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Government budgets

Government budgets support poverty alleviation programmes through a variety of income transfer schemes, including employment guarantee and self-selective food-for-work type of programmes. Such direct support, however, is only a fraction of the much larger indirect subsidisation programme. In these subsidy provisions, although considerably larger resources are involved, most benefits could be appropriated by the non-poor if the subsidy is not designed and administered carefully. Flow Chart 3.1 provides an outline of the channels through which fiscal policies can affect the incidence of poverty in a country. First, the size of the budget itself indicates the capacity of the government to intervene. Secondly, the structure of its expenditure programmes determines the relative strengths of direct and indirect interventions for poverty alleviation. Expenditures on services that are in the nature of public goods, like law and administration, can serve as pro-poor instruments, provided access costs are taken care off. Thirdly, expenditure on education and health constitute a long-term strategy for combating poverty through human development. Fourthly, expenditure on infrastructure increases growth prospects and thereby reduces poverty. These are all avenues of indirect intervention. Flow C hart 3.1: Fiscal Policies and Poverty Reduction: Direction and Factors Strengthening Im pact Higher budgetary resources P o licies reducing Subsidised incom e social and in eq u alities eco n o m ic services Higher growth H ig h er H ealth E d u catio n Investm ent in in frastructure Low incom e and asset inequality B etter targeted sub sid ies D irect in terv en tio n Labour intensive growth M in im isin g leakages H igher Em ployment Lower poverty Social securites transfers Low access costs Poverty allev iatio n programmes 50

Bardhan (1996) emphasizes that often, in the name of the poor, excessive, untargeted and distortionary policy intervention has been resorted to in many countries. 11 Even if all markets, including in particular, labour markets were functioning well, there would always be some individuals who are weakly connected to the income generation processes of the economy because of their particular circumstances such as, severe disabilities. The functioning of the labour market is particularly important, as labour is the main asset of the poor. The composition of public expenditure is also quite important. Effective coverage of poor by government programmes depends on the institutional environment including local administrative capabilities, the incentives facing local administrators, and their interface with the poor. Ranis and Stewart (2000) suggest decomposing public expenditure on human development into three components: i. Public expenditure ratio: share of public expenditure in GDP, ii. Human development allocation ratio: share of human development expenditure in total public expenditure, and iii. Human development priority ratio: share of priority human development expenditure in total human development expenditure. They have argued that, with decentralisation, the human development allocation and priority ratios almost always improve. Between growth and human development, Ranis and Stewart talk about “two chains”, one running from human development to economic growth, and the other from economic growth to human development. In the first chain, with human development, productive capabilities of economic agents (workers, managers, and farmers) increase, the organisational capabilities also increase, leading to better technology and production processes. The structure of output contains greater variety, exports increase, and overall growth increases. 11 Bardhan (2006) observes: “In the recent past and, even currently, the governments in many poor countries have heavily interfered in the market in the name of helping the poor. They have used high tariffs, quantitative trade restrictions and overvalued exchange rates, subsidised credit and under priced energy, water, and other publicly provided inputs to help domestic producers. They have used price control and made restrictions on agricultural commodities to keep food prices low for the urban poor. They have used industrial and investment licences to keep larger producers at bay and help small-scale, sometimes inefficient, producers. They have imposed high marginal tax rates and public sector dominance in production with the objective of reducing concentration of income and wealth. The experience of the last four decades has shown that many of these policies have been counterproductive from the point of view of both efficiency and equity”. 51

World Comparative Economic And Social Data
Police Stations - Tamil Nadu Police
N u m b e r o f S c h o o l s - DISE
Census 2011 population of Latur district
PDF: 1.0MB - Population Reference Bureau