In the sixty years since independence, our governments, both central and the state, have undertaken a large number of poverty alleviation programmes of different kinds. Like the proverbial curate's egg we have been successful partially in our endeavours. The great challenge facing us is to focus on alleviating or even eliminating poverty using the scarce resources at our disposal. In other words, an economist would call it a challenge of efficiently allocating scarce resources.
Any government assistance for the poor can be divided into two broad categories. One category consists of the basic social welfare functions like primary and secondary education, primary health care, minimum social safety nets, civic services and facilities like sanitation and drinking water etc, that are intended towards providing the basic minimum civic infrastructure and services for every citizen. The other category consists of more specific poverty eradication assistance like self employment and wage schemes, many categories of subsidies, soft loans etc. This assistance is aimed at specifically assisting the Below Poverty Line (BPL) households in increasing their incomes and emerging out of their present poverty trap.
My interest is with this second category of government poverty programs. Nobody will dispute that economic development is a continuous process of movement up the income ladder. But my contention is that in the real world, for this movement to have any substantive effect, it has to be a discrete jump and not a continuum crawl. In fact, an individual is meaningfully benefitted by a government poverty elimination program only if the assistance helps him move up from a lower to a higher trajectory of growth.
I am therefore convinced that for any assistance at poverty alleviation to be effective, it should aim towards catapulting the assisted towards a higher trajectory of livelihood or growth. In other words, the poor person should be able to leverage this assistance to move into atleast the next higher income group. The anti-poverty programs should therefore trigger off a cascading movement up the economic ladder.
Any assistance which would increase the income of an individual from say Rs 20000 to Rs 25000, would surely fail to achieve this objective. It would only provide a slight repreive for the poor person. Unfortunately most of our poverty eradication programs are afflicted by this problem. In our anxiety to cover as many people as possible with our poverty elimination programs, we end up losing focus and converting these programs into poverty mitigation efforts, which is precisely what our first category of government programs are supposed to deliver.
Instead imagine, a poor person being able to leverage a specific government program assistance to move up from Rs 20000 per annum to Rs 50000 per annum. This assistance could be anythig from a soft loan to buy a tractor to scholarship for his son to be admitted for a professional course. Now we have a genuine climb up the ladder and the first victory in the battle against poverty. This jump to the next income level would invariably be accompanied by a movement up the occupational ladder too. Thus a landless farmer would move up to either own some land or preferably migrate to some more remunerative non-farm employment; a non-farm employed poor could increase his income by entering the manufacturing or the tertiary sector.
There are numerous examples. One of the ways in which we can most certainly, but only slowly, help move people up thet economic ladder is by assisting their children get admitted into a proffessional course. We need to spend our poverty elimination resources in training the more promising students among the poor to clear the entrance examinations for these professional courses, and then support them with scholarship assistance during the course period. This investment would go a long way in poverty elimination than any piecemeal division of huge resources among a large number of people.
Many of our self-employment assistance programs consist of giving small amounts of assistance to buy a sewing machine or set up a kirana shop. Having seen and interacted with thousands of such beneficiaries, I am yet to see even a single case of a sewing machine or a kirana shop propelling a poor person into a higher growth trajectory! In fact, I am convinced that most such people who benefit minimally by the sewing machine, would have purchased it even without the government assistance! Maybe, it would make sense to assist someone already running a sewing shop with one machine, to be assisted with say two or three more machines. This will atleast help him move from a being worker to being an entrepreneur. With adequate training and some linkages, we will have the ingredients in place to push him up to a higher trajectory of growth. Instead of helping 100 people in the village this year, we may be able to assist only 50. But atleast we can be assured that this 50 will not approach us again next year for assistance.
Similarly instead of giving subsidy cum soft loan assistance for purchasing a cow or a goat or a buffallo, to every farmer in a village, we may as well spend the resources more efficiently by providing the same assistance to those farmers who are already having two or three animals and can move up the income chain substantially with this additional unit of cattle.
The guidelines of these programs and the bureaucratic and political imperatives results in this distortion of objectives and dissipation of scarce resources. Typically, all these poverty alleviation programs like self-employment and wage employment assistance schemes are target oriented, with the objective of covering as many beneficiaries as possible. The implementing bureaucrats scramble to cover as many beneficiaries as possible, so as to meet their targets. The importance of numbers in a democracy, and the attendant political compulsions only exacerbates the problem. Further, most often, they adopt an one-size-fits-all approach, with the same program components and guidelines for the entire country and for all sections of poor.
It is therefore important that our poverty alleviation priorities move away from simple target-oriented output based to a more outcome-based approach. This would involve focussing on identifying the specific local needs and remunerative local economic opportunities, and the target beneficiary groups, and then delivering the critical mass of assistance required for them to move into a higher trajectory of economic growth. Instead of mindlessly covering as many poor people as possible with no concern for the quality of assistance, the objective should be to ensure that the beneficiary should not come back seeking more next year. However, to cover as many people as possible, it may be more appropriate to target all those at the margins of the poverty ladder, and lift them up to the higher growth trajectory.
The economic case for such analysis is simple. Any efficient allocation of scarce resources would demand that the total marginal utility be maximized. We should focus on helping those at the margins of each income or occupation level, who have the maximum marginal utility to be gained by any incremental unit of assitance, since they would move up to a higher growth trajectory. By helping those at the margins, we can maximize the utility gained by allocating the scarce available resources. In contrast, the most poor and the more poorer require much higher quantum of unit assistance for it to make any meaningful difference to their lives.
This way we can maximize the marginal utility gained by the spending and thereby optimize the allocation of scarce resources. It would mean that we allocate every incremental money spent on poverty elimination among those whose marginal utility with that resource is maximum.
The argument is simple, albeit politically incorrect. In any case, by spreading ourselves thin by trying to cover as many people as possible, we are giving too little help for anybody, to actually achieve our objective. The beneficiary will continue to keep coming back to us the next year demanding more assistance. We will continue to take one step forward and two steps backwards! In contrast, if we focus our resources on those at the margins we are utilizing our resources more efficiently. It helps achieve our desired outcomes, and lift the beneficiaries to a higher level of economic opportunity and growth. That will be two definitive steps forward!
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