Notes

Failure of Public Policies, Subsidies

Properties1
tagspolicy, governance, subsidy

2 min read

  • despite being welfare state, poverty still issue because
    • focus on poverty alleviation, not removal
    • DBT, subsidy, etc not permanent
    • vicious cycle of poverty
      • indefinite subsidies keep ppl poor
      • dependent on govt
      • no self initiative
  • subsidies should have specific time limit
flowchart TD
A[Poor] --> B[Subsidy] --> C["Revenue
expenditure high"] --> D["Capital
expenditure less"] --> E["Low investment"] --> F["low infra"] --> G["No pvt
investment"] --> H["no employment"] --> A

Identification of beneficiaries

  • info to identify not accurate/complete
  • hard to reach right ppl w/ right support
  • corruption, unfairness creeps in
  • NITI Ayog: use principle of exclusion
    • eg. ppl filing IT return excluded
    • ppl w/ houses
    • ppl w/ four wheelers
    • ppl w/ certain durables
  • make mandatory for states to spend certain % of budget on capex
  • only certain grp, individual get help
    • others left out
    • eg PDS misuse
  • sometimes, deserving individuals left out due to
    • administrative errors
    • strict criteria
    • narrow in situations considered
  • ppl not eligible get benefits
  • w/o proper monitoring, difficult to know if beneficiary selection process working as intended
  • needs concentrated effort from policy makers, administrators, civil society
  • data collection improve, effective oversight -> enhance fairness & efficiency of public policy gov system

Solutions to Subsidy

  • consensus among political parties regarding limited continuation of subsidy
    • ppl should be able to find productive employment by the time they reach 25 yrs of age => don’t be dependent on govt
  • merit vs non merit subsidies
    • merit: essential (food, edu, health)
    • non merit: populist (remove)
  • identification of beneficiaries, remove undeserving
    • current scope too wide eg. Garib kalyan Ann Yojna grains given to 83cr ppl (more than half country)
    • acc to latest NITI Aayog report, only 11.7% country below poverty line under multi dimensional poverty index, i.e. 16cr ppl
    • move from principle of inclusion to exclusion
    • Shanta Kumar Committee: spread food stamps to save on transportation, procurement, storage cost and reduce corruption in state
  • Fiscal Responsibility and Budgetary Management
    • amend to ensure both central/state govt ensure 40% expenditure on capex
  • golden rule of borrowing
    • govt be allowed to borrow only for capex otherwise it’ll lead to situation of debt trap
    • make mandatory for both central/state govt to spend 6% on edu+health
      • current only 1.7% each
      • transform democratic bulge into dividend
  • outlays must be transformed into outcomes

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