The World Bank was poor India’s rich aunt for many decades. Though her wealth has become less impressive as India has prospered, it is not uncommon for people in the Indian government to call her up and ask her to pick up the bill for something they want. In 2004, the chief of the Planning Commission asked the World Bank to hold a conference in Delhi on social welfare programmes. More than a dozen papers were presented over two days. They were intended for publication; but for that the World Bank needed the permission of the government of India. Formally, this meant the finance ministry; but since the papers were on social issues, it would not give permission unless the concerned ministries agreed. They took their time. The last permission was coaxed out of the labour ministry in October 2010, six years after the conference. The publication of the papers must wait till some indeterminate future date. Meanwhile, the report has already been dismissed as outdated and irrelevant by Abhijit Sen, a member of the Planning Commission whose chief asked for it in the first place. The way our government works, analyses of the state of the country will always be outdated. But we have no reason to think that the reality has changed all that much, so it is still relevant.
Using the data from the 2005 National Sample Survey, the World Bank established that the poorer the state, the less was the Central government’s expenditure in it per poor household. Richer states were better at getting money out of the Central government and spending it. That does not mean that more Central money went to the poor of rich states, just that their governments managed to extract more money from the Centre.
To illustrate, getting foodgrains from the Centre for distributing to the poor and diverting it instead to the market and pocketing the profits was a flourishing business; about 60 per cent of the foodgrains obtained from the Centre were thus converted into profit by politicians and bureaucrats. The highest proportion of diversion — close to 90 per cent — was in Bihar; the proportion in Punjab was nearly as high. There were hardly any poor in Punjab. But the Punjab government invented poor people, collected cheap grains in their name from the Centre, and sold them off. Uttar Pradesh, Karnataka, Haryana and Tamil Nadu also diverted a lot of grain. West Bengal and Maharashtra diverted the least.
The Centre allocates resources to states according to the number of poor people estimated in them from the NSS. If they divert the resources to those who are not poor, then their poor must not be getting the intended benefits. They did so by excluding the really poor from their lists. Punjab and Andhra Pradesh excluded about three-quarters of their poor. Bihar, Orissa and Madhya Pradesh misclassified only about a third of their poor.
The government thinks of poverty as an indelible quality of some people, like the colour of their skin. But people move out of poverty; they also fall into poverty. They are vulnerable to misfortunes such as bad harvests, death or illness of income-earners, livestock epidemics, etc. How do they cope with bad luck? They take help from the family, they sell off assets such as land and animals, they borrow or they migrate for work. Only those who have assets can sell them; it is unusual for the poor to have assets. But borrowing was very common; so was migrating in search of work.
In 2004-05, 83 per cent of all households were supposed to have ration cards, but only 23 per cent drew rations. The difference between the two figures gives us an idea of foodgrain diversion. It was less than 30 per cent in Andhra, Karnataka and Tamil Nadu. It was over 80 per cent in Punjab, Haryana, Rajasthan and West Bengal, states bordering Pakistan and Bangladesh; in Assam it was 76 per cent. It was 77 per cent in UP, and 50-70 per cent in the remaining states. Thus the rationing system functioned more or less in the south (including Kerala; 60 per cent of the poorest quintile there took rations), and failed in the rest of the country. Amongst the reasons people gave for not taking rations, unavailability was the major one; in other words, the grain meant for the public distribution system was diverted. Lack of money was mentioned only in the poor states of central India. Although the World Bank does not say it, the border states in the east and west specialized in smuggling grains to Pakistan and Bangladesh. The rest just made a good business out of diversion to the open market. The Planning Commission made estimates of diversion, which were much smaller than ours.
The World Bank made its own estimates of diversion by comparing what the government claimed to have supplied the states with households’ consumption of PDS grains according to NSS; its estimate is 41 per cent, compared to our 60 per cent. Its geographical variation was similar to ours. Interestingly, diversion was much greater for rice than for wheat. Over 90 per cent of rice supplied to Assam, Orissa, West Bengal and Punjab never reached ration card holders — a confirmation of smuggling to Bangladesh and Pakistan. For wheat, the pattern was the same, but the proportion diverted was lower.
I shall call the Mahatma Gandhi national rural employment guarantee scheme the work-on-demand scheme. Under it, any villager can go to a district collector and ask for a hundred days’ work in a year. The World Bank asked workers on 100 sites; almost all wanted to work for 100 days, and only 13 per cent had in the previous year. Many did not know about their entitlement; some had been told that work was not available. If it is not, those who ask for work must be given unemployment allowance; virtually no one was. It is the states that are supposed to give the allowance out of their own budgets, and they did not feel like it. The World Bank did not look into corruption the way it did with PDS, but cited a study which said that 50 per cent of the money was siphoned off. Poor Mahatma Gandhi deserved better.
The use of contractors on work-on-demand schemes is banned; but they are commonly employed. Their advantage is that they can underpay workers and invent fake workers; that creates considerable scope for their profits, and for bribes to organizers of work-on-demand.
There is much more to the World Bank’s study, but enough has been said to show that it has performed an extremely useful service — that it has made a candid review of the government’s most vaunted social services. Its findings are damning; if the government were honest and if it could not contest the findings, it would wind up PDS and MGNREGS. If it did, the poor would not be worse off; but many politicians, contractors, bureaucrats and businessmen would be. That is precisely why it will not wind up these and other schemes. But it can surely ask whether the objectives it aims at cannot be achieved more efficiently.