'No Point In India Growing So Fast If Wages Stagnate And Social Spending Is Slashed'
Budget 2023's allocations for most critical social security schemes have declined in real terms, says economist Jean Dreze
Bengaluru: The last full Union budget before the next general elections in 2024, which was presented on February 1, gets "a big zero" in terms of welfare spending from economist and social activist Jean Dreze. "Budget allocations for most critical social security schemes have declined in real terms," said Dreze.
The Union government withdrew the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), under which poor households were receiving free foodgrains in light of the economic shock wrought by the Covid-19 pandemic and related lockdowns. One reason why the allocation for food subsidy in Budget 2023 is lower than the last two years is the discontinuation of these bonus food rations, said Dreze.
Beginning January 1, the government announced that foodgrains to 813.5 million beneficiaries under the National Food Security Act (NFSA) 2013 would be distributed for free for one year. This includes 5 kg foodgrains per person to Priority Households and 35 kg per household to the poorest of the poor households. But this offers little help to poor families and enables Prime Minister Narendra Modi to steal the credit for NFSA, said Dreze. "People are going to save a few rupees every month on the issue price [of foodgrains under NFSA], and lose big on the quantity," he said.
In an interview, Dreze speaks about India's reduced social sector spending in face of increased hunger and inequality post the Covid-19 pandemic.
The government withdrew the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which provided 5 kg of foodgrains per person per month free of cost, and decided to provide free food grains to 813.5 million beneficiaries under the National Food Security Act (NFSA), 2013 for a year. The government is expected to provide Rs 2 lakh crore in food and welfare subsidies in 2023. How significant is this decision and how well does it target the poor population?
The main purpose of centrally-sponsored welfare schemes today is to promote the prime minister. The food subsidy takes the cake in that respect. There was a massive cut in food subsidy this year, with the discontinuation of bonus rations under PMGKAY. But the routine NFSA rations have now been renamed PMGKAY. This is a masterstroke from the government's point of view: not only does it enable the prime minister to steal the credit for the National Food Security Act, 2013, it also hides the discontinuation of PMGKAY. The fact that NFSA rations are going to be distributed for free for a year is neither here nor there, because the earlier issue prices [price of foodgrain under NFSA] were virtually nil in any case. People are going to save a few rupees every month on the issue price, and lose big on the quantity. But this is being hidden from them and they are expected to sing the praises of the prime minister.
For practical purposes, NFSA cardholders are more or less back to where they were before the Covid-19 crisis, and so is the food subsidy, in real terms. The discontinuation of PMGKAY is in tune with the government's claim that the economy has made a 'full recovery' from that crisis, as the Economic Survey puts it. But this claim is unlikely to cut much ice with working people. In fact, the Economic Survey's own data show that real wages are no higher today than they were at the time of the lockdown in May 2020. This is not the time to roll back social security measures, as the 2023-24 budget intends to do.
The food subsidy is lower because the bonus food rations have been discontinued. The bonus rations consisted of 5 kg per person per month for all NFSA cardholders. They were of great help to poor people during the Covid-19 crisis. They have now been withdrawn, with a consolation lollipop in the form of a marginal reduction in issue prices for routine NFSA rations, from Rs 2 or Rs 3 per kg to zero. Without the bonus rations, life is obviously going to be harder for poor families.
The bonus food rations were not indefinitely sustainable, because they led to a steady depletion of the country's foodgrain stocks. The main objection is not to the discontinuation of PMGKAY, but to the fact that it was done abruptly without any alternative relief measures being put in place. When PMGKAY was discontinued, we argued that the food subsidy savings should be used to initiate or expand other social security measures such as old-age pensions, maternity benefits and child nutrition programmes. Instead, all these schemes have been sidelined in Budget 2023.
The beneficiary list under the NFSA is based on the 2011 Census, and there has been a delay in conducting the 2021 census. This could exclude millions of beneficiaries from the scheme. Your comments on the impact on the rural and urban poor in the context of the pandemic and the delay in the census?
The most insecure households today are poor households without a ration card. This includes many young couples who got married and formed separate households after the Socio-Economic and Caste Census (SECC) was conducted in 2011. In many states, the SECC was used to draw lists of ration cards when the NFSA came into force in 2013. Households that were formed later on often have the greatest difficulties in obtaining a ration card. Some poor households that already existed in 2011 were also left out of the NFSA lists for various reasons, such as gaps or inaccuracies in SECC data. Further, the list of household members on a ration card is often incomplete, depriving the household of its full entitlements since NFSA entitlements are defined in per capita terms. For all these reasons, it is important to update the NFSA lists, and this is difficult to do without a [fresh] Census.
Some states have tried to reduce exclusion errors by giving ration cards and monthly foodgrain rations to poor households at their own expense. The central government could have facilitated this with a provisional increase in foodgrain allocations to the states, in advance of the next Census. This is the sort of compensatory relief measure we would have liked to see when PMGKAY was discontinued. Higher allocations are quite feasible, since annual foodgrain procurement exceeds NFSA requirements by 30 million tonnes or so. With PMGKAY discontinued, foodgrain stocks are all set to balloon again.
[The Ministry of Consumer Affairs, Food and Public Distribution declined to comment on the reduction in allocation for NFSA and the withdrawal of the bonus food rations.]
Over the last 14 years, on average, nearly a third of the Union government's social sector spend was on "providing subsidised food to the poorest two-thirds of the country", according to an analysis by the Centre for Policy Research's Accountability Initiative released last month. Social sector expenditure has been around 20%. How would you assess this last full Union budget before the next general elections on welfare spending?
I would give it a big zero. Budget allocations for most of the critical social-security schemes have declined in real terms. This applies, for instance, to the food subsidy, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), social security pensions, maternity benefits and Integrated Child Development Services (ICDS). The health budget has also declined in real terms. For school education, there is a marginal increase, but mainly to fund Kendriya Vidyalayas, Navodaya Vidyalayas and especially PM Schools for Rising India. This is going to benefit a tiny minority of children, in line with the tendency to create islands of excellence in a sea of deprivation.
There is some increase for the midday meal scheme [PM POSHAN] vis-à-vis last year's budget figure, but it's a big decline against the revised 2022-23 budget figure. In real terms, the Union budget allocation for midday meals is 40% lower today than it was in 2014-15, and the same applies to ICDS. This is truly shocking, but it passed unnoticed in the euphoric comments that predictably followed the budget in the corporate-sponsored media? What is the point of being the fastest-growing large economy in the world if real wages are stagnating and social spending is slashed?
[IndiaSpend has requested comments from the Secretary, Finance and Expenditure on budget allocations for social security and its impact on the poor, and the cut in food subsidies. We will update the interview when we receive a response.]
Since the Covid-19 pandemic and until November 2022, billionaires in India have seen their wealth increase by 121% and the bottom 50% of India's population possess only 3% percent of wealth, Oxfam reported this January. In 2022, India fell six places to 107 on the Global Hunger Index. While the government has contested the index ranking and the methodology, as it did last year as well, there is concern about wealth inequality and the extent of hunger and malnutrition brought about by the pandemic. Your comments?
The Global Hunger Index is a flawed index in my view, but not for the reasons given by the government. Mixing apples and oranges is not the best way to find out how many you have of each. In India, we have enough data on nutrition and related matters not to depend on this sort of khichdi [hotchpotch]. We know, for instance, that India has some of the highest rates of child undernutrition in the world, especially in terms of weight for age. It has been known for some time that South Asia had higher levels of child undernutrition than other regions, but now India itself stands out within South Asia in this respect. Quite likely, this has something to do with India's exceptional levels of economic and social inequality.
I am not thinking only of the sort of wealth or income inequalities highlighted by the Oxfam report, but also of other inequalities such as those of caste, gender and access to education. When you see the hardships and oppression that poor women in rural India face, it is perhaps not surprising that so many children are undernourished. Indeed, these women themselves are more undernourished than their counterparts almost anywhere else in the world, judging from Body Mass Index data.
These are not new problems, but obviously, the pandemic has made them worse. What is astonishing is not just how billionaires were catapulted further into the money stratosphere even as the poor struggled to survive, but also how the super-rich were exempted from contributing anything in this situation. In fact, they enjoyed a bonanza of further concessions and subsidies.
MGNREGA is caught today in a deadly pincer. On one side, the budget has been drastically cut, not only vis-à-vis last year's revised estimates but also vis-à-vis budget estimates in any of the last five years. If you deduct wage arrears of nearly Rs 10,000 crore, the effective MGNREGA budget for 2023-24 is even lower.
On the other side, a problematic system of digital attendance has been made compulsory from January 1, 2023. Wage payments are now conditional on timely uploading of workers' photographs twice a day, using the National Mobile Monitoring System (NMMS) app. This app is causing havoc, especially in areas with poor connectivity. If a worker has worked six days in the week but the worksite supervisor managed timely uploading of her photograph on just three days, she will be paid for three days. This is grossly unfair. But it helps the central government to contain wage payments and discourage workers from applying for MGNREGA work. So, the budget cut and the NMMS App are made for each other.
This app has been made compulsory, well in advance of being reliable and user-friendly, in the name of preventing corruption. I am sceptical of it being of much use in that respect, considering the ability of corrupt middlemen to game digital records. Taking action against corrupt elements would be far more useful. But in any case, anti-corruption measures cannot ride roughshod over workers' legal right to assured payment within 15 days. And a troubling question remains – is the real purpose of NMMS to stem corruption, or to help the Modi government to dismantle MGNREGA? It could turn into a diabolical weapon in that respect, by sapping workers' interest in the entire programme.
[In a response to IndiaSpend, the Ministry of Rural Development said that it is training states and Union Territories (UTs) as per their request on transitioning to the NMMS app. They also said that "technical issues are being resolved on real time basis" and they are incorporating new provisions/suggestions as requested by the states/UTS. They also said that there is no time boundation of uploading the photo for attendance and it can be captured offline and then uploaded later but did not specify the time period within which the photo has to be uploaded. In exceptional cases of the attendance not being uploaded, the District Programme Coordinator can authorise manual attendance. "NMMS facilitates timely attendance which in turn leads to timely payment. It ensures accountability and transparency in the implementation of the Scheme," the ministry said. On the reduction in the MGNREGA budget for 2023-24, the ministry said that the programme is a demand-based programme and that, in FY 2022-23, 99.8% of rural households who demanded work were provided with it. Further, the revised estimates for the programme are usually higher than the budget estimates and thus the programme gets allocated more money than laid out in the budget estimates. You can read their response in full, here.]
The NREGA Sangharsh Morcha, a national collective of workers unions and organisations working on MGNREGA, of whom Dreze is a part of, sent a response questioning the MORD's statement on demand for work under the rural jobs programme, payment delays and the NMMS app. You can read the statement by the NREGA Sangharsh Morcha here.
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