capacity of productionin the industrial hubs, stabilization policies can increaseincome and utilization of such resources up to a significant pointwithout affecting prices and the rate of inflation. Public debtwhich finances such stabilization policies can have large impacton the economy and the welfare of the representative agent inthe economy. This is the typical Keynesian view of public debt.Certain things have to be borne in mind when evaluating suchstabilization policies: firstly,when agents anticipaterationally the policy changes,they might just proportionatelyjack up the nominal variableslike prices, wages and interestrates thus leaving the real economic variables unchanged. Thesecond point is that if excess capacity and unemployment ofresources are structural factors, then expansionary fiscal andmonetary policy may not have the desired real effect until itaffects the structure of relative prices in order that structuralchange led economic growth is possible.What is the welfare effect of public debt? When the realinterest rate is above the rate of economic growth in steadystate, it is a sign that capital has over-accumulated. Under suchcircumstances, public debt expansion can reduce the rate ofcapital accumulation by reducing the yield on of physicalcapital relative to financial capital and can increase the steadystate income, consumption and welfare of the current generationkeeping the allocation constant for later different generations.In a financially repressed economy with artificially allowrates of interest on financial securities like savings certificatesand bank deposits, an increase in public debt depresses bondprices and sometimes raises the term structure of interestrates. In an economy with substantial unhedged microeconomicand systemic risks due to underdevelopment of financialmarkets, public debt can play an important role in enhancingrisk sharing possibilities. This is discussed in greater detailin another section.SustainabilityIn a financially repressedeconomy, an increase in publicdebt depresses bond pricesGiven the definition of accretion to debt as given in the previoussection, it is evident that its key drivers are the primary deficitand the interest rate. It follows that the debt to GDP ratio willdepend upon the ratio of primary deficit to GDP and thedifferential between the rate of economic growth and the rateof interest. Taking the former as constant (which is generally trueempirically), it all depends on the latter or the differential: ifit is positive then debt will not grow exponentially but insteadwill grow at a declining rate eventually approaching a constant,if it is negative then it will grow explosively. If the growthpath of debt is stable it is called sustainable. But sustainabilitydoes not always imply that debt is serviceable; for that a conditionknown as solvency constraint has to be satisfied. Thesolvency condition states that the discounted sum of primarysurpluses of the governmentbe greater than equal to thevalue of the present debt; inother words, the net worth ofthe government is positive. Ifeconomic agents perceive thegovernment as having positive net worth, they will buy governmentsecurities, otherwise not. If expectations are conditioned byfiscally prudent or imprudent and successful or unsuccessfulactions, then they might significantly change in the middle of amismanaged fiscal and financial crisis. Whether or not stable andhigh growth paths are expected to be achievable turn out to bethe crucial determinants.The allocation of public expenditure is also important. Ifexpenditure is wasted on unproductive items in the revenueaccount then it will have no feedback on economic growth whileif expenditure is on plan and development items which havepositive linkages with growth (in terms of growth enhancementand growth usability) then the debt will be more sustainable,serviceable and less burdensome. Sustainability depends on howfast the economy grows relative to the rate of interest. It alsodepends on public perception about government solvency.Finally, it depends on how public expenditure is allocated andmanaged. All these issues can only be understood in the contextof a framework which allows to think about economic growthand development. It is to such a discussion that we now turn.GrowthWhen one starts thinking of a theoretical framework to under-THE INDIA ECONOMY REVIEW197

Reliving TheGreatIndianDreamstand the effects of public debt in agrowing economy, one typicallyconfronts a system of equationswhich portray the dynamics of aperfectly competitive economy. Inparticular, there are no externalitiescaused by public investment onprivate investment and the assetmarket clearing condition is basicallyone of total savings financing privateinvestment and the public debt. Thisessentially means that an increase in public debt crowds outprivate investment. Azariadis (1993) shows in the context of anOLG (Overlapping Generations Economy), that if the originalcompetitive equilibrium is intertemporally optimal by virtue ofmaintenance of the golden rule, then, an increase in the stock ofper capita national debt decreases aggregate consumption andlifetime utility in the steady state. The intuition for the statedresult is simple and left as an exercise for the reader.Risk SharingPublic Debt can increase welfare and reduce the cost of capitalfor the government throughintroduction of appropriatesecurities which increases therisk sharing possibilities forthe general public. Essentially,the key to increasing risksharing is to introduce public securities which are negativelycorrelated with existing securities in the market. Risk sharing canbe long term or intergenerational or short term and intra-generational.In both cases, the challenge is to design securities whichallow smoothing of income and consumption paths in the face ofdifferent kinds of risks. Historically, the Indian financial marketdeveloped mainly through the issuance of government securitieslike postal savings certificates, public provident funds, nationalsavings certificates, securities issued by the Unit Trust of India(UTI) and Life Insurance Company of India (LIC) etc. After thenationalization fourteen major domestic banks, bank depositswere also in the nature of government borrowing from themarket. These have been the major vehicles for savings. The governmentguarantee against debt default, fixed yields and longterm maturity structure on these financial assets have allowedhouseholds to hedge risks like default risks, market risks andIn a financially repressedeconomy, an increase in publicdebt depresses bond pricesliquidity risks for other privatedebt securities. In the last fewyears the private bond market, themarket for equities, mutual funds,derivatives and different insurancelinked products havedeveloped in terms of depth andvariety of financial instrumentstraded. These have added to thecomplexity of fiscal proceedingsand financial crises. Public debtcan increase welfare by insuring macroeconomic risks likeinflation and recessions. The government will also be able toreduce the cost of capital by issuing inflation-indexed bonds andGNP or GDP linked bonds. There also exist microeconomicrisks for households and institutions investing in private securitieswhich have become popular in recent years. As against thesesecurities, the risks are essentially risks of fall in asset prices,reduction in floating interest rates, default risks, liquidity risksetc. Hedging against such risks have become an important issueand various measures can be taken through changing thecomposition of the public debt by issuing contingent securities.These can take the form ofsecurities indexed to bondprices, stock index futures,housing price index, interbankrates, derivatives etc. Allin all, in my opinion, the policymakers need to pay attention to the under-mentioned facets andassociated inferences:1. public debt should not be seen as a residual2. public debt can have important consequences in terms ofgrowth and welfare.3. debt issue has to be tied to specific budgetary programs.4. debt management has to minimize the cost of capital subjectto welfare considerations.References• Azariadis, C., “Intertemporal Macroeconomics”, Blackwell(1993)• Barro, R., “Are Government Bonds Net Wealth?”, Journal ofPolitical Economy, (1974), 82• Diamond, P., “National Debt in a Neoclassical GrowthModel”, The American Economic Review, (1965), 55, 5198 THE IIPM THINK TANK

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Reliving TheGreatIndianDreamPublic Expenditure InIndia: Issues And ConcernsK. GayithriCenter for Economic Studies and Policy, Institute for Social and Economic Change(ISEC), BengalooruGovernment activity measured in terms of theproportion of government expenditure in the GrossDomestic Product (GDP) expanded considerablyacross the globe during the sixties (The World Bank, 1997).This was a result of the immense faith countries had in thestate led growth strategy. Market failure accorded the governmentsa central role in making corrective interventions in theessential areas such as allocation, production, distribution andregulation. Governmental control prevailed in almost allsectors. The enormous growth in government expenditurethat had occurred during the state led regime has resulted inmounting fiscal deficits in the case of many countries.There has been a sea change in the recent thinking on therole of government, which has led to the launching of the200 THE IIPM THINK TANK

A N INCLUSIVE INTENTeconomic reform/Structural Adjustment Program process inmany countries. The economic reform process emphasizesupon the need to reduce the fiscal deficit in bringing abouthigher growth. Thus, fiscal deficit reduction has been animportant component of the stabilization measures initiatedin many countries. While some countries have been able tosuccessfully reduce their deficit levels, some countries are stillstruggling to find appropriate measures to bring down thesame. In Indian context the size of government had grownenormously as a percentage tothe Gross Domestic Product.Government has assumed manyresponsibilities in the course ofplanned development, thereforehas initiated a number ofprogrammes resulting in a hugeincrease in government expenditure. The government over aperiod of time has not able to meet the expenditure from itsresources. The growing imbalances between the resourcesand expenditure of government have resulted in a large-scaleincrease in the size of fiscal deficit.The 1991 reforms aimed at containing the size of fiscaldeficit through both tax and expenditure measures. Unfortunatelyin Indian context the experience of expenditurereduction so far has not been very encouraging as the expenditurecuts both at the central government and state governmentlevel are more revealing on the crucial sector like theinfrastructure, social sector, capital expenditure, etc.Broad trends in the central government expenditure and itscomposition especially during the economic reform phase areanalyzed in the present paper. An attempt is also made toaddress the hitherto neglected issues concerning expenditureimpact, management and control of government expenditure.Trends In Fiscal DeficitIndia launched economic reforms in the year 1991 comprisingof stabilization and structural adjustment measures in orderto overcome the macro economic crisis the country faced inthe 1990s. Fiscal deficit reduction was an important elementof the fiscal stabilization program. This was very essential inview of the huge fiscal deficit that the governments both at thecentre and state levels had amassed over a period. It was ashigh as 10 percent of GDP and the rate of inflation, generallyassociated with high fiscal deficits, was 17 percent per annum.The share of revenue deficithas been on increase, from41.59 percent in 1990-91 to62.57 percent in 2004-05The gross fiscal deficit of the centre alone was as high as 7.85percent of GDP (Table 1) in 1990-91, which has been broughtdown to 4.03 percent in 2004-05.While the reduction in thefiscal deficit is laudable and in line with the overall fiscalobjectives of the Government of India, the share of revenuedeficit has been on the increase from 41.59 percent in 1990-91to 62.57 percent in 2004-05 implying that the correctivemeasures have been increasingly sacrificing the capitalinvestments made by the government. In addition, the fiscaldeficit reduction at the centralgovernment level is cancelledout by an increased level ofdeficit at the state level.Thegrowing fiscal burden at thelevel of state governments isrevealed by the rapid growth inthe revenue deficits at the level of state governments (Graph-2). States have suffered a decline in the proportion of nettransfers from the center.Net transfers to states as a proportionof total receipts of the central government has declined(Table 2) from 33.3 percent in 1991-92 to 17.4 percent inTable 1: Trends In Central Government Deficits(Rupees In Crore)YearsRevenueDeficitFiscalDeficitRD as a % ofFD1990-91 18562 44632 41.591991-92 16261 36325 44.771992-93 18574 40173 46.241993-94 32716 60257 54.291994-95 31029 57703 53.771995-96 29731 60243 49.351996-97 32654 66733 48.931997-98 46449 88937 52.231998-99 66976 113348 59.091999-00 67596 104716 64.552000-01 85234 118816 71.742001-02 100162 140955 71.062002-03 107879 145072 74.362003-04 98261 123273 79.712004-05 78338 125202 62.57Source: RBI, Handbook of Statistics of Indian Economy, Various IssuesTHE INDIA ECONOMY REVIEW201

Reliving TheGreatIndianDreamTable 2: Net Transfer To The Statesthat of government receipts has been causing considerableYears1991-921992-931993-941994-951995-961996-97Proportion To Center's Receipts33.332.431.932.631.732.7concern. This is more so on account of the fact that revenueexpenditure has been growing faster than revenue receipts,thus causing revenue deficits. One cannot ascribe thesedevelopments entirely to the fiscal reform process in India.An analysis of growth of real public expenditure (Mundle S,and Govinda Rao, 1997) reveal that from mid-seventies to1980, expenditure increased at a marginally higher rate thanthat of receipts and thus borrowings were modest. Thesecond phase (1981-86) caused a great damage to the fiscal1997-98 30.9situation due to excessive utilisation of borrowed funds to1998-99 23.6meet the current expenditure. Some attempts were made to1999-00 24.2contain the expenditure during the third phase (1987-90).2000-01 26.1These measures only resulted in compression of capital2001-022002-032003-0425.422.117.4expenditure. By the end of this phase, revenue deficit had asharp increase, which resulted in substantial diversion ofborrowed funds to meet the current expenditure.Source: Government of India, Indian Public Finance Statistics, Various Issues The trend analysis attempted in the present context for theperiod 1986-87 to 2004-05 reveal that the legacy of huge2003-04. States have also been increasingly contributing tothe fiscal problems by way of their increased mismatchbetween resources and expenditure.revenue deficits persisted and sharper decline is observed inthe size of capital expenditure. While revenue expenditurehas increased (Table 3) at the rate of 11.66 percent per annumthat of capital expenditure has grown only at 7.82 percent, thisTrends And Composition Of Union Expenditure:The out-pacing of the growth in government expenditure towould amount to a negligible growth in real terms. In addition,it has had a very sharp decline as a proportion of GDPfrom 7.09 percent to 3.65 percentGraph 2: Revenue Deficits: Central And State Governmentsduring the above period. ThePercent of GDP4.5percentage composition of the totalexpenditure reveals that while the4proportion of revenue expenditurehas increased from 64.94 percent3.5(1986-87) to 77.23 percent (2004-05),3the share of capital expenditure hasdeclined from 35.06 percent to 22.772.5percent during the above period(Graph-3). However, the purpose of2stating these facts is not to subscribe1.5to the view that the entire revenueexpenditure is wasteful and all1capital expenditure is productive.0.501 2 3 4 5 6 7 8 9 10 11 12 13 14Revenue Deficit CentreRevenue Deficit States202 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 3: Trends In Central Government Expenditure(Rupees In Crore)YearRevenue expenditure% to GDP Capital expenditure% to GDP Total expenditure% to GDP1986-87 40860 13.13 22056 7.09 62916 20.221987-88 46174 13.03 22087 6.23 68261 19.261988-89 54106 12.83 25005 5.93 79111 18.771989-90 64210 13.21 28698 5.90 92908 19.111990-91 73516 12.93 31782 5.59 105298 18.521991-92 82292 12.60 29122 4.46 111414 17.061992-93 92702 12.39 29916 4.00 122618 16.381993-94 108169 12.59 33684 3.92 141853 16.511994-95 122112 12.06 38627 3.81 160739 15.871995-96 139861 11.77 38414 3.23 178275 15.011996-97 153933 11.25 42074 3.08 201007 14.691997-98 180335 11.84 51718 3.40 232053 15.241998-99 216461 12.43 62879 3.61 279340 16.041999-00 249078 12.86 48975 2.53 298053 15.392000-01 277839 13.30 47753 2.29 325592 15.582001-02 301468 13.27 60842 2.68 362310 15.952002-03 338713 13.75 74535 3.03 413248 16.782003-04 362074 13.12 109129 3.95 471203 17.072004-05 384351 12.38 113331 3.65 497682 16.03Growth rate 11.66 7.82 10.80Source: Government of India, Indian Public Finance Statistics, various issuesGraph 3: Composition Of Government ExpenditurePercent to Total90.0080.0070.0060.0050.0040.0030.0020.0010.000.001986-871988-891990-911992-93Revenue Deficit Centre1994-95Years1996-971998-992000-01Capital Expenditure2002-032004-05These trends are disturbing due to theincreased diversion of capital receiptsto meet the growing revenue expenditureneeds. Greater fiscal instabilityemerges from this on account of themounting debt servicing liabilitiescaused by diversion of capital investmentfunds. The governmentalinvestment on infrastructure developmentis getting adversely affected dueto paucity of funds. The decelerationin the infrastructure investmentduring the reform phase will haveserious setback to investment prospects.The problem has been furthercompounded, as the much-awaitedprivate investment in infrastructureTHE INDIA ECONOMY REVIEW203

Reliving TheGreatIndianDreamTable 4: Economic Classification Of Expenditure(Rupees In Crore)Year Final Outlays Transfer Payments to the rest of the economy Financial investments&Govt. consumptioncapitalloans to theGross Total Current Capital TotalExpendituromyformationrest of the econ-(gross)Total expenditure1981-82 6096 2551 8648 7728 1524 9253 7499 25401* 24.00 10.04 34.05 30.42 6.00 36.43 29.521985-86 11210 4557 15768 18347 3825 22172 15171 53112* 21.11 8.58 29.69 34.54 7.20 41.75 28.561990-91 22359 8601 30961 45134 7117 52251 21760 104972* 21.30 8.19 29.49 43.00 6.78 49.78 20.731995-96 41881 16684 58565 85303 15262 100566 26101 185232* 22.61 9.01 31.62 46.05 8.24 54.29 14.091999-2000 68831 26074 94906 161548 20481 182030 30572 307509* 22.38 8.48 30.86 52.53 6.66 59.20 9.942003-04 87169 23996 111166 248436 32038 280474 34490 426131* 20.46 5.63 26.09 58.30 7.52 65.82 8.09Note : * denotes percentage to total expendituredevelopment has not come forth in adequate quantity, despitemany concessions.Economic Categories Of ExpenditureThe composition of expenditure by economic categoriesreveals that government consumption expenditure (comprisingof compensation to employees and net governmentmaintenance) and current transfers have had a substantialincrease from 54.42 percent in 1981-82 to 78.76 percent in2003-04 (Table 4). While the gross capital formation andcapital transfers have had a marginal increase the share offinancial investments had a sharpdecline. This growth in governmentexpenditure which is turning out tobe largely in the nature of transferpayments can have adverse macroeconomic implications.Tanzi and Shome (1993) rightlyobserve that “When on the one hand, a large part of theexpenditures are explicitly or implicitly transfer payments togroups with high marginal propensity to consume and on theother, infrastructural bottlenecks resulting from relativeneglect by the government exist on the production side, lowgrowth and inflation might be expected. If prices are attemptedto be controlled either directly, or indirectly throughadministered prices, the inflationary tendencies crop up inthe uncontrolled markets (e.g., rents, professional consultationfees etc.) or in the black economy (real estate prices,professional incomes, etc.), causing tax evasion and concomitantvicious circle of unfavorable economic effects” ( asquoted in Shome (et al), 1996.)These trends clearly account for the fact that expenditurecompression measures have adversely affected the productiveinvestment while the wages and salaries and current transfershave continued to increaseunabated. The Fifth Payrevision has enhanced theshare of salaries andpensions from 17 percent ofrevenue receipts in 1995-96to 21 percent in 1997-98.Composition of expenditure by the development and nondevelopmentexpenditure categories plotted in Graph-4reveal that there has been a considerable increase in the shareof non development expenditure contrary to a decline in theshare of the development expenditure.The much-awaited privateinvestment in infrastructuredevelopment has not comeforth in adequate quantity204 THE IIPM THINK TANK

A N INCLUSIVE INTENTGraph 4: Development And Non-development ExpenditurePercent to Total7060504030201001980-811982-831984-851986-871988-891990-911992-931994-951996-971998-992000-012002-032004-05YearsDevelopmental Expenditure Developmental Expenditurethe social welfare has to be based on a comprehensive reviewTrends In Non-Plan Expenditureof the existing programs and ensure adequate private sectorComposition of government expenditure by the plan and participation in the gaps left by the government. Core functionsof a government vary from one country to another andnon-plan categories reveals that a major portion of the totalexpenditure is under non-plan category. Its share however has even from one state to another. Generally, governments canincreased from 71.24 (1990-91) percent to 76.47 (2004-05) enhance the social welfare by participating in:percent. Main items under them are interest payments,defence, subsidies, etc (Please do refer Table 5). It is generallyargued that non-plan expenditure is sticky downwards prevent serious fiscal imbalances.• An effective macroeconomic management that wouldand thus cannot be compressed, which means very little fiscal • Provision of internal and external security.adjustment can be effected by way of expenditure reduction. • Regulation of private sector activityThe broad (macro) trends vividly reveal that the central • Poverty alleviation and provision of basic minimum needsgovernment expenditure during the last few years is characterizedby larger increases in the expenditure under catego-• Provision of basic social and economic infrastructureto the vulnerable sections of the societyries such as revenue head, non-plan, non-developmental and It is very important to decide on the appropriate size ofcurrent transfer payments.public expenditure in the first instance. In India, it is generallyassumed that compression of non-plan expenditure, whichCorrective Measuresconstitutes a very big share in the total expenditure, is difficultIn the light of the ongoing reform process, there is a need to in view of its stickiness downwards. However, reforms in thetake a fresh look at the governmental role and responsibilities.Despite the fiscal reform process in India the govern-budget to a suitable form of performance based budgetingbudgeting practices from one of the current incrementalcanment has still not clearly defined itsrole, being fully aware of the fact thatthe past over-extension of governmentwithout an adequate backing of theresource growth has been mainlyresponsible for the present problems.The government has not effectivelyshed down some of its responsibilitiesthat the private sector should betaking on. There is no justificationwhatsoever for direct participation ofgovernment in the areas like hotelbusiness, fertilizers, air lines, textilesetc., just to name a few. About theprograms under various departments,there is a need for a comprehensivereview of the role of government in thechanging context. As a first step, thegovernment should redefine its roleand confine itself to some coreactivities. This however is easier saidthan done. Deciding as to what thecore activities are that help maximizeTHE INDIA ECONOMY REVIEW205

Reliving TheGreatIndianDreamTable 5: Trends And Composition Of Non-Plan Expenditure(Rupees In Crore)and whether the expenditure undertaken hasbeen able to deliver what was expected.1990-91 1995-96 2000-01 2004-05 2005-06However, the performance audit is taken uponly for select schemes and accordingly itsInterest payments 21498 50045 99314 126934 132630 coverage is very limited. This acts as a major* 27.94 37.94 40.88 34.74 36.29 limitation on the checks and balances that weDefence Expenditure 15426 26850 49622 75856 80549 have on the performance/results of the financial* 20.05 20.36 20.43 20.76 22.04operations of the government.An important issue that largely escapes theSubsidies 12158 13372 26838 43653 47520attention is with reference to the wastage and* 15.80 10.14 11.05 11.95 13.00improper use of public funds caused by multiplicity/duplicationof government schemes inGrants to State and 3982 5967 14717 14784 30475Utsachieving the certain objectives of the government.Instances are evident from many sectors* 5.18 4.52 6.06 4.05 8.34Loans and Advances 7606 10538 -140 612 89to States and Utslike Education, Housing, Rural development* 9.89 7.99 -0.06 0.17 0.02etc., Even while there are schemes existing tofulfill a particular objective, there are moreOthers 16263 25123 47083 64799 65548introduced, with out having a clear understandingof the need for such new additions amount-* 21.14 19.05 19.38 17.73 17.93A. Non-Plan Expendituringto improper use of public funds. Instances76933 131901 242923 365406 365485of this kind are evident even in a state likeNote : * denotes percentage to total non-plan expenditureKarnataka that has introduced a number offiscal reforms. Housing subsidy is one suchcertainly help in containing a routine increase in the size ofpublic expenditure.scheme on account of which there has been a substantialincrease in the expenditure by the government. It has beenobserved that (Gayithri, 2003) in view of the multiplicity ofInsights Into Impact Of Public SpendingTwo important means of getting to know the impact of publicspending, CAG reports and Performance Budget reports ofdevelopment departments have been in existence for longperiod, with a recent initiative/intervention introduced in theform of ‘outcome’budgeting.schemes and the involvement/participation of many Departmentsin providing the service, problems like keeping track oftotal investments made for the purpose and the total impactof such financial operations by the government crop up. Tothe best knowledge of the author, none of the agencies areaddressing these kinds of issues. However, some such evidencesmay come to limelight based on some evaluation studiesCAG SourceCAG carries out two types of auditing: procedural/regularityauditing and Performance audit. Procedural/ regularity auditis undertaken largely to verify whether the expenditure hasbeen authorized, disbursements sanctioned and whether rulesand regulations have been followed. The issue of whethervalue for money is ensured and whether the results are inconsonance with the objectives of the government are notaddressed in the procedural audit. On the contrary, efficiency–cum-performance audit seeks to evaluate whether theobjectives of the expenditure have been met at the lowest cost,carried out by independent agencies, these obviously will beonly stray cases that are taken up for study even, while a largenumber of other programs may not be evaluated at all fortheir usefulness to the citizens that the programs are serving.Similarly there are some agencies/autonomous institutions,such as Public Affairs Centre (PAC) Bangalore, that useCitizen Report Cards to assess the quality of public servicesprovided by the government, these again will be focusing onlimited number of themes thus, a major component ofexpenditure falls outside the scrutiny of public usefulness.Agencies that have some constitutional backing and cover a206 THE IIPM THINK TANK

A N INCLUSIVE INTENTwide gamut of control on public finances, such as CAG wouldbe the appropriate agency to address such issues.Performance Budget SourcePerformance budgeting is a system introduced based on theAdministrative Service Commission recommendation in 1969and as per its directives, departments have to report performanceof their programs on an annual basis to the Legislature.These are often taken up for discussion by the SubjectCommittees, which have the powers to seek explanation fornon/poor performance.This is yet another goodpractice that has been inexistence for over threedecades. However, thereare many weaknessesassociated with thissystem. The current performance budgeting largely presentsfinancial targets vis-à-vis achievements and physical targetsvia avis achievements. While it is important to know whethermoney allocated is spent or not outlays cannot be treated asoutcomes. It is important to know the impacts of governmentexpenditure rather than know about the quantum of expenditureitself. While these issues are addressed to some extentunder the Physical targets and achievements, these are largelywith reference to the outputs rather than the outcomes.Outputs basically indicate the work carried out by the Departmentsin the process of delivering some final product to thepublic. In essence what is highlighted is the activity that hasbeen undertaken and not the impact. Yetanother weakness of the system is thatperformance reporting is largely limitedto the plan programs and centrallyfunded schemes (at the state governmentlevel), and the huge non-plan expendituresis left outside the purview. Nonplanexpenditure constitutes a very largeshare in the total expenditure as observedearlier in this paper.Citizens will not be interested inknowing how many pulse polio campshave been conducted or how much hasbeen spent on procuring polio vaccine;they will be interested in knowing aboutWhile it is important to knowwhether money allocated isspent or not outlays cannot betreated as outcomeshow safe their own wards are from the polio menace. Similarly,the interest is not in knowing about what the governmenthas been spending on law and order situation, ratherthey would be concerned about the safety to their own livesand property which is largely dependent on the crime rate inthe society. Governments are accountable to the public in thedelivery of services and the effectiveness with which they aredelivered. There is currently a big information gap withreference to the impacts of government programs upon thecitizens. While the CAG does attempt an evaluation of thisnature in its performance audit, thecoverage is very small and there is anurgent need to address this issue.Outcome budgeting is yet anotherrecent initiative implemented by theGovernment of India, if designed andimplemented well can provide withways and means to eliminate redundant schemes that haveoutlived their socio-economic utility.Management And Control Of Govt. ExpenditureIssues pertaining to management and control of publicexpenditure are two essential aspects that need considerableattention. This gains added importance during the reformprocess. Unfortunately "the increased size and complexity ofthe public sector had clearly over-stretched the managementcapabilities of many governments even before the crisis of the1980s" (The World Bank, 1989). Control of public expenditurein India has to be ensured by the office of the Comptrollerand Auditor General, legislature and thelegislative committees and the Judiciary. Oneof the important indications of the presence ofa sound public financial accountability in acountry is when its legislative committees andaudit committees provide for its citizens crucialoversight of the country’s public finances. Acountry may be publicly accountable financiallyif it maintains internal control and performancereporting systems that make the results ofpublic operations transparent to the citizensand corrective actions initiated wherever publicfunds are not efficiently used. In Indiancontext, checks and balances are imbibed onthe government financial operations in theTHE INDIA ECONOMY REVIEW207

Reliving TheGreatIndianDreamform of internal controls, external auditing and Legislaturereviews of the governmental financial operations, which havebecome a part of the system attempting to ensure accountabilityon a regular basis.External ControlExternal control mechanisms upon public spending have beenlaid out in the Indian Constitution. The office of the Comptrollerand Auditor General (CAG) of India is the agency,which oversees the compliance of the laws by the executive.The office of the CAG is an independent Constitutionalagency and derives its authority from article(s) 148-152 of theConstitution. Further legal basis for powers and duties of theCAG is provisioned in the Comptroller and Auditor General’sAct of 1971, in a detailed fashion.External control on public financial operations is in theform of auditing by the Comptroller and Auditor General(CAG) of all receipts and expenditure of the government,which is conducted through out the year based on which auditreports are prepared. These reports highlight many importantobservations regarding government financial operations,which get tabled in the Parliament/Legislatures.The legislativebodies such as Public AccountsCommittee (PAC) and Committeeon Public Sector Undertakings(COPU) critically examine all ofthese reports and question theDepartments concerned. Reports of the PAC and COPU inturn are submitted to the Parliament/Legislature. Theseprocedures are very well streamlined over the years and auditinggoes on a regular basis and can be broadly termed asprocedural/ regularity audit.An important question that needs to be addressed in thecontext of prevailing/extant mechanisms to imbibe publicfinancial accountability is whether these have ensuredeffective control on the usage of public funds and overallpublic financial accountability. There are three importantaspects that throw some light on the above mentionedquestion: First, whether the current control mechanism(s)captures entire the entire gamut of public spending patterns.Secondly, adequacy of the control mechanism in terms ofproviding insights on the results of public expenditure andthirdly response to the CAG audit findings.Partial CoverageCAG has powers under its Act 1971 (C&AG Act 1971) section13,16 and 17 to audit all expenditure from and receipt into theConsolidated Fund of India and the state. CAG has theauthorization under sections14, 15 and 20 to audit receiptsand expenditure of bodies orauthorities substantiallyfinanced by loans or grantsUnion or State or UnionTerritory .(National Commissionto Review the Constitution,2001)There are certain items of expenditure incurred by theGovernments at the Central as well as at the state level that donot form a part of audit by the CAG. These include grantsthat are made to autonomous bodies and institutions, whennot very substantial, Non Government Organizations (NGO).Utilization certificates are however produced, the results ofsuch grants (as very often they are meant to provide theservices that the government should have provided otherwise)are not known to the government let alone the public. It isworthwhile an exercise to examine the quantum of suchexpenditure in the form of grants to such agencies on ayear-to-year basis. Even in the cases, which receive substantialgrants that fall with in the jurisdiction of CAG audit, are notsubmitting their annual accounts for audit in time and there isa time gap of two to three years. Hence, all such expenditureWith increasing magnitudeof central transfers, there is aneed to develop satisfactoryaudit systems of local bodies208 THE IIPM THINK TANK

A N INCLUSIVE INTENTGraph 5: Quarterly Growth In Union Govt. ExpenditureExpenditure40000030000020000010000001 st quarter 2 nd quarter 3 rd quarter 4 th quarterQuarter2003-04 2004-05incurred by the government is escaping even procedural auditlet alone performance audit.With the 73 rd and 74 th amendment of the Constitution, thelocal bodies have been playing a greater role in the provisionof services, for which substantial transfers take place from theCentral and State governments. Very often these are directtransfers, from the Central government, the magnitude ofwhich has substantially increased in the recent years. There isa need to develop satisfactory audit systems of these localbodies (some states have developed these already).Tax ExpendituresState governments in India have until the recent past indulgedin fierce competition with one another in attracting industryto their respective states by resorting to fiscal tools. While thefinancial implications of direct subsidy is available in blackand white in the Budget documents, the tax incentives doledout by the governments which result in loss of revenue to thegovernment, popularly known as ‘Tax Expenditures’ is a greyarea. Strictly speaking these incentives are offered to fulfillcertain specific objectives, and there is every need to assessthe results of such tax expenditures. While the CAG auditdoes look into any improprieties associated with such incentiveschemes, it is very important to know the impact of suchschemes vis-à-vis the objectives with which such incentives areprovided. A study carried out atthe Institute for Social andEconomic Change (Gayithri,2004) reveals that while therevenue loss on account of salestax concessions to the megaindustries alone in Karnatakahas increased in a very substantialway from Rs.7.38 crore in1994-95 to Rs. 514.51 crore in2002-03, total amount of revenueloss during the above periodbeing Rs. 1946.52 crore, theresults are not very satisfactory.In addition, medium, small andTiny units had also availed suchconcessions. In many a states’case these do not even getestimated, however, in Karnatakatax expenditures are reported in the Overview to theBudget on an annual basis. There are many other concessionsof this nature provided through the other Departments, thefiscal implications and the results of such fiscal operations arenot known. Similarly, studies reveal that (Gayithri, 2002) theprograms like Capital investment subsidy have not reallyaided much in the dispersal of industry to the backward areas,the objective with which the scheme was originally conceived.On the contrary it has inadvertently helped the industries inthe industrially developed regions. Hence, Public financialaccountability does not make sense if the results of completefiscal operations of the government are not captured. There isa need to subject all government spending to external scrutinyto ensure efficiency and effectiveness in spending. Unfortunatelyin Indian context "this elaborate system tends tocontrol expenditure in a mechanical or legal way: checks aremade for the necessary approvals and completed forms: thecontents of various expenditure proposals and their worthrarely gets a scrutiny once past the formulation stage. Thesystem is not very successful in controlling leakage either: ithas been stated that a non-negligible part of public expenditureends up in the under ground economy." (Shome, p, et.al,1996). In Indian context, an important issue that needs to beaddressed pertains to the control of committed expenditure.Shome, et.al (1996), makes an interesting suggestion in thisTHE INDIA ECONOMY REVIEW209

Reliving TheGreatIndianDreamcontext. The expenditure could be bifurcated into committedand discretionary components, while discretionary expenditurehas to be strictly controlled to their ceiling levels;adequate guidance should be given for the committedexpenditures. Reduction in sectoral allocations while gettingthe budget cleared by the parliament do not carry any significanceif the reductions are more than made good in the formof supplementary grants. Inadequate control and monitoringof the government expenditure has resulted in practices likebunching of expenditure towards the last quarter of thefinancial year. Statistics presented for the years 2003-04 and2004-05 (Please refer Graph-5)clearly account for these. Inorder to ensure proper returnsfrom government expenditurethere is need for proper monitoringof its growth. Quarterlymonitoring of the departmentalexpense will put a stop to the present practices of rushingthrough the spending in the last quarter of the year. Thesepractices exist in Countries like United Kingdom, (cashlimits), Canada (envelope system), Japan (Scrap and burn),New Zealand (Tit for Tat) are aimed at apportioning spendingevery quarter. (Premchand, 1983, 281).Quality Of Public ExpenditureQuality of public spending is one aspect that has not drawnany serious attention of the policy makers until now. Althoughthere are couple of promises made in certain budgetspeeches and announcement of formulation of committees tolook into the quality of government spending, none of thesehave been given a concrete shape. Despite the recommendationof various bodies, right from mid 80s, about the containmentand review of government expenditure nothing muchhas been achieved until today. The government even todaycontinues to have multiple schemes that are duplicative innature. As a result, the resources are thinly spread onmultiple schemes which are not adequate at all for any ofthese programs. There is also improper targeting under manyprograms. A proper control of expenditure by examiningeach item of expenditure is needed as opposed to the presentpractice of automatic approvals. There is an urgent need toreview the government expenditure by programs rather thanplan and non-plan categories. Based on a review of programsthere is a need to drop the programs that have out-grown theirutility and become redundant. This, however, cannot beachieved overnight. The process has to begin without furtherwasting any more time and resources.References• Gayithri, K,2003 Housing Subsidies in Karnataka, inGovinda Rao ed “Volume and composition of BudgetarySubsidies in Karnataka, Monograph 1,ISEC,Bangalore• ---------.2004, “Spin off Effects of Industrial Incentives inKarnataka,A Study of Mega Industrial Units”, Memeograph,ISEC, Bangalore• International MonetaryFund, 1991 "Public ExpenditureHand Book: A Guide toPublic Policy Issues in DevelopingCountries" WashingtonDC• Premchand, A (1983),”Government Budgeting and ExpenditureControls: Theory and Practice”, InternationalMonetary Fund, Washington, D.C.• Shome Parthasarathi, Tapas K Sen. and Gopalakrishnan S,March 1996, Public Expenditure Policy and Managementin India: A Consideration of the Issues, (Paper presented atDepartment of Expenditure, Ministry of Finance, Governmentof India, Vigyan Bhavan, New Delhi.)• Shome, Parthasarathi, (1998), "A Critical Assessment ofthe Public Finances and a future Agenda for Reform" inAshok V Desai (ed), Economic Reforms, the next step,vol., Frank Bros and Co., New Delhi.• Tanzi, V. and Shome, P. (1993), "A Primer on Tax Evasion",IMF Staff Papers, International Monetary Fund, Washington,D.C., December• The World Bank (1998), Managing Public Expenditure: AnEvolving World Bank Perspective, The World Bank,Washington DC.• The World Bank, (1998), India, "Macro-Economic Update",Washington D.C.• The World Bank, 1995, India: Recent Economic Developmentsand Prospects, Washington D.C.• The World Bank, 1995, India: Recent Economic Developmentsand Prospects, Washington D.C.• The World Bank, 1997, World Development Report,Washington D.C.As opposed to the presentpractice of automatic approvals,a proper expenditure controlmechanism is needed210 THE IIPM THINK TANK

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A N INCLUSIVE INTENTBudget India: FromAllocations To EffectiveExecutionShanti JagannathanDevelopment EconomistIt Is Not All About Money, HoneyThe Budget period is a time of frenzy about allocations. It is atime for lobbying for additional resources and how the cake offunds is to be cut. Rare is a debate or an in-depth analysis ofefficiency and effectiveness of public funds in the previousyear and what needs to be done in reaching developmentalobjectives in the coming year. It has been much easier to arguefor additional resources, given the scale of problems andchallenges in India, than explore how existing allocations areperforming. Recent times have seen adistinct upswing in allocations acrossthe board. The education sector, inparticular, has had a good run withrapidly growing finances. In the2007-08 Budget, the allocation foreducation increased by 34.2% toRs.32,353 crore. Allocations for schooleducation went up by 35% to Rs.23,142crore and the Sarva Shiksha Abhiyan, anational flagship program, received Rs.10,471 crore. Teachertraining institutions saw allocations increase from Rs 162 croreto Rs.450 crore. The Prarambhik Shiksha Kosh transferincreased from Rs.8,746 crore to Rs.10,393 crore. The 11 thFive Year Plan outlay for education is Rs.2,87,362 crore,compared to Rs.62,238 crore in the 10 th Plan. PM ManmohanSingh has stated in public that he sees the 11 th Plan as India’sIndia is one of the25 countries that arefar from achievingthe goals of theEducation For All (EFA)development index‘Education Plan’, with allocations for the sector touchingalmost 20% of Gross Budgetary Support. If one adds upadditional resource mobilization expected through theeducation cess (raised from 2% to 3% in last year’s unionbudget), the overall resource availability to education couldwell be getting close to the region of 6% of GDP, a favouritedemand from education lobbyists.But, how well do these allocations translate themselves intoeffective expenditures and then into desirable outcomes?Therein lies the heart of the problem:the difficulty of public expendituresystems in transforming budgets intobetter service delivery for development.While securing increasing allocations topriority sectors is indeed a very crucialelement of budgeting, it is far moreimportant to examine how they areleading to results. According to theEducation For All Global MonitoringReport 2008, India is one of the 25 countries that are far fromachieving the goals of the EFA development index. Childmortality in India is higher than that of Bangladesh. Recentstudies show that levels of malnutrition among Indian childrenis higher than some countries of sub-saharan Africa. Sanitationcoverage in India is also lower than sub Saharan Africa.The Finance Minister, speaking at the World EconomicTHE INDIA ECONOMY REVIEW213

Reliving TheGreatIndianDreamForum in 2007, expressed his concern that the outcome ofenhanced budgetary outlays (four times increase for theeducation sector and two times increase for the health sectorsince 2003-04) is not visible on the ground. Clearly, addingmore finances alone will not lead to the desired results unlessthere is much greater push to improve productivity levels andimpact of public funds and other resources.It is perhaps time to look at the annual budget process alittle differently and to address downstream budget use andeffective execution much more closely. A ‘developmental’approach to budgets ought to concretely address bottlenecksto drawing down and spending funds effectively and efficiently.The frenzy around budget timeneeds to incorporate a more in-depthdialogue and debate on how wellfunds are being utilized to realize thegoals and objectives and a prognosison where to put money within andacross various sectors.It may be worthwhile to considersome shifts with a view to improvingthe impact of public spending:The frenzy aroundbudget time needs toincorporate a morein-depth dialogue anddebate on how wellfunds are being utilized1. From Conventional Budgeting To Public ExpenditureManagementBy and large, allocation of finances to programs and to Statestends to be made based on normative patterns and standardprocedures. Although there has been a visibleshift towards decentralized, district-basedbudget preparation for important sectors likeeducation and health, at a decentralized level,fund allocations may not fully account for thefamed diversity that India represents. Limitedautonomy is exercised at district and block levelson financial matters. Even in the context ofdevolution under the Panchayati Raj Act,transfer of funds has been substantially slowerand lower than transfer of functions andfunctionaries.While preparing budgets and making allocations,it might be useful to consider the followingyardsticks:• Are funds being allocated in proportion tothe size of the developmental challenges indifferent states, districts and blocks?• Are funds being allocated to interventions according totheir eventual effectiveness (evidence of ability to contributeto specific developmental goals)?• Are funds being used as a leverage to bring the desiredimpact (performance oriented funding)?Uniform financing formula, whether it is per unit AlternativeSchool or per child bridge course allocation, may not helpto address the variation in the degree of difficulty in reachingthe goals. Putting money in proportion to the degree ofchallenge would be a crucial aspect of effective public sectormanagement. For instance, bringing firstgeneration girls to school in States likeBihar, Uttar Pradesh and tribal Chhattisgarhis likely to be considerably moredifficult than in Tamil Nadu, but fundingpatterns do not take this into account.‘Equality’ in funding may not help tobring ‘Equity’ in development.2. Streamlining Budget ExecutionThere are many bottlenecks in translating budget allocationsinto fund releases which then convert into actual expenditures.Year after year, there are large unspent funds, affectingprograms in many development sectors. To illustrate, in2007-08 the budget outlay for Human Resource Development214 THE IIPM THINK TANK

A N INCLUSIVE INTENTAnnual Turnover Of Top IT Companies(In Rs. Crore) 2007Bharat Sanchar Nigam Limited 3,462Tata Consultancy Services 1,891Bharti Airtel Limited 1,852Wipro Ltd 1,500Infosys Technologies Limited 1,315Source: Electronics For You, October 2007financial autonomy and accountability at local levels to closethe budget loop for the next round of funding. Transformingbudget allocations into effective expenditures requires rapidaction from a range of actors such as government agencies,contractors, service providers, all of whom are governed byrules and procedures. Inadequate discretion and opaque rulescan lead to under utilization – unearmarked funds have oftenbeen found to be unutilized.Budget Allocations For Major National Programs 2007-08 (RsCrore)Health and family welfare 15,291National Rural Employment12,000Guarantee Scheme (NREGS)Sarva Shiksha Abhiyan (SSA) 10,671Drinking water and sanitation 5,850Integrated Child Development4,761Services(ICDS)Source: Budget Documentswas Rs.6,480.50 crore against which the release until December2007 was only Rs.1,932.67 crore, less than 30%. (Source:Telegraph, quoting HRD Accounts Committee). Rs.4,670crore were allotted in the 2007-08 budget for the BackwardRegions Grant Facility (BGRF), a major initiative to helpbackward regions catch up with the rest of the country. TillNovember, only Rs.1,249 crore (or 27%) had been released tothe state governments. While accelerated expenditures can bewitnessed in the last quarter of the year,this syndrome recurs each year. Thissymptom of under utilization hides anumber of inefficiencies in budget executionwhich are relate not just to financeand the following questions could beasked: Were fund requirements assessedalong with execution capacity andimplementation speed? How predictableand timely were budget releases from the Centre to States toDistricts and below? How clearly laid out are programeligibility criteria for draw down of funds? How well are theStates equipped with technical guidance to develop ‘spending’plans that strengthen ‘implementation readiness’ at thebeginning of the year? Effective budget execution requiresadministrative efficiency at all stages: approval of budgets,actual transfer of funds to States, districts and blocks, greater3. Bringing Private Market Discipline Into PublicAdministrative ActivitiesThere is much heated debate on growing ‘privatization’ of thedelivery of services in the social sector. Aspects of privatesector strength that ought to be subjects of non-controversialdebate are usually not addressed – cost effectiveness, value formoney and efficiency of operations. Key private sectorprinciples of optimal use of financial and human resources orattention to client satisfaction could have similar applicationin the public sector. The following table attempts to comparethe scale of financial resources in the public sector andnon-manufacturing private sector. Drawing a parallel betweenthe annual turnover of Top-5 IT companies (representinghuman resource based and knowledge oriented sectors) andthe budget outlay of five important development sectors in2007-08, it is clear that government departments have accessto volume of funds that compare favourably with resources inthe private sector. It is becoming increasingly relevant toTill November 2007,only 27 percent of theBackward RegionsGrant Facility (BGRF)had been released tothe state governmentsquestion whether governmentdepartments are conscious andcareful in the effective use of funds attheir disposal to reach stated objectivesand how capable and accountableto clients they are in the use ofthose funds, compared to operators inthe private sector.Considering thefinances available (these are supplementedby more resources at the State level) and the scale ofoperations in the social sectors, some thought is neededwhether they are supported by the best of human resourcesand whether adequate quality controls are applied in the useof funds. We could perhaps derive inspiration from theSingaporean example of drawing in, for specific durations, thebest CEO talent from the private sector, to head key ministriesand portfolios. The private sector is increasingly challengingTHE INDIA ECONOMY REVIEW215

Reliving TheGreatIndianDreampublic provision of services of adequate quality on costefficiency grounds. In education and health, private operatorsare claiming better service delivery at the same levels of perunit budgets. There is growing empirical evidence of privateschools or private medical facilities providing better serviceseven at the same levels of investments. Government spendingdo not get screened for value for money as private sectorspending does. In education, a range of interventions takeplace to improve quality, but which ones are bringing betterresults for student learning? Let us take for example, teachertraining – it is an essential component of effective teacherperformance and crore of rupees are spent across the countryfor this component. Monitoring usuallycomprises of expenditure tracking –number of teachers trained and amountexpended as compared to plans. Notmuch evidence is generated on whatthis is bringing to schools and children.Was teacher training need-based? Didthe same teacher receive training eachyear while others did not? Did theteacher training programs add concrete professional skills toteachers each time? Do they address varying degrees ofprofessional competence among teachers? And most importantly,what was the final impact of teacher training in schoolsand upon children’s learning and eventual achievement levels?Without such decisive information, the value of money spentcannot be judged.Empirical evidencepoints that privateentities provision betterservices than state,even at the same levelsof investment4. Addressing Rigidities In Budget ManagementIt is well known that use of budget allocations imposerigidities in terms of budget ceilings, lack of freedom inshifting budgets across line items, and pre-determined normsfor budget draw down. In the education sector there areexamples of how program managers have attempted toprotect budgets for quality improvement activities by introducingceilings on civil works and management costs. However,attention is also needed to facilitate spending onquality, not just as spending items, but ensuring they bringresults. This requires stronger understanding at local levels ofbudget flows in the annual budget cycle and special effortstowards qualitative items that may below on budget absorption. Reformingbudgets for improved social deliveryrequires a discourse on changing thestructure of budgets – most of publicsector budgets are predominantlydirected to salaries and wage bills. Inrecent years, certain indicative normshave been developed that could beexplored for specific contexts. For instance, the Fast TrackInitiative for the education sector provisions some guidelines,such as share of recurrent spending upon inputs other thanteachers, unit construction costs, average annual teachersalary and so on, which could be eventually used for adialogue upon budget restructuring.5. Moving From Budget Compliance To PerformanceAnd ResultsSubstantial energy in budget planning and implementation isconcentrated on compliance issues on the budget processes,and not much on performance and results. Input-basedprocesses take precedence over reviews based on outputs,results and outcomes. Lack of knowledge of which expendituresare more productive than others in attaining educationalgoals also hinders an effective education system. Statesneed to develop mechanisms to identify the most effectiveinterventions with the help of research agencies.Much of the monitoring of expenditures is merely onadministrative lines – ‘utilization’ rates of budgets allocated.International agencies are also known to be highly preoccupiedwith ‘disbursement rates’. The use of funds in the budgetneeds be linked to expected outcomes of the associated216 THE IIPM THINK TANK

A N INCLUSIVE INTENTannual plan for the year. While one-to-one causal links arevery difficult to establish, it is important to move into resultoriented budget frameworks to do evidence-based programmingand to know why we are funding certain elements.Visible results in social sectors take more than the annualfinancial year, and process monitoring could be pursued inthe short run. Over time, instruments like the Public ExpenditureTracking Surveys could provide very good insights intocost efficiency and overall accountability of public funds andcould help planners and administratorsto understand bottlenecks and flaws inthe extant public expenditure managementsystems better.6. Efficiency, Effectiveness &Equity In AllocationsA key objective of public policy anddeployment of public funds is to protectthe rights of the weaker and deprivedsections of society. Recently, the Comptroller and AuditorGeneral’s (CAG) Performance Audit Report on ‘EducationalDevelopment of Scheduled Castes (SC) and Scheduled Tribes(ST)’ has highlighted that the gap in Gross Drop out Ratiobetween general candidates and SC and ST candidates, whichwas 6.7% and 15.1% in 2001-02 deteriorated to 10.4 and16.6% in 2003-04 respectively. It must be acknowledged thatthe Sarva Shiksha Abhiyan has helped to increase theenrolments of SC and ST children close to their share inpopulation. However, the CAG report points to evidence ofunderutilization of funds, inter-state imbalances in allocationof funds, non availing of central assistance, delayed/non/shortrelease of funds, unspent balances lying with States/UTs,diversion of funds and so on that were observed in respect ofmost of the schemes. Budget management needs to haveclear benchmarks and monitoring parameters to trackwhether public funds are being spent with efficiency and arepromoting equity and are effectively reaching the goals thatset out in budget planning.7. Moving From Budget Control To TransparencyAnd AccountabilityFinally, the ultimate test of the value of public funding lies inits accountability to the citizens it serves. Therefore, goingbeyond tracking of utilization of budget, are issues relating toUltimate test of thevalue of public fundinglies in its accountability.An important means ofaccountability is openinformation systemsright sequencing, transparency of budgeting and budgetallocations and accountability of budget use and implementationto the beneficiaries. An important means of accountabilityis open information systems. The education sector, due toinitiatives under the SSA, has one of the most extensiveEducation Management Information Systems. The DistrictInformation System for Education (DISE) provides a wealthof data on the school system and since recently report cards ofover one million schools in the country are included in anon-line data system. If it is complementedwith financial data, it wouldact as a powerful tool to improve theperformance of funding towardseducation as perceived by the commonpublic. Augmenting the qualityof information of public spending oneducation at the local level, the use ofRight to Information by people wouldall create the requisite climate forimproving the performance of public funds. Other meansinclude citizen report cards, public hearing procedures andlocal consultation mechanisms.Last Things Last!While resources are important for Indian economy development,the current times demand closer attention to how theyare being put to optimal and effective use. Public funds oughtto be used even more carefully than private funds. The processof the annual budget needs to have an element of a review ofhow the previous year went in terms of effective execution andresults in terms of stated objectives for the year. It should notbe construed that no actions have been taken with regard tothe issues raised in the above sections – indeed a number ofrecent initiatives are important – to illustrate, the growing useof e-transfer of funds to States, Districts (and in some caseseven to Block levels) that speed up funds transfer; increasingconcentration on poorly performing States, Districts andBlocks, whether it is the Empowered Action Group States forthe National Rural Health Mission (NRHM), special focusdistricts for minorities and SC/ST education, educationalbackward blocks for improving girls’ education; focus onbudget allocations for quality improvements – all contribute inthe right direction, but we need to do much more to enhanceresults from budgets.THE INDIA ECONOMY REVIEW217

Reliving TheGreatIndianDreamSita SekharPublic Affairs Centre (PAC), Bengalooru218 THE IIPM THINK TANK

A N INCLUSIVE INTENTSocial AccountabilityAnd Monitoring InUnion Budgets:A Bottom Up ApproachTHE INDIA ECONOMY REVIEW219

Reliving TheGreatIndianDreamHumanizing the budget would not only mean workingon allocation and increasing the size of the socialsector outlays but critically the citizens’ voices needto be incorporated in the process. There needs to be generalbudgeting and the budget needs to be designed in such a waythat it does give importance gaender budgeting or makingprovisions to support women's issues, and special considerationto the underprivileged , in addition to that if the estimationpurpose itself is made more realistically and if we have asort of participative budgeting. If people can be included ,then nothing like it, though I believe that the budgetingprocess cannot be entirely taken over by the community itself(it will require to be handled by experts and technically soundindividuals / bodies) , though in a way they can give some ideaof what exactly is their needs, and what kind of resources theywould require, and then they could prioritize of what theythink is more important for their locality, or for their village orfor whatever it might be.Just consider a facet (case) like say, expenditure allocationupon education, wherein the expenses towards payment ofteachers salary constitutes to about 95 percent of the allocatedresources or budget, and only a mere five percent is left forsupplies and other variants of expenditure. Then you can wellimagine why there is no proper enabling infrastructure,furniture and educational aids available for proper educationalservice delivery. It has been noted that the salary expensesin such sector should not exceed 40 percent of the totalallocated budget, but at present there is no single directDISHA in Gujarat, anindependent budget group cangive the budgeting process anunique citizen orientationauthoritative body to regulate such expenses and balance thepayments, resulting which the deficit is showing up in excess of70 percent in many sectors. Granted, a sector like public worksis capital intensive and others which are not, but when takenoverall, their combined expenditure upon salaries should notbe too much off the 40 percent benchmark. That unfortunatelydoes not seem to be the case. There ought to be prioritization,more balance and controls. For example, there is a cap on howmuch should go to salary and how much to other (heads) costs.But this demands a policing body and it can't be just a commonperson as in some variant of public-private partnership orother NGOs who are working in that particular area. There isa need to form some kind of budget advocacy groups.Through sustained collective action, budget groups canensure their demands are reflected in budget priorities. Theycan also enable legislators to better scrutinize budgets. Thisdeepens participation and citizen voice. Currently, Publicbudget processes like the union budget in developing economieslike India are viewed as the domain of executive andtechnical specialists. The potential emergence of independentbudget groups which can involve themselves into expendituretracking like DISHA has in Gujarat ,or the Porto Alegremass-participation budget experiment in Brazil can give thewhole budgeting process an unique humanized and citizenoriented perspective, while at the same time ensuring effectiveutilization of education and health expenditures. An inclusiveintent in the budget would require a bottom up approach tothe budget more than anything else. To cite an anecdotalexample, the Public Affairs center recently did a study on thevarious housing schemes and their awareness among people.We found that the awareness ran very low in most places,mostly in single digit percentages. What made matters worsewas the fact that the selection of the number of beneficiariesfrom each panchayat was totally determined with a top downapproach ignoring the ground realities. In the case of a schemelike the ‘Indira Awas Yojana’ the money comes to the housing220 THE IIPM THINK TANK

A N INCLUSIVE INTENTscheme from the center, which then is passed on to the state,then the district, taluk, block and finally the panchayat.Ultimately, only about two to three beneficiaries per panchayatare selected which far outstrips the demand which runsclose to 200-300. Naturally, lot of people who turn up duringthe allocation return disappointed. The planning for theseschemes should not have a lump sum figure, let’s say somecrores, which is grossly inadequate. It definitely needs a‘bottoms up’ approach; assess the demand in a particular placefirst and then go ahead and start allocations. In some areas, itBy influencing allocation anduse of public expenditure,budget groups increase equityand social justice outcomesis worse thanks to reservations like 50 percent of the housesneed to be awarded to SC/ST families. The area might noteven have that many SC/ST families so what ends up happeningis that the administrators end up granting them multipleunits to stick to the allocation plan. It is high time that a levelof local discretion is allowed in matters like these schemes oreven income generation schemes or even the National RuralEmployment Guarantee (NREG) Scheme.The International Budget Project (IBP) studies these issuesand their findings suggest how these NGOs can have a largerrole to play. The research draws on case studies of independentbudget organizations in Brazil, Croatia, India, Mexico,South Africa, and Uganda who have been engaged in budgetanalysis and budget advocacy for a period of five-ten years.The range of organizations is purposefully broad and includesdevelopment NGOs, networks and social movements, andresearch organizations. Despite differences in perspective andorganizational type, all the organizations share a commitmentto social justice and the rights of the poor, and the mosteffective and efficient use of public resources. Each organization'sapproach to budget work is shaped by these normativeprinciples. The IBP has found that all these organizationswork on different aspects of public budgeting. The principalactivities on the budget process include work to promote theavailability of budget information, budget transparency, andbroadening societal participation. All undertake capacitybuildingto promote awareness and understanding of publicbudgets among legislators, NGOs and citizen groups. Severalorganizations work to improve budget allocations and outcomesthrough advocacy work designed to influence budgetpriorities (allocations between and within major items ofexpenditure), the quality of implementation (the targeting ofexpenditures and the proportion of the allocation actuallyexpended) and the utilization of expenditures (how far budgetallocations translate into physical outcomes, and the efficiencyand effectiveness of expenditures). By influencing the allocationand use of public expenditure, budget groups can contributeto equity and social justice outcomes. However, they arestill emerging in India and this issue needs to be addressed.The group could be NGOs, a committee or a mixture of both,but it’s paramount that one is powered into action right away.In Gujarat, an NGO called DISHA (Developing Initiatives forHuman and Social Interaction) has developed a method fortracking expenditure allocations in the state budget for use inlocal council (panchayat) jurisdictions. Following legislativeapproval of the state budget, DISHA informs elected councilorsin village panchayats in writing of specific allocationsunder the state budget for local infrastructure purposes andasks if physical implementation is underway. Where there isno knowledge of the allocation or implementation (as is oftenfound to be the case), DISHA writes to the relevant ministerin the government who then compels the local administrationto release the designated allocations. This has proved to be avery effective way of placing pressure on the local governmentmachinery to ensure that financial resources for local infrastructuredevelopment are being utilized for the designatedpurpose. DISHA is regarded as the sole source of legitimateTHE INDIA ECONOMY REVIEW221

Reliving TheGreatIndianDreambudget information and analysis by the leading newspaperswhich use this on a regular basis in their reporting on budgetissues. There are hordes of other NGOs which are doingsimilar work that has a simple end: to make the people moreaware about the budgeting process and how their money isbeing utilized. Consumer Unity and Trust Society (CUTS) inJaipur, Rajasthan has been doing work on a public expenditurestudy on the Mid-day Meal Scheme (MMS) whichendeavors to identify leakages and transaction costs for thescheme and provide suggestions to make it more efficient.Feedback is collected from the people as well as agenciesinvolved and the money is tracked from the union budget tothe final beneficiary which can help identify the points ofinefficiency and iron them out. There are budget advocacygroups which meet around India with the central aim ofawareness building among people and make them understandhow the budget (whether at the national or at the local level)works and how their voice can matter in it. These organizationsinclude Samarthan Center for Budget Studies in Mumbai,Sankalp in Bhopal as well as many in the states of TamilNadu and Andhra Pradesh in South India.There needs to be involvement of the legislature, academia,the corporate sector as well as the public affairs domain to setup a participatory budgetary allocation scheme to ensureoverall development of the social sector. There needs to becommittee and nodal points set up by the government toensure transparent and effectivediffusion of allocated resources. Atpresent in a village of say 20-30people, if aids are allocated, itwould not be wrong to exemplifythat only two-three people ultimatelyreceive the aid and that toonot in totality. So it needs to beeffective that the processes aretransparent and corruption needsto be minimized by overall growthin the social and public affairssectors. Achieving significantincreases in budget allocationswhere there is substantial benefit topoor and marginalized socialgroups is a major achievement andevidence suggests such changes arepossible through an independent budget work. The IBPfindings lead to a number of conclusions on the impact ofapplied budget work. The impacts fall into two principalcategories: changes in budget policy and changes in the budgetprocess. The research finds that the most significant impactsachieved by independent budget groups lie in improvingbudget transparency, awareness and civil society engagementon the one hand, and enhancing budgetary resources forexisting programs and improvements in their utilization on theother. It also provides evidence that the analysis carried out byindependent budget groups can directly lead to positiveimprovements in budget policies.The impact of DISHA’s budget work, for example, can beexamined at several levels: by improving the budget process inthe form of increased accountability and transparency;widening participation in the budget process; and influencingbudget priorities and the quality of execution. It is importantto recognize that it may not be possible to demonstrate successacross all these areas and that positive impact has to beassessed in light of the political and bureaucratic context inwhich DISHA is operating. Budget groups can provide firmpolicy advocacy and force implementation and efficiency at amicro level (like council budgets), but an urgent imperativewould be to evolve an empowering mechanism to help themscale up their efforts in order to influence an exercise as vast asthe Union Budget.222 THE IIPM THINK TANK

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Reliving TheGreatIndianDreamWhat Does The BudgetHave To Do With DisasterRisk Reduction?Mihir R. Bhatt,Director, All India Disaster Mitigation Institute, Founding member of NationalAlliance of Disaster Risk Reduction, Ahmedabad224 THE IIPM THINK TANK

A N INCLUSIVE INTENTIndia is one of the most disaster prone economies in theworld. Yet, realisation of this facet has dawned onlynow and it is certainly catching up in course of applyingmeasures aimed at the reduction of disaster risks. Afterthe 1999 Orissa Super Cyclone, the Prime Minister AtalBihari Vajpayi appointed the High Powered Committee toreview the existing state of affairs. After the 2001 Gujaratearthquake the Government of India moved ahead withmajor initiatives to launch country-wide community baseddisaster risk management programme with UNDP andEuropean Commission support in one hundred and sixtynine vulnerable districts and 38 towns and cities. Soon afterthe 2004 Indian Ocean Tsunami, the Prime MinisterManmohan Singh’ government rapidly formulated theNational Disaster Management Act (2005) and establishedNational Disaster Management Authority (NDMA). Theseefforts at national level deserve and immediately warrantpublic financing. Thousands of local and innovative disasterrisk reduction measures at the grassroots by organizationssuch as Abhiyan, SEWA, SIFFS, ToFARM, SNEHA,SPHERE, DHAN, and many more have brought citizens toa stage where the local disaster risk reduction measures andinterventions deserve union budget financing.By and large, the national efforts have not focused onlarge scale macro economic measures to reduce disasterrisks. It is time to put money behind the range of large andsmall-scale disaster reduction measures available. Nationalattention must move from making cyclone or earthquakeguidelines to developing economic and financial mechanismsfor reducing risks of disasters.For a fast growing country like India, such risk reductionmeasures are especially important as economics is a centralaspect of risk reduction measures. Widespread povertymakes people more vulnerable to the widest range ofhazards: floods, cyclones, droughts and industrial crises. 1Rapid economic growth in cities and key sectors alsolikewise exposes people to disaster risks such as highwayscausing flooding and in turn damaging rich farmland andstanding crops. India has witnessed rapid economic growthand undertaken many poverty reduction measures. Now isthe time the Union finance minister to allocate additionalresources for direct disaster risk reduction measures. The2008 Union Budget need to apportion resources forlivelihood continuity after disasters and protect productiveassets—especially those of the poorer sections. Diversificationof income sources is foremost to poor people’s recoveryfrom disasters. This is very much evident and is reflectedin the recovery work of SEWA in West India, whereinnearly 20,000 poor victims (of 2001 earthquake) got a newlease of life. More recently, the 2004 Tsunami victims(nearly 12,000 in number and they belong to South IndianFederation of Fishermen Societies (SIFFS)) show thestrategic importance income diversification. Similar livelihoodprotection work of DHAN Foundation in central andcoastal South India shows that disaster victims reduce theirrisks and accelerate their sources of income by building awell-protected asset base, saving more and regularly,borrowing thoughtfully and using formal or informal socialsafety nets. Increasing income invariably leads to, thoughnot always fully, reduced vulnerability. This aspect isrecently reflected in an evaluation undertaken by AIDMI ofTHE INDIA ECONOMY REVIEW225

Reliving TheGreatIndianDreaman international NGO, Christian Aid, where eighteenTsunami recovery partners in South India highlighted theneed for various livelihood development interventions. Fororganizations such as DHAN, SEWA, SIFFS, and others,finding financial resources to sustain this livelihood protectionprocess is a struggle. The banksdo not lend for recovery or riskreduction measures and interventions.So far, public funds areunavailable for this purpose tocitizens, public institutions andprivate bodies. The Union Budgetfor 2008 may take the first steptowards making a Livelihood Protection Fund for DisasterRisk Reduction. AIDMI’s decade old experience (itsLivelihood Relief Fund is functional in five states) ofreaching out to now 22,000 victims (earthquake, riot,cyclone, flood, Tsunami and drought affected) has nowshown that protected livelihoods indeed protect lives. InA local NGO workingwith coastal farmersfound that a mere rise inincome was not enoughto reduce all disaster risksfact, possession of assets, however small that might be,always ensures renewed incentives and optimism, inaddition to the risk management and reduction options.Recovery work of Swayam Shikshan Prayog in coastal SouthIndia also underscores the need to have many options inorder to reduce and manage risks.India’s national efforts have onlynow started addressing this issue andin my opinion, Union Budget 2008can accelerate this specific process.Also, mere allocation of resourcesfor aam aadmi, does not alwaysentail an eventual safety fromdisaster risks. The Common Minimum Programme of theUnited Progressive Alliance is committed to making aamaadmi safer and in the light of this, Union Budget 2008must realise this commitment. The 2004 Tsunami was agood example for this. Although, the fisher folk in coastalTamil Nadu are a relatively more prosperous lot than the226 THE IIPM THINK TANK

A N INCLUSIVE INTENTother coastal communities such as Irula tribes, dalits, orcasual fish harbour labourers, they were the first to beaffected, were the most adversely affected, and are takingthe longest to recover. Economic growth alone will notmake individuals or economies safer.A local NGO working with coastalfarmers, ToFARM, also foundthrough its activities that rise inincome was not enough to reducedisaster risk for coastal farmers.The rising middle class in citiesbecomes complacent about preparedness.Reducing risk is not on their agenda. This complacencyis also spreading across the growing businesses,large and small, in India. The new Indian middle classand the growing businesses do not realise that assetsthemselves cannot and donot protect againsthazards and all assetshave to be protected.India’s large-scale investmentthrough the JawaharlalNehru Urban RenewalMission (JNURM) aswell as private sectorbuilders in cities mustrealise that bridges, roads,or sewerage systems needto be adequately protected.2 When cities borrowmoney to build roads, when businesses attract investmentsto expand Special Economic Zones, when a CEObuys his second home to earn rental income, they areexposing themselves to many disaster risks. Floods,earthquakes and cyclones can damage or wipe out theseassets, not to mention any expected returns upon them.Not only is the asset lost, but loans often remain unpaid.It is high time that the state focuses upon the safety of itsgrowing asset base and allocates additional resources inthe union budgets for asset protection and replacementfinancing. In doing so, the role of insurance companieswill be crucial. Not only do NGOs and businesses needsuch resources, even local panchayats and ward committeesas well need resources in order that they can reduceEmpirical research evidencepoint out that economicgrowth alone willnot make individuals oreconomies saferrisks. A study of Panchayats in Gujarat, Orissa, Tamil Naduand Kerala conducted by Gandhigram University (andsupported by Action Aid, an international NGO), indicatedthe demand for resources to reduce risks at panchayat level.A similar demand emerged at thenational consultation launched byPREPARE, a coastal NGO withover two decades of experience inworking with disaster victim communities,in Chennai last month.Cities such as Kochi and Trivandrumin Kerala and Ahmedabadand Surat in Gujarat, implementing the Urban EarthquakeVulnerability Reduction Programme of the Government ofIndia and UNDP (with European Commission support)express similar need for asset protection resources. 3 Afinancial mechanism willhave to be worked out tosupport such risk reductionmeasures. Nevertheless,it is about time suchfinancing is made availableto the state and cityauthorities in the publicsector and small businessesand large corporationsin the private sector.Such an initiative willneed a piloting periodbefore up-scaling. Anyeffort to raise GDP, alleviate poverty, and asset creationneeds to consider the hazard context if India wishes todouble its trillion-dollar economy in the next five years. Inthis regard, the Union Budget 2008 can surely set thedirection for safer growth.Endnotes1AIDMI. (2007, August). Understanding the 2007Floods in South Asia. southasiadisasters.net; Issue 342IEG/World Bank. (2006). Hazards of Nature, Risks toDevelopment. Washington, DC: IBRD.3Ministry of Home Affairs. (2003). Urban EarthquakeVulnerability Reduction Programme. Programme Document.New Delhi: GoI/MHA and UNDP.THE INDIA ECONOMY REVIEW227

Reliving TheGreatIndianDreamIndia’s SecurityExpenditure– An OutlineAnalysisRahul BhonsleEditor, South Asia Security Trends“Adequate defence has been the catchword of every militarist forcenturies”.Frank B. KelloggIntroductionIndia is a relatively new nation state, though India as an ideahas existed over the past five millenniums. Thus nationalism isa strong strain in the country. The manifestations of thispredisposition are evident in the pride demonstrated byIndians be it at home or abroad on symbols of statehood, thenational flag or the cricket team. While being a largelypositive trend, this has adverse spin offs in the rational field ofdefence and economics. At the micro level if the governmentcannot raise the price of petrol and diesel in the country dueto fears of a popular upsurge which partly is politicallymotivated, at the macro plane questioning expenditure ondefence and security could be viewed as anti national. Thusdefence economics has assumed, “holy cow” status in thecountry. 1 More over national security in India is the exclusiverepository of the state, thereby preventing a rational debate incivil society and academic institutions which are the truedrivers of intellectual gurgitations in a modern democracy.The difficulties increase further due to diverse nature of internaland external threats faced by the country ranging fromnuclear and missile coercion by China and Pakistan tointernal dangers of Naxalism and terrorism. Given the eternaldebate between defence and development, adequacy ofnational resources for defence will always remain disputed.Moreover lack of transparency on defence and security issueswould imply that apart from reports by agencies as theComptroller and Auditor General, there is hardly any auditon defence expenditure. This too is a post dated survey;thereby corrective actions are generally retributive andreactive in nature rather than contributing to real timecorrectives. Yet as this article will attempt to denote, a debateon defence budgeting can be conducted rationally without anyfears of compromising national security. An attempt is thusbeing made to carry out a basic review of defence and securityexpenditure in India and suggest measures to impart greateroptimality in the context of available resources and thegeneral security environment in the sub-continent. TheIndian approach to budgeting defence security, a criticaldeterminant of national prosperity, is peculiar. In many waysit appears to be ad hoc. A popular news story may indicate228 THE IIPM THINK TANK

A N INCLUSIVE INTENThow the system works. Mr. Pranab Mukherjee, India’sExternal Affairs Minister and a recent awardee of theprestigious Padma Vibhushan is one of the most experiencedadministrators in the country.Having donned many ministerialportfolios in the UnionMinistry, Mr.Mukherjeeindicated how as a defenceminister his previous tenure asfinance minister helped him ingarnering greater resources for defence. Thus knowing thatthe finance ministry routinely scaled down demands, Mr.Mukherjee confessed that he always projected an inflatedfigure and did not relent even when the Prime Minister wascalled upon to mediate by the Finance Minister, Mr.Chidambaram. “I am an old cat of the finance ministry andwill take the fat rat with me for my new ministry” was thendefence ministers jocular retort. 2 In many ways this highlightsthe system or lack of it in our defence budgeting. While thereis a five year defence plan, (latest figures indicate $ 142 billion11 th five year plan allocatednearly $142 billion for defencerequirements. It has beenpegged at 2.56 % of GDPallocated for defence sector in the 11 th Plan, over 2007-2012time period), the rationale for the same is based on percentageof GDP. Thus defence allotments have been pegged at2.56 percent of the GDP. Defence ministry officials who hadprojected demand at minimum three percent of the GDPclaimed a shortfall of $ 22 billion or $ 4 billion (ApproximatelyRs.16,000 Crore) per year. 3 This could be considered a verylarge deficit given that the capital account budget each year isapproximately Rs.32,000 Crore. However possibly as noconcrete rationale was provided apart from the proverbialone, “if you need a pistol, ask for a double barrelled gun”, thefinance ministry felt well within its rights to reject this demand.Moreover a major security need of the country today isinternal. This does not fall within the ambit of the defencebudget and is catered for in the budget of the Ministry ofHome Affairs. This is an omnibus ministry, the charter ofwhich is varying from internal security to, “Implementation ofthe provisions of the Constitution relating to Official Languageand the provisions of the Official Languages Act,1963.” 4 Under these circumstances, tracking the budget forauditing sufficiency appears quite an impossible task.There are however various determinants of a nation’sdefence requirement based upon key environmental issues.First and foremost are aspirations of the people. These bynow appear quite clear; it is development, growth, eliminationof poverty and creation of prosperity. In a realist securityworld view, attaining these aims would be confronted withmany challenges. Thus expenditureon defence and security is aninevitable facet of a states routinefunctioning. The quantum ofallotments will be dependent onissues such as the level of confrontationor cooperation prevailingin the neighbourhood, domestic law and order andmilitancy situation, impact of global factors such as terrorism,international military obligations, protection of nationalresources particularly those that are beyond the land boundariessuch as the marine and exclusive economic zones andpublic perception of defence needs. 5 The last is dependentupon mass emotional response which varies in direct proportionto the proximity of an event. Thus immediately afterOperation Vijay in Kargil (in 1999), there was a popularupsurge for arming and equipping the troops which is slowlyTHE INDIA ECONOMY REVIEW229

Reliving TheGreatIndianDreamwaning as the years go by. Such a situation is not peculiar toIndia but is prevalent in all democracies. For instance, in theUnited States, despite profligacy in defence spending with thebudget touching $ 500 billion, the President still has to fightfor accretions for the war effort in Iraq and Afghanistantoday, whereas in the immediate after math of 9/11, the USCongress was more than willing to allot funds for defence. 6What then is the ideal processfor defence budgeting? Thisshould generally be based on aLong Term Perspective Plan(LTIPP) which should run overseveral plan periods. Presently,the perspective plan touches theyears from 2007 to 2022 or in other words, the 11 th to 13 th FiveYear plans. There are grounds to believe that such a longterm process is under way in India, though its efficacy remainsto be tested. The LTIPP is required to be prepared by theservices and approved by the Ministry of Finance. 7 Defenceacquisitions are made based on planning at three differenttime levels, Long Term Integrated Perspective Plan (LTIPP),which is generally prepared for a period of 15 years, the FiveDefence budgeting mustbe based on a 'Long TermPerspective Plan', running overseveral five-year plan periodsYear Plans and the yearly defence budget. The LTIPPprovides the framework for long term defence acquisitions bydesignating the structure of forces, levels at which these willbe maintained and profile of various major equipment. FiveYear Defence Plans draw from the LTIPP to facilitateacquisitions for achieving desired capabilities within the giventime frame. A top-down-top, intra-services process is followedwhich is now beingcoordinated by HeadquartersIntegrated Defence Staff. Theyearly defence budget has acapital account which caters fordefence acquisitions. This isgenerally in tune with the Fiveyear plans and practically no major capital acquisitions aremade on a yearly basis unless there are critical emergencies. 8Thus defence budgeting is made within this broad framework.Let us focus upon the five year plans now. Each defence fiveyear plan has a key objective. The focus of the Eleventh planis to bring parity in spending between revenue that is pay,allowances, stores and equipment upkeep and capital accountor purchase of defence equipment bringing the ratio of230 THE IIPM THINK TANK

A N INCLUSIVE INTENTcapital: revenue expenditure to 50:50 as against 40:60 atpresent, with the goal of 65:35 ratio planned for the future.The country’s defence budget is said to be growing betweennine to 9.5 percent in real terms over the past seven years andcapital expenditure has gone up from 25 to 42 percent in thecurrent fiscal. The Tenth Plan targets for making up deficienciesand voids and inducting suitable replacements of obsoleteequipment and modernizing assets were not fully met dueto a shortfall of resources. These are proposed to be made upin the Eleventh Plan. 9 Thus a follow up Plan invariably carriesa back log of the previous one.The third step is the yearlydefence budgets. The StockholmInternational Peace ResearchInstitute suggests that defencebudget should include allexpenditure on forces includingpay, pension, social services,research and development and even aid to allied countries.India is facing threat of militancy in over 125 of its 602districts (20 percent), thus amount spent on these areas couldalso be placed in the security if not defence category. A backof the envelope calculation of some of the items not includedin the defence component of the Indian budget for 2006–07would reveal that total allocations could be as high as Rs1,20,334 Crore, (26 percent more) and above four percent ofthe GDP, if the defence related heads or portions of otherheads as given below are included in the defence budget (AllFigures in Crore) 10 :-1. Defence Budget (Main) - 89, 0000.002. Defence Pensions - 13,224.003. Defence Ministry including JAKLI - 1,899.004. Nuclear Energy - 1,700.005. Para Military Forces - 14,500.006. Bureau of Civil Aviation Security - 11.007. Total - 1,20,334.00Let us do a similar exercise for the Defence Budget for2007-08. Some of the heads which can be part of the defencebudget are the Rs. 3,186 Crore spent on Defence Researchand Development, Rs.19,000 Crore on the police forces,Rs.4,500 Crore budget of the Department of Atomic Energywhich also includes special projects, Rs.4,000 Crore spent onthe Department of Space. Another facet of an omnibussecurity budget is expenditure incurred by the Ministry ofDefence cooperation andassistance compete oftenpoorly with other Ministry ofExternal Affairs' led initiativesExternal Affairs which can enhance national security. India’sdefence minister, Mr.A.K.Antony identified the country’snew security paradigm as, “a mix of security cooperation,developing strategic partnerships and deterrence” in hisspeech to the Unified Commanders in New Delhi on 18 June.11Thus involving another major cog in the giant governmentwheel, the Ministry of External Affairs. How much thisministry is allotting to defence and security cooperationremains a mystery. Thus as one analyst has indicated, “Defencecooperation and assistance activities and programmesand initiatives compete oftenpoorly with other MEA ledinitiatives”. 12 Assistance givenby the Ministry of ExternalAffairs to foreign governmentsof approximately Rs.1,750Crore and various other headsmay also be a part of thedefence budget. 13 Given the expenditure on police forces bystates, the overall security budget could well touchRs.1,75,000 to Rs.2,00,000 Crore or $ 40 to $ 50 billion. Thesum total of the argument above is the need for a holisticTHE INDIA ECONOMY REVIEW231

Reliving TheGreatIndianDreamanalysis and inclusion of all components that go to add tonational security against an audit of pay offs. In some waysthe results could be startling. For instance it is commonlybelieved that India is one of the biggest victims of terrorismwith over 3000 killed both civilian and military in the year2007. The issue is flagged whencompared with figures ofapproximately 4,400 Americansoldiers killed in Iraq andAfghanistan since 2001. 14 Whilesuch comparisons are no doubtodious, these have been carriedout primarily to highlight the need for a thorough cost benefitanalysis of defence expenditure in the country. Given thebroad assumption of possibility of conflict in the years ahead,the country has no option but to continue to spend ondefence. This further leads to the need for greater efficienciesin planning and executing our defence and security budget.Some recommendations towards this would be in order. Thenational security threat environment today is asymmetric andhas a 360 degree profile with internal and external dimension.There is a need for a holistic analysis of this situation andallocate resources for defence and security accordingly. Thetrends in our security threats are reasonably clear. With theboundary issue with both China and Pakistan unresolved andmajor perception differences with the latter on Kashmir andIn defence sector, Indiastill continues to be largelydependent upon externalresources for procurementterrorism, there is unlikely to be a major shift in appreciationof our external threats. On the other hand rapid accretion incapabilities undertaken by both nations denotes that Indiatoo would have to undertake corresponding accruals leadingto what some analysts fear an arms race in the Sub Continent.Some signs of the same are already evident with both Pakistanand India being the top five arms importers in the world in2006. 15 On the other hand internal threats are not receding.Social conflict arises from two factors, economic gap betweenthe haves and the have nots and a rise in awareness of thisdifference in the latter. In India the phenomenon is mostnoticeable. Sadly we continue to have over 300 million livingat one dollar a day, a figure which is equal to that in SubSaharan Africa. On the other hand overall GDP growth issurging at 9.6 percent. Another perspective will highlight thisdivide. The growth in the agricultural sector continues tolanguish at 3.8 percent. 16 With approximately 70 percent ofthe population engaged in this slow growth sector, the richpoor divide will continue. Yet knowledge of this inequity inthe mass of population, leading to social conflict in variousforms, be it naxalism, tribalism or a battle for ethnic identityis indeed very high.A defence and security planning and budgeting act may beone way of standardising theprocess by bringing togethervaried heads to coordinatesecurity needs of the countryholistically. There are a numberof countries as France which hasa Law on Military Planning,while Canada has a Strategy 2020 which charts the guidelinesfor the military as well as the government to provide fordefence. 17 This also facilitates the defence industry both localand multinational to identify the projections in the yearsahead and plan deployment of resources.This brings up the next issue in budgeting which when seensuperficially may not seem directly related to budgeting but isan important component of overall defence planning, that isan indigenous industry base. India’s much touted economicand industrial growth is pygmied in the field of defenceindustry where the country continues to be largely dependentfor procurements from external resources. This has resultedin distortions in budgeting as foreign suppliers can frequentlyresort to arms twisting by raising prices of critical items. A232 THE IIPM THINK TANK

A N INCLUSIVE INTENTcase in point is the purchase of the aircraft carrier, Gorshkovfrom Russia. Moscow has sought additional money to thetune of $ 650 million for the carrier which is as much as 6.5percent of the countries yearly capital budget of approximately$ 10 billion. 18 A national vendor may not have the luxury ofsuch a steep rise in price upsetting the MoF's calculations.Coordination of procurements in the government defenceand security sector is another important facet of defencebudgeting. While the armed forces particularly the armyrequires equipment which is similar to that of the paramilitary forces, the procurement process and agencies aredifferent. All defence procurements are made by the DefenceAcquisition Council headed by the Defence Minister, whilepara military and police procure independently underrespective police authorities. As policing is a state subject inIndia, frequently state police tend to acquire weapons andequipment required independently through a local, nationalor even a global tender. With a rise in the threat of Naxalism,it was seen that many state police forces placed tenders foracquiring equipment such asnight vision binoculars which thearmy had procured recently.Similarly the defence ministry isenvisaging buying over 300 lighthelicopters. The para militaryforces as the Border SecurityForce and the Assam Rifles also need this critical resource, bycombining the same economy of scale in procurement andbetter bargaining leverage with the provider can be achieved.In conclusion it can be said that the realist security paradigmcombined with post cold war international détente wouldindicate that international pressures and overall economicconstraints in the Indian Sub-continent makes a regionalconflict unlikely in the future, yet preparation for the same isunavoidable, thereby forcing developing countries as India tospend on defence. The internal security environment in thecountry would also reveal that policing will not be restrictedto crime and law and order but would have to combat armedinsurgency and terrorism. Expenditure on security is thusinevitable. At the same time, limitation of resources wouldimply a planned approach to defence budgeting to maintainthe, “guns-butter” balance. A holistic internal-externalsecurity assessment, coordinated budgeting and procurementswhich can be assisted by greater transparency, developmentof indigenous defence industry and an act of parliamentwhich will force the country’s defence and security managersto co-jointly prepare a long term strategic plan as present inFrance and other developed countries are some of themeasures suggested herein.End Notes1Katoch, Dr Rajen, Talk at the Institute for Defence Studiesand Analyses. 19 February 2006.2Kapoor, Coomi. Inside Track. Of cats, rats and rabbits. TheSunday Express. 3 February 2008. New Delhi. P 7.3Raghuvanshi, Vivek. India to Spend More. Defense News.11September 2006.4Role of Ministry of Home Affairs India. www.mha.nic.in.http://mha.nic.in/about_mha.htm5Katoch, Dr Rajen, Note 1.6Congress Submits Final, $542 Billion Budget Bill; WhiteHouse Fears Eased. Accessed http://www.foxnews.com/story/0,2933,317045,00.html.716th Report on StandingCommittee on Defence (2006-07). Lok Sabha Secretariat. NewDelhi. 2007. p 46.8Research Paper, “DefencePolicy, Budgeting and AcquisitionProcess” Security-risks.com. New Delhi9The Hindu Report. The Hindu. New Delhi. 28 July 2006. p15.10Ministry of Finance Budget Documents 2006-07.11MOD India Press Release, 18 June 2006. mod.nic.in12Muthanna, K A. Enabling Military to Military CooperationAs a Foreign Policy Tool Options for India. KnowledgeWorld. 2006. New Delhi. P 139.13Ministry of Finance Budget Documents 2007-08.14Faces of the Fallen. Accessed at http://projects.washingtonpost.com/fallen/15Arms Trade Dips But Still Brisk in 2006. Accessed at http://www.armscontrol.org/act/2007_09/ArmsTrade.asp16Subramaniam, Kandula. Revised Data says growth nine-pluslast year___”. Indian Express 1February 2008. New Delhi. P 1.17Katoch, Dr Rajen, Note 1.18Chill in Indo-Russian defenceties? Accessed at http://timesofindia.indiatimes.com/articleshow/2593187.cmsPolicing is a state subjectand accordingly state policetend to acquire weapons andequipment independentlyTHE INDIA ECONOMY REVIEW233

Reliving TheGreatIndianDreamGrowth Not By GDP Alone;Need For Paradigm ShiftS. P. SinghSulabh International Social Service Organisation, New Delhi234 THE IIPM THINK TANK

A N INCLUSIVE INTENT“How can we organise a meeting of G-8 for two andhalf days and invite the G-5 for lunch on Day 3?”Nicolas Sarkozy, French PresidentGandhiji was fondly remembered at the World EconomicForum meeting at Davos, Switzerland, last month whenthe representatives of Global Anti-poverty Alliance quotedBapu as saying that there is enough for our need but notenough for our greed. The representative said the moneythat Europeans spend on looking after their dogs and catsare enough to give three meals a day to all the people in 54inland African countries.The veritable meltdown in the thrity-share benchmarkBombay stock market and other bourses in the countriesgive us enough reason to stop in the high-speedeconomic growth track of close to 9% and ponder over how ithappened. We were told that in seven days (January 17 th -23 rd )investors lost Rs. 15 lakh crore which is 2.2 times India’s budgetallocations and also enough to buy 10.75 crore Tata Nano carsor feed rice to the whole world for two and a half years!!However notional this figure and wild these guesses, it gives theimpression that if this had not happened, there would not havebeen no hungry man in the world for two and half years despitecrop failures, drought and war. Human ingenuity is simplyamazing!! Among the much quoted causes for the crash is thesub prime home loan default in the US and also a slowdown itseconomy. In simpler terms, it means that the Americans whohad borrowed money to build or purchase houses withoutcollaterals defaulted and we have lost money in India, presumablyto pay for them. Or, the US spending has increased on warand other non productive uses, resulting in economic slowdown.And we have to suffer for that bad decision. What astrange logic! But it has not happened for the first time.Archduke Franz Ferdinand of Austria was assassinated inSarajevo, Bosnia, on June 28 th in 1914 and Indian soldiers hadto fight in France and Flanders, and on the Western Front or inwhat was then Mesopolomia. Hitler killed Jews in Germanyand Palestinians were thrown out of their homes to create Israelfor the European Jews. In both cases, it was imperialism,economic and colonial. Yet another analogy that comes to mindis the East Asia Crisis of late 1990s. When Thai bahat collapsedon July 2, 1997, it was said to be a market correction as is toldThe present global crisis is caused partly by the US economicculture of extravagance and wastefulness.now in the Dalal Street. But, later the crisis spread fast and hitMalaysia, Korea, the Philippines and Indonesia. It also partlyspread to Asia, Russia and Latin America where share marketfell sharply to become the greatest economic crash after GreatDepression. The stock market crash in India and other developingcountries happened because we accepted the Westernsolutions for our problems. The most important cause of thecrisis was, however, the mistaken policies of the affectedcountries themselves which uncritically accepted the marketliberation policy which together is called Washington Consensusevolved by the IMF on 19 th Street, the World Bank on the18 th Street and US Treasury on 15 th Street. They had recommendedthe globalization-based free trade policy, liberalization,privatization and deregulation, leaving the poor on the margins.And when the Washington Consensus apologists were told ofthe consequences of their policy in East Asia, they dismissed it,saying Asian institutions were rotten, their government.corrupt and more of the Washington Consensus solutions wereneeded to solve problems. This policy also included freeconvertibility; free flow of hot money (short term speculativedollar) into the bourses and the problem will take care of itself.“Leave it to the invisible hand of the market and every thingwill be OK”, they said. Asian countries did that in 1997 andthey lost all their savings and devalued currencies just as wehave lost close to Rs. 15 lakh crore in seven days to possiblyAmerica defaulter on home loans. The horror of globalization,a vapid nostrum of capitalism, is best demonstrated in theexpanding poverty and growing social discontent.Gandhism Is A Win-Win GameThis happens when weak economies are hitched to strongeconomies and external solutions (like Washington Consensus)are adopted for country-specific problems. India is keen onjumping into the US bandwagons without being anywhere neartheir GDP level of $ 9 trillion (against India’s $ I trillion) withonly one-third of India’s population to feed. Let this be notedthat China is not as much affected by the meltdown because theTHE INDIA ECONOMY REVIEW235

Reliving TheGreatIndianDreamexperience high economic growth rates.In reaction to the Washington Consensus policy, many LatinAmerican countries turned left. The communist have won, insome cases with a significant majority; in Brazil (with PresidentInacio Dula da Silva in 2002), Argentina (with PresidentNestor Kirchner in 2003), Uruguay (with President TabareVasquez in 2004), the Dominican Republic (with PresidentLeonel Fernandez in 2004), Bolivia (with President EvoMorales in 2005) and Chile (with President Mischelle Bacheletin 2006). President Hugo Chavez of Venezuela has been inpower for quite some time now, and keeps winning elections.So much for Washington Consensus. Now Let us see how EastAsian countries have recovered from the crisis which would bea lesson for us. What East Asian countries did was to saveheavily and invest, stop hot money, allow selective role of theGovernment at the national and local levels, and help set upenterprises. And, they have heavily invested in social sector topromote educational services and skills in various fields whileIndia has failed in social sector and accepted the Westernnostrum for economic growth.While we have every reason to celebrate the high growth incommunist Government allowed flow of foreign investmentlargely in projects and strictly stopped hot money in bourses.And, China has much higher foreign investment than in India,but they have no stock market crash. We had Enron investmentin power project and the Enron had failed and its Chairman putNow that power is shifting from the West to the East,organizations like UN Security Council and G-8 have to bereconstituted. China is growing at 11.5%, India at 9% andBrazil at 8% while the growth in the West is falling below3%. Oil prices at $ 100 a barrel has given lots of money tothe underdeveloped countries including Nigeria and Venezuela,upsetting the balance of power and prosperity.Their saving rate is 10% of the GDP against China’s 50%and India’s 35% And to make up the consumption deficitand bad economic planning, Americans borrow heavily forthe sub prime borrowers to default and cause a global crisis.This is called the “Liars Loan” when borrowers lie to borrowmoney and the banks are complacent. American cultureis “spend, spend and spend”- and hell with the world. Thisis not Gandhian.in jail for life but India has not lost anything because the factoryis here and it is being energized again. No wonder capitalistIndia is a rolling in dust while Communist China continues tothe Indian economy but no country can be called a progressivewhich has endemic poverty with more than half the population,or the total population of Europe, living off Rs. 15 a day. India’ssocial record also has been consistently bad. It ranks a lowly126th in the UN Human Development Index and has amongthe highest rates of child malnutrition and maternal mortality inthe world, according to last month’s UNICEF report. TheWorld Hunger Index has rated India among the ‘most hungry’nations, just above Ethopia and Bangladesh. Other socialindices are equally depressing. Children begging for food,young women in letters struggling to hide her womanhood andthe shelter less people don’t entitle us to talk big about our236 THE IIPM THINK TANK

A N INCLUSIVE INTENTachievements. A survey of centre for Media Studies shows that80% of all Indians pay petty bribes totaling a whopping $4.8billion for services they are entitled to. So if the poor aredeprived, blame not the Ambanis or Narayana Murthys but theleadership. Prime Minister Rajiv Gandhi said in 1985 inKalahandi, Orissa, that out of the one rupee, only 17 paisereach the people. His son Rahul said in Bundelkhand the otherday that only 5 paise reach the people; the rest is stolen. This isthe level of corruption in the country which hurts growth.And, to say that poverty reduction can best be achieved byliberalization alone, is a flawed argument. Globalisation andliberalisation are fashionable words to describe a simplesituation like abolishing trade barriers, deregulation of economyand abolishing the Government. role in economy. And,thus, creating a free fall global situation in which the poor andthe rich will compete on unequal terms. For instance, under thenew WTO regime, Bangladesh cannot export fabrics to the USor Europe, which it has in surplus, butit is allowed to export jet enginewhich most Bangladeshis have yet tosee. This is only one part of the story;if we add the subsidy part and othermeasures suggested at the DohaDevelopment Round, one will findthat globalization social developmentis imperialism by another means.Human IndexThe social development is notmeasured in terms of GNP, or percapita income as is the practice in thecapitalist system. When Mr. Ambani’sincome is added up to those ofthe beggars to arrive at an averageincome, the starving man may befound richer the richest any man of your town. This is a flawedmeasuring yard. Pakistan’s noted economist, Mahabub-ul-Haq.(Who has authored UN Development Report), says that therehas to be human index to measure development. This indexincludes health, education, sanitation, water supply and thatindefinable situation, called human happiness. Once the humanindex of growth is good, GNP may or may not be good but thesociety will be happy and live well.Nobel Laureate Amartya Sen says that there is no inequalityexcept inequality in education. The educational gap is the onlygap that needs to be bridged in India to be able to set up a justsociety. Once a child, especially the girl child, is given education,rest of things will follow—not the education given in our“Why can’t the people in the West leave us alone to dowrong things that we want to do instead of dictating US inthe flawed belief of their infallibility? However we will listento the us because it will continue to be the global leader itis a knowledge–driven and innovative society.”Mohammad Mahatir, Former President of Malaysiaschools that only strengthens social prejudices but the educationbased on science and mathematics, the education that willmake the young mind wonder at the falling apple. Once this isdone, social prejudices will collapse under their own weight. Allover the world it is taken for granted thateducational achievement and economicsuccess are closely linked that thestruggle to raise a nation’s livingstandards is fought first in classrooms.In September 2000, some 150 heads ofstate and Government accepted theMillennium Development Goals in NewYork pledging to cut poverty in half bythe 2015. They clearly said that absolutepoverty cannot be abolished withoutsocial developments. Social developmententails fairness, when the share ofthe poor in the economic growth grows,and that the rich and the poor bothshare in the pains of society in times ofcrisis. The Washington ConsensusInterdependence is not loss of independence or sovereignty.We hold the global system together by interdependence.Self-interest is the glue that holds us together anddoes not separate us.policies paid little attention to issues of distribution or “fairness.”If pressed, many of its proponents would argue that thebest way to help the poor is to make the economy grow. TheyTHE INDIA ECONOMY REVIEW237

Reliving TheGreatIndianDreambelieve in trickle-down economics. This says the benefits of thegrowth trickle down even to the poor. Trickle-down economicshas been an article of faith for the West.Trickledown TheoryPoverty grew in the nineteenth century England even thoughthe country as a whole prospered. Growth in America in the1980s provided the most recent dramatic example: while theeconomy grew, those at the bottom saw their real incomesdecline. The Clinton administration had argued strongly againstthe trickle-down economics; it believed that there had to beactive programs to help the poor. While it is true that sustainedreductions in poverty cannot be attained without robusteconomic growth, the converseis not true: growth neednot benefit all. It is not truethat a rising tide lifts all boats.Sometimes, a quickly risingtide, especially when accompaniedby a storm, dashes weaker boats against the shore, smashingthem to smithereens, says Nobel Laureate Joseph Stigliz. Inspite of the obvious problems confronting trickle-down economics,it has however, a good intellectual pedigree. NobelPrize winner Arthur Lewis, has argued that inequality was goodfor development and economic growth, sincethe rich save more than the poor, and the keyto growth was capital accumulation.Another Nobel Prize winner, SimonKuznets, has argued thatwhile in the initial stagesof developmentinequality increased,Trickle-down economics hasobvious problems. However, ithas a good intellectual pedigreelater on the trend was reversed. Growth gives money to spendon social justice programmes. Therefore, growth and socialjustice are not mutually exclusive. The Soviet Union could notstrike a right balance between the two and robbed the rich topay the poor. The system collapsed eventually. Understandingthe choices requires understanding the causes and nature ofpoverty. It is not that the poor are lazy; they often work harder,with longer hours, than those who are far better off. Many arecaught in a series of vicious spirals: lack of food leads to illhealth, which limits their earning ability, leading to still poorerhealth. Barely surviving, they cannot send their children toschool, and without an education, their children are condemnedto a life of poverty which is passed from one generationto another.While Rome Burns!!Mr. Thandika Mkandawire,Director of the Geneva-basedUN Research Institute forsocial Development, said on February 3 last (as reported in TheHindu) that while India has proved a trade-off betweendemocracy and economic growth what it has to do now is torelate growth with social development………trickle-down willnot have effect on the poor; social growth will not happenautomatically (as suggested by trickle-down theorists) it has tobe made to happen”, he said The National Rural EmploymentGuarantee Programs is a major initiative towards socialdevelopment, but the programme is ridden with corruption, atpanchayat and block levels. As a result of failure on the socialdevelopment front, 17,060 farmers committed suicide in oneyear of which 4,453 were in Maharashtra alone according to theNational Crime Records Bureau report 2006 (as reported inThe Hindu on January 31). But who are we say that UnionAgriculture Minister Shared Pawar is playing lyre (or cricket)while the farmers burn, as Nero did before history began!!Gandhian EconomicsGandhiji recommended cottage industries and small andintermediate technologies to create jobs at the village level buthe never opposed large industries as long as they did not upsetthe rural economy. To argue that Gandhiji opposed industrializationis wrong; yes his focus was on the poor. Gandhiji hadannounced award for the man who could innovate Charkha. Inwhich case, Gandhi said that as long as the poor remained the238THEIIPM ITHINK TANK

A N INCLUSIVE INTENTfocus of development, it is all right. For that matter JosephStiglitz, American Nobel Prize winner and one-time WorldBank Chief Economist, and now an apologist of social development,is a great Gandhian, so also Amartya Sen. Anything thathelps the poor and the disenfranchised is Gandhian. This is theonly way to economic growth.As Gandhiji said, the poor of the world cannot be helped bymass production, only production by the masses. The system ofproduction by the masses mobilizes the priceless commonresources. The technology of mass production is inherentlyviolent, ecologically damaging, self-defeating in terms of"Lift society from top and only those on the top will belifted and lift it from the bottom and the entire society willbe lifted. Technology liberates and connects the Sulabh’sindigenous technologies have liberated scavengers and connectedthem to the mainstream of society."Dr. Bindeshwar Pathak, Sulabh International Social ServiceOrganisationnon-renewable resources. The technology of production by themasses, making use of the best of modern knowledge andexperience, is conducive to decentralization, compatible withecology, gentle in its use of scarce resources and designed toserve man instead of making him the servant of machines. Thisintermediate technology is vastlysuperior to the primitive technologyof bygone ages but simpler,cheaper, and freer than thesuper-technology of the rich.One can also call it self-helptechnology, or people’s technology– technology to which everybody can acquire and which isnot reserved to those already rich and powerful. It will alsoprotect the environment.Sulabh ModelIn this context the role of the Sulabh movement, which ispan-India attempt to ensure the social development of scavengersis relevant. Ironically, their income, on an average, may notbe less than the income of the absolute poor but their job isdegrading. These scavengers are the targets of the SulabhMovement. Dr. Bindeshwar Pathak, Sulabh Founder, hasalways believed that once the lifestyle of the lowest of the low israised, the other equally disadvantaged people will also benefitand the social development will take place. He has tried to solvethe scavenging problem technologically, economically, educationallyand culturally. He has set up centers for their trainingand education, especially one in New Delhi which is an Englishmediumschool for the children of scavenger families. Throughsocial upgradation programmes, he has succeeded in manyways, but a lot has to be done to completely abolish scavengingand set up a clean and happy society.Access to water for life and sanitation is a basic human needand a fundamental right but in India about 70 per cent of thepeople are denied access to adequate sanitation. Every yearless than half million children die as a result of diarrhea andother diseases caused by unclean water and poor sanitation.Every day million of people all over the country walk a considerabledistance to reach a secluded place for open air defection.This clubbed with ill health undermines productivity, loss ofmanpower and economic growth and trapping them in thecycles of poverty. This also results in heavy drop-outs andabsenteeism in the schools.Poverty has deepened because we have ignored Gandhiji whohad advised decision-makers: “If you are in doubt, think of thepoor man’s face – starving and helpless – and think of what bestcan reduce his poverty and helplessness. And you will arrive atright decisions.” This is the Gandhian GDP which has combinedsocial justice witheconomic growth. Gandhijirepeatedly said thatdevelopment is all about thepoor, the environment andvillage and not totaleconomic growth withoutsocial context. Gross Domestic Product, which is the aggregateincome of a nation, can never be equally divided among itspeople; not even unequally. We have to re-invent Gandhi andre-package Gandhism to ensure equitable growth, And, Sulabhis working to do that. As many as 27 heads of state, 113 cabinetministers, 74 of the top 100 companies’ CEOs and 2,300 NGOand other delegates, who attended Davos mega conference,unanimously supported the Gandhian principle of restrainingconsumption and establishing right relationship between ourgrowing demand and diminishing resources. This is what thesustainable development is all about, so also Gandhism.17,060 farmers committed suicidein one year of which 4,453 werein the state of MaharashtraTHE INDIA ECONOMY REVIEW239

Reliving TheGreatIndianDream240 THE IIPM THINK TANK

A N INCLUSIVE INTENTGovernment,Market andAgrarian Crisisin VidarbhaMadhumantiNational Centre for Advocacy Studies(NCAS),PuneTHE INDIA ECONOMY REVIEW241

Reliving TheGreatIndianDreamIntroductionRural employment growth hasdeclined from over two percent(annually) in early 1990s to 0.58percent by the year 2000Going by the present trends, rural India and farmers inparticular are in the midst of a crisis like situation. RuralIndia is faced with absolute decrease in agricultural incomes,purchasing power, stagnation in rural, especiallyagricultural employment, and rise in rural food insecurity,indebtedness and land alienation. Even the green revolutionbeneficiaries have long lost the days of prosperity, replacedby the daily battle for survival. Unable to continue with thebattle, some are taking their own lives. The worst affectedare the small, marginal farmers, sharecroppers, tenants andlaborers who form the vast Indian peasantry. Historically,the condition of these categories was pathetic. These actualtillers of the land, either, owners or tenants and sharecroppers,toiled long and hard for a yield that was barely enoughto provide two square meals a day. The country’s independencehad very little meaning for them for it did not herald abetter life. Though, policy makers were clearly aware thatthe only way their lives could be bettered, and agriculturalproduction could be increased, was by replacing the exploitativeagrarian structure and relations with egalitarian landdistribution. But there was no political will as the vestedinterests of the elite landowning class prevailed. Tenancyand land reforms remained only legislations, largely unimplementedin most parts of the country. Ironically though, itwas around this period that neighboring China and much ofEast Asia had already started implementing sweepingpro-poor agrarian land reforms.Thus without the requisite incentives or even resources forinvestment with actual tillers, agricultural production andproductivity continued to stagnate and the rural cultivatorscontinued in abject poverty. But with successive droughtsand the humiliation regarding food imports (especially PL480), 1 the policy makers were forced to look for a fast trackand easier way of increasing food grain production andachieving self-sufficiency. Therefore, in the 1960s and 70s‘green revolution’ was ushered. It was a technologicalpackage of HYV seeds, chemical pesticides, fertilizers,irrigation, and government-assured rates and procurement,242 THE IIPM THINK TANK

A N INCLUSIVE INTENTaimed at increasing production levels at the earliest. Withmassive injection of government funds and efforts, agriculturalgrowth escalated, especially in case of wheat and riceproduction and the country achieved self-sufficiency in foodgrains within a span of ten years. This formula was repeatedin several other areas of the country and on a variety ofcrops. Despite corruption and mismanagement, overflowinggodowns and government push ensured that the publicdistribution of food grains at subsidized prices made deepinroads into rural areas. This also provided a measure offood security to the rural poor.But as agriculture suddenly became highly profitablethrough the technological breakthrough, governmentsubsidies and assured markets, the non-farming gentry alsoshifted to agriculture in the select pockets. Thus without therequisite land reforms original cultivators, tenants, smallof the paper. Their plight is examined through the lens oftwo key themes of the reforms ie reliance on market mechanismand government withdrawal from control, interventionand expenditure. It is broadly based on the findings of arecently concluded research in six villages over threeRural development expenditurehas declined from 14.5 percentof the GDP (in 1985-86) to mere5.9 percent in 2000-01and marginal farmers were simultaneously pushed out. 2 Thisheightened existing rural inequalities and vulnerability ofthese groups within the pockets that benefited from thetechnological package and high production rates andbetween these regions and the rest of the country. The 1990seconomic reforms further changed the agrarian scenariowith the privatization push, cuts in government expenditure,its intervention and a general thrust on market freedom. It isroughly from this decade that the farmer suicides alsoassumed epidemic proportions. Though the Indian peasantryhas always remained impoverished and neglected,thousands of them ending their lives in desperation, wasunprecedented. Progressive farmer-centric groups allegethat Indian farmers have not been into greater trouble asdue to the reforms, and that huge indebtedness and plummetingreturns is killing them.The present condition of the average farmer and thehardships, especially the manner in which the poorestamongst them i.e. landless, marginal and small farmers,adivasis, dalits and women are impacted, is the central focusdistricts of Vidarbha, Maharashtra ie Yavatmal, Amravatiand Wardha, examining the agrarian crisis linked to globalizationand governance changes in the cotton growingsector. 3 Personal interviews with a large number of farmer’smovement activists, journalists and individuals consistentlyworking on the issue of farmer suicides have also contributedto the paper. 4The Indian Farmer Is In Dire Straits…From the 1990s, the contribution of agriculture to the GDPTHE INDIA ECONOMY REVIEW243

Reliving TheGreatIndianDreamAnnual per-capita food grainsabsorption of India’s poordecreased from 177 kg in 1991to 141.5 kg in 2002has sharply declined and now stands below 20 percent. Theaverage annual income of Indian farming households alsodeclined to Rs.25,380, while expenditure is Rs.33,240,calculated on the basis of average monthly per capitaexpenditure of Rs.503. 5 The percentage share of profits inpaddy and wheat has steadily declined and profitability incoarse cereals has become negative and over 40 percent offarmers are now want to quit agriculture. 6 Employmentgrowth in rural areas has declined from over two percentannually in early 1990s to 0.58 percent by 2000 while inagriculture the rates turned negative. 7 Therefore even thetwo percent growth rate in agriculture is nottranslating into increased employment levels.Rather in higher productivity regions like Punjab,adoption of labour displacing technologies andhi-tech farming are leading to sharp reduction inemployment generation. Moreover, with theerosion of community rights and ownership overcommon property resources, their degradation andthe dwindling small scale and cottage industriesand non farm employment has ensured thatcultivators are unable to move to alternativelivelihoods for sustenance. 8Reducing employment opportunities, agrarianprofitability and incomes also account for thedecline in purchasing power in rural India. Thispartly explains the reason for the rapidly decliningper capita food grains absorption i.e., cereals andpulses the most important component in the dietof India’s poor from 177 kg in 1991 to 141.5 kg percapita per annum in 2002. The per capita foodgrains production has also declined. Thus the ruralpoor are also facing severe food insecurity.Rural indebtedness is on the rise with approximatelyhalf the farming households under heavydebt. With plummeting farm incomes and purchasingpower, farmers are forced to borrow inorder toinvest in agriculture and also for meeting consumptionneeds. The problem of indebtedness is also the highest inthe most suicide hit regions. The number of total cultivatorshas sharply declined, while that of landless laborers hasincreased significantly. Among cultivators, the number ofmarginal farmers has gone up and the average landholdingper household has also declined, significanly. Yet, thepopulation dependent upon agriculture has hardly reducedas the sector continues to retain/support sixty percent of thetotal Indian population.Thus most of rural agrarian India of over 600 millionpeople is living on less and less. To survive they are forced tostick to cultivation which gives them such low returns that itbarely covers their production costs. With no capital of theirown to invest they are forced to take loans externally thatthey are unable to pay back so they again have to borrowand the vicious cycle continues. With no money to survive,they are also forced to reduce their food intake and other244 THE IIPM THINK TANK

A N INCLUSIVE INTENTessential consumption even though the rest of India isbooming economically.What Has The Government Done?The economic reforms led to a number of significant policychanges impacting the agrarian sector. The government hasmade deep cuts into its public expenditures in order tocurtail the fiscal deficit as a compulsory measure. Budgetcuts as investment and subsidies on rural development andsocial sectors like health and education, poverty alleviationand food subsidies were initiated. Reforms were initiated forliberalizing international trade in agriculture; trade barrierswere dropped for many crops to facilitate internationalmarket integration and with massive policy push promotingexport oriented agriculture.Financial sector reforms ensured that banks were nolonger bound by priority sector lending to agriculture andfixed interest rates. Policies towards privatization andderegulation in agriculture sector has ensured that privatesector provides the agro inputs at unregulated prices andquality, provide extension facilities through their ownrepresentatives and make farm gate purchases on theirterms and conditions. Changes in land ceiling and tenuriallaws were made to facilitatedirect corporateparticipation in farming.Cuts in rural developmentexpenditure from14.5 percent of the GDPin 1985-86 to 5.9 percentof the GDP in 2000-01 hasmeant that expenditureon agriculture, ruraldevelopment, specialareas programme,irrigation and floodcontrol, village industry,energy and transport havebeen severely hit. Expenditurein areas of particularimportance to agriculturesuch as irrigation, ruralroads, market facilities,rural transport, incrementsin livestock, major land improvements, extension offormal credit institutions, agro-chemical inputs (especiallyfertilizers), agricultural education and research serviceshave as a percentage of GDP declined from 17.7 % in1980-81 to 6.0 % in 2003-04. 9Public expenditure is an important source of employmentgeneration and injection of purchasing power to rural India.It explains why despite normal rainfall in several years, fallin public expenditure has coincided with falling agriculturalgrowth rates, productivity, private investment and thereforeemployment. The worst hit has been production of foodgrains, coarse cereals and pulses. In the period 1991-98, thegrowth rate of food grain production halved as compared tothe previous decade and for coarse cereals and pulses thegrowth rates turned negative. The limited governmentincentives are now mostly routed to export oriented andhigh value crops, that only the few very rich farmers canDuring 1991-98, the growthrate of food grains halved andin case of coarse cereals andpulses, rates turned negativeTHE INDIA ECONOMY REVIEW245

Reliving TheGreatIndianDreamafford to grow. Thus evidence from the field indicates thatthe small and marginal farmers who are dependent on statesupport in agriculture production and non-agricultural ruralemployment generation have been rendered so vulnerableHow International Market Integration Worked?Cotton farmers Became Paupers…As global prices of cotton went up right after tradeliberalization, many small and marginal farmers took tocultivating the extremely expensive input intensive cottoncrop often on credit and abandoning their traditionalstaple crops (minor cereals). With low tariffs at fivepercent and falling global prices, domestic prices crashedand farmers were ruined. For instance, cotton importsfrom the USA increased from 21,221 tons to 48,805 tonsin 2000. Cotton in these developed countries is grownwith huge producer subsidies, now a major bone ofcontention in the WTO negotiations.And Oilseeds Were Stomped Out…In the mid-1980s through sustained government efforts,total production of oilseeds doubled, import of edible oilfell and India became self-sufficient, as many farmers inAndhra Pradesh and Karnataka started monoculture ofoilseed, giving up their traditional multi-crop agronomy.But with trade liberalization India became the largestimporter of edible oil (constituting 63.5% of totalagricultural import in 2002-03). Today, domestic edibleoil prices have come down but the farmers have beendriven into a debt trap and tragic suicides.that they are unable to face a single sharp downtown.Along with these troubles, prices of basic services likehealth and education previously available for free have risensignificantly due to reduced government support andprivatization. So poor farming households faced withdeclining incomes are forced to either do away with them orare forced into debts. Similarly declining PDS allocations,rising PDS prices and faulty targeting through TPDS,implies larger numbers of needy households have beenpushed out of the food security net and extremely poorfarmers like Laxmibai Shende of Nandgaon Khandeshwar,Amravati, breadwinner and mother of four to drasticallyreduce the family food intake in the lean agriculturalmonths when there is no agricultural employment.How The Market Mechanism Works In CottonSector (Maharashtra)?Till 1990s Maharashtra cotton farmers were protected fromexogenous shocks and exploitative domestic traders throughdirect purchases by the cotton procurement scheme at predetermined rates. With international market integration(please refer the box) domestic cotton market prices crashedand the scheme almost folded up due to heavy losses.Meanwhile market prices have steadily fallen from Rs.2,300per quintal in 2005 to Rs.1730 per quintal in 2006 (ratesdeclared by the scheme) with private traders buying at evenlower rates of Rs.2,000 per quintal in 2005 and Rs.1500 perquintal in 2006 respectively.Yet simultaneously production costs have risen in asubstantial fashion. Respondent farmers from Amravati,Wardha and Yavatmal districts have pegged the presentaverage costs at Rs.2,000-3,000 per acre, contingent uponthe type and extent of pesticides and hybrid seeds. Outputsaverage at two quintals per acre. The estimate excludesexpenses on repaying loan interests, capital expenditures onfarm improvements, purchase of machinery, cost of irrigation,marketing and labors of the cultivator and familymembers. In 2006, Narayan Mahadeorao Warde of Ambanagarvillage, Wardha district grew cotton on seven acres ofleased land, using Rs.32,000 worth of inputs from the localinput dealer. Excluding all costs of cultivation including thelease amount of Rs.2,000 per acre per annum, he earnedRs.5,000 for the whole year, excluding the value offoodgrains grown for subsistence/personal consumption.246 THE IIPM THINK TANK

A N INCLUSIVE INTENTAt present, 90 percent ofpesticides and 48 percent offertilizers used in agriculture areproduced by the private sectorReduction in subsidies mostly given on fertilizers, irrigationand electricity and withdrawal of public sector fromagro inputs especially in providing low cost seeds, pesticideshave sharply increased the costs of cotton production. Lowcost improved seeds, agro chemicals and extension servicesfrom the public sector were key drivers in the times of greenrevolution. The void left by the dismantled public sector wasquickly filled by the private sector including big MNCs likeMonsanto, Syngenta, Bayer and Dupont. At present, ninetypercent of pesticides and 48 percent of fertilizers used inagriculture are produced by the private sector.With hardly any government regulation of pricing, quality,advertising claims and grievance redressal mechanisms,inputs from the private sector are often extremely costly andrife with false advertising claims and even spurious quality.As the government withdrew, the entire agriculture extensionservice was also taken over by the experts hired byprivate companies and agro input dealers with farmers’interests superceded by company interests and profitmotives. Activist farmer Ram Kalaspurkar from Yavatmal,the founder of Vidarbha Organic Farmer’s Association(VOFA) promoting organic farming with over 170 farmermembers has come across expensive hybrids promising aspectacular yield, that have failed to produce a single boll ofcotton on an entire farm though the plants looked healthy,without visible signs of pest attack or disease. According torespondents in village Dorli, district Wardha 10 companyrepresentatives tried to sell exorbitantly priced BT seedsclaiming astronomical yields of ten quintals per acre. Filmshows of happy farmers claiming such yields and high profitswere conducted throughout the village to make the claimsconvincing. Given their long association with farmer movements,farmers at Dorli were not fooled, but farmers fromother villages easily fall for such false claims.THE INDIA ECONOMY REVIEW247

Reliving TheGreatIndianDreamProduction costs have also increasedbecause chemical intensivefarming is like a treadmill, tomaintain the yield levels, eitherincreasing doses of agrochemicalsare needed or more improved andmuch more expensive variants haveto be used. Hi-tech BT cotton seedssold at Rs.1,800 per 450 gram packetin 2005-06 11 often have to be usedwith improved pesticide ‘Tracer’costing Rs.11,000 per litre. InVidarbha, entire villages are in debtand many farmers are defaulters onloan principals ranging from as littleas Rs. 5,000 to Rs 1,00,000. Activistfarmer Burshottam Bansode claimsthat village Shivni Rasulapur indistrict Amravati is under a totaldebt burden exceeding Rs one crore 12 . Though loans aretaken for productive purposes, a series of failed cropscoupled with crashing farm prices for cotton and the risingcost of inputs makes it difficult for farmers to repay. Incidentsof banks using coercive and often use humiliating waysto extract unpaid debts are on the rise. Along with abusesand insults, debt recovery officials resort to confiscating thefreshly produced and harvested cotton crop, confiscatinghousehold goods like TVs, transistors, fans and even utensilsand tin roofs from defaulters. Heavily indebted farmerVinod Rathore of village Bothbodan, Yavatmal, committedsuicide in 2000 by drinking pesticide a few days after recoveryofficials humiliated him. Financial sector reforms andlack of government support have led to the decline insubsidized credit, rural credit deposit ratios and bankbranches and staff to rural areas affecting the availability offormal credit to vulnerable farmers. Loans disbursed toagriculture have been steadily declining over the last decade.So poor farmers have no option but to go to the moneylenders who often charge interest rates of over 100%, perannum, while interest rates charged by banks is about 14%per annum. With government crackdown, money lending hasgone underground and agro input dealers doubling upmoneylenders providing inputs on credit at similar rates ofinterest. Repayments are made with the year’s harvest onrates and terms decided by thecreditor. In case of crop failures, forrepayment a common practice is ofsending a family member (usuallychildren) from the debtor’s familyfor manual labour in the house orfarms of the creditor (either as adomestic help or field help) till thedebt is paid off in lieu of wages.Conclusion And RecommendationsThough cotton farming is soexpensive and market prices soun-remunerative, why do Vidarbhafarmers still stick to cotton? It is aquestion that has no straightforward answers. One certainreason is that cotton is one of thefew crops that can grow in such water scarce, unirrigatedareas and other suitable crops like jowar, bajra and coarsecereals have little market. Also many farmers are into suchun-manageable debts that they cannot afford to grow cropsthat surely have no market and thus continue hoping for amiracle in the next cotton crop. But it also implies thefailure of the agricultural department to create awarenesson possible alternatives and the key role governmentexpenditure on irrigation, rural marketing, roads andinfrastructure can create. As without adequate infrastructurethese small resource less farmers cannot imagine highvalue cropping like vegetables and fruits, floriculture andother export oriented cropping that can pull them out ofpoverty. The plight of the cotton farmers also indicates thatthe withdrawal of the government with out sufficient systemsin place that would protect the farmers’ interests, especiallyin vital areas like credit, marketing and agro inputs, takeoverby market forces can play havoc. Simultaneously, it isalso important to keep in mind that markets can only workin favor of small and marginal farmers when there fair play,a level playing ground for all the parties, in conditions ofnear perfect information and when they have the resourcesto participate in the market. Clearly none of these factorshold for the poor and marginal farmer. As a result theunprecedented prosperity and growth rates have completely248 THE IIPM THINK TANK

A N INCLUSIVE INTENTbypassed them. In such a case government intervention infavor of the small and marginal farmers is essential and theyare in immediate need of such protection through:• Strict implementation of minimum support pricing in keycrops and in all states. The Minimum Support Price(MSP) has to be calculated as over fifty percent above thecosts of production and in a rational fashion.• Forming and strengthening existing cooperatives withspecial focus on small and marginal farmers to providethem bargaining power in the market.• Strong regulatory mechanisms over private players in allagro-inputs, including a farmer friendly grievance redressalmechanism/intervention.• Reinstating public expenditure on rural development (asa percentage of GDP) at least to pre reforms period withparticular focus on irrigation and rural marketing.• Waiver of loan repayments of currently indebted smalland marginal farmers in suicide hit pockets. Expansion ofinstitutional credit to the agrarian sector with interestrates not exceeding four percent in crop loans andproviding landless and marginal farmers access to adequateconsumption credit facilities.• Well planned and farmer friendly schemes focused onweaning farmers (especially resource poor ones) awayfrom external input intensive agriculture and R&Dfocused on providing workable alternatives based ontraditional wisdom and knowledge. This will bring downinput costs without significantly affecting outputs and willbe environmentally friendly.• Encouraging those resource poor farmers who are intocash cropping to compulsorily devote a part of their landto subsistence cropping so that even in the event of cropfailure,they will not go hungry.• Honoring commitments made under Common MinimumProgramme (CMP) to increase budgetary allocation tosocial sectors. Education at six percent of the GDP andhealth at three percent of the GDP and proper implementationof the activities under NREGA.• Completion of the egalitarian agrarian land reformspromised right after independence.EndNotes1PL480 scheme was availed by India for cheap food grainespecially wheat imports from USA. When India criticizedthe American war in Vietnam and for preventing India fromgoing the “communist way”, President Johnson retaliated bycutting short the food aid to India. With massive crop failureat home, the Indian government was humiliated and forcedto approach the White House for food grain release toprevent famine in the country.2This was done through a variety of ways such as consolidationof land holdings, several rounds of tenant evictions andtakeover of agricultural lands, specifically of small andmarginal farmers by force.3Madhumanti (2007), Examining the Agrarian Crisis in theContext of Globalization: A Case Study of Vidarbha CottonFarmers, Maharashtra, NCAS Pune.4Some of the key activist organizations were local levelfarmer led campaigns Karz Mukta Gaon, Gaon Vikne Aahe,Gaon Girwi Thewa and larger movements like ShetkariSanghtna, VJAS, NBA/NAPM5S.P. Singh, ‘Agriculture’, Alternative Economic Survey for2005-06.6National Sample Survey Organization (NSSO) surveyfigures for 2006.7NSS figures from 1987-88 to 1992-03 and 1993-04 to 1999-00indicating average annual growth rates in agriculture8These economic resources include forests, water bodies,grazing lands and such village commons and farmerstraditionally relied upon them for food and sustenance intimes of droughts/famines, floods or exigencies that madefarming temporarily impossible.9They are grouped under GCP (Gross Capital Formation inAgriculture). Report of the Committee on Capital Formationin Agriculture, Directorate of Economics & Statistics,Department of Agriculture & Cooperation, Ministry ofAgriculture (MoA), Government of India (2003)10Village Dorli hit national headlines in the year 2006 whenactivist farmers started the campaign “Gaon Viknar Aahe”,putting up their village for sale inorder to highlight theplight of farmers crushed by plummeting farm incomes andhigh indebtedness.11The price of BT cotton seeds was reduced following aMRTPC order in 2006-07 but still remains over Rs.750-1000for a 450 gm packet.12Bansode and other activists started the Gaon Girwi Thewaor Villge is Mortgaged campaign to focus the nation’s gazeover the huge indebtedness levels.THE INDIA ECONOMY REVIEW249

Reliving TheGreatIndianDream1. Who Are The Dalits (Or Scheduled Castes)?For simplification, most of the people often refer to ScheduledCaste (SC) people as dalit and Scheduled Tribe (ST) people asadivasi. But some people prefer to term both of them as dalitas the term broadly includes the whole set of [historically]deprived population. Our objective in this paper is not to focuson the debate relating to the definitions of dalits or thedistinctions between dalits and adivasis. But at the outset wecan try to develop a simplified and very brief perception aboutdalits based on the existing literature. Let us now confine tothat and gradually we will move to examine public expendituresfor them. The Aryans, a set of highly self-conscious tribessharing a common language and religion, began their invasionof India from the north-west in around 1500 B.C. For centuriesthey remained in seemingly constant conflict with theindigenous peoples, whom they looked down upon becausethey thought they were culturally superior to the indigenouspeople and also shunned the local people because theyconsidered the indigenous people ritually unclean (Michael,1999). But the Dravidian civilisation was not an inferior one atall; rather, according to several leading historians, the IndusValley Civilization, or the Harappan Culture, which wasdeveloped by the indigenous Dravidians, formed the earliesturban civilization on the Indian sub-continent, and one of theearliest in the world. Some tried to preach and prove that theIndus Valley Civilization had been developed by the Aryans.250 THE IIPM THINK TANK

A N INCLUSIVE INTENTDalits Are NotGetting TheirDue SharesThroughBudgetaryAllocations:A Case Study On TheSpecial ComponentPlan Budgets InRajasthanSubrata DuttaBudget Analysis Rajasthan Centre(BARC), JaipurBut they were not successful to prove their point on severalgrounds. For example, nomadic Aryans’ were pastoral,agricultural people who lived in villages whereas well-establishedurban foundation (e.g. houses of brick equipped withadequate sanitation, bathrooms, wells, and other amenities)had been found in the ruins of the Indus Valley Civilization.The metals which the Indo-Aryans used in the time of theRigveda are goldand copper orbronze; but a littlelate, in the time ofthe Yajurveda andAtharvaveda, thesemetals are supplemented by silver and iron. Among the Induspeople silver is more commonly used than gold, and utensilsand vessels were sometimes made of stone -- a relic of theNeolithic Age (New Stone Age) -- as well as of copper andbronze. There was no sign of iron. See, for more evidences,Marshall (1973: 109-112). Aryans had come to the IndusValley and slaughtered indigenous Dravidians. Michael (1999)stated that once conquered by superior military technology,some of these indigenous peoples moved to regions as yetunoccupied by the Aryans, while others lived as separate andinferior castes within Aryan-dominated society. People whohad started living around jungles (unconquered by the Aryans)depending on hunting and forest produces are called adivasiand those who had remained within Aryan society are calleddalit. While the former was totally isolated for ages from theAryan society, the latter was denied access to the main-streamsocio-cultural-religious life of the Aryans. It was only in theperiod between 600 B.C. and 200 A.D. when untouchabilityappeared in India (Michael, 1999).The Hindu varna system clearly assigned different works todifferent social groups. Brahmins were allowed to acquire educationand knowledge; Kshatriyas were assigned to runadministration and take part in wars, Vaishyas were allowed toaccomplish trade and business; and Shudras were given thetask to provide the above three groups with menial services.The Shudras had been deprived of the three basic qualities ofhuman life -- developing intellectuality through gatheringknowledge and information, acquiring ruling right as well asadministrative power, and accumulating wealth (Gupta, 1988).Since a section of the Indian population remained deprivedof many basic things of life they needed to be properly identifiedand listed so that some specific developmental programmescould be formulated for, and routed towards, them. 1A few castes and tribes in each state, generally grouped as“depressed classes” were listed in a ‘Schedule’ for the firsttime in 1930, so that the government could have an accurateestimate of their numbers and make provisions for educationaland employment facilities for them. But it was only in 1950that separate listswere drawn up for‘Castes’ and ‘Tribes’which were latermodified after theState Reorganisa-A few castes and tribes, generally groupedas “depressed classes” were listed in a‘Schedule’ for the first time in 1930THE INDIA ECONOMY REVIEW251

Reliving TheGreatIndianDreamtion in 1956. The castes and tribes included in the ‘Schedule’have come to be commonly known as ‘Scheduled’ castes and‘Scheduled’ tribes respectively. Ramachandra Guha (2007)has recently written that the adivasis are even more deprivedthan the dalits. This is quite true but Dalit’s situation has alsonot reached the satisfactory level, since still quite a number ofdalit people are illiterate and poor (see Table-1). As we knowthat the dalits in India have been deprived of basic things forages, in this paper we would like to confine ourselves to aquestion whether or not the dalits have been receiving theirdue shares through public budgets/expenditures. Beforeexamining that, let us try to understand the employmentsituation of dalits in Rajasthan, using the Census 2001 data.Among dalit population, how many people are looking forjobs, or, in other words, how many people are unemployed?Let us take a look at the Census 2001 data. If we consider thedalit population of age group of 5 to 80+ years, then we findthat only sixpercent of dalitsare unemployedor, in census term,“available forwork”. Howreliable is this sixpercent unemployment figure? To examine this, first we haveto check the Census definitions of “workers”. The Census hasdivided the whole SC population of workers in three broadcategories: main workers, marginal workers and non-workers.The workers who had worked for the major part of thereference period (i.e. six months or more) were termed asmain workers. The workers who had not worked for the majorpart of the reference period (i.e. six months or more) weretermed as marginal workers. And a person who did not workat all during the reference period was treated as a non-worker.Table 1: Literacy Rate, Dropout Rate AndPoverty Rate Of SC Population In IndiaLiteracy RateDropoutRate BeforeMatriculationPopulation LivingBPL (In %)Dalit Adivasi Dalit Adivasi Dalit Adivasi30.1 23.8 49.4 62.5 41.5 49.5Source: Maharatna (2005), cited in Guha (2007)Note that, according to the Census, unemployed people werefound only in the last two categories. Since a portion of themarginal workers were not looking for work all through a yearand, also, a portion of the non-workers were not looking forwork at all, only afraction of them canbe termed as unemployed.For example,some marginalworkers, who justwant to be engaged inwork for a particular season only, cannot be called as unemployed,and similarly some non-workers who are not eligiblefor work (e.g. infants, some students, pensioners etc.) and whoare voluntarily not willing to work outside the home (e.g. somehousewives) cannot also be called unemployed. Thus, the totalnumber of unemployed population accounts for only 6 percentof the total SC population. Up to this, there is no problem inunderstanding the proportion of unemployed people amongthe total number of SC people in Rajasthan. But, now thequestion arises is: what is the break-down of the ‘main worker’group? We have further details of the ‘main worker’ group,which have been furnished in Table-2. The data, although littledated, is useful to understand the employment situation of theSC main worker group. Cultivators and agricultural labourerstogether account for about 69 percent of the total SC mainworkers in Rajasthan. Landholding SC household membershave been considered as main workers, irrespective of the sizeof land and accessibility to irrigation. But this is not a correctcategorisation since we are unable to know as to how manydalit cultivators are small and marginal farmers and whetherAdivasis are even more deprived than thedalits. This is quite true, but Dalit’s situationhas also not reached the satisfactory level252 THE IIPM THINK TANK

A N INCLUSIVE INTENTthey have access to irrigation. Not surprisingly, most of thelandholding SC households are small and marginal farmers inRajasthan. It is worth mentioning that small and marginalfarmers are hardly able to earn their living for the whole yearfrom their small piece of land in the present competitive worldwhere farming has already become non-viable and non-profitablebusiness. Moreover, disguised unemployment is acommon feature among the households which are attached tothe small landholdings. Let us now critically view the Censusconcept of ‘main worker’ from another angle. As mentionedabove, according to the Census, a person is a main worker whohad worked at least for six months in the reference period, i.e.,in a particular year. Let us assume that there were somepeople, if not many, who were found to be working only for sixmonths. Is six-month work enough for a person to maintainher/his cost of living for a year? If not, can we call them ‘mainworker’? If return from farming is very nominal, or if wage isvery low, then it might be difficult for a person to maintain thesubsistence level with the earning from six month-work. Eventhe small and marginal farmers might face trouble in maintainingthe standard/cost of living if they work for the wholeyear in their farm and get a marginal return at the end of theday. We did not consider natural calamities, such as drought,yet and their consequences. There are several questions thatneed to be addressed while defining ‘main worker’. Forexample, a ‘main worker’ was probably not asked [by theTable 2: Percent Distribution Of SC Main Workers, 1991 Census (Selected States And Union Territories)States / Union TerritoriesTotal Main WorkersCultivatorsAgricultural LaborersLivestock, Forestry, Fisheries& Allied ActivitiesMining & QuarryingManufacturing, Processing,Household IndustriesManufacturing, Processing,Servicing Other ThanHousehold IndustriesConstructionTrade & CommerceTransport, Storage &CommunicationOther ServicesAndhra Pradesh 100 27.74 40.87 1.77 0.87 3.36 5.47 1.65 6.69 2.79 8.79Haryana 100 38.77 19 0.95 0.12 1.53 9.03 2.62 8.63 3.25 16.10Himachal Pradesh 100 63.25 3.30 2.47 0.26 1.43 3.71 4.85 4.40 1.93 14.40Karnataka 100 34.21 28.92 3.57 0.67 1.86 8.84 2.47 7.98 2.63 8.85Orissa 100 44.31 28.68 1.86 0.98 3.13 3.51 0.87 5.38 1.74 9.54Punjab 100 31.44 23.82 0.81 0.01 1.33 10.95 2.56 10.85 3.83 14.70Rajasthan 100 58.80 10 1.80 1.03 2.00 5.45 2.42 6.42 2.39 9.69Tamil Nadu 100 24.84 34.64 2.03 0.30 3.52 10.51 2.15 8.68 3.09 10.24Uttar Pradesh 100 53.27 18.94 0.72 0.08 2.41 5.34 1.23 6.17 1.86 9.98West Bengal 100 28.40 24.56 2.75 0.78 3.91 12.06 1.85 10.72 4.22 10.75Bihar 100 43.58 37.13 0.39 1.25 1.75 2.26 0.63 4.00 1.28 7.72Madhya Pradesh 100 51.75 23.51 1.39 0.89 2.41 4.40 1.56 4.77 1.70 7.62Tripura 100 38.09 23.58 2.32 0.29 1.42 3.52 1.47 7.68 2.77 19.06Chandigarh 100 1.03 0.74 2.65 0.04 0.20 17.74 9.88 21.37 7.11 39.24Delhi 100 1.12 0.85 0.64 0.24 1.41 23.22 7.80 23.90 8.30 32.52Average Percentage 100 36.04 21.23 1.74 0.52 2.11 8.40 2.93 9.18 3.26 14.61Source: National Level Evaluation Study on the Implementation of SCP for SCs, National Commission for SC & ST, Government of India, 2005, p.15.THE INDIA ECONOMY REVIEW253

Reliving TheGreatIndianDreamCensus] a question such as whether s/he was in need of workfor the rest of the year when s/he had no work, considering thefact that six-month work is enough for her/him for the wholeyear. Hence, the legitimacy of showing six percent unemploymentfigure might be questioned or, rather challenged, sinceTable 3: Estimated Plan Size 2007-08Sl.No.Areas ofPlanning1. Agricultureand alliedservices2. Rural development3. Specialarea programme4. Irrigationand floodcontrol5. Electricityand power6. Industryand minerals7. Transportation8. Scientificservices9. Social andcommunityservices10. Economicservices11. Social servicesEstimatedState Plan,2007-08Source: Rajasthan Budget Book, Volume 4B, 2007-08EstimatedSCP,2007-08Rs. In LakhShare ofSCP in theState Plan26959.92 3784.64 14.0%69435.66 8780.02 12.6%4007.01 683.60 17.1%99769.28 13161.73 13.2%532080.02 91447.53 17.2%16409.02 397.12 2.4%81589.06 10522.53 12.9%270 0.00 0.0%300999.73 49161.02 16.3%20244 2291 11.3%5122.81 0.00 0.0%12. Total 1156886.51 180229.19 15.6%the actual picture in the reality is not better than what may betermed as gloomy. As a whole, economic conditions of thedalits are not remarkably good. They are also unable to takefull advantage of the reservation policy of the government asfar as job reservation is concerned, unless they are providedwith proper education and health services, among othersupports. Public support is necessary.From this perspective, the present study focuses on thegovernment funds that have been channelled for socioeconomicdevelopment of the dalits only and examines whetherthe allocated funds have been spent for the specific purpose ordiverted to the benefit of the general caste people. SpecialComponent Plan (SCP) and Tribal Sub-Plan (TSP) are the twomain channels through which budgets for dalits and adivasisrespectively are routed. This study presents the case ofRajasthan with regard to the SCP (while fund-flow throughthe TSP can also be an important subject of study but we arenot addressing that in this paper).2. What Is The Special Component Plan?The Government of India started a scheme in the year 1979entitled ‘Special Component Plan’ (SCP) as a strategy forachieving the objective of overall development of the ScheduledCaste (SC) population and to uplift and raise theirstandard of living -- especially above the poverty line -- in thecountry. The principal theme of the SCP is to allocate funds atleast in the proportion of the SC population to the state’s totalpopulation. For example, SC population in Rajasthan constitutes17 percent of the total population in the state andtherefore each department is required to allocate and spend17 percent of its total plan size for the SC people through theSCP. Note that, according to the Census 2001, the totalpopulation of SC in Rajasthan is 96,94,462.There is a nodal department in each state which is responsiblefor coordinating the implementation of the SCP. InRajasthan, the Department of Social Welfare is the nodaldepartment, which is in charge of looking after the implementationof the SCP. In most of the states in our country, the SCPmodel has not been properly followed by the departments ofthe governments. Rajasthan is not an exception. Most of thedepartments of the Rajasthan Government have been showinggreat apathy in spending money under the SCP. In a certaingovernment document (Rajasthan Budget Book, Volume 4B,2007-08), the SCP allocation figures show marginal funding254 THE IIPM THINK TANK

A N INCLUSIVE INTENTanomalies which can be depicted as negligible anomalies. Forexample, as we see in Table-3, 15.6 percent funds of the totalplan-size have been allocated for SCP in 2007-08. The pictureis not so different in the previous years too. But when wecritically examine the individual head-wise budget allocationsand expenditures wefind huge anomaliesthere. We will showthis into detail but,before that, let usbriefly describe thedata sources we are using in this study.3. The Data SetsThe data of total plan size and SCP are available in Volume 4Bof Rajasthan Budget Books. Table-3, as presented above, hasbeen taken from the same volume. But this data need to becrosschecked further to examine if the government has reallyallocated about 16 percent (as claimed by the government andshown here in Table-3) of the plan size for the dalits in2007-08. For verification, we have used budget-headwise datathat have been taken from several other volumes of theBudget Books. For example, volumes of the revenue expendituresand capital expenditures have been thoroughly scannedduring investigation. The total “Plan Size” data are alsoavailable in a government budget document called “BudgetStudy” which is published every year. However, the anomalieswe found are presented in the following part of this paper.4. Anomalies In FundingThe public funds are channeled through three services:economic services, social services and general services.Economic activities in the economy are encouraged throughspending on economic services. For example, if agriculture,animal husbandry, irrigation, large industry, rural industry,rural development, cooperatives etc. are promoted by thegovernment, size and/or number of economic activities mayenhance in the economy and, in turn, there may be someimprovement in the quality of life of the people throughemployment generation and also an increase in governmentrevenue. Spending on social services gives an impetus to theproductivity of the people by improving their health/nutritionas well as educational status. Social security gives relief tomany people (e.g. elderly people, widows, disabled peopleetc.) who are in difficult position to find work, or physicallyunable to work as well. General services include servicesprovided for the maintenance of the general organ of thegovernment like State Legislative Assembly, law and order,judicial administration, Public Service Commission etc.Expenditures undergeneral services arecalled non-developmentexpenditures,whereas expendituresunder socialand economic services are called development expenditures.In the following, we will mainly concentrate in social andeconomic expenditures and see how much share the dalits arereceiving through the budgets.As per Table-4, the share of the SCP in the plan size of theeconomic services in 2007-08 is only 0.97 percent. The share ofthe SCP in the plan size of the social services in 2007-08accounts for 3.43 percent (see Table 5). And the share of theSCP in the total plan size of the 2007-08 budgets is just 1.76percent (see Table-6). 2 From Table 6 it is clear that the2007-08 percentage figure is the lowest among the last severalyears. In Table-6, we have shown two different figures for SCPshares in selected years. Why did we make two differentcalculations for each year? In Tables 4 and 5, we have calculatedSCP shares on the basis of combined “Plan” and “CentrallySponsored Schemes” (CSS) data because we did nothave the “Plan Size” figure for each separate budget head. Inthe budget statements of some states in India the term ‘Plan’ isself explanatory, while in Rajasthan Plan Size is almostequivalent to the combined ‘Plan’ and ‘CSS’. In order toremove confusion, we show in Table 6 that in aggregate ‘PlanSize’ is almost equivalent to Plan plus CSS (see the two datarows in Table-6 and compare them with each other). The exacttotal “Plan Size” figure for the state for each year is availablein several budget documents (for Table-6, we have used adocument called “Budget Study”). To compare the SCPshares, we have presented two measurements in Table-6 -- onebased on the combined “Plan” and “CSS” figures and theother based on the exact total “Plan Size” figures. Now, seethat the SCP shares calculated in the two methods do negligiblydiffer from each other. This confirms that the “Plan Size”is almost equivalent to the Plan plus CSS estimates or expenditures.This also confirms that our ‘Plan Outlay’ figures pre-Share of the SCP in the plan size of theeconomic services in 2007-08 is only 0.97%and in social services, it accounts for 3.43%THE INDIA ECONOMY REVIEW255

Reliving TheGreatIndianDreamTable 4: Budget Head-Wise Expenditures (Revenue And Capital) Under The SpecialComponent Plan In Economic Services, 2002-03 To 2007-08Economic Services 2002-03 AE 2003-04 AE 2004-005 AEPlanOutlaySCP% of SCPin PlanOutlayPlanOutlaySCP% of SCPin PlanOutlayPlanOutlaySCP% of SCPin PlanOutlayCrop Husbandry (Revenue)425090 44890 10.56% 450268 63866 14.18% 548998 70871 12.91%Crop Husbandry (Capital)0 0 -- 1279 0 0.00% 6356 0 0.00%Revenue + Capital 425090 44890 10.56% 451547 63866 14.14% 555354 70871 12.76%Soil and Water Conservation(Revenue)Soil and Water Conservation(Capital)Revenue + CapitalAnimal Husbandry (Revenue)57615 0 0.00% 87778 5949 6.78% 149620 10554 7.05%Animal Husbandry0 0 -- 0 0 -- 0 0 --(Capital)Revenue + Capital 57615 0 0.00% 87778 5949 6.78% 149620 10554 7.05%Fisheries (Revenue) 7542 0 0.00% 1605 45 2.80% 4365 0 0.00%Fisheries (Capital) 0 0 -- 800 0 0.00% 2890 0 0.00%Revenue + Capital 7542 0 0.00% 2405 45 1.87% 7255 0 0.00%Forestry and Wild Life(Revenue)ForestryEnvironmental forestryand wild lifeTotal (Revenue)Forestry and Wild Life(Capital)Revenue + CapitalCooperation (Revenue) 7002 0 0.00%Cooperation (Capital) 178 0 0.00%Revenue + Capital 7180 0 0.00%Other Rural Development2536964 0 0.00% 2419402 0 0.00% 4168735 0 0.00%Programmes (Rev-enue)Other Rural Development1721513 79179 4.60% 2266959 312572 13.79% 2290475 315327 13.77%Programmes(Capital)Revenue + Capital 4258477 79179 1.86% 4686361 312572 6.67% 6459210 315327 4.88%256 THE IIPM THINK TANK

A N INCLUSIVE INTENT2005-006 AE 2006-007 RE 2007-008 BERs. in ThousandPlan OutlaySCP% of SCPin PlanOutlayPlan OutlaySCP% of SCPin PlanOutlayPlan OutlaySCP% of SCPin PlanOutlay2447230 147812 6.04% 1550119 194832 12.57% 1532865 259065 16.90%75339 0 0.00% 29850 0 0.00% 49877 0 0.00%2522569 147812 5.86% 1579969 194832 12.33% 1582742 259065 16.37%447253 0 0.00% 659238 0 0.00% 613916 1 0.00%163294 0 0.00% 222547 0 0.00% 127859 1 0.00%610547 0 0.00% 881785 0 0.00% 741775 2 0.00%173934 21721 12.49% 211063 25000 11.84% 215696 25000 11.59%1580 0 0 18897 0 14475 0 0.00%175514 21721 12.38% 229960 25000 10.87% 230171 25000 10.86%7829 0 0.00% 14659 350 2.39% 12300 400 3.25%3486 0 0.00% 3575 0 0.00% 4500 0 0.00%11315 0 0.00% 18234 350 1.92% 16800 400 2.38%234577 0 0.00% 276823 0 363790 0 078556 0 0.00% 390391 0 0.00% 496592 1 0.00%313133 0 0.00% 667214 0 0 860382 1 0.00%781233 0 0.00% 608256 0 0.00% 330549 5002 1.51%1094366 0 0.00% 1275470 0 0.00% 1190931 5003 0.42%0 0 -- 1 0 0.00% 1501 0 0.00%2467169 398800 16.16% 2763952 484900 17.54% 1395008 239246 17.15%2467169 398800 16.16% 2763953 484900 17.54% 1396509 239246 17.13%THE INDIA ECONOMY REVIEW257

Reliving TheGreatIndianDreamOther Special Area Programmes(Revenue)Other Special Area Programmes(Capital)Revenue + CapitalSpecial Programme forRural Development(Only revenue, no capitalbudget for SCP)Rural Employment(Only revenue, no capitalbudget for SCP)347976 16623 4.78% 592628 33526 5.66%279005 132047 47.33% 247920 124293 50.13%Petroleum(Only revenue, no capitalbudget for SCP)Village and Small Industries29800 0 0.00% 76163 0 0.00% 85509 0 0.00%(Revenue)Village and Small Industries0 0 -- 2580 0 0.00% 19670 0 0.00%(Capital)Revenue + Capital 0 0 -- 78743 0 0.00% 105179 0 0.00%Industry125392 904 0.72% 165284 841 0.51% 102928 808 0.79%(Only revenue, no capitalbudget for SCP)Census Survey and Statistics29800 0 0.00%(Only revenue, nocapital budget for SCP)Major Irrigation (Revenue)92934 0 0.00%Major Irrigation (Capital)6096228 32328 0.53%Revenue + Capital 6189162 32328 0.52%Minor Irrigation (Revenue)Minor Irrigation (Capital)Revenue + CapitalNon-Ferrous Mining and 2481 0 0.00% 162 0 0.00% 102 0 0.00%Metallurgical Industries(Revenue)Non-Ferrous Mining and 1692 0 0.00% 107014 0 0.00% 14028 0 0.00%Metallurgical Industries(Capital)Revenue + Capital 4173 0 0.00% 107176 0 0.00% 14130 0 0.00%TOTAL OF THEABOVE BUDGETHEADS11724232 305971 2.61% 6419842 541092 8.43% 7393676 397560 5.38%258 THE IIPM THINK TANK

A N INCLUSIVE INTENT0 0 -- 1 0 0.00% 1501 0 0.00%538730 0 0 730436 0 0 454200 59940 13.20%538730 0 0.00% 730437 0 0.00% 455701 59940 13.15%3256 0 0.00% 4233 0 0.00% 6023 1 0.02%171252 0 0.00% 168174 1 0.00% 164603 502 0.30%171252 0 0.00% 168174 1 0.00% 164603 502 0.30%119111 953 0.80% 192829 923 0.48% 191243 1375 0.72%46184 0 0.00% 26824 0 0.00% 40414 1 0.00%0 0 -- 0 0 -- 0 0 --6423308 0 0.00% 5009408 0 0.00% 5978172 7 0.00%6423308 0 0.00% 5009408 0 0.00% 5978172 7 0.00%11361 0 6581 25012005053 0 0 1676091 0 0 1703606 1 0.00%2016414 0 0.00% 1682672 0 0.00% 1706107 1 0.00%548 0 0.00% 895 0 0.00% 1300 0 0.00%13990 0 0.00% 48105 1 0.00% 49700 1 0.00%14538 0 0.00% 49000 1 0.00% 51000 1 0.00%16214273 569286 3.51% 14612948 706007 4.83% 13752191 590544 4.29%THE INDIA ECONOMY REVIEW259

Reliving TheGreatIndianDreamECONOMIC SERVIC-ES TOTAL(In this total, the ‘planoutlay’ under the EconomicServices not onlyincludes the above-mentionedbudget heads butalso the other heads thatdid not allocate funds forthe SCP)69386193 305971 0.44% 30257905 541092 1.79% 34213065 397560 1.16%Note: AE = actual expenditure, RE = revised estimate, BE = budget estimateSource: Rajasthan Budget Book, Volumes 2D and 3A, various yearsTable 5: Budget Head-Wise Expenditures (Revenue And Capital) Under The Special ComponentPlan In Social Services, 2002-03 To 2007-08Social Services 2002-03 AE 2003-04 AE 2004-005 AEPlanOutlaySCPPlanOutlaySCPPlanOutlaySCP% of SCPin PlanOutlay% of SCPin PlanOutlay% of SCPin PlanOutlayGeneral Education(Revenue)Primary Education 1315014 0 2088590 29 0.00% 2911012 0 0.00%Secondary / HigherSecondary48351 0 202593 14135 6.98% 548421 339 0.06%Higher Education 32923 0 96571 364 0.38% 73832 0 0.00%Adult Education 2271 0 3367 0.00% 105855 0 0.00%Advancement of languages12916 0 12964 0.00% 20417 0 0.00%Other (general) 84374 0 100946 0.00% 93137 0 0.00%Total (Revenue) 1495849 0 0 2505031 14528 0.58% 3752674 339 0.01%General Education(Capital)188382 0 161317 0 0.00% 116677 0Revenue + Capital 1684231 0 0.00% 2666348 14528 0.54% 3869351 339 0.01%Technical Education(Revenue)17951 0 0.00% 16738 0 0.00% 27002 0 0.00%Technical Education(Capital)4500 0 0.00% 12533 0 0.00% 20836 0 0.00%Revenue + Capital 22451 0 0.00% 29271 0 0.00% 47838 0 0.00%Art and Culture (Revenue)Art and Culture(Capital)Revenue + CapitalMedical and PublicHealth (Revenue)260 THE IIPM THINK TANK

A N INCLUSIVE INTENT41840721 569286 1.36% 45018161 706007 1.57% 61112816 590544 0.97%Rs. in ThousandPlan Outlay2005-006 AE 2006-007 RE 2007-008 BESCP % of SCP Plan OutlaySCP % of SCP Plan Out-SCP % of SCPin Planin Plan layin PlanOutlayOutlayOutlay4628656 0 0.00% 4150334 1 0.00% 3452488 3001 0.09%710340323 0.05% 321900 1470 0.46% 298901 4509 1.51%140484 400 0.28% 175204 400 0.23% 149958 600 0.40%88851 0 0.00% 106903 0 0.00% 102100 10081 9.87%197300 0.00% 33407 1 0.00% 17809 1800 10.11%114244 0 0.00% 185710 0 0.00% 12940 0 0.00%5702305 723 0.01% 4973458 1872 0.04% 4034196 19991 0.50%2308670 0.00% 377176 0 0.00% 393602 0 0.00%5933172 723 0.01% 5350634 1872 0.03% 4427798 19991 0.45%451120 0.00% 45002 1 0.00% 68006 2 0.00%1481360 0.00% 231699 0 0.00% 149898 0 0.00%193248 0 0.00% 276701 1 0.00% 217904 2 0.00%228470 0.00% 73101 0 0.00% 48371 1 0.00%195070 0.00% 60990 0 0.00% 140200 0 0.00%42354 0 0.00% 134091 0 0.00% 188571 1 0.00%THE INDIA ECONOMY REVIEW261

Reliving TheGreatIndianDreamUrban health services- Allopathic29990 0 118582 0 0.00% 311029 0 0.00%Urban health services(homoeopathy, 59541 817 20421 3265 15.99% 32720 934 2.85%Ayurveda etc.)Rural health services -Allopathic400749 0 433335 0 0.00% 434639 0 0.00%Rural health services(homoeopathy, 9135 0 13341 0.00% 8613 0 0.00%Ayurveda etc.)Medical education,training and research556 0 1006 0.00% 8203 0 0.00%Public health 198532 0 189627 0.00% 268546 0 0.00%Total (Revenue) 698503 817 0 776312 3265 0.42% 1063750 934 0.09%Medical and PublicHealth (Capital)140307 0 0 192012 0 0.00% 32914 0 0.00%Revenue + Capital 838810 817 0.10% 968324 3265 0.34% 1096664 934 0.09%Family Welfare (Revenue)Family Welfare (Capital)Revenue + CapitalWelfare of ScheduledCaste (SC), ScheduledTribe (ST) andOther Backward Class(OBC) (Revenue)Welfare of SC 459316 142599 31.05% 703987 202716 28.80% 613372 312172 50.89%Welfare of ST 230798 0 0.00% 328022 0 0.00% 766507 0 0.00%Welfare of OBC 716 0 0.00% 23159 0 0.00% 40855 0 0.00%Other (general) 0 0 -- 0 0 -- 0 0 --Total (Revenue) 690830 142599 20.64% 1055168 202716 19.21% 1420734 312172 21.97%Welfare of SC, ST andOBC (Capital)473396 135018 28.52% 550153 200211 36.39% 488501 144834 29.65%Revenue + Capital 1164226 277617 23.85% 1605321 402927 25.10% 1909235 457006 23.94%Labour and Employment(Revenue)LabourEmployment servicesTrainingTotal(Only revenue, nocapital budget forSCP)Social Security andWelfare (Revenue)262 THE IIPM THINK TANK

A N INCLUSIVE INTENT1706977916548947418704728830 0.00% 240396 1 0.00% 279063 1 0.00%1304 1.65% 222915 3300 1.48% 68198 3300 4.84%0 0.00% 546558 0 0.00% 219353 0 0.00%0 0.00% 28797 0 0.00% 37720 0 0.00%0 0.00% 65084 0 0.00% 97202 6 0.01%478011 0 0.00% 858488 0 0.00% 1645471 0 0.00%1308934 1304 0.10% 1962238 3301 0.17% 2347007 3307 0.14%6564210 0.00% 794725 0 0.00% 552415 0 0.00%1965355 1304 0.07% 2756963 3301 0.12% 2899422 3307 0.11%13252290 0.00% 1673107 0 0.00% 2203607 2 0.00%00 0.00% 0 0 0.00% 12419 0 0.00%1325229 0 0.00% 1673107 0 0.00% 2216026 2 0.00%700371 432675 61.78% 1169091 641056 54.83% 1040823 656322 63.06%630304 0 0.00% 979061 0 0.00% 932865 0 0.00%44744 0 0.00% 47450 0 0.00% 166207 0 0.00%350 0 0.00% 1500 0 0.00% 0 0 0.00%1375769 432675 31.45% 2197102 641056 29.18% 2139895 656322 30.67%55478684402 15.21% 948747 162822 17.16% 908361 151805 16.71%1930555 517077 26.78% 3145849 803878 25.55% 3048256 808127 26.51%2323 0 3800 0 4647 1 0.02%5751 0 5031 0 3999 450 11.25%9401 0 27690 0 36078 1 0.00%17475 0 0.00% 36521 0 0.00% 44724 452 1.01%2991430 0.00% 1260347 2 0.00% 768490 2 0.00%THE INDIA ECONOMY REVIEW263

Reliving TheGreatIndianDreamSocial Security andWelfare (Capital)Revenue + CapitalNutrition (Revenue) 2027080 296370 14.62% 2295854 319396 13.91% 2416932 352830 14.60%Nutrition (Capital) 92309 0 0 0 -- 7540 0 0.00%Revenue + Capital 2119389 296370 13.98% 2295854 319396 13.91% 2424472 352830 14.55%Water supply and sanitation(Revenue)56009 0 0.00% 51881 0 0.00% 95601 0 0.00%Water supply and sanitation(Capital)5855278 16691 0.29% 5566681 67825 1.22% 6096228 26493 0.43%Revenue + Capital 5911287 16691 0.28% 5618562 67825 1.21% 6191829 26493 0.43%Urban Development(Revenue)Urban Development(Capital)Revenue + CapitalTOTAL OF THEABOVE BUDGET 11740394 591495 5.04% 13183680 807941 6.13% 15539389 837602 5.39%HEADSSOCIAL SERVICESTOTAL (In this total,the ‘plan outlay’ underthe Social Servicesnot only includes theabove-mentioned budgetheads but also theother heads that didnot allocate funds forthe SCP)19153525 591495 3.09% 22426904 807941 3.60% 26483730 837602 3.16%Note: AE = actual expenditure, RE = revised estimate, BE = budget estimateSource: Rajasthan Budget Book, Volumes 2C and 3A, various yearssented in Tables 4 and 5 (calculated based on the Plan plusCSS figures) and the corresponding SCP shares are valid andlegitimate. But the sectoral and total SCP shares presented inTable-3 are quite misleading as they do not resemble with thatof Tables 4 and 5. The government shows us an illusive pictureof SCP through Table-3 while our own estimates presented inTables 4 and 5 (based on official budget data) try to offersomewhat actual picture.In economic services, only through two budget heads about17 percent funds have been allocated in 2007-08 (see Table-4).(While we observe the SCP shares, we need to look at thefigures that include both the revenue and capital expendituresunder each budget head). They are ‘crop husbandry’ and‘other rural development programmes’. But these sharesrepresent the estimated shares for 2007-08 and there is noassurance that this will not fall at the end of the year when wewill have the actual expenditure figures. In the case of ‘crophusbandry’, the actual share of SCP in 2005-06 accounted foronly 5.86 percent. In the other years, as presented in Table-4,the share maintained a 12 percent average level. So, there is aby and large consistent trend in crop husbandry. The SCPshare under the budget head called ‘other rural developmentprogrammes’ experienced a robust upward jerk in the year of2005-06. Prior to that, SCP had been receiving nominal shareunder this budget-head. ‘Other special area programmes’ and‘animal husbandry’ are found to be two budget heads in whichSCP has got about 13 and 11 percent shares respectively in2007-08. It is astonishing that several budget heads have264 THE IIPM THINK TANK

A N INCLUSIVE INTENT576150 0.00% 103903 0 0.00% 90018 0 0.00%356758 0 0.00% 1364250 2 0.00% 858508 2 0.00%2547356 272112 10.68% 3179105 502300 15.80% 3913244 570500 14.58%105593 0 0.00% 338929 0 0.00% 175506 0 0.00%2652949 272112 10.26% 3518034 502300 14.28% 4088750 570500 13.95%103280 0.00% 127206 0 0.00% 7990 0 0.00%788206844979 0.57% 14026271 40000 0.29% 17038632 40000 0.23%7892396 44979 0.57% 14153477 40000 0.28% 17046622 40000 0.23%6202260 0.00% 1296232 0 0.00% 1252242 0 0.00%72848790 0.00% 9758102 0 0.00% 5373501 2 0.00%7905105 0 0.00% 11054334 0 0.00% 6625743 2 0.00%30214596 836195 2.77% 43463961 1351354 3.11% 41662324 1442386 3.46%30522095 836195 2.74% 43955293 1351354 3.07% 42069081 1442386 3.43%experienced just token allocations. For example, in major andminor irrigations only Rs.7000 and Rs.1000 respectively havebeen allocated for SCP. In proportion to the plan size, theyaccount for zero percent allocations.In social services, two important departments, viz. educationand health, are found to be reluctant to allocate funds throughthe SCP (see Table-5). SCP shares in these two departmentsaccount for less than one percent each in 2007-08. It is remarkablethat the budget under ‘welfare of SC’ has offered morethan 17 percent of the plan size to the SCP. In 2007-08, itaccounts for 63.06 percent. But, here, it is worth mentioningthat this budget head is actually titled as ‘welfare of SC/ST/OBC’. If we consider the gross total of the budgets allocatedfor these three communities, the SCP share would fall down to26.51 percent. SCP share accounts for about 14 percent in the‘nutrition’ budget. Several departments such as ‘technicaleducation’, ‘art and culture’, ‘family welfare’, ‘urban development’etc. have allocated just a token amount of fund in2007-08. Also, under an important budget head called ‘socialsecurity and welfare’, a token amount of only Rs. 2000 hasbeen found in 2007-08.5. The Budget Heads Under Which SCP AllocationsAre MissingThere are a number of budget heads in the budget books ofsocial and economic services, through which even a singlepenny was not allocated for the SC people through the SCP.The list of those budget heads is given in Box 1. It is observedTHE INDIA ECONOMY REVIEW265

Reliving TheGreatIndianDreamTable 6: Shares Of SCP In The State Plan In Two Different Methods (For Selected Years)2002-03 AE 2003-04 AE 2004-05 AEState Planand SCP inTwo DifferentMethodsState Plan SCP % ofSCPin theStatePlanState Plan SCP % ofSCPin theStatePlanState Plan SCP % ofSCPin theStatePlanState PlanSize = Plan+ CSS*; SCP=> summationof thebudget headwiseSCPvaluesState PlanSize => aspresentedin a Govt.Documentcalled “BudgetStudy”;SCP => assame as it isin the aboverow42286602 897466 2.12% 53481552 1322033 2.47% 61624643 1235162 2.00%44310700 897466 2.0% 60443800 1322033 2.19% 65905500 1235162 1.87%Note: *Plan and CSS each includes both the revenue and capital expenditures under the three services such as economic services, social services and general services.Source: Rajasthan Budget Book (Volumes 2C, 2D, 3A); and “Budget Study”, Govt. of Rajasthan, various years.from the list that there are several budget heads (such as, ruralemployment, special programme for rural development,housing, medium irrigation, among many others), spendingthrough which would benefit the SC population to combattheir poverty.6. Diversion Of SCP FundsThe dalits are continuing to be deprived. They are deprived oftheir due shares which they are entitled to get through publicexpenditures. The discrepancy between Table-3 and 6 representthe fact that the SCP funds are grossly diverted tonon-SCP account. While Table-3 (government estimates)projects SCP as 15.6 percent allocation of the total plan size,Table-6 (our estimates) negates this myth and depicts SCP justas 1.76 percent allocation in 2007-08. Why does such inconsistencyarise? There is a perception in the minds of the bureaucratsand policy makers that since there are 17 percent SCpopulation in the state, the proportional benefit of everyproject or expenditure goes to the SCs. How? Let us give anexample. When the Public Works Department spent money toconstruct a road in Jaipur main city they claimed that 17percent of the total expenditure was made for the benefit ofthe dalit population. When asked how this was so, theyverbally explained that since the dalit people (which constitute17 percent of the total population of Rajasthan) of the stateare using this road it was considered that 17 percent of thetotal fund have been spent for the benefit of the dalits.Actually, behind the shield of this explanation, SCP funds arediverted to other expenditures. This is how the government isfooling dalits. At the same time, it is difficult to ignore thatthere is an implementation-related problem as to how tospend 17 percent fund for the specific 17 percent SC population.Let us offer a suggestion to resolve this problem. Thereare 2,463 villages, which are called ‘Sambal Gram’ (seeTable- 7), in Rajasthan and a majority of the SC population isconcentrated in these villages, whereas others are dispersed266 THE IIPM THINK TANK

A N INCLUSIVE INTENTRs. in Thousand2005-06 AE 2006-07 RE 2007-08 BEState Plan SCP % of SCPin the StatePlanState Plan SCP % of SCPin the StatePlanState Plan SCP % of SCPin theState Plan83646162 1405481 1.68% 90683174 2057361 2.27% 103997657 2032930 1.95%76998300 1405481 1.83% 87556800 2057361 2.35% 115688651 2032930 1.76%throughout the whole state. It is not difficult to get the dataabout how much of the 17 percent SC population live in thesevillages. So, why not the state departments accordingly spendmoney in these villages? For example, in these villages, theHealth Department can build hospitals, the EducationDepartment can build Schools and appoint teachers, and soon. If 10 percent of the dalit population (say, the rest sevenpercent are scattered in the whole state) are living in theSambal Grams then the departments can spend 10 percent oftheir Plan Size in these villages!7. Attempting To Kill SCP?A National Level Evaluation Study was undertaken on theimplementation of Special Component Plan in 2005 by theNational Commission for SC and ST, Government of India,under the leadership of Dr. G.S. Somawat. We are now goingto take a look at the findings and recommendations that cameout of the study. Individual state-wise recommendations weremade in the report. Therefore, there are some exclusiverecommendations for the state of Rajasthan in the report. Thereport said much in favour of liberalisation and globalisation.It was expected that the National Commission for SC and STwould bring out some helpful recommendations for thescheduled caste population based on the findings of the study,but conversely many of the recommendations are found to beanti-poor, pro-market economy and pro-liberalisation. Let usnow examine the recommendations in the following.The Commission found that the implementation of SCP inRajasthan did not produce desired results. What had beenexpected to be the result of the implementation of SCP at theinception? A large number of dalits were expected to beelevated from their destitute condition to a better life throughgreater access to health services, education, social securities,employment opportunities etc. The Commission argued thatin about 60 percent cases, the benefits could not generateincome of the poor SC people. According to them, bothnon-income generating and income generating schemes havevirtually failed in this regard in Rajasthan. Who are to beTHE INDIA ECONOMY REVIEW267

Reliving TheGreatIndianDreambought at their own. This means that the poor1. Dairy Development2. Food Storage and WarehousingSCs have inclination towards enhancing their3.4.Agricultural Research and EducationCooperativeeconomic condition by their own efforts, whichshould be further encouraged” (Government5. Other Agricultural Programmeof India, 2005: 252). The study of the Commissionsuffered from a limitation that it surveyed6. Special Program for Rural Development7. Rural Employment8.9.Medium IrrigationCommand Area Developmentonly 9 villages in Rajasthan. While the Commissionhas found that most of the SCs have10. Powerenough purchasing power to buy animal wealth11. Non-conventional Sources of Energy12. Civil Aviationon their own, Table-2 suggests that only about13.14.Road & BridgeRoad & Transportationtwo percent of the SC main workers wereengaged in livestock rearing, forestry, fisheries15. Other Scientific Researchetc. It is not the fact that the Commission did16. Ecology & Environment17. Secretariat Economic Servicesnot understand the crux of the problem faced18.19.Civil SuppliesOther General Economic Servicesby the SCs because the Commission talked ofland reform (allotment of cultivable land20. Compensation and Assignments to Local Bodies andamong the poor SCs) and of ensuring irrigationfacilities for the SC farms. A further clearPanchayati Raj Institutions21. Aid Material and Equipments22.23.Sports and Youth ServicesHousingdirection regarding land reform, and specificallyregarding accessibility to irrigation, was24. Information & Publicityexpected, but not found in the report. Moreover,it said that in a drought-prone state like25. Relief on Accounts of Natural Calamities26. Other Social Services27.28.Secretariat Social ServicesFlood Control ProjectRajasthan “animal husbandry type schemes”have failed in the past and would fail in future29. Chemical and Pharmaceutical Industriesas well. These finding and prediction are30. Consumer Industries31. Industries and Mineralsconfusing since we know that in drought-prone32.33.34.Scientific and Environmental ResearchTourismInvestment in General Financial and Trading Institutionsregions cultivation is found to be difficult dueto lack of irrigation, and therefore animalhusbandry takes place as an alternative sourceof income. There are several income generatinganimals, such as camel, sheep, goat etc.,blamed for the persistence of the situation? And what is to bedone in future to help SCs to overcome their socio-economicproblems? Surprisingly, the Commission says that it is verydifficult to offer answers to such questions or to suggest aconcrete alternative. But the Commission did not find itdifficult to recommend that entrepreneurship needs to beencouraged among the SCs. For becoming an entrepreneur,various resources are required. According to the Commission,the SCs have the required resources and accordingly, it arguesin the following fashion:“The study shows that the villagers under study are rich inanimal wealth. Some of the SCs have got the cattle wealththrough the developmental schemes, but most of them havewhich can survive in adverse hot climate in desert areas,depending on the desert plants. The Commission further goeson, saying that even if the SCs are given some benefitsthrough some schemes, beneficiaries will feel compelled touse it for domestic consumption; and thus they would neitherrepay their previous loans nor would be able to create asustainable economic base. The Commission found that mostof the poor SCs want a regular source of income. Daily wageemployment provided such a source to the SCs in the village.Hence, the villagers stress that the govt. should give priorityto those programmes which provide regular daily employmentthroughout the year. If the villagers desired so thenthere is virtually nothing wrong in it. But the CommissionBox-1: The Budget Heads Under Which SCP Allocations Are Missing268 THE IIPM THINK TANK

A N INCLUSIVE INTENTTable 7: Sambal Gram In RajasthanSl. No. District Number of Sambal Gram(the villages where dalitsare majority)1. Ajmer 132. Alwar 813. Banswara 44. Baran 445. Barmer 916. Bharatpur 847. Bhilwara 368. Bikaner 699. Bundi 3110. Cittorgarh 6211. Churu 6412. Dausa 8113. Dholpur 6114. Dungarpur 215. Hanumangarh 33616. Jaipur 8317. Jaisalmer 2218. Jalore 1419. Jhalawar 5420. Jhunjhunu 1621. Jodhpur 1722. Karoli 5923. Kota 3924. Nagaur 3025. Pali 1726. Rajsamand 1127. Sawai Madhopur 6628. Sikar 1129. Sirohi 4330. Shri Ganganagar 85931. Tonk 5732. Udaipur 6Total 2463Source: Prayas ebong Pragati, Annual Report 2005-06, Social Welfare Department,Jaipur, Rajasthanrecommended that since the earlier and existing developmentalschemes and programmes have not yielded any marketdriveneconomic activities among the SCs, “it is advisable tochange their direction in a way that the developmental budgetdoes not go waste…” The Commission’s another recommendationappears to be a pure neo-liberal voice that pronounces:“The beneficiaries should themselves decide priorities[and] their activities as per the needs of the market andavailability of finance at lower rate of interest. Subsidyamount, which has led to the corruption and misutilization,should be phased out or abandoned.” We found theseobservations and recommendations very strange. While poordalits need state support in various ways to improve standardof living, the Commission has recommended the governmentto push them into the market economy. Instead of 17 percent,they have been getting around two percent of the Plan Sizeper year through the SCP. Now, the Commission’s recommendationsindicate that an attempt is being made to abolish thistwo percent allocation from budgets.Endnotes1Every year numerous dalit people get victims of atrocities,made by the so called upper-caste people, in India.2This total plan size includes expenditures on generalservices too.References• Government of India (2005): National Level EvaluationStudy on the Implementation of Special ComponentPlan(SCP) for Scheduled Castes, Jaipur: National Commissionfor Scheduled Castes And Scheduled Tribes.• Guha, Ramachandra (2007): “Adivasis, Naxalites andIndian Democracy”, Economic and Political Weekly(EPW), Vol. XLII, No. 32, August 11, pp. 3305-3312.• Gupta, Kamala (1988): “Economic Deprivation of SociallyDeprived in Uttar Pradesh.” In Development of ScheduledCommunities, ed. K.L. Bhowmick; New Delhi: Inter-IndiaPublications, pp. 143-166.• Maharatna, Arup (2005): Demographic Perspectives onIndia’s Tribes, New Delhi: Oxford University Press(OUP).• Marshall, Sir John (1973): Mohenjo-daro and the IndusCivilization, Vol.I, New Delhi: Indological Book House.• Michael, S.M. (ed.) (1999): Dalits in Modern India: Visionand Values; New Delhi: Vistaar Publications.THE INDIA ECONOMY REVIEW269

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A N INCLUSIVE INTENT271

The state failed in its core areasof legitimate functioning and dideverything possible to undermineour self-esteem and enterprise272

Politics has in a large measureceased to be a means to publicgood. Plunder and rent-seekinghave become the political norms273

Legislator's influence is deployedfor postings of pliable bureaucrats,transfers of inconvenient officialsand distorting market forces274

Politics has become big business.Big investments are made inelections, and much bigger profitsare reaped once elected to office275

Our public health expenditure at17% of total health expenditureis comparable to that of failednations like Cambodia and Burma276

About 28 million workers are inorganized sector, Of them, anastonishing 20 million, or nearlythree-quarters, are in government!277

278Extortionary corruption andarbitrariness in tax departmentssap the energies of SMEs anderode their world competitiveness

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