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Acknowledgements

This report, in two volumes, was prepared at therequest o Government o India. Volume II contains theull detailed report with all analyses and ndings, whileVolume I is a more condensed version highlighting

main conclusions. The report team was led by PhilipO’Keee (EASSP, then SASSP), and the core teamincluded Puja Vasudeva Dutta, Mohammed IhsanAjwad, Kalanidhi Subbarao, Robert Palacios, RinkuMurgai, and Dina Umali-Deininger. Mansoora Rashid,Sector Manager Social Protection or South Asia,guided its preparation, and Julian Schweitzer wasthe then Human development Sector Director. Thereport was thoroughly updated by Philip O’Keee, PujaVasudeva Dutta, Robert Palacios and John Blomquistin 2010 to reect recent developments in SocialProtection (SP) policy and programs, more recent data

or some programs, and government eedback. VidhyaSoundararajan provided extensive research support tothe team during revisions to the report. Renu Gupta,Savita Dhingra and Tanusree Talukdar provided teamsupport throughout preparation. Peer Reviewers areShubham Chauduri (EASPR); Lant Pritchett (Harvard

Kennedy School o Government), and Mamta Murthi

(ECSHD).

The report draws on background papers prepared by

N.C. Saxena (Anti-Poverty Programs), Mahendra Dev,

K. Subbarao, C. Ravi, and Pro. Galab (Saety net program

perormance, drawing on the three state SP survey),

Puja Vasudeva Dutta (Poverty and vulnerability; Social

pensions), Martin Ravallion and Rinku Murgai (ex-ante

simulations or MGNREG), Soumya Kapoor and Vidhya

Soundararajan (MGNREG program perormance),

Sumita Chopra (Smart cards) Mohammed Ihsan Ajwad

(national SP program perormance, drawing on the

IHDS data), Rinku Murgai and Jyotsna Jalan (2002 BPL

System; Social pensions); Dina Umali-Deininger and

Klaus Deininger (PDS), Robert Palacios and Sangeeta

Goyal (Social security or unorganized sector); Navolina

Patnaik (Welare unds); Philip O’Keee (Workare and

social security); Jayashree Balachander, Philip O’Keee

and Puja Vasudeva Dutta (SP review or Jharkhand);

R. Badiani, S. Dercon and P. Krishnan (chronic and transient

Acknowledgements



Social Protection for a Changing India: Volume II

development, GoI), Dr. Pani (then Secretary RuralDevelopment, GoI), Arjun Sengupta, K.P. Kannan,and Ravi Srivastava (NCEUS), Amita Sharma (JointSecretary, MoRD, GoI), Neelam Sawhney (JointSecretary MoRD, GoI), Abhijit Sen (Member, PlanningCommission), Santosh Mehrotra (then Advisor,Planning Commission), Anil Swarup (DG, MoLE,GoI), Mr. Prashant (then Director, DEA, GoI), K. Raju

(then Principal Secretary Rural Development, GoAP),Pronab Sen (Chie Statistician and Secretary, Ministryo Statistics and Programme Implementation, GoI),A. Mishra (then Special Secretary Planning, GoUP),R.V. Singh (Secretary Planning, GoO), A. Singh (SecretarySocial Welare, GoR), Dr. Sharma (Secretary Food, GoO),K. Saha (then Secretary Food, GoB), A. Mukerkji (thenPrincipal Secretary, Rural Development, GoB), andmany other ocials at state and district levels. Otherswho provided their time and insights included AlakhSharma (IHD Delhi) and Geeta Unikrishnan (DFID,

New Delhi), Marc Socquet (ILO, New Delhi), RobertJenkins, Ramya Subramanian, Annemieke Burkmeisterand Rajib Ghosal (UNICEF, New Delhi and Lucknow),and World Bank colleagues Shonali Sen, GauravDatt, Christine Allison, Maitreyi Das, Tara Vishwanath,Sumita Chopra and colleagues in the South Asia SocialProtection group. The report has also greatly benettedrom ormal comments received rom the Ministrieso Rural Development (September 2008), ConsumerAairs, Food & Public Distribution, Panchayati Raj andLabour and Employment (April 2010).

poverty, capture in development programs, drawingon ICRISAT data) and S. I Rajan (Social pensions). It hasalso beneted greatly rom two surveys: (i) a nationalsurvey conducted by NCAER in 2005 in collaborationwith the University o Maryland. This was a survey o many human development issues and included a Bank-nanced set o saety net questions. The team is mostgrateul to Amaresh Dubey (then NCAER) and Proessor

Sonalde Desai (University o Maryland) or their eortsin producing the data and insights into the surveyprocess, and to Suman Bery (NCAER) or support; and(ii) a three-state SP survey commissioned or this report. This was carried out by AC Nielsen ORG-MARG underthe leadership o Sumit Kumar, and with inputs andoversight by a team rom Centre or Economic and SocialStudies, Hyderabad, led by Proessor Mahendra Dev,and including Proessors C. Ravi and Galab. KalanidhiSubbarao was also a key participant in design andanalysis. The study was nanced rom a DFID Trust Fund,

support rom which is grateully acknowledged.

The scope o the report was dened ollowing a launchworkshop in New Delhi in late 2004, which was jointlyorganized with Government o India, World Bank,and World Food Program, in particular with NishaSrivastava. The report has also beneted enormouslyrom interactions with and eedback rom a range o Government o India and state level ocials, and withresearchers and civil society representatives. Theyinclude Renuka Vishwanathan (then Secretary Rural

Regional Vice President Isabel Guerrero, SACVP

Country Director N. Roberto Zhaga, SACIN

Sector Director Michal Rutkowski, SASHD

Sector Manager Mansoora Rashid, SASSP

Task Team Leader Philip O’Keee, EASSP (then SASSP)



Acronyms

AABY Aam Aadmi Bima Yojana

AAY Antyodaya Anna Yojana

ACA Additional Central Assistance

APL Above Poverty Line

BPL Below Poverty LineCAG Comptroller and Auditor General

CBO Community-based Organization

CCT Conditional Cash Transer

CSS Centrally Sponsored Scheme

CSO Civil Society Organization

DEA Department o Economic Aairs

DPC District Planning Committee

DRDA District Rural Development Agency

EPFO Employees Provident Fund Organization

FCI Food Corporation o India

FM Financial ManagementFPS Fair Price Shop

GDP Gross Domestic Product

GoB Government o Bihar

GoD Government o Delhi

GoI Government o India

GP Gram Panchayat

GoR Government o Rajasthan

GoUP Government o Uttar Pradesh

HD Human Development

HH Households

IAY Indira Awaas YojanaICDS Integrated Child Development Scheme

ICRISAT International Crops Research Institute or the Semi-Arid Tropics

ICT Inormation and Computer Technology

IEC Inormation and Education Campaign

IRDA Insurance Regulatory and Development Authority

Acronyms



v Social Protection for a Changing India: Volume II

JBY Janshree Bima YojanaLIC Lie Insurance Corporation o India

LPG Liquied Petroleum GasM&E Monitoring and Evaluation

MDM Midday MealMEGS Maharashtra Employment Guarantee SchemeMFI Micro-nance Institution

MIS Management Inormation SystemMKSS Mazdoor Kisan Shakti Sangathan

MOLE Ministry o Labour and EmploymentMoRD Ministry o Rural DevelopmentNCEUS National Commission on Enterprises in the Unorganized Sector

NFFWP National Food or Work ProgramNGO Non-governmental OrganizationIGNOAPS/NOAPS Indira Gandhi National Old Age Pension Scheme

MGNREGA Mahatma Gandhi National Rural Employment Guarantee ActNRLM National Rural Livelihood Mission

NSAP National Social Assistance Program

NSS National Sample SurveyJNNURM Jawaharlal Nehru National Urban Renewal Mission

OBC Other Backward ClassesPDS Public Distribution System

PEM Public Expenditure ManagementPEO Perormance Evaluation OcePFMA Public Financial Management and Accountability

PMGY Pradhan Mantri Gramodaya YojanaPMT Proxy Means TestPOS Point-o-service

PRFDA Pension Fund Regulatory and Development Authority

PRI Panchayati Raj InstitutionRBI Reserve Bank o IndiaRSBY Rashtriya Swasthya Bima YojanaRD Rural Development

SC Scheduled CasteSFC State Food CorporationSGRY Sampoorna Grameen Rozgar Yojana

SGSY Swarnajayanti Gram Swarozgar YojanaSHG Sel-Help Group

SJSRY Swarna Jayanti Shahari Rozgar YojanaSP Social Protection

SRM Social Risk ManagementST Scheduled TribeULB Urban Local Bodies

UTI Unit Trust o IndiaUWEP Urban Wage Employment ProgramVAMBAY Valmiki Ambedkar Awaas Yojana



Table of Contents v

Executive Summary xv

Chapter 1: Poverty, Inequality and Vulnerability in India: Setting the Context or Social Protection 1

A. Poverty and Inequality 4

B. Vulnerability 10C. Implications or Social Protection Policy 21

Chapter 2: The Social Protection Policy and Program Mix 25

Chapter 3: Protective Programs 31

A. Public Distribution System (PDS) and Antyodaya Anna Yojana (AAY) 33

B. Social Pensions 44

C. Targeted Housing Programs

D. Determinants o Program Participation 52

E. Conclusions and Recommendations 55

Chapter 4: Public Works and Promotional Programs 67

A. Public Works Programs 70

B. Promoting Movement out o Poverty in the Short and Long Term 88

C. Conclusions and Recommendations 100

Chapter 5: Social Security: Closing the Coverage Gap 105

A. Social Protection Coverage and the Nature o the Unorganized Labor Force 109

B. Social Security Schemes Operating in India 111

C. Recent Initiatives to Expand Social Security Coverage 116

D. Expanding Social Security Coverage in the Coming Decade 124

E. Conclusions and Recommendations 128

Chapter 6: Financing and Institutions or Social Protection 131

A. Financing o Social Protection Programs 134

B. Institutional Roles and Responsibilities in SP Programs 145

Table of Contents




C. Political economy o Institutional Reorm in Social Protection 152

D. Conclusions and Recommendations 154

Chapter 7: Program Administration Issues in Social Protection – The “Nuts and Bolts” 159

A. Program Awareness and Outreach 161

B. The Application Process and Eligibility Determination

C. Operational Aspects o Program Administration 171

D. Conclusions and Recommendations 180

Chapter 8: Targeting mechanisms – BPL and Beyond 185

A. What Does “Poor” Mean in Terms o Public Programs? 188

B. The 2002 BPL Methodology

C. Alternative Targeting Methods 202

D. How Do Targeting Methods Stack Up? 208

E. Options or Improving Targeting in SP Programs 210

Chapter 9: Getting More rom India’s Social Protection System – Directions or the Future 219

A. Policy Reorm in Social Protection 222

B. Improving Implementation o Social Protection Programs 225

C. Political Economy o Social Protection Reorm 253

Annexes 255

Annex 1: India Human Development Survey (IHDS) – II (2005) 257

Annex 2: Social Protection Survey in Three States 261

Annex 3: Cumulative Coverage Across Major Programs 265

Annex 4: Unbundling SP Service Delivery Activities 266

Annex 5: Methodology or Comparing BPL “Poor” and NSS “Poor” at the Household Level 269

Reerences 271

List o Tables

Table 1: Major central social protection schemes, 2009

Table 2: Summary o SP program perormance (all-India)

Table 1.1: Inequality trends

Table 1.2: Migration rates (%)

Table 1.3: High incidence o shocks among rural households

Table 1.4: The poor cope dierently with shocks than the rich

Table 2.1: Major central social protection schemes, 2009

Table 2.2: Major SP programs by objectives and spending rank Table 3.1: Possession o ration cards by type and state, 2004/05 (% o households) 36

Table 3.2: Household-level otake o PDS grains - All households and rural/urban,1993/94, 1999/00 and 2004/05 (% HH) 37

Table 3.3: Household-level otake o PDS grain by quintile by state, 2004/05 3



Table of Contents v

Table 3.4: Share o PDS grains captured by consumption quintiles, 2004/05 4

Table 3.5: Planning commission estimates o BPL grain leakage in PDS, early 2000s 41

Table 3.6: Household PDS otake as share o ocial otake by state, 2004-05 (%) 42

Table 3.7: Coverage rates o target group or NOAPS, annapurna, widow and disabilitypensions by state, 2004-05 45

Table 3.8: Household coverage rates and benet incidence o social pensions by wealth, locationand social category, 2004/05 (%) 46

Table 3.9: Schemes to provide support or housing, latrine or chulha construction bystate (rural only), 2004-05 49

Table 3.10: Coverage and median benets o targeted housing programs by wealth, location andsocial category (rural areas only), 2004-05 50

Table 3.11: Coverage rates and median benets o urban housing by quintile and social category, 2004-05 51

Table 3.12: Program participation determinants by wealth quintiles, 2004/05 5

Table 3.13: Program participation determinants by social category, 2004/05 5

Table 3.14: Program participation determinants by selected socio-economic characteristics, 2004/05 54

Table 4.1: Evolution o public works programs in India, 1980 to 2006 7

Table 4.2: Pre-MGNREG public works coverage rates rom state-specic surveys 7 Table 4.3: Coverage o MGNREG using administrative data, 2006/07 to 2008/09 7

Table 4.4: Coverage o SGRY/FFW by expenditure/wealth and social group, 2004/05 77

Table 4.5: Average and marginal odds o participation in Indian public works programs, 1993/94 78

Table 4.6: Rural daily minimum and average agricultural wages and MGNREG average wage cost 83

Table 4.7: Coverage o SGSY by wealth, social category and location, 2004/05 8

Table 4.8: School stipend coverage and receipts (rural and urban areas), 2004/05 93

Table 4.9: Coverage and receipts o school stipends by wealth, social category and location, 2004/05 94

Table 4.10: Coverage o midday meals, 2004/05

Table 4.11: Coverage o MDM by per capita expenditure and social category, 2004/05 98 Table 4.12: Determinants o participation – Karnataka, Orissa and Madhya Pradesh (2006) 99

Table 4.13: Inrastructure or MDM

Table 5.1: Distribution o unorganized sector workers aged 20-50, by earnings decile, 2004/05 109

Table 5.2: Unorganized sector workers that are members o groups by earnings decile 110

Table 5.3: Key indicators o mandated social security programs

Table 5.4: Selected insurance and pension programs o the unorganized sector 11

Table 5.5: Key parameters o RSBY

Table 6.1: Spending on major SP programs, 2002/03 - 2009-10 1

Table 6.2: Allocation rules or selected SP CSS Table 6.3: Core unding shares by state or rural anti-poverty programs 13

Table 6.4: Formula share or SP CSS and actual allocations (% o total by state), 2004/05 139

Table 6.5: Expenditure releases per poor rural household or major SP CSS, 2006/07 142

Table 6.6: Spending on the ve main CSS or 2006/07 and adjusted allocation norms 143




Table 6.7: Average household spending on SGRY/NFFW, SGSY and IAY by region, 2002-05: BPLand below the poverty line households 144

Table 7.1: Awareness about Programs, Orissa, Madhya Pradesh and Karnataka (%) 162

Table 7.2: Households Aware o the Saety Net Programs by Social Groups, Orissa, Karnataka andMP combined (%) 163

Table 7.3: Village level determinants o program awareness, Orissa, Karnataka and MP, 2006 164

Table 7.4: Overall awareness o MGNREG, various MGNREG states, 2006 16

Table 7.5: Awareness o specic elements o MGNREG entitlements by state, 2006 165

Table 7.6: Main reasons or not having ration card by state, 2004/05 (% households) 166

Table 7.7: Main reasons or no ration card by wealth, location and social category, 2004/05 167

Table 7.8: Main problems in getting social pension sanctioned, Rajasthan, 2006 16

Table 7.9: Determinants o use o middleman to access benets, 2006 16

Table 7.10: Reliance on intermediaries to access benets by program and intermediary types,Orissa, Karnataka and MP, 2006 169

Table 7.11: Share o GPs maintaining registers o social pensioners, Rajasthan, 2006 175

Table 8.1: Discrepancies between dierent estimates o “BPL” households (rural and urban combined) 189

Table 8.2: Poverty rate and targeting errors in the 2002 BPL classication, by state 192

Table 8.3: Poverty rate and targeting errors in the BPL classication, by expenditure class (1999/00) 193

Table 8.4: Under-coverage rates o BPL method or the poor, selected states 19

Table 8.5: Poverty and under-coverage rates across dierent targeting methods 19

Table 8.6: Improvement over BPL method in coverage rates or lowest two deciles bystate across dierent targeting methods (%) 198

Table 8.7: De acto targeting even worse than de jure

Table 8.8: Possession o ration cards, by type and socio-economic status (% households) 201

Table 8.9: Determinants o ration card holding

Table 8.10: Type o targeting by SP programs Table 8.11: Comparing community-based and BPL targeting

Table 8.12: Comparing community-based and expenditure-based identication o poor or Orissa 207

Table 8.13: Cumulative share o beneciaries o major programs by wealth quintile, 2004/05 (%) 208

Table 8.14: Cumulative share o total benets captured by quintile by program, 2004/05 (%) 209

List o Figures

Figure 1: Correlation between major CSS SP program share in total allocations (LHS) andreleases (RHS) by state and state share o total poor/poverty rate, 2004/05 xx

Figure 2: Diversion and leakage o BPL PDS grains (as % o total) by state, early 2000s xxi

Figure 3: Share o poor household by state misclassied as non-poor by 2002 BPL method xxvFigure 1.1: Evolution o poverty since the early 1970s 5

Figure 1.2: Poverty rates - rural, small urban centers and large cities 8

Figure 1.3: Inter-state disparities in poverty 9

Figure 1.4: A large proportion o the population is clustered around the poverty line 10



Table of Contents x

Figure 1.5: Health problems and natural calamities are the most common shocks aecting households 18

Figure 3.1: Household-level otake o PDS grains by quintile, various years 38

Figure 3.2: Household-level otake o PDS grains by quintile and rural/urban, 2004/05 38

Figure 3.3: Share o TPDS grains in total household grain consumption among householdsaccessing TPDS, various years 39

Figure 3.4: Proportion o explained program determinants accounted or by state location,various programs, 2004/05 54

Figure 4.1: SGRY workdays per agricultural worker and per BPL household by state, 2003/04 73

Figure 4.2: Household coverage rates o public works by state and all-India, 1987/88 to 2004/05 73

Figure 4.3: Seasonality in MGNREGs work provision, 2006/07 to 2007/08 76

Figure 4.4: Coverage o MGNREG by state, 2008/09 76

Figure 4.5: Participation o women, SC and ST workers in MGNREG, 2006/07 to 2008/09 78

Figure 4.6: Main types o works under MGNREG, 2008/09 85

Figure 4.7: Coverage o midday meals according to administrative data (among children enrolled inprimary school), 2007-08 97

Figure 5.1: Lie insurance and pension coverage by income decile 112

Figure 5.2: Household enrolment in RSBY by month, February 2008 – August 2009 122Figure 6.1: Share o main CSS in total central SP spending, 2002/03, 2006/07, and 2008/09 135

Figure 6.2: Spending on social assistance and social insurance by region, early 2000s (% GDP) 137

Figure 6.3: Correlation between major CSS SP program share in total allocations by state andstate share o total poor in India, 2004/05 140

Figure 6.4: TPDS BPL/AAY otake by state, 2002-05 141

Figure 6.5: SGRY otake on cash and ood, 2004-05 141

Figure 6.6: Average spending per poor rural HH on main SP programs and poverty headcount bystate, 2006-07 143

Figure 6.7: Intra-state SP spending 144

Figure 8.1: BPL misclassication o the Poor and Rural Poverty across states 193

Figure 8.2: Predicted targeting errors in the BPL classication (1999/00) 193

Figure 8.3: Distribution o individual BPL indicator scores across expenditure classes 195

List o Boxes

Box 1.1: Lost in translation – Invisible populations under - served by public programs 6

Box 1.2: Approaches to assess vulnerability empirically 11

Box 3.1: Policy evolution o the PDS 34

Box 3.2: Some PDS terminology 41

Box 3.3: PDS ood coupon reorm in Bihar – Better results in a poor state 57Box 3.4: Smart cards in ood programs 61

Box 4.1: Key eatures o MGNREG 71

Box 4.2: Some state-level innovations in implementing MGNREG 80

Box 4.3: MGNREG implementation agencies 81



x Social Protection for a Changing India: Volume II

Box 4.4: Potential channels o impact o MGNREG 87

Box 4.5: Employment Generation and Marketing Mission (EGMM) 92

Box 4.6: International experience with Conditional Cash Transers (CCTs) 94

Box 4.7: Overview o conditional cash transers (CCTs) in India 96

Box 5.1: Main models o health insurance or unorganized workers in India 115

Box 5.2: Recent ailed attempts to expand insurance coverage to unorganized workers in India 115

Box 5.3: Illustration o a contribution based old age pension scheme 124Box 6.1: Mission convergence: Institutional reorm o targeted programs in Delhi 150

Box 6.2: Guiding principles or assignment o institutional responsibilities 157

Box 7.1: Accessing IAY – The view rom the eld in three states 170

Box 7.2: Innovations in payment systems 174

Box 7.3: Smart cards in public programs: Experience and issues 177

Box 7.4: Case study o cross-checking or duplicate beneciaries in Karnataka 178

Box 7.5: Community monitoring o social programs: Experience rom Rajasthan and AP 179

Box 8.1: Main types o targeting methods 203

Box 8.2: Participatory Identication o the Poor (PIP) in Andhra Pradesh 205Box 8.3: Combining indicator-based targeting with community validation and nalization o

the poor in Kerala 205

Box 8.4: Community targeting in Bangladesh – How well does it identiy the poor? 206

Box 8.5: International ndings on targeting methods 211

Box 8.6: International experiences with proxy means testing 214

Box 8.7: Targeting under mission convergence or urban Delhi 216

Box 8.8: Operational considerations in scaling up community-based targeting methods 217



Executive Summary



Executive Summary x

A. The SoCiAl PRoTeCTion

ConTexT in inDiA

india’s surge in growth and rapid expansion in

public spending in the past decade has created new

possibilities for its social protection system. Thegrowing importance o social protection (SP) is reectedin the Government o India (GoI) Common MinimumProgram and 11th Five Year Plan which commit toinstitutionalization o programs as legal rights (as inthe case o public works, through the National RuralEmployment Guarantee Act), continued upscaling o interventions (e.g., social pensions and midday meals),and proposals to expand new types o SP interventionsto the large unorganized sector (e.g., social security).

Increased resources and political priority or socialprotection are at the core o India’s 11 th Plancommitment to a more inclusive growth model.

in addition to presenting opportunities, india’s

growth has raised expectations from the population

of the social protection system. India’s SP system is onewhich has the resource base and institutional capacityo a lower-middle income country, but expectationsrom its population and the political establishment that

increasingly approach those o a middle income power.Matching scal and institutional capacity with societalexpectations will be a major challenge or policy makersin the coming decade. While sustained spendingincreases on SP have been seen in recent years andshould continue to be possible with robust growth, achallenge will be to avoid the growth dividend beingdiluted on programs which do not eectively addressthe needs o India’s poor.

while the indian economy has undergone a sea-change

since the 1970s, the country’s social protection

policies and implementation practices have only in very recent years begun an overdue transition.

Social protection systems need to evolve to meetthe needs o their populations and developments inthe economy. In this respect, the policy mix o the SPsystem has until very recently been to a signicant

Executive Summary



xv Social Protection for a Changing India: Volume II

extent ounded on the needs o the India o the 1970s.1 This was a period when around hal the population waschronically poor, the country was in aggregate ooddecit and importing grains, private market channelsor grains were very under-developed, the nancial andbanking inrastructure had minimal rural penetration,growth was consistently low, technologies available orprogram administration were rudimentary, and only

around one th o the population lived in urban areas.In much o the country, the scenario is quite dierentto the 1970s, which creates new opportunities torealize signicant equity and eciency dividends romSP reorms.

while poverty has gradually reduced in recent

decades, vulnerability remains high, new sources

of vulnerability have emerged, and the diversity of

needs among the poor has increased. Since the 1970s,the poverty headcount has allen rom around onehal o the population to closer to one quarter, though

poverty rates remain signicantly higher in severallagging states. With increasing urbanization, the shareo the urban poor in total has also increased, particularlyin small and medium towns. In addition, a largeproportion o households, both poor and non-poor,may be vulnerable to poverty even though they maynot be currently poor. Variability o incomes and copingwith recurring shocks are a common eature, especiallyamong poor households. Despite these developments,SP spending remains ocused on programs to alleviatechronic poverty, and ocused overwhelmingly on rural

areas. Divergence in income and social indicators acrossand within states has also increased the diversity o social protection needs in dierent parts o the country,including growing needs among the urban poor.2 Basicsubsistence needs and services remain the priorityin some areas, while other areas are acing secondgeneration challenges o expanding SP instruments todeal with economic modernization, and the new risksand vulnerability it brings.

the authorities at central and state levels recognize

the need for a more effective and relevant social

protection system, and there has been considerable

innovation on sp policy and delivery systems in

recent years. The period since the mid-2000s has been

one o considerable dynamism in the SP arena in Indiawhen compared to the preceding decades. Notably,MGNREG represents a qualitative leap in the design andexecution o public works, a commitment which hasbeen matched with massive resources. While still in anearlier stage o development, the RSBY health insuranceprogram or BPL households is path-breaking in itsdesign and has pioneered approaches to delivery which

provide a model or other public programs. There hasalso been overdue but increasing recognition that someparts o the SP system have serially under-delivered andneed undamental overhaul, as seen or example in thereorms o SGSY under the aegis o the National RuralLivelihoods Mission and the ongoing debate on the PDSin the context o the Food Security Bill.

however, while the momentum of sp reform has been

positive in recent years, there is a strong need to

take the lessons of success from individual programs

and from the experience of states as a basis for more

fundamental transformation of the sp system in its

relevance, efficiency and welfare impacts. Despiterecent progress, India is not getting the “bang or therupee” that its signicant expenditure would seem towarrant, and the needs o important population groupsremain only very partially addressed. This has severalelements. Firstly, PDS continues its long term pattern o consuming large resources with huge ineciencies andleakage, and “promotional” SP programs (e.g., SGSY)have not perormed as expected in much o the country.Secondly, the needs o the growing number o urban

poor remain inadequately addressed, and initiativessuch as JNNURM have not proven eective in reversingthe situation. Similarly, the system is largely unpreparedto address the needs o mobile populations, a groupwhich is likely to continue to grow as economic reormsdeepen. Thirdly, identication o the poor people whothe SP system seeks to prioritize remains problematic,with major issues in design and implementation o theBPL system. Fourthly, execution is a perennial challengeand one where progress is slow. Innovations in deliverysystems in terms o ICT use, increased social and

community engagement, and other eatures remainpiecemeal, both in program terms and geographicpenetration. However, this variable SP program

1 Saxena(2006)documentstheevolutionoprogramssincethe1960s.

2 SeetheWorldBank’sIndiaPovertyAssessment(2011)orevidenceondivergenceacrossthecountryinkeyindicators.




implementation experience across states oers valuablelessons or the uture.

it thus seems timely to look at where india’s sp system

has come from, where it stands, and where it might

be expected to move in the coming decade. The reportdeals with two key elements o India’s social protectionsystem: saety net policies and programs, and social

security or the unorganized sector.3

It has been preparedat the request o Government o India, which requesteda review to assess which SP programs work best, whichare less eective, identiy gaps and overlaps, andsuggest reorm options. In response, the objectives o the report are to: (i) review trends in poverty, inequalityand vulnerability in India; (ii) evaluate SP programperormance – including both saety net programs andsocial security or the unorganized sector - accordingto: (a) a coherent social protection policy ramework;(b) empirical indicators o perormance, includingawareness, coverage, adequacy and benet incidence, and

(c) nancing, administrative, and institutional systems; and(iii) provide recommendations or improving the abilityto reach the poor with more eective public spending,private participation and stronger administration.

the report draws on existing and new data sources,.

including analysis o: (i) administrative data; (ii) severalrounds o the National Sample Survey (NSS) data;(iii) the 2004/05 Human Development Prole o Indiasurvey (undertaken by NCAER and the University o Maryland), which included a World Bank-nancedsaety nets module and was representative nationally

and or major states; (iv) a social protection survey(SPS) undertaken or this report in 2006 in rural areas o Orissa, Madhya Pradesh and Karnataka; (v) dedicatedsurveys on social pensions in Karnataka (KSPS) andRajasthan (RSPS) in 2005 and 2006 respectively;(vi) a living standards survey conducted in Jharkhandin 2005 (JLSS).4 In addition, the report incorporatesa rich body o secondary sources on SP programperormance and impact by national researchers andGovernment agencies.

B. The FRAmewoRk FoR

looking AT The SP SySTem

the report organizes the discussion of sp policies and

programs according to terminology widely used in

india.5 the three main pillars of sp programs in this

typology are:

“promotional” measures, which aim to improveincomes, both in the short to medium term(through livelihood interventions) and in thelonger run (through human capital interventions).In the context o this report, the key programsin this area are SP interventions to supportinvestments in human capital (e.g., stipends;midday meals; conditional cash transers), andtargeted credit and livelihood programs or thepoor (see Chapter 4). Public works programscan be viewed as a hybrid o promotional and

preventive measures. “preventive” measures, which seek to avert

deprivation prospectively by supportinghouseholds to manage dierent risks and shocksex ante. The main ocus in the report (Chapter 5)in this pillar is on public social insurance programsor the unorganized sector.

“protective” measures, which provide relie against deprivation ex post to the extent that theother two sets o measures ail to do so. This couldaddress those alling into poverty as a result o

shocks, and/or or the chronically poor. The mainpublic programs within this pillar in the reportare PDS, social pensions, and targeted housingprograms or the poor (see Chapter 3). In theprivate arena, such strategies would include saleo household assets, reduction in consumption,running down savings, or taking children outo school.

this typology is similar to the social risk management (srm) framework commonly used by the world bank

3 Whilelabormarketpoliciesareanimportantelementosocialprotection,theyarenottheocusothisreport.Forarecentstudyonlabormarkettrendsand policiesinIndia,seeAhmedandNarain(2010).

4 Annexes1 and 2 give details otheHDPIandtheSPS surveys.The HDPI surveydata ispublicly available athttp://www.icpsr.umich.edu/icpsrweb/ICPSR/ studies/22626,seealsoAjwad(2006)andDevetal(2007).

5 DrèzeandSen(1989);Guhan(1994);SeealsoGentilini(2005)oradiscussionotheseconcepts.Intheollowingdiscussion,“socialprotection”reerstopoliciesand programsunderallthreeothesepillars;“saetynets”reertoprotectiveandpromotionalmeasureslargely;“socialassistance”reerstoprotectiveprogramsonly;and“socialinsurance”and“socialsecurity”areusedinterchangeablytoreertoinsurance-basedprograms.




Sc Tp DscrptAcat 2009/10` crr

Prar bjct;bt cas/d

Public DistributionSystem (PDS)

Subsidizedood and ueldistribution

Subsidized wheat and rice, pluskerosene and sugar in moststates. Level o subsidy variesaccording to whether APL, BPL,

AAY or Annapurna household (seeChapter 3).

42,490 or ood;

2,866 orkerosene/LPG

Protective

Food/uel

Mahatma GandhiNational RuralEmploymentGuarantee (MGNREG)

Sel-targeted publicworks

Unskilled and low skill publicworks. MGNREG guarantees 100days employment per rural HHper year in all districts. SGRY hadaimed or 100 (non-guaranteed)days in rural districts, with a cashand ood component. Ater 2006SGRY was limited to non-MGNREGdistricts, but was discontinued in2008 (see Chapter 4).

MGNREG:

30,100

Protective (andpreventative)

MGNREG: Cash(ormerly ood and cashunder SGRY)

Swarnajayanti GramSwarozgar Yojana(SGSY)

Targeted creditscheme orgroups and someindividuals

Subsidized lending rom banksto groups o BPL people, withallowance or some individuallending, and small APL share ingroups (see Chapter 4).

2,115 Promotional (short tomedium term)

Cash (credit)

Tab 1: majr ctra sca prtct scs, 2009

and familiar internationally.6. The SRM approachis based on the insight that individuals, householdsand communities are exposed to multiple risks, bothcovariate and idiosyncratic, and that the poor areparticularly vulnerable to the maniestation o these risksin the orm o shocks. Social risk management strategiescan be grouped into three broad categories, each o which involves a mix o reliance on public interventions,

inormal arrangements, and market-based approaches:(i) risk prevention strategies, which seek to reduce theprobability o adverse shocks occurring.Such strategiesmay be at the macro level, such as labor policieswhich increase employment growth, or investmentsat household level in human capital or livelihoodpromotion; (ii) risk mitigation strategies, which help toreduce the impacts o shocks ex ante when such shocksare unavoidable. The classic example o this is insuranceagainst low income in old age, or health insurancein the inevitable event o serious health events; and(iii) ex post “risk coping” strategies, which seek to mitigatethe impacts o shocks ater they have occurred, whichwould classically be social assistance programs, whetherin kind or cash.

C. key FinDingS

while india’s range of social protection programs is

impressive for a developing country, the sp system

in spending terms and priorities remains strongly

focused on protective programs to mitigate chronic

poverty, and on rural areas. This can be seen in Table 1. While a primary ocus on protective interventionsis understandable, the policy mix o the SP systemhas not to date responded to the evolution o livingstandards as much as might have been expected. Thereare three areas where the evolution o SP programs andspending has been less and/or later than one mighthave expected:

insurance-based interventions remain in their

inancyintermsocoverageotheunorganized

sector, though RSBY is an exciting and rapidly

expanding initiative which can provide a way

orward. Expanding inormal sector coverageo social insurance is a challenge that India hashad relatively limited success with until veryrecently, despite a series o central and state-

6 SeeHolzmannandJorgensen(2000)oranelaborationotheSRMramework.




Sc Tp Dscrpt

Acat 2009/10

` crr

Prar bjct;

bt cas/d

Indira Gandhi Naonal

Old Age Pension

Scheme (IGNOAPS)

Non-contributory

social pensions

Annapurna

Monthly cash benets for BPL

elderly (originally called NOAPS

unl renaming to IGNOAPS and

expansion in 2007), and state

schemes for widows and disabled

people (since 2007 also included in

the central Indira Gandhi pensionsprogram) (see Chapter 3).

5,109 Protective

Social pensions: CashAnnapurna: Food

Indira Awaas Yojana

(IAY)

Targeted rural

housing

Subsidies for rural BPL with

inadequate housing for housing

construcon (see Chapter 3).

7,920 Protective

Cash or housing

Midday meals School feeding

program

Hot meal for children in grades 1-8

in government and aided schools

(see Chapter 4).

8,000 Promotional (long term)

Food

Schools stipends Stipends or schoolenrollment

Some central and some stateschemes or various target groups,including SC, ST, some categorieso girls, disabled

– Promotional (long term)

Cash

Rashtriya SwasthyaBima Yojana (RSBY)

Subsidized andtargeted healthinsurance

Subsidized health insurance orhospitalization or BPL households(and MGNREG) in 26 districts (seeChapter 5).

350* Preventative

Cash

Aam Admi BimaYojana (AABY)

Lie/disability/accident insuranceor BPL

Free insurance covers naturaldeath, disability and accident orrural landless households (seeChapter 5).

– Preventative

Cash

Social insurance orunorganized workers

Subsidized socialinsurance

Variable by state, though centralwelare unds or select sectors (e.g.beedi workers) (see Chapter 5).

270 Preventative

Mixed

Specic urban anti-

poverty programs

Targeted urban

housing ( VAMBAY)and employmentor the poor (SJSRY)

Housing construction and

upgradation or slum dwellers,and wage and sel-employmentprograms or unemployed orunderemployed urban poor (seeChapter 3).

535 Protective

Cash

Source: See Table 2.1, Chapter 2. * RSBY allocation reers to 2008/09.

specic schemes. This has been a product o poordesign, inadequate attention to institutionaland implementation arrangements, and a “start-stop” approach to new initiatives. O course, suchexpansion is not easy, and many developing

countries have struggled to expansion socialinsurance coverage in the ace o large inormalsectors.7

promotional interventions in the public sector

continue to receive relatively little emphasis,

particularly given the continuing challenges

in improving human capital outcomes.

Overall, saety nets in India remain primarily

“nets” rather than “ropes” or “ladders” whichseek to promote sustained movement out o poverty.8

7 SeeO’KeeeandPalacios(2006)oradiscussionointernationalexperience.

8 SeePritchettetal.(2002)oradiscussionothesedistinctions.




Figure 1: Correlation between major CSS SP program share in total allocations (LHS) and releases (RHS) by stateand state share o total poor/poverty rate, 2004/05

Source: GoI, various years or program expenditure; Sen and Himanshu (2007) or poverty estimates.

Notes: Programs included: PDS, SGRY/NFFW, SGSY and IAY. HCR reers to head count poverty rate.

0

5

10

15

20

25

0 2 4 6 8 10 12 14 16 18 20

Allocation share (%)

P o v e r t y s h a r e ( % )

0

10

20

30

40

50

60

0 2000 4000 6000 8000 10000 12000 14000

Central release per poor rural HH

H C R

otherthanPDS,SPinterventionsinurbanareas

are negligible and even more strongly biased

towards protective interventions. With thecombination o urbanization and slower rateso urban poverty decline, the urban poor are agrowing share o all poor people. Despite this,per capita SP spending on the poor remainheavily biased towards rural areas, and the

promise o JNNURM as a vehicle or transormingthe situation in this regard has to date ailed tobe realized in any signicant measure.

thereremains astrong emphasison ood-based

support which is subject to major governanceand implementation problems and which is o questionable relevance or many among thepoor whose non-ood spending needs are anincreasing source o pressure. At the same time,ood programs remain important or certaingroups, in certain chronic ood decit areas and

at certain times in other areas. These issues arecurrently being debated in the context o theRight to Food legislation.

a Sat ts

while india spends significant resources on its core

safety net programs – over 2 percent of gdp in

recent years – the returns to spending in terms of

poverty reduction have been much lower than could

be hoped for a variety of reasons. In householdterms, in 2004/05, total spending allocated per poorrural household nationally on major CSS SP programswas signicant, at around `9065 (about 40 percento the annual rural poverty line) Despite this, impactson the poor as measured by survey-data appear to bemuch lower. A rst reason or this is that the absorptivecapacity o poorer states is typically low. They are not

able to utilize all unding available given limitationsin administrative capacity. SP CSS allocation ormulaeare redistributional, however, providing more undsto states which have higher poverty, but which havethe lowest capacity to spend eectively. This resultsin pro-poor allocations with regressive actual releaseso SP unds across states (Figure 1). Such patterns arethen exacerbated at the sub-state level in many cases,and nally at the household/delivery level throughmisidentication o beneciaries, and a range o implementation problems.

in programmatic terms, the main driver of poor cost effectiveness and impacts of india’s safety net is its

largest program – the public distribution system (pds).

While it consumes almost 1 percent o GDP and has widercoverage than other saety net programs - between20-25 percent o the population in the mid-2000s basedon actual drawing o grains by beneciaries, and closerto 40 percent based on administrative numbers on BPLhouseholds - its impact on the poor is very limited inmany states, particularly a number o lagging states.



Executive Summary xx

This is due to a combination o high leakage o grains(estimated by the Planning Commission to be around58 percent nationally in the early 2000s and evenhigher based on estimates using NSS data), a range o demand and supply side issues in program design andimplementation, and considerable leakage o subsidiesto the non-poor. Although many o the shortcomings o PDS and its very poor perormance have been known

or some time, it continues to absorb substantial publicresources with limited benets or the poor. This limitsthe scal options or more eective SP interventions inthe absence o PDS reorm (See Chapter 3). At the sametime, there have been a range o state-level initiatives,national-level pilots, and proposals to improve theunctioning o PDS which have merit. In recent years,there has been increasing recognition o the need orreorming the PDS as evident by the ndings o theWadhwa Committee report and the ongoing debatearound the Right to Food legislation and the recent

proposal in the 2010/11 Economic Survey in avor o direct subsidy (through ood coupons) as opposed tothe current indirect subsidy.

the most heralded reform of sp programs in

recent years has been the introduction of the

mahatma gandhi national rural employment

guarantee act (mgnrega) in 2006. In philosophy, this is amajor innovation in taking a rights-based and demand-driven approach, guaranteeing all rural households upto 100 days public works employment per year at theagricultural minimum wage. The program also has a hosto implementation innovations (e.g., social audits bycommunities o perormance; a structured role or PRIsin implementation; closer attention to the stang needs

at lower levels o the system) which provide a model oruture reorms o other SP programs. Administrativedata and eld studies suggest both signicant successesrelative to previous public works programs (e.g., highcoverage o rural households, with impressive inclusiono SC/ST and women workers) and many challenges intranslating improved program design into outcomes orthe poor, such as, matching demand or work with theadministrative demands o opening worksites; aligningpiece rate compensation with the minimum wagerequirement; strengthening mechanisms or community

participation in works identication and oversight. Thediversity o implementation experience across statesprovides a rich opportunity or cross-state learning toachieve better and more transparent impacts. A numbero innovations in MGNREG design – including socialaudits – seem worthwhile to mainstream in other anti-poverty programs.

Figure 2: Diversion and leakage o BPL PDS grains (as % o total) by state, early 2000s

Source: Planning Commission, GoI.

0 20 40 60 80 100

AP

Assam

Bihar

Gujarat

Haryana

HP

Karnataka

Kerala

MP

Maharashtra

Orissa

Punjab

Rajasthan

TN

UPWB

All-India

% of BPL grains diverted and leaked



xx Social Protection for a Changing India: Volume II

Prra

Spd

acatra

2008/09

Cra%

ratppat;

2004/05

Bttt as

% ttabcars

2004/05

Btcdc

% t bttt

2004/05 Aarss

edc

aatsd

bcars

hhTart

cas

(1) (2) (3) (4) (5) (6) (7) (8)

PbcDstrbt

Sst PDS

123.3% o all

HH (APL andBPL)

27% 29.7% High High BPL

maata

gad

nata Rraept

garatmgnReg

2 33% o ruralHH

(2008/09)

– – Substantial – Sel-targeting

Tab 2: Sar SP prra prrac a-ida

b Sca scrt r rad

rrs

insurance and pension programs are less developed

relative to safety nets and cover fewer than ten

percent of the labor force. Despite repeated attemptsto introduce new programs or unorganized sectorworkers over the years, insurance against lie’s majorshocks such as health, old age, disability and death hasnot been available to the vast majority o the population.Recognition o this public policy gap led to the passageo ramework legislation in December 2009 and thecreation o a Social Security Board.

the most promising effort in this area is the targeted

health insurance scheme known as rashstriya

swasthya bima yojana or rsby. This program nowprovides insurance or hospitalization or more thanorty million poor people and is growing rapidly. The

RSBY may be the rst social sector program in Indiathat simultaneously takes into account the perspectiveo the poor, ocuses on getting the incentives o thevarious players that have to deliver the benets rightand encourages changes over time based on evidence. The experience o the rst year or so has been positive,particularly in terms o demonstrating that the targetpopulation can be reached (despite the poor qualityo the BPL list). However, in no country has such a largehealth insurance scheme operated without the oversighto a specialized agency. Setting up this agency is the keyshort run challenge or the RSBY.

in addition to the rsby, a number of important

changes to the social security landscape appear to be

unfolding both in terms of program design as well as

delivery. The 2010 Budget includes a budget to nancea matching contribution o ` 1000 per annum to thoseworkers that voluntarily choose to contribute at leastthat amount. This incentive, combined with the kind o outreach typical o the RSBY program, could generatea signicant increase in pension coverage or the rsttime in India.

c Adstrat ad dr

sca prtct prras

most safety net and social security programs in most

states are characterized by a range of problems

which also reduce their poverty reduction impact.

There are dierent experiences with implementationacross SP programs and states. This includes programswhich have wide coverage but are plagued by leakageo subsidies that limit the impact on the poor (e.g.,PDS), others which are well targeted and increasinglywell designed but ace a range o implementationchallenges (e.g., public works - MGNREG), and still otherswhich appear to be well designed and with systems orbetter implementation (e.g., RSBY). Summary indicatorso program perormance are presented in Table 2,Chapters 3–5 provide discussion o programmaticperormance and Chapters 7 and 8 examine somedrivers o outcomes.




Prra

Spd

acatra

2008/09

Cra%

ratppat;

2004/05

Bttt as

% ttabcars

2004/05

Btcdc

% t bttt

2004/05 Aarss

edc

aatsd

bcars

hhTart

cas

(1) (2) (3) (4) (5) (6) (7) (8)

Sapragra Raryjaa SgRy

5 1% o ruralHH

43.4% 34.2% Low – Sel-targeting

Sarajaat

gra Sararyjaa SgSy

7 0.8% o ruralHH

32.9% 7.7% Low Intermediate BPL

idra gad

nata odA Ps

noAPS

6 8.3 % HHwith elderly

32.8% 31.1% Substantial Low Mixed

Aapra – 1.7 % HHwith elderly

51.9% 37.9% – Low Mixed

wd ps – 6 .2% HHwith widows 43.2% 32.8% Substantial Low Mixed

Dsabd

ps

– 14.1 % o HHwith disabled

30.7% 27.6% – Low Mixed

idra Aaas

yjaa iAy

4 12.8 % o rural HH

28.6% 24.6% Substantial High BPL

mdda as 3 – – High – Government/aided schools

only

Scsstpds

– 9.6 % o HHwith children

school age

22.6% 11.7% Low Low Various;strong SC/ST

ocus

Source: Ajwad (2006) based on the 2004/05 HDPI, except or PDS based on Bank sta estimates rom the 2004/05 NSS 61 st round. Awareness based on 2006SP survey in three states; Leakage based on HDPI survey and NSS (or PDS) and GoI and CAG reports.

Notes:

l Col. 2: GoI budget data or spending allocation rank (see Chapter 6)

l Col. 3-5: Coverage and targeting indicators are based on national household survey data, namely the 2004/05 National Sample Survey or PDS and the2004/05 Human Development Prole o India survey (NCAER-University o Maryland) or all programs except PDS (see relevant tables in Chapters 3-5).

The only exception is coverage rates or MGNREG – these are based on administrative data or 2008/09. See also Ajwad (2006) or coverage and targetingindicators based on the 2004/05 HDPI. Note that coverage reers to the share o beneciaries in the relevant population. For instance, coverage o old agepensions are estimated or households with at least one elderly (65 years and above) member; PDS coverage or all BPL and APL households; MGNREGcoverage or all rural households, etc.

l Col. 6-8: These are broadly summarized based on the ndings o several GoI and other research studies, including those commissioned or this report. Forinstance, assessment o awareness among households o various SP programs draws on the Social Protection Survey in three states, the Jharkhand LivingStandards survey, the Rajasthan social pensions survey, etc. Awareness levels: High = 70% + o population aware; Substantial = 40-70%; Low = < 40%aware. Assessment o leakage is based on comparisons o household survey data against administrative data as well as ndings o CAG reports and otherstudies. These are documented in the relevant chapters (Chapters 3-5 or leakage; Chapter 7-8 or awareness and targeting mechanisms).

l Population coverage: For NOAPS as share o HH with member. 65+, or Annapurna, or HH with member 60+; or widow pension, or HH with a widow;or disabled pension, coverage as share o census PWD rate in state; Awareness levels: High = 70% + o population aware; Substantial = 40-70%; Low = <40% aware.

despite such spatial and cross-program

diversity, a number of common challenges emerge,

including:

lack o coordination and overlap in delivery

o programs (both within and across levels o

government), reduces accountability o those

Tab 2: Sar SP prra prrac a-ida



xx Social Protection for a Changing India: Volume II

responsibleorSPservicedelivery.Lack o nancialand human resource capacity - most notably atthe block and GP level but also at higher levelsin terms o unctions like strategic planning -compounds the challenges o service delivery.As in many areas o service delivery in India, SPprograms suer rom incomplete alignment o the “3 Fs” (unctions, unds, and unctionaries) or

a variety o reasons. Even where there has beenprogress in specic programs (such as MGNREG)or states (such as Kerala), there remains a hugeunnished agenda in “squaring the circle” in asector that is dominated by centrally sponsoredschemes operating in a broader environment o constitutionally-mandated decentralization o service delivery (see Chapter 6).

maintenanceoa“onesizeitsall”SPprogram

andpolicymixromthecentredoesnotrespond

to the growing spatial diversity in living

standards. While the insight that “India is a bigand diverse country” is a truism in public policy,the CSS which continue to dominate SP policiesgive states limited exibility to tailor centralsubsidies and programs to their diverse needs.While there has been progress in allowingstates exibility at the margin in adaptingimplementation specics o some schemes,their overall SP policy mix remains largelydetermined on a uniorm basis by the centre,more so in lagging states where own-resourcesare limited. (see Chapter 6).

the basic “nuts and bolts” o program

administration and procedures in most states

are ar below the standards that could be

possible given India’s technological and human

capital capacity. The report outlines a rangeo challenges where India has struggled tomodernize SP program administration, includingprogram outreach and awareness raising, theapplications process, public expenditure andnancial management, record keeping andpayment systems, and monitoring and evaluation

as well as public-private partnerships. At the sametime, the progress made in modernizing programadministration in states such as AP and underspecic programs such as MGNREG suggests thata modern SP delivery system is an achievable goalor India with sucient commitment and modest

investment. The RSBY program indeed provides a“state o the art” example o how a well thought-out and executed delivery model has the potentialto be transormative and provide a backbone orother parts o the SP system to consolidate aroundrobust systems (Chapter 7).

or a number o programs, expansion o and

innovation in the private sector has created

possibilities or newmodalitieso Public Private

Partnership (PPP) program delivery which have

yettobeexploredullybythepublicsector.MostSP programs remain dependent on the traditionalmode o publicly nanced and delivered benets.While or some programs (and/or in somegeographic areas) market ailures will continueto make this the appropriate delivery mode, theexpansion o private sector players makes mixeddelivery options more easible than in the past.Some programs such as MGNREG have successully

partnered with civil society and communities orprogram execution and oversight. Similarly, RSBYhas partnered with private sector providers orprogram delivery (see Chapter 5).

a poorly designed and executed household

targeting mechanism (the so-called BPL 2002methodology). The BPL method does notreect good practice in design o proxy means-testing mechanisms, and as a result in its designmisidenties almost hal the poor as non-poor,and conversely almost hal the non-poor as poor

(Figure 3). In addition, empirical evidence onperormance indicates that it typically perormsworse in targeting terms than other methods. Incontrast, methods such as sel-targeting (in publicworks), mixed methods o identiying the poor(as in social pensions) have notably bettertargeting eciency and inclusion o the poorest,while some states rely on community wealthranking and verication (see Chapter 8).

the emerging experience with some programs

suggests that problems in sp service delivery can

be overcome. Despite the signicant policy andimplementation challenges acing SP programs,experience with programs (such as MGNREG andRSBY) and/or in specic states across programs (e.g.,AP, Kerala, Gujarat, TN) suggests that sucient will andattention to incentive structures o dierent service




D. SoCiAl PRoTeCTion FoR A

ChAnging inDiA

the report finds that significant reforms are needed

with both respect to the medium term social protection

strategy and in implementation arrangements of

current programs. India needs to consider both thevision and policy mix o social protection programs,and how to improve implementation o its current anduture programs. It suggests that India could signicantlyimprove and modernize its social protection system - inboth saety nets and social security – and in so doing help

reduce chronic poverty and assist both poor and non-poor households to manage risk better. A more eectivesocial protection system would allow India to promotegreater equity, i.e., to ensure the benets o growth areshared by the poor. It could also contribute to growth,by allowing individuals to make risk/return choices thatcontribute to higher productivity, enhancing dynamiceciency. Someothekeymessagesare:

a Pc rr sca prtct

there is a need to deepen the ongoing policy reorientation of the indian social protection system

to meet the changing and increasingly diverse needs of

its population. Marginal changes alone will not deliverthe kind o saety net which a changing India needs orits poor and or its economy. This would involve several

delivery agents can improve the implementation

o programs. While the above problems havecharacterized the saety net system or some time, thelast decade has witnessed much greater innovationand experimentation by states in addressing perennialchallenges. The core challenges are thereore tocreate space or innovation by states and a eedback loop, via the systematic collection o evidence onimplementation, to the design o central SP policiesand programs rom best practice in the states.

in recent years, increasing attention is rightly being

given to implementation, delivery and tracking

of benefits. A Committee has been charged withimproving the awed methodology or determining theBPL list and at least one state has already implementeda new round. The Government o India is sponsoring anunprecedented scale o biometrically based, national IDthrough the Unique Indentication Authority o India(UIDAI) which could acilitate everything rom nancialinclusion or direct payments o benets to verication o identication or receipt o public transers or MGNREGAwages. In parallel, many states are attempting to tightenverication and tracking o benets in major programssuch as PDS, NOAPS and MGNREG through the use o

biometric identication and the creation o a back-enddatabase that can track what happens on the ground. The challenge acing the country is to coordinate all o these good initiatives towards minimizing duplication,converging on national standards or interoperabilityand allowing or portability o benets.

Figure 3: Share o poor household by state misclassied as non-poor by 2002 BPL method

Source: Jalan and Murgai (2008).

0 10 20 30 40 50 60 70 80 90 100

AP

AS

BI

GU

HA

HPKA

KE

MP

MA

OR

PU

RA

TN

UP

WB

% of poor HHs misclassied as non-poor



xxv Social Protection for a Changing India: Volume II

elements: (i) a rebalancing o the policy mix acrossdierent types o public SP priorities; (ii) consolidationo the large number o central and state schemes toa core set o agship programs; (iii) in the context o consolidation, introducing an element o choice andexibility or states in the specic program mix o centrally-supported schemes that they operate; and(iv) in some areas and or some programs, actively

exploring the possibilities or leveraging the role o private players (both non-governmental and or-prot)in delivery o interventions.

in terms of reorienting the policy mix, the report

suggests several directions:

increasingtheemphasisonpreventiveprograms

which help the poor and those vulnerable topoverty to manage risks and shocks better. Thisimplies a signicant expansion in coverage o dierent social insurance instruments, though

in a phased manner consistent with institutionaland scal capacity. Experience to date suggeststhat phasing would benet rom: (i) starting withsimpler-to-administer insurance products such aslie and permanent disability, while continuing topilot and evaluate experience with more complexproducts such as health insurance; and (ii) orreasons o ease o worker mobilization and tocontrol transactions costs, ocusing initially on the“low hanging ruit” o unorganized workers whoare members o groups (e.g., MFIs, cooperatives,trade union and worker associations, SHG

ederations) that could play an intermediaryunction between workers and the state/insurers.

rethinking programs which seek to promote

movement out o poverty in two ways: rstly,moving rom administratively driven subsidizedcredit to public nancing o a more diverse rangeo livelihood promotion approaches better suitedto the labor market conditions o individual statesas is currently being proposed under NationalRural Livelihoods Mission (NRLM); and secondlyconsidering the options or use o saety net

transers (see next bullet) to leverage participationin core education, health and possibly nutritionservices, in order to promote long term movementout o poverty.

movingtomoreconsolidatedandmorecash-based

social assistance programs or the chronically

poor. The “big elephant in the room” in this respectis undamental reorm o PDS. The poor longrun perormance o the program in many statessuggests that the medium term vision o a reormedPDS or most groups should be cash-based, thoughthis would ace substantial resistance in light o the ongoing debate around the Right to Foodlegislation. A reormed PDS could still provide

ood-based support or specially vulnerablegroups (consistent with Supreme Court orders),and in specic areas acing chronic or acute oodshortages, but or most areas and most people, acash-based social assistance system seems a moreecient and transparent means o providing anincome oor. An intermediate solution currentlybeing mooted in the 2010 Economic Survey is totranser the subsidy directly to households (ratherthan the PDS store owner) through ood couponswith a lumpsum entitlement that can be exchanged

at any PDS store. in the ace o demographic change and slower

rates o poverty reduction in urban areas, starting

toaddresstheneglectourbansocialprotection

policy. While some o the needs o the urbanpoor are common to their rural counterparts,the possibilities (and constraints) o the urbanenvironment suggest that simple mimicking o rural models o SP programs and service deliverymechanisms is unlikely to be an adequateresponse. For example, the options or “voiceaccountability” o service providers which can

be mobilized in rural areas through collectivecommunity action are likely to be less possiblein urban areas, while the possibilities or “choiceaccountability” (through income enhancementand oering options in service providers wherepossible) are likely to be greater. The JNNURMprogram oers a base or larger reorms aectingurban policy, however closer consideration maybe needed regarding support to specic SP policyimplementation.

the specific proposal of this report is that central

sp programs over time aim for a “3 +block ” strategy. This would involve 3 core CSS SP programs or “pillars”,combined with an SP block grant rom which statescould nance other SP programs - or supplementbenets under the core pillar programs - more tailoredto the poverty and vulnerability prole o the individual



Executive Summary xxv

state. This would also involve signicant expansion inurban areas. This could promote both a more coherentand less duplicative SP system, but also give states moreleeway to adapt the SP policy mix to the needs o thepoor in individual states in light o available economicopportunities. The three core pillars proposed are:

amajor socialassistanceprogram. The obviouscandidate or this is a signicantly reormed PDS,merged or specic groups with existing socialpension programs.9 Chapter 3 give more detailson the options or reorm o PDS proposed bythis report, with a preerence or a predominantlycash transer approach.

a public works program, or which MGNREGwould be the building block, as well as pilotingexpansion in urban areas. There are severalbenets o a reliable public works program at thisstage o India’s development: (i) by its demand-driven nature, it can be responsive to shocks in a

way that longer run programs typically can not.In this way, it unctions as a “quasi-insurance”program or the extended period duringwhich more structured insurance is expandedto the unorganized sector; (ii) the positivetargeting outcomes o sel-targeted works; and(iii) the potential or multiplier eects romasset creation and community mobilizationdistinguish public works rom other SP programs.See Chapter 4 or a discussion.

abasicsocialsecuritypackageorthose outside

the ormal sector which could be expandedin terms o coverage and scope o benetsas institutional capacity and scal space isdeveloped. The core types o insurance whichGoI aims to expand include lie, disability, old agepension, and health, and the RSBY program isalready an important step orward in this regard.Chapter 5 gives suggestions on institutional,nancing, sequencing and other aspects o anexpansion strategy.

beyond the three “pillars”, states could receive an

additional transfer and implement state-specific sp interventions. How this is programmed could

vary according to state-level priorities, and includeinterventions such as livelihood support o dierentorms, targeted housing, interventions to incentivize useo basic social services, nutrition and/or early childhoodcare (e.g., through conditional cash transers as beingpiloted in some states), specic urban SP programs,or other options as proposed by states. A secondarybenet o such an approach would be strengthening o

complementarities between CSS and state-sponsoredschemes in order to control unnecessary duplication.A common core national SP system under the threepilars could promote portability o basic entitlements,and be increasingly useul as mobility o workers andhouseholds increases.

in terms of promoting both more effective spending on

sp, the “3+block ” proposal would allow more cross-

program flexibility to states – or possibly districts -

in deciding their sp expenditure priorities, while still

maintaining a common national core sp system. It

would also allow or greater adjustment in light o poverty levels and key vulnerabilities. This could be donein a variety o ways, possibly using a menu approach toSP programs, and a exible orm o social protectionblock or matching grant which consolidates resourcesrom existing SP CSS.10 This is an approach which hasreceived increased attention in India in recent years aspolicymakers seek greater impacts rom SP spending.Given current nancing channels rom the centre tostates in India, a more exible granting mechanism orSP programs to states could take dierent orms – as a

more “bundled” anti-poverty CSS, as Additional CentralAssistance (ACA) along the lines o programs likePradhan Mantri Gramodaya Yojana (PMGY), or through amore ungible realignment o Gross Budgetary Supportshares between the states and central Ministries whichcontrol CSS.11

the above approach would require close consideration

of the policy design of existing programs. Thendings o this and other reports suggest that thePDS require undamental consideration o its currentdesign, SGSY is currently undergoing signicant change

and attention to implementation under NRLM, whiletwo others warrant experimentation to see whether

9 ThiswouldbesimilartotheChineseurbanandemergingruralsocialassistancesystem,whichisbuiltaroundthe“dibao”programwhichprovidescashbenetstothepoor,andhasadditionalprovisionorspeciallyvulnerablegroupssuchasdisabledandunsupportedelderly.SeeWorldBank(2009b).

10 SeedeNeuborg(2002)oradiscussionothestrengthsandweaknessesodierentblockandmatchinggrantmechanismsinthecontextoSPprograms.

11 SeeSaxena(2006)orahistoryocentraltransersoranti-povertyprogramssincethe1960s.




innovative approaches can yield better outcomes thanseen to date – IAY and school stipends. The other majorprograms – public works and social pensions - would alsobenet rom policy improvements but these are morein the nature o incremental policy reorm which can beexpected in the normal course o program evolution.Urban programs remain small, but pre-conditionssuggest that merely transerring rural SP models to

urban settings will limit potential impacts, and equallythat the SP system needs to explore stronger linkageswith the livelihood opportunities available to the poorin urban areas.

a number of cross-cutting issues in policy evolution

of the sp system will also be important. Theseinclude cross-program convergence and consolidation,willingness to experiment with new types o programsand modes o delivery, and more structured eorts tobuild understanding o the benets o reorms andmanage the political economy o the reorm process.An additional challenge will be ensuring increasedattention in SP policies to the needs to the urban poor. These are discussed in turn below.

firstly, central and state-level policymakers will

need to accelerate cross-program convergence and

consolidation in policy and administration to make

the system more understandable to the population,

realize economies of scale in policy development

and administration, and simplify ongoing planning

and execution of sp programs. This will require

enhanced eorts o institutional coordination withinand across levels o government and administration.Both at central and state levels, there seems a need orormation o an inter-departmental Task Force or SocialProtection which would promote coordination (andpossibly reduce duplication) across targeted programs,and promote more coherent strategy developmenton the medium term policy mix and priorities. Thiscould in turn assist the transition rom the currentprogram-driven approach to SP to thinking in terms o a social protection systemwhich is animated more bypoverty outcomes and less in terms o scheme-based

target ulllment. Such institutional reorms havebeen important elements o successul SP reorms ina range o developing and developed countries. SomeIndian states, notably Kerala and more recently Delhi,are also moving towards an integrated approach toSP delivery.

a second overarching need in such policy reorientation

will be greater willingness to experiment in program

design and base reforms on results of evaluations.

This will require changes in two tendencies o IndianSP policy since the 1970s: rstly, what CAG has called“rechristening and revamping” o programs at theexpense o genuine experimentation and innovation,and secondly a limited willingness on the part o thecentral government to give states (and in some cases, thesub-state level) a reer hand in adapting their policy mixamong programs, by allowing exibility in adjustmento specic programs to suit their diverse circumstances. The experience o a number o developing countriesincluding Bangladesh in recent decades provides apositive example o the social benets o experimentationin SP policy. Closer to home, there is growing innovationat the state level in India which demonstrates the valueo such an approach, and the increased buy-in amongpoliticians and administrators or innovations which are

“home grown”.

a third overarching theme of policy reform is that

“government cannot do it alone”, and programs

would benefit from appropriate partnerships with

the non-government sector. This partnership couldbe in both policy ormulation and the specics o policydesign. The “non-government sector” in this respectcould range rom communities themselves (in the ormo SHGs and other orms o CBOs), to the NGO sector,to the or-prot private sector in specic programsand unctions. The design o MGNREG is a promising

example o such a reorientation o policy ormulationand program design, with its clear roles or communityand NGO actors, and willingness to bring in privatesector expertise and research institutions on areassuch as M&E. But there is room or much more activeengagement with the commercial private sector also,including in areas such as public grain distribution,targeted credit and livelihood interventions or the poor,and low-income urban housing.

b ipr ptat SP

prras

even if the necessary reorientation of the sp policy

and program mix can be achieved, it will not improve

outcomes for the poor unless accompanied by a

thorough overhaul of sp program administration,



Executive Summary xxv

including institutional arrangements. Whateverthe evolving mix o SP policies, there will be severalkey elements o administration and institutionalarrangements which will need to be conronted i Indiais to achieve the poverty reduction outcomes that itssignicant spending on SP warrants, including:

delineating clear lines o accountability

accompanied by adequate sta and nances.Delineating appropriate institutionalresponsibilities or all links o the SP servicedelivery chain, and aligning the divisiono unctions with assignment o personneland allocation o resources or programimplementation will be critically important orimproved implementation o SP programs. Thiswill require rst and oremost greater proactivityon the part o states to approve policies andput into practice the PRI/ULB decentralizationprovided or under the 73rd and 74th constitutional

amendments. This would need to be ollowedby a process-intensive reconciliation o centralguidelines, state-level stances on service deliverydecentralization, and capacities at sub-statelevels to perorm the required implementationunctions in SP programs. Achieving this goal willrequire coordination and gradual convergenceacross the many departments o governmentresponsible presently or dierent programs, andcommitment to strengthening implementationcapacities at the lower levels o the system, inparticular at the block and GP levels. It will alsomean building on innovations in institutionalroles to promote greater accountability amongSP service providers, as exemplied by socialaudits in MGNREG.

rapidandsubstantialimprovements inthe basic

“nuts and bolts” o program administration

and procedures. The detailed suggestions inthis regard are outlined in Chapter 7. Broadly,they would involve overhauling a range o bureaucratic procedures which impede undsow, strengthening processes or administrative

and social accountability o service providers,a through modernization o program recordkeeping and reporting arrangements (includingcomputerizing systems and taking advantage o India’s ICT prowess to look or “technology leap-rogging” opportunities such as introduction o

smart cards and other innovations), building onimproved rural banking inrastructure to overhaulpayment systems, and building a strong culture o M&E. Recent reorms in RSBY and to a lesser extentMGNREG, together with a number o state-specicprogram pilots, provide many lessons in this area,and it is hoped that they can be systematicallyincorporated in other SP programs over time.

overhauling existing targeting mechanisms,

bothatthehouseholdlevelandgeographically.

Any social protection system needs to be ableto identiy who are the poor with a reasonabledegree o accuracy. Innovations already operatingin India and good practice rom other developingcountries oer a range o options or signicantimprovements in targeting mechanisms. Theseinclude: (i) development o “poverty maps” ata sub-state (probably block) level which wouldallow more precise geographical allocation o SP

unds to poor areas; (ii) overhaul o the BPL 2002methodology in line with good practice in designo proxy means-tests (PMT) in other developingcountries, including allowing or cross-stateand urban/rural variations in the PMT ormula;and (iii) in rural areas, continued piloting andstrengthened evaluation o community-basedbeneciary identication or SP programs with aneye to convergence with a reormed BPL system,and possibly – as has already happened in AP – itsreplacement in appropriate settings. While thenew BPL methodology proposed by the SaxenaCommittee improves upon the 2002 system inseveral ways, several drawbacks o the previousmethod remain. Piloting the proposed methodsand subjecting this methodology to the testusing NSS data as done with the 2002 BPL methodwould yield interesting insights into how well thenew dejure targeting design would perorm.

in the area o social security or unorganized

workers, past experience suggests that direct

public provision, nancing and administration

is neither easible nor desirable. It seems more

easible to partner with existing non-governmentalentities (or-prot, NGOs, and membership -based organizations) and restrict the role o government to: (i) providing targeted subsidies;and (ii) regulating these entities and setting basicstandards. This model already exists in India in




several orms, such as the JBY scheme operatedby Lie Insurance Corporation o India (LIC) orlie insurance, and more importantly the RSBYprogram. In addition, many other schemes allinginto the community based or micro-insurancecategory could be incorporated under an umbrellaprogram that provided matching contributionsor premia but set certain standards in terms o

benet targets, eligibility conditions, investmentpolicy and recordkeeping, among others.

if such a reform agenda can be delivered, the benefits

for the poor of india could be substantial, and make

growth significantly more inclusive. In addition, thereare likely to be positive impacts on growth itsel rom anSP system which more eectively addresses a range o market ailures which result in poor and unproductivecitizens. The traditional view o social protectionsystems and the redistributional objectives underlyingthem was that there was a clear growth versus equity

trade-o. However, empirical evidence increasinglyhighlights that a well-designed and implementedSP system provides dynamic eciency gains to theeconomy through positive impacts on productivity, andas an important tool or governments in managing theimpacts o reorms in the wider economy.12

c Ptca c SP rr

the political economy of sp policy reorientation

is complex, and will require intensive efforts to

build consensus on reforms. In particular, it will beimportant to ensure that the interests o perceived“losers” o SP and broader economic reorms are takeninto account. While reorms that involve expandedcoverage or new types o interventions are unlikely tobe controversial, there are strong interests in preservingthe status quo in SP programs among a range o actors,including administrators, politicians, contractors andothers. Simply cutting programs or excluding certaingroups o beneciaries or institutional players isthereore unlikely to be successul unless incentivesor institutions and households which will be aectedby reorms can be part o the reorm package. Thepolitical economy o SP reorm is challenging in allcountries, and governments in India would benetrom more innovation in their eorts to create a

broader societal understanding o the need or andbenets o reorms.

some of the political economy challenges that the

sp system confronts if it is to become more coherent

and more effective as a tool for promoting poverty

reduction and inclusive growth include:

as in many areas o policy reorm in India,

consolidation and reorm o the SP systemwithin a coherent strategy will run counter to

thepastexperienceoscheme-driveninitiatives

by a plethora o Ministries, and the observedtendency o each new government at bothcentral and state levels to want new SP programsclearly distinguishable rom their predecessors.Reducing these natural bureaucratic and politicaltendencies will be very challenging. A rst step isobviously having an integrated SP strategy whichis driven by the top politicians and bureaucrats

at central and state levels, with strong inputsrom civil society in its development, includingopposition parties. However, even i such astrategy process can be developed, it will beimportant or it not to become a “one shot”exercise, but to have institutional coordinationmechanisms in place which explore programduplication and exploit synergies.

giving states a more exible hand in use o

central SP resources will be a challenging

transormation both or central administrators(whose past tendency has been to denethe parameters or use o central unds quitetightly) and politicians (who not unexpectedlyseek political attribution or centrally-nancedschemes implemented by states). The rst o these challenges is perhaps easier to addressthrough development o more outcome-basedmonitoring systems. The second is more dicultin a democracy.

in a number o programs, there are presently

signicantrent-seekingopportunitiesorarange

oactors.Such opportunities are acilitated by thecurrent complexity o the SP program mix, butalso by the number o intermediaries who otenare involved in the interactions o poor peoplewith the SP system. The generic identity o such

12 SeeWorldBank(2004).



Executive Summary xxx

ocial intermediaries and unocial middlemenis generally well-understood, but minimizing thepotential avenues or their continued roles has onlyrecently become a more explicit goal o SP policydesign. While it is too early to say, even apparentlynaïve blanket bans on certain actors in legislationand/or guidelines (such as the ban on contractorsunder MGNREGA) do appear to help. However, a

more comprehensive approach will require a morethorough modernization o SP business processes.Examples where such approaches already appearto be making headway include greater reliance ondirect transers to beneciaries through bankingand postal systems, and innovations in use o ICTin SP program delivery.

it is increasingly important to understand how

increased decentralization o responsibilities

to panchayats generates dierent patterns o

contention, cooperation and collusion between

newly elected panchayat ocials and traditionalloci o inuence among administrators andhigher level politicians such as MLAs and MPs. Anessential rst step in promoting decentralizationo SP service delivery as a tool or contestabilityand hence accountability will be getting a betterempirical understanding o the diversity andevolution o experience. This would include howthe gradual increase in the role o panchayats isproceeding (and what actors – such as limitedcontrol o resources and very low capacity),and the extent to which panchayats eectivelypromote accountability in SP service deliveryare captured by local social, political andadministrative elites.

a more nascent, but powerul, element in the

politicaleconomyoSPreormisthepolicyshit

towards a rights based approach. Governmento India is increasingly operationalizing suchan approach in a number o areas throughlegislation and specic policies and programs. Forinstance, the Right to Inormation Act was passedin 2005 and mandates the government to release

timely inormation demanded by citizens. It hasbeen widely hailed as one o the most importantdrivers o governance reorm and transparency inIndia. The Right to Food and Right to Livelihoodmovements are led by civil society, but havemanaged to inuence government so that the

National Rural Employment Guarantee Act, (nowrenamed the Mahatma Gandhi Rural EmploymentGuarantee Act) was passed in 2005. Other similarActs include the Right to Education Act (2009),the Scheduled Tribes and Other TraditionalForest Dwellers (Recognition o Forest Rights) Act(oten called simply the “Tribal Rights Act”, 2006)while legislations such as or ood security are on

the anvil.

a consequence o the above is the increasingly

prominentrole o communities and civilsociety

in promoting more eective poverty reduction

outcomes rom spending. In this respect, thestrengthening o the “authorizing environment”or communities in SP service delivery in recentyears is encouraging. This is both cross-cutting,through reorms such as the Right to InormationAct, and program specic, such as the anticipatedrole o social audits in MGNREGA, and new roles

or community groups such as SHGs in delivery o some SP services (e.g., running Fair Price Shops).However, there is no guarantee o “trickle down”to citizens in terms o awareness o their emergingentitlements. The role o NGOs, media and otheractors in this respect can not be under-stated, asvarious political and administrative actors at locallevel may not have strong incentives to promotesuch citizen-based accountability mechanisms.Notable examples such as Mazdoor Kisan ShaktiSangathan (MKSS) in Rajasthan demonstrate thepotential impacts o such partnerships.

e. The STRuCTuRe oF The

RePoRT

the structure of the report is as follows:. It starts

with setting the context within which the SP systemis operating, with respect to the evolution o poverty,inequality and vulnerability in India in recent decades,and insights on the patterns o risks, shocks and copingmechanisms o households. There is then a discussion

o key perormance indicators o the major SP programsin India, both protective, promotional and preventive,exploring coverage, adequacy o benets, incidenceo benets across the income distribution and socialgroups, and determinants o the programs outcomes,and in the case o preventive programs, looking at Indian



xxx Social Protection for a Changing India: Volume II

experience and strategies or expanding coverageo dierent types o social insurance to unorganizedworkers. The ollowing chapters then explore dierentaspects o program nancing, program administration,and institutional arrangements that help to understandthe observed outcomes. This is ollowed by a moredetailed discussion o targeting mechanisms and

options or SP programs, in particular the BPL (BelowPoverty Line) targeting method that acts as a backbonetargeting mechanism or several key programs. The concluding chapter attempts to summarizerecommendations with respect both to the overallSP system, and the specic aspects o policy andimplementation discussed in individual chapters.



C HA P T

E R

1Poverty, Inequality and Vulnerability in IndiaSetting the Context for Social Protection



CHAPTER-1: Poverty, Inequality and Vulnerability in India: Setting the Context for Social Protection

it is increasingly clear that the social protection

policy debate needs to broaden its focus to the

currently poor as well as those vulnerable to

poverty. Fity years ago, nearly hal o India’s population

was poor, with high levels o chronic poverty. Today,this gure is closer to a quarter o the population.However, there are growing concerns that the gureso the ocial poor understate the true extent o theproblem and Government is making serious attempts torevise these gures.13 A changing external environmentand improved living standards over time suggest thatthe ocus o attention needs to move beyond thecurrently poor.

in fact, there is considerable movement in and out

of poverty in rural india and even households not

currently poor can be in danger of falling into poverty. Households are exposed to risk and insecurityin many dierent ways. While perennial sources o

vulnerability such as natural disasters continue to remainimportant, new sources have emerged with the changingexternal environment. An increasingly important part o this story relates to shocks experienced by households,

both idiosyncratic and covariate. As a result, volatilityo household incomes and exposure to risks remainsa serious concern, even in better-o areas and even aschronic poverty continues to decline.

this chapter provides an overview of poverty,

inequality and vulnerability in recent years in india

in order to provide the social context within which

social protection programs operate. In doing so, thechapter draws on a vast literature on poverty and on theanalysis o poverty and inequality trends in the WorldBank’s India Poverty Assessment (2011) as well as analysis

o various rounds o the National Sample Surveys (NSS). The analysis o household level shocks and inormalcoping mechanisms draws primarily on two household

Chapter–1

Poverty, Inequality and Vulnerability in IndiaSetting the Context for Social Protection

13 TheExpertGrouponpovertyestimation,ledbyS.TendulkarsubmitteditsreportwitharevisedmethodologyortheestimationopovertylinesandpovertyratestothePlanningCommission.Thecommittee’srecommendationswereacceptedbyGovernmentshortlybeorethepublicationothisreport.Asaresult,theanalysisanddiscussioninthischapterandelsewhereinthereportreliesonpreviousocialpovertystatisticsandnotthoseproposedbytheTendulkarCommittee.




surveys: (a) the 2006 Social Protection Survey (SPS)covering 1,356 households in the states o Karnataka,Madhya Pradesh and Orissa undertaken specially orthis report; and (b) the 2005 Jharkhand Living StandardsSurvey (JLSS) covering 2000 households in Jharkhand.14

several key points emerge from the analysis:

Poverty has signicantly reduced over time and

gradualprogressonpovertyreductioncontinues.As a result, the ocially poor are closer to onequarter o the population than the one hal o anearlier period. However, a large proportion o thepopulation remains chronically poor.

However, inequality has risen since the 1990s.

While economic inequality remains moderateby international standards, sustained growthhas increased the ocus on the inclusiveness o growth and its distributional outcomes.

There are signicant disparities in poverty,

inequalityandvulnerabilityacross thecountry,and across groups. As a result, there not onlyremain a large number o chronically poorpeople, but the actors that underlie theirpoverty may in some cases be less amenable toa simple growth-driven approach.

There is a growing urbanization o poverty.

Though the majority o India’s poor continue toreside in rural areas, poverty rates in small andmedium towns are comparable, and even higher,than rural poverty rates.

Povertyandvulnerabilityislikelytobearmorewidespread than the ofcial poverty gures

suggest. This is both because communities’perceptions o poverty and what it means to bepoor are typically higher than ocial estimatesand due to the large proportion o householdsthat remain vulnerable to poverty.

A signicant majority o households experience

serious crisis events. Health problems are themost requent idiosyncratic and natural calamitiesthe most requent covariate shock aecting

households. Poor households experiencemore idiosyncratic shocks (primarily health-

related) while richer households suer rommore covariate shocks such as crop ailures andlivestock epidemics.

Coping strategies adopted byhouseholdsin the

ace o shocks vary notably across states and

income groups, and according to the nature o

shockexperienced. There is some evidence thatthese inormal coping mechanisms may haveadverse long-term impacts and are unlikely toprovide adequate protection.

The structure o the chapter is as ollows. The rstsection presents poverty and inequality trends orIndia. Section B shits the ocus to vulnerability andpoverty transitions. This section presents evidenceon household shocks that oten drive vulnerabilityand poverty, as well as ndings on inormal copingmechanisms adopted by households in the ace o shocks. Section C concludes with implications or social

protection policies and programs.

A. PoveRTy AnD inequAliTy15

india has made steady progress in poverty reduction

and about a quarter of the population is poor

today. This improvement in living standards isevident not just in ocial poverty estimates but alsoin community perceptions o poverty and well-being.However, inequality has started to rise during the1990s, particularly in urban areas. Structural inequalities

also continue to persist, leading to the exclusion o certain groups rom the development process. Inter-state disparities in poverty and human developmentoutcomes also remain signicant. Thus, rural povertyis concentrated in the seven poorest states o Bihar,Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa,Uttarakhand and Uttar Pradesh. At the same time,urban poverty is starting to become more signicantand poverty rates in small and medium towns arecomparable or even surpassing rural poverty rates. There is a growing perception that poverty is likely to bemore widespread than the ocial gures suggest and

that a ar larger proportion o the population is eithercurrently poor or in danger o alling into poverty. This

14 SeeDevetal.(2007)andBalachanderetal.(2009)ordetails.

15 This section draws extensively on the analysis o poverty and inequality trends by the World Bank’s recent India Poverty Assessment report. See WorldBank(2011).




percentage o population with consumption expendituretoo low to purchase the basket o commodities (oodand basic necessities) as measured by the povertyline - has allen in both rural and urban areas.16 In 2004/05,28 percent o people in rural areas and 26 percent o people in urban areas lived below the poverty line, downrom 56 percent and 49 percent respectively in 1973/74. The depth and severity o poverty declined even aster,

suggesting that incomes gains leading to povertyreduction were experienced even by those well below thepoverty line. Consistent with the decline in consumption

Figure 1.1: Evolution o poverty since the early 1970s

Notes: Based on uniorm recall period consumption aggregates and ocial Planning Commission poverty lines.Source: GoI ocial estimates, World Bank (2011).

20

30

40

50

60

1973-74 1977-78 1983-84 1987-88 1993-94 2004-05 % P

o p u l a t i o n b e l o w

t h e p o v e r t y l i n e

Poverty incidence

Rural Urban National

0

5

10

15

20

Rural Urban

P o v e r t y g a p i n d e x ( P G I )

Poverty gap - depth

1973-74 1977-78 1983-84 1987-88 1993-94 2004-05

0

5

10

Rural Urban

S q u a r e d p o v e r t y g a p ( S P G )

Squared poverty gap - severity

1973-74 1977-78 1983-84 1987-88 1993-94 2004-05

is both because communities’ perceptions o povertyare typically higher than ocial estimates and becauseo the large proportion o households that remainvulnerable to shocks and hence, to alling into poverty.

a Trds prt ad at,

ar 1970s t d-2000sindia has made steady progress in poverty reduction

since the 1970s (see figure 1.1). Poverty incidence – i.e., the

16 Ocialestimatesopovertyarebasedonthe“thick”roundsothenationallyrepresentativeNationalSampleSurveys(NSS).Changesinthequestionnairedesignothe1999/2000NSSroundrenderedconsumptionmeasuresromthisroundnon-comparablewithprevious(andlater)rounds.Thisgeneratedconsiderabledebateonthepreciseextentopovertyreductionduringthe1990s,thoughmostanalysisconrmsacontinuedgradualreductioninpovertyeveninthisperiod.SeeDeatonandKozel(2005)orasummaryothisdebate.ThemostrecentNSSround2004/05iscomparablewithpre-1999NSSrounds,enablinganalysisopovertytrends.TheTendulkarCommittee’sre-estimationothepovertylineandrevisedpovertyestimatesor2004/05isthemostrecentcontributiontothisdebate.




poverty, communities also report improvements in well-being or declining perceived poverty.17

however, poverty in india is perceived to be more

widespread than that suggested by official poverty

figures to date. Several studies show that communitiesperceive the ocial poverty line threshold to be toolow. Participatory methods including techniques such

as the ladder o lie and community wealth rankingshave been used in a number o studies to elicit people’sviews about what it means to be poor and to speciya community poverty line—the threshold beyondwhich the community would consider households tono longer be poor.18 For instance, the Moving Out o Poverty study (World Bank 2008b) nds that two-thirdsor more o the sampled communities in the our statescovered in the study—West Bengal, Assam, AndhraPradesh, and Uttar Pradesh—elt that the ocialpoverty lines were inadequate to meet basic needs. Inthese states, the levels o poverty based on community-

dened poverty lines are much (10 to 20 percentage

points) higher than that obtained using ocial povertylines. Spatial comparisons o poverty are more dicultand ambiguous using community-dened povertylines as these typically measure relative poverty ratherthan absolute poverty. Nonetheless, these ndings dosuggest that until recently ocial poverty estimates didnot adequately reect people’s notions o what it meansto be poor (see Box 1.1 or a discussion o groups that

are regarded as particularly poor or vulnerable).

in contrast to the steady reduction in poverty incidence,

other indicators of human development suggest much

slower improvement. For instance, the pace o progressin improving child nutrition in India has been slow, andmuch slower than would be expected given India’space o GDP growth. In 2005/06, 43 percent o Indianchildren (aged below ve years) were underweight,48 percent stunted and 20 percent wasted (based onWHO standards). India’s under-nutrition gures areamong the highest in the world, making slow progress

all the more troubling.19 While outcomes are decidedly

17 Improvementsareseenintermsoanincreaseinincomesandpurchasingpower,ineducationandhealth,andanincreaseinpersonalreedomandchoices(relatedtoreduceddependenceonpatronsinruralareasandgreaterenterpriseinurbanareas).BasedonndingsreportedinPraxis(1999),JayaramanandLanjouw(1999),Krishna(2004,2006),Swaminathan(1995),KozelandParker(2005),WorldBank(2008b).

18 Seeootnote17orsources.SeealsoChapter8ontargetingosocialprogramsoradiscussionotheselocalindicatorsopoverty.

19 InternationalInstituteopopulationsciences(IIPS)andMacroInternational(2007).

B 1.1: lst trasat – isb ppats dr - srd b pbc prras

Certain groups may be particularly disadvantaged in some way or systematically excluded rom the development process

and/or public programs and services. For instance, low educational attainment, poor employment prospects and stigma mean thatpersons with disabilities and their households are notably worse o than average. While ocial estimates o disability (Census andNSS) are low (around 2 percent), there is growing evidence that people with disabilities comprise at least 5-8 percent o the Indianpopulation. Even on the very conservative ocial denitions, about 6 percent o urban households reported having a person with adisability (PWD) compared to 8 percent o rural households in 2002. Estimates by WHO and others are ar higher.1 While programs existor PWDs (notably disability pensions – see Chapter 3), these require a certication o disability in excess o 40 percent severity, leadingto many being excluded rom government programs.

In urban areas, this could also include the ‘oating’ population, such as the homeless, street and pavement dwellers, commercial

sex workers, and working children. Working children constituted about 12.5 percent o the child population (aged 5-14 years) in 1995,o which about 21 percent were in urban areas. 2 Urban working children are more likely to work outside the household rather than ashelpers in amily work as in rural areas and are also more likely to be at risk o exploitation in an unamiliar urban setting. Within urbancenters, those living in slums (particularly non-notied or unrecognized slums), temporary settlements and “invisible slums” bound tospecic industries (such as construction sites, leather, waste handling, jute, etc.) are likely to be poorer than the general population.Localized studies also suggest a high degree o homelessness in urban centers, with a large proportion o the homeless staying thatway or long periods (over ten years).3 The inormation base on these groups is extremely weak. In act, it is likely that the scale o urbanpoverty is underestimated due to the exclusion o the poorest groups in the conventional household surveys. These groups orm a parto the “invisible population” that are largely unrecognized and un-served by public programs and services.

Seasonal migrants are also among the most vulnerable and least visible groups as ar as public policy is concerned. Migration isoten also viewed as a problem and a potential threat to social and economic stability rather than an important livelihood and copingmechanism or the poor. In the destination villages or cities, migrants typically remain without an identity and hence are unable to claimstate resources or education, health care, water and sanitation and other basic services.

Sources: 1. World Bank (2009a). 2. NIEPA (2001). 3. Mander (2009).




worse or those below the poverty line, the burden o under-nutrition is not conned to the consumption poor.

as a result, there are divergent views on the extent of

poverty in india. For instance, the Sengupta Commissionon the unorganized sector estimated that about77 percent o India’s population lives on less than ` 20per day and could be considered poor. The World Bank’s

international poverty line o $1.25 per day suggeststhat poverty incidence in 2005 is as high as 42 percentin 2005.20 More signicantly, the recent re-estimationo poverty lines by the Tendulkar Committee impliesa signicant revision o poverty rates in the country toabout 41.8 percent in rural and 25.7 percent in urbanareas. This proposed methodology and consequentpoverty headcount rates have recently been acceptedby government, these estimates o poverty would beused or policy and planning, particularly the allocationo scal resources across states (see Chapter 6).

poor households typically have few resources and face greater insecurity. Analysis o variousrounds o the National Sample Surveys suggests that,predictably, households with high dependency ratios,low educational attainment, low physical resources,primarily dependent on casual labor, and belongingto scheduled castes or tribes are more likely to bepoor.21 Poverty proles developed using participatorytechniques also identiy similar correlates o poverty.22 Thus, communities identiy poor households as thosethat are engaged primarily in casual work, have ewassets and/or high debts, are unable to meet basic needs(particularly ood), and are illiterate or poorly educated.An interesting point o departure rom poverty prolesderived rom quantitative survey data is the emphasison volatility o incomes and insecurity in these localdenitions o poverty. Thus, communities identiy thepoor as those acing insecurity o tenure (in urban areas)and insecurity o work and income; those that lack economic support (such as widows and elderly); andthose that have suered health-related shocks especiallyillness, disability or death o the bread-winner.

inequality in india is moderate by international

standards but has increased during the 1990s. Thesecular trend in declining inequality o consumption

expenditure was reversed in the 1990s as inequalitystarted to rise. This increase was particularly sizeablewithin urban areas with the Gini coecient rising rom0.34 in 1993/94 (and 1983) to 0.38 in 2004/05 (see Table 1.1). Given the growing divergence between ruraland urban consumption levels and rising urbanization,this is reected in a rise in national inequality.

however, it is likely that the rise in inequality is

understated. This underestimation is likely due to

measurement issues such as the understatement o rural-urban gaps and increases in the incomes at the top-end o the distribution in the NSS household surveys. Inaddition, estimates o economic inequality in India arelikely to underestimate the true extent o inequality, suchas that due to social stratication and segregation bycaste, religion, gender or other sources o exclusion (seebelow). Though the rise in inequality appears modest,popular perception is o rapidly increased inequality. Thisperception is possibly driven by the observation that richIndians have benetted enormously rom the economic

boom o the 1990s. Though these movements in the verytop end (99th percentile and above) o the distributionare unlikely to drive movements in the overall incomedistribution, such changes in the tails o the distributionare critical or societal perceptions o inequality.

other structural inequalities continue to persist

and gender, caste and tribal identity remain critical

markers of well-being. Despite highly impressivegrowth rates and low levels o income inequality, India’sexclusionary social structures continue to place obstaclesor several groups in access to key opportunities. While

welare indicators or scheduled castes and scheduledtribes are improving, the gap between them and thegeneral population is large and persistent.23 Today,

Rra urba nata

1983 0.32 0.34 0.32

1987-88 0.30 0.35 –

1993-94 0.29 0.34 0.30

2004-05 0.30 0.38 0.33

Tab 1.1: ida iat trds

Notes: Gini coecients calculated using NSS data.

Source: World Bank (2011), Himanshu (2007).

20 Downrom60percentin1981(ChenandRavallion,2008).

21 SeealsoJayaramanandLanjouw(1999)orsimilarndingsbasedonareviewovillagestudies.

22 See,orexample,Krishna(2004,2006),Swaminathan(1995),WorldBank(2008b).




scheduled tribes still experience levels o poverty seen inthe general population 20 years earlier; while scheduledcastes lag 10 years behind the general population.Amongst the Scheduled Tribes and Scheduled Castes it isoten women who experience the greatest disadvantage. Though there are positive signs o dynamism withinthe caste hierarchy, caste remains a potent indicator o social status and gaps between SC/STs and general caste

groups persist with respect to educational attainment,earnings, poverty rates and other indicators o welare.STs in particular remain the most disadvantaged andthe remoteness o tribal habitations creates problemsor service delivery.24

b urba prt

though the majority of india’s poor continue to

reside in rural areas, there is a growing urbanization

of poverty in india.25 Urban and rural poverty rates

have been converging in recent years. Though ruralpoverty rates remain higher, the depth and severityo poverty in urban areas is higher than in rural areas(see Figure 1.1 above).26 At the same time, India’s urbanpopulation is growing aster than the rural population.In 2001, almost 28 percent o India’s populationresided in urban settlements, and this is expected toreach around 40 percent by 2020, o which about one-third are likely to be slum-dwellers and squatters.27 This indicates a growing urbanization o poverty, albeitat a relatively slow rate compared to the historicalexperience o other developing countries.

size matters: a larger proportion of the urban

poor are concentrated in small and medium towns

compared to large metropolitan cities. Poverty rates inlarge cities (with population o one million or more) aredramatically lower than that in small and medium towns(see Figure 1.2). Thus, in 2004/05, only about 15 percento people living in large cities were poor compared

to nearly 30 percent o people living in small andmedium towns. By 2004/05, the poverty rate in small/

medium towns had surpassed that in rural areas. As themajority o urban population (about 70 percent) is alsoconcentrated in these smaller urban agglomerations,the bulk o India’s urban poor (about 85 percent) are alsoto be ound in these towns.28

the comparative picture of relative urban and rural poverty across states is also of interest.29 Urbanpoverty is estimated to be higher than rural povertyin the more urbanized and industrialized southernand western states, while rural poverty remains higherin northern and eastern states Figure 1.3. Some o

these states – such as Andhra Pradesh, Maharashtra, Tamil Nadu – also report the highest number o townswith slums in the 2001 Census. Approximately 23 percento the urban population in these states lives in slums. The national pattern o higher inequality in urban areas,relative to rural areas, holds or all states.

this suggests that greater policy attention would need to be paid to the social dimensions of urbanization.30

23 Thesetermsarederivedromagovernmentscheduleorpositivediscriminationandarethecommonlyusedinadministrativeandsurveydocuments.Inthisreport,weollowthisconventionanduseSCandST.Inrecentyears,DalitsandAdivasisareincreasinglybeingusedinstead.

24 WorldBank(2011).

25 Thisisacommonpatterninthedevelopingworld(seeRavallionetal.2007).

26 WorldBank(2011).

27 WorldBank2007.

28 WorldBank(2011).

29 However,thereareseriousconcernsabouttheurbantoruralpricedierentialsimplicitintheocialpovertylinesthathampercomparisonsbetweenruralandurbanpovertyrates.

30 SeetheIndiaUrbanPovertyReport(GovernmentoIndia2009),India2025:InputsoranUrbanStrategy(WorldBank2007)andPerspectivesonPovertyinIndia:StylizedFactsromSurveyData(WorldBank2011)orarecentanalysisotheseissues.

Figure 1.2: Poverty rates - rural, small urban centers andlarge cities

Notes: Percentage o population with monthly per capita consumptionexpenditure below the poverty line, 2004/05. States sorted on overall urbanpoverty rate.

Source: Sta estimates using NSS. World Bank (2011).

50

40

30

20

10

01983 1993-94 2004-05

Small/medium townsRural Large cities




indian policy-makers have traditionally emphasized ruralpoverty alleviation in the past and though increasingurbanization and concomitant pressures has broughturban issues into ocus, unding or urban poverty still lagsbehind the magnitude o the problem. The level o undingor anti-poverty programs in urban relative to rural areaswas only 1:35 in the late 1990s, against a share o urban

to rural poverty o 1:3.5.31 In recent years, Governmento India has initiated a comprehensive national urbanreorm through the Jawaharlal Nehru National UrbanRenewal Mission (JNNURM) and the Urban InrastructureDevelopment Scheme or Small and Medium Towns(UIDSSMT). While social sectors are included as possibleareas o support under these schemes, city developmentplans - the rst step or cities to access the grant resourcesunder JNNURM - typically have very little on social sectors.It is increasingly clear that an understanding o thespatial distribution o urban poverty and urban-specicstrategies are needed or strengthening social protection,but equally that such distinct thinking rom Governmentshas been lacking to date.

c Dsparts prt ad a

dpt acrss stats

there are wide disparities across states and spatially,poverty is concentrated in the northern and central states. Urban poverty rates vary dramatically acrossstates, ranging rom a low o 3-4 percent in Assam and

Himachal Pradesh to over 40 percent in Chhattisgarh,Madhya Pradesh and Orissa (see Figure 1.3). In ruralareas, the seven poorest states—Bihar, Chhattisgarh,Jharkhand, Madhya Pradesh, Orissa, Uttarakhand andUttar Pradesh—have poverty rates between 33 and47 percent. The least poor rural states such as Punjab,Haryana, Kerala, Himachal Pradesh and Andhra Pradeshhave poverty rates that are a third or a quarter o thosein the poorest states.32 Thus, in 1983, a group o theour poorest, and most populous, states – (undivided)Bihar, (undivided) Madhya Pradesh, Orissa and(undivided) Uttar Pradesh – accounted or 50 percento the rural poor. By 2004/05, this share had increasedto 61 percent.33

31 LakdawalaCommitteeReportandNIUA(1993).Inaddition,publicserviceprovisioninurbanareashastraditionallyocusedoneconomicserviceslikeinrastructure,transport,housing,sanitationandwatersupplytotherelativeneglectosocialprotection.

32 WorldBank(2011).

33 WorldBank(2008a).

Figure 1.3: Inter-state disparities in poverty

Notes: Poverty rates or the newly created states o Chhattisgarh, Jharkhand and Uttarakhand only reported ater states were ormed. For comparability overtime, poverty trends reported or Madhya Pradesh, Bihar, and Uttar Pradesh in all three years are or the divided states. States sorted in ascending order o 1983 poverty rates.

Source: World Bank (2011) or poverty estimates.

(Rural, % below poverty line)

0

20

40

60

AI PU HP HA AP OTH GU KA RA KE AS MA UP MP TN WB BI OS JH UT CH

1983 1994 2005

(Urban, % below poverty line)

0

20

40

60

AI HP AS PU OTH HA WB AP RA MA GU KA KE OS TN UP MP BI JH UT CH



10 Social Protection for a Changing India: Volume II

these lagging states and even some regions in leading

states (such as eastern maharashtra, northern

karnataka and andhra pradesh) are being left out

of the growth process. In particular, poor economicperormance (except or Madhya Pradesh) may haveexacerbated these disparities in household consumptionexpenditures incomes and human developmentoutcomes. Households in these lagging regions lack access to adequate inrastructure, markets and socialservices, with corresponding ewer opportunitiesor employment and income diversication. Whilepermanent migration, particularly across state borders,remains low, a common coping strategy is seasonalmigration. Localized studies suggest that seasonalmigration is particularly high rom some o thesedistressed areas that have emerged as signicantexporters o unskilled labor to urban centers and torelatively richer states (see Section B (a) below).34

B. vulneRABiliTy

it is increasingly clear that the policy debate needs to

focus not just on the incidence of poverty, but also

on vulnerability to poverty. Households are exposedto risk and insecurity in many dierent ways. As a

result, a large proportion o households, both poor andnon-poor, may be vulnerable to poverty even thoughthey may not be currently poor. Vulnerability is otenthought o as “the existence and the extent o a threato poverty and destitution; the danger that a sociallyunacceptable level o wellbeing may materialize.”35 I the poverty line is taken as the threshold below whichthe level o wellbeing alls below a socially acceptable

level, then vulnerability can be conceptualized as thethreat o uture poverty (see Box 1.2 or a description o approaches to assess vulnerability empirically).36 As aresult, volatility o household incomes and exposure torisks remains a serious concern, even in better-o areasand even as chronic poverty continues to decline.

a far larger proportion of the population than those currently poor is in danger of falling into poverty. The literature on poverty dynamics and vulnerabilityin India suggests that there is considerable movementin and out o poverty. In other words, regardless o the

current poverty status o a household, households mayall into poverty ater exposure to large, severe and/or requent shocks, especially when clustered closeto the poverty line. Figure 1.4 shows a large majorityo rural households clustering within one standarddeviation o the poverty line, while urban and mega-urban households show greater dispersion (reected

34 WorldBank(2008a).

35 Dercon(2005),pp.3.

36 Rigorousanalyticalworkontheseissues islimitedbythe lackopanel datainIndiato trackconsumptiondynamicsohouseholdsovertime,with thenotableexceptionotheICRISATsurveysandthelargerNCAERARIS-REDSpanelsurveys.

Figure 1.4: A large proportion o the population is clustered around the poverty line

Notes: Distribution o log monthly consumption per capita, normalized by the poverty line. Poverty lines in 1993/94: Rural areas = ` 205.84; Urban/

Mega-urban areas = ` 281.35. Poverty lines in 2004/05: Rural areas = ` 356.30; Urban/Mega-urban areas = ` 538.60.Source: Jalan and Murgai (2008); Sta estimates using NSS.

0

.2

.4

.6

.8

1

D e n s i t y o f p e r c a p i t a e x p e n d i t u r e s

-2 -1 0 1 2 3 4 5 6

Log consumption per capita, normalized by poverty line

1993-94

0

.2

.4

.6

.8

1

D e n s i t y o f p e r c a p i t a e x p e n d i t u r e s

-2 -1 0 1 2 3 4 5 6

Log consumption per capita, normalized by poverty line

2004-05

Rural Urban Mega-urbanRural Urban Mega-urban



CHAPTER-1: Poverty, Inequality and Vulnerability in India: Setting the Context for Social Protection 11

37 SeeWorldBank(2011)oradetailedcomparisonoconsumptionandothersocio-economiccharacteristicsordierentgroupsotheexpendituredistribution.

38 SeeWorldBank(2008b)andothersourcesinootnote17.

As the notion o exposure to risk and insecurity underlies all denitions o vulnerability, incorporating this into an empirical assessment o

vulnerability usually requires panel data with detailed inormation on exposure and response to shocks. There are very ew panel datasets

in India that track consumption dynamics o households over time, with the notable exception o the ICRISAT surveys and the NCAER

ARIS-REDS panel surveys.

vrabt as pctd prt Cadr 2000

This approach denes vulnerability as the probability o a household alling below a specied welare threshold. An attraction o theapproach is that the econometric methodology does not require panel data with observed consumption distributions over time.

However, this must then necessarily rely on stringent assumptions on how shocks evolve over time and space; the model also does

not incorporate covariate risk. This approach develops a model to predict realized welare, typically measured as consumption, over a

specied time horizon. These predictions are used to generate the distribution o expected consumption and the predicted probability

o being poor in the uture. Households with probability o uture poverty above an arbitrarily chosen vulnerability threshold, analogous

to the poverty line, are classied as vulnerable, yielding an incidence measure that is analogous to the incidence o poverty.

vrabt as pctd tt l ad Scctr 2003

This approach is similar to the rst in that it also denes vulnerability in the context o expected uture welare. However, this approach

also takes into account risk aced by households. Specically, vulnerability is measured as the dierence between a threshold level o

certainty-equivalent consumption (analogous to the poverty line) and the household’s expected utility o consumption. The attraction

o this approach is that it decomposes overall vulnerability into a poverty term and two terms capturing covariate and idiosyncratic

risk. As a result, it is possible to identiy the link between vulnerability and poverty status (due to low resource base, poor returns to

assets, unavorable location, etc.) and between vulnerability and risk. One disadvantage lies in the act that the unit o measurement o

vulnerability are not easily amenable to policy dialogue.

vrabt as srd psr t rs Tsc ad ldrt 2002

This approach explicitly ocuses on household’s exposure and response to risk. Unlike the previous two approaches that are essentiallyassessments o exante vulnerability to alling below a specied welare threshold, this approach assesses the ex post realization o anegative shock that results in a household deviating rom its expected welare and leading to a socially unacceptable level o welare. There are drawbacks in this methodology in that changes in consumption are treated as symmetric regardless o the household’s positionin the income distribution. Similarly, the impact o positive and negative shocks are assumed to have symmetric eects. These havelargely been addressed in subsequent extensions to the original model. However, the data requirements are stringent – this methodologyideally requires several waves in the panel as well as inormation on both income and consumption.

vrabt as t trat tr prt Ca ad Drc 2005More recent work has ormulated a concept o vulnerability that implies both the likelihood o alling into poverty in the uture (asin the rst approach mentioned above) and the severity o poverty in that case. These measures estimate individual household-levelvulnerability using an axiomatic approach.

In all these approaches, there are problems in aggregating these household-level estimates o vulnerability that have not yet beenaddressed in the empirical literature.

Sources: See also Christiaensen and Subbarao (2005), Dercon (2005) and Hoddinott and Quisumbing (2003) or a methodological review.

B 1.2: Appracs t assss rabt prca

in the higher inequality gures in Table 1.1).37 A urtherimplication o this clustering relates to the dicultyo achieving ne-tuned targeting in social protection

programs in India (see Chapter 8 or a discussion). Inact, as noted previously, poverty proles based oncommunity perceptions o what it means to be poor

typically incorporate notions o insecurity and risk. Thisqualitative work nds that variability o incomes andcoping with recurring shocks are a common eature,

especially among poor households.38 In addition, thisexposure to risk leads households to adopt ex-antecoping strategies that may mitigate risk but oten




imply lower returns, while ex-post coping mechanismscan oten have adverse long-term impacts, sometimesleading to poverty traps.

poverty and vulnerability are similar but distinct concepts. Households that are currently non-poor canbe vulnerable to the risk o alling into poverty as aresult o a crisis event. At the same time, poverty and

vulnerability can reinorce each other and poverty canbe a source o vulnerability.39 An application o the rstmethod described in Box 1.2 on earlier rounds o NSSdata or 1993/94 and 1999/2000 illustrates this point.40 This method denes vulnerability as the probabilityo uture poverty and estimates vulnerability as theprobability o being poor at least once in the nextthree years. As noted in Box 1.2, this method relies onseveral stringent assumptions on how shocks evolveover time and space. Several empirical studies haveadopted this methodology to assess vulnerability indeveloping countries.41 Evidence rom these studies

suggest that this methodology, though imperect, isuseul in predicting the ordering o groups with respectto vulnerability to poverty. This analysis is illustrativeo the patterns o vulnerability across socio-economicgroups in India in the 1990s.

in most cases, the profile of vulnerable households

mirrors that of poor households. For instance, SC/SThouseholds were ound to be among the poorest and themost vulnerable groups. There was, however, one notableexception. Households headed by widows or with oneor more widowed members were ound to be highly

vulnerable to poverty relative to other households, eventhough these households were not necessarily currentlypoorer. Widows represent about 6.5 percent o the totalemale population in India. Despite legal provisions,widows nd it dicult to inherit property, have limitedreedom to remarry, and are orced by social custom toreside in their husband’s village. They also receive littleeconomic support rom the community or extendedamily, except possibly in the orm o co-residence withan adult son. As a result, the common perception is thatwidow-headed households would tend to be poorerthan the general population. Empirically, however,

there is little evidence o widows being predominantlyin poor households in India (or only when economieso scale are incorporated).42 Participatory researchreveals that communities also consider widows asamong the most vulnerable groups. In act, most stategovernments have long-standing social assistanceprograms or widows (see Chapter 3 or a discussion).

a er srcs rabt

a range of factors contribute to household level

vulnerability, some of which are macro- and some more

household specific. Perennial sources o vulnerability,such as climatic conditions, natural disasters, poorpublic health environment and household-level shocks,continue to be critical to household welare. In recentdecades, new sources o vulnerability have also emergedwhich are both signicant in themselves and as actorswhich exacerbate perennial sources o household

and community vulnerability. While by no means acomprehensive list, some o these old and new sourceso vulnerability include:

Weakening traditional support networks

Declining common property resources

Natural disasters

Increasing stress on agriculture

High and rising indebtedness

Poor public health environment

Rising urbanization

Increasing casualization o the labor market

Financial, ood and uel crises

Mobile populations

traditional informal support networks are being

placed under strain in the face of factors such as

declining inter-generational co-residence. Severalstudies stress the inadequacies o amilial support orelderly.43 Similarly, there is some evidence that socialamily, kinship and community networks are understrain. Rising migration and urbanization put urther

39 Essentially,povertyistheexpostrealizationoastatewhilevulnerabilityistheexanteprobabilityoahouseholdbeinginthatstate.Whilepovertyisaunctionothemeanleveloconsumptionanditsdistribution,vulnerabilityisaunctionopovertyaswellastheinter-temporalvarianceinconsumption.

40 SeeDutta(2006)ordetails.

41 Seeorexample,Chaudhuri(2000)orChina,IndonesiaandPhilippines;delNinnoetal.(2006)orPakistan.

42 DrèzeandSen(2002),DrèzeandSrinivasan(1997).

43 Agarwal(1990)andPal(2004).




stress on such networks. There is also some evidenceo a decline in the traditional jajmani or patron-clientrelations (e.g. between the 1960s and early 1980s inRajasthan).

common resources are being lost as increased demand

for land led to the conversion of forests and natural

habitat into land used for agricultural, industrial

or urban use. This has costs with respect to the losso common property resources (CPRs), imbalances inthe local ecosystems, and low yields as such marginalland is usually not very productive. Several studieshave documented a decline in the access to CPR inrural areas, with the proportion o total geographicalarea under CPR declining between 1981 and 1991 in allstates, by between 4 and 32 percent.44 In addition, anestimated 41 percent o India’s orest cover has beendegraded to some degree in the past several decades.45 At the same time, inormal access rights to uncultivatedprivate land have also declined during this period in allstates primarily due to human and livestock populationpressure and increased demand or land.46 The eects o this decline and rising degradation o common propertyresources have disproportionate impacts on poorhouseholds with limited alternative resources, especiallytribal communities. The latter depend on orests orlivelihoods, seasonal subsistence and ood security,so that inringement o these traditional rights andinstitutions could substantially increase vulnerability.47

india is particularly prone to natural disasters.

Between 1990 and 2007, 249 natural disasters,leading to 102,313 deaths, were recorded in India. This accounted or 37 percent o all natural disasters(and 25 percent o deaths) in South Asia during thisperiod. The most common types o disasters in Indiaincludes oods, wind storms and epidemics o variouskinds. However, the highest death tolls are rom

earthquakes, waves/surges (such as the 2004 Tsunami)and wind storms. Historically, it was droughts and slowonset disasters like amines that caused the highestdeath tolls in the region (including in India). In recentdecades, however, it is these rapid onset disasters thatlead to large casualties.48 Recent research suggestsincreasing requency and intensity o natural disasterssuch as cyclones, oods and droughts. A common

response to such disasters is displacement and short-term migration. In addition, the strain on eco-system-dependent livelihoods, such as shing and subsistencearming, could contribute to long-term migration. This adverse impact is likely to be higher or poorcommunities, who tend to be located in relativelyhigh-risk areas rely on such livelihoods and also havelimited resources to cope with disasters.49

there is increasing stress on agriculture in the face of

rising seasonal climate variability, soil degradation,

depleting water table resources and breakdown in

traditional systems of water management. There isstill a high dependence o agricultural on rainall as onlyabout 40 percent o net sown area is irrigated.50 Risingland ragmentation, unpredictable supply o rain orirrigation water can increase the vulnerability o resource-constrained armers and the near landless.51 However,though irrigation acilities have reduced variability inthe annual growth rate o oodgrain output, there is arising problem o depleting ground water resources as62 percent o irrigated area comes rom this source.52 Falling water tables, in turn, orce armers to deepen

wells requently. This is a costly and oten unsuccessulexercise i the groundwater level is very low, therebypushing armers into long-term debt traps.53

there is high and rising indebtedness among rural

households. By 2002, more than a quarter o ruralhouseholds were in debt, increasing by our percentage

44 Chopra(2001).SeealsoJodha(1995)orRajasthan.

45 WorldBank(2005c).

46 Chopra(2001).

47 WorldBank(2011)andWorldBank(2005c).Jodha(1986)oundthattheshareoincomeromtheseresourcesaccountsorabout20percentototalannualincomeorpoorhouseholds(andonlyabout1-2percentornon-poorhouseholds)inRajasthanintheearly(1980s).

48 Heltberg(2007)usingEM-DATdata.

49 CIESIN(2009),IPCC(2007).

50 MSSRFandWFP(2004).

51 Brugereetal.(2003).Thereissomeevidenceogreaterinstabilityinood-grainsoutputinthepost-GreenRevolutionperiod.SeeRaoetal.(1988)andRamaswamietal.(2003)orareview.

52 Ramaswamietal.(2003).

53 SeeWorldBank(2006a).




points since 1991 even as the share o credit rominstitutional sources declined. As a result, the bulk o rural debt is rom non-institutional sources andlargely or household expenditure, particularly or poorhouseholds. Farmer households are even worse o, withnearly hal reporting indebtedness - over 80 percento these are marginal and small armers owning twohectares or less o land. In absolute numbers, ve states –

Andhra Pradesh (as high as 82 percent), Madhya Pradesh,Maharashtra, West Bengal and Uttar Pradesh - accountor hal the indebted armer households.54 Farmersuicides in some parts o these states (notably AP andMaharashtra) have been widely reported in recent years,bringing the underlying issues o indebtedness, agrariandistress and vulnerability to the ore.55 In response, thegovernment announced a armer debt waiver program(or institutional debt) in February 2008.

public health environment remains poor, implying

greater exposure to health risks. Despite signicant

improvements in recent years, improving access to basicamenities (including basic sanitation and adequatehousing) remains a challenge. For example, three-quarters o rural households reporting no toilet acilitieseven in 2005/06.56 Village-level surveys in our southernstates provide strong evidence o capture o sanitationservices along political and caste lines and a complete lack o awareness o the public health benets o sanitation.57 Urban areas are urther characterized by trac congestion,lack o green spaces and high levels o air and noisepollution. It is the urban poor who are primarily aected

as they are unable to aord good quality housing inbetter served and saer localities. As a result, vulnerabilityto health risks remains high. A national study nds thatsel-reported morbidity is lower among households thatuse clean uels (compared to biomass uels), have pipedindoor water and ush toilets. However, only 7 percento Indian homes have access to all three amenities whilenearly two-thirds do not have any o these.58

increased urbanization is likely to translate into

increasing pressure on basic amenities and services,

particularly for the urban poor. India’s urban populationis growing aster than the rural population, while ruraland urban poverty rates are converging. In 2001, about 28percent o India’s population resided in urban settlements. This is expected to reach around 40 percent by 2020, o which about one-third are likely to be slum-dwellers and

squatters.59 Low-income urban households oten citeactors such as insecurity o land tenure, inadequate orlack o shelter and poor access to amenities as signicantproblems. Potentially weaker social networks, especiallyin non-slum settings, may make it harder or urbanhouseholds to cope with shocks, insecurity and threato crime. The greater commercialization o goods andservices, implying a greater dependence on cash income,may urther exacerbate vulnerability. Across the world,growing urbanization has usually been accompaniedby rising deprivation in urban areas.60 As mentioned

earlier, Indian policy-makers have traditionally paid littleattention to urban poverty and vulnerability.

the labor market is becoming increasingly informal. In addition to the persisting dualism in the Indian labormarket (approximately 90 percent o the labor orce isemployed in the inormal labor market), recent trends havecontributed to increasing vulnerability at the household-level. These include rising contractual and part-timesubsidiary employment, slower wage growth and risinginequality during the last decade.61 Household incomes,particularly those o poor households, are closely linked

to the labor market. As a result, the nature o the work contract - with respect to regularity, security, benets andremuneration - would be expected to have signicantbearing on household vulnerability.62 In addition,severalstudies suggest that access to jobs, land and otherlivelihood opportunities are strongly inuenced bygender, caste, religion and neighborhood networks andare oten mediated through local power brokers.63

54 NSSO(2005a).

55 SeealsoDeshpande(2002).

56 InternationalInstituteopopulationsciences(IIPS)andMacroInternational(2007).

57 Banetal.(2008).

58 Desaietal.(2009).

59 Supritietal.(2002).

60 Haddadetal.(1999),Ravallion(2002).

61 SeeAhmedandNarain(2010),UnniandRaveendran(2007)andPais(2002)ordetailedanalysis.

62 SeeDrèzeetal.(1992)andPalandKynch(2000)orananalysisoragriculturalworkers.Similarly,Harrissetal.(1990)ndthat53percentohouseholdsdependentonirregularandunprotectedemploymentarepoorinurbanareas.

63 Seeorexample,Iversenetal.(2009),MunshiandRosenzweig(2006).




the world has recently witnessed a sequence of food,

fuel and financial crises. India has to some extentbeen relatively cushioned rom the impact o theseglobal crises, with the ood and uel crisis probablymore important in the Indian context. Growth declinedrom an annual peak o about 9.7 percent in 2006-07 to5.8 percent in the ourth quarter o 2008-09. The Indianeconomy stabilized airly quickly and growth has picked

up to 7.9 percent in the second quarter o 2009-10.64 However, the impact o these crises was elt intensely,at least in specic sectors and geographical areas. Thus,in India, job losses occurred primarily in the gems and jewellery, transport and the auto industry, textiles (to amore limited extent) and mining. Adjustment to suchshocks could take several orms: open unemployment,underemployment, sectoral shits in employment,declining wages and earnings, changes in labor orceparticipation, migration, and increased inormalization.For instance, anecdotal evidence indicates that workers

in mining and in ancillary jobs suered, leading toan increased dependence on the Mahatma GandhiNational Employment Guarantee Scheme (MGNREG)in some (mineral-rich) parts o Orissa.65 Both alling realwages and reallocation o labor are likely to come at ahigh social cost, especially as these crises are likely toaect groups that may not necessarily be poor and aretypically not covered by saety net programs.

migration and increasingly mobile populations: Over aquarter o Indians were migrants in the early 2000s, moreso in urban than rural areas.66 There has been a marginal

increase in the extent to which the Indian populationhas become more mobile over time (see Table 1.2). For men, the predominant reason or migration wasemployment – 30 percent o male migrants in rural and52 percent in urban areas migrated in search o work.In contrast, women tended to migrate or marriage orwhen the entire household moved. Among migrants,the overwhelming majority (61 percent) was intra-district migrants, with about a quarter migrating acrossdistricts and only 13 percent across states (again, thisgure was higher among urban migrants at 20 percent).

Inter-state migration was much higher in certain states(Punjab, Haryana and Maharashtra) than the nationalaverage. The largest exporters o rural migrants wereUttar Pradesh, Madhya Pradesh, Bihar, West Bengaland Maharashtra, while Andhra Pradesh, Maharashtraand Uttar Pradesh were the largest exporters o urbanmigrants. However, the bulk o migration is within ruralareas - only 5 percent o urban migrants are rom ruralareas. This relatively slow pace o rural-urban migrationsuggests that constraints to urban living could possiblybe serving as disincentives to this process.67

however, these figures are likely to understate the

extent of seasonal and circular migration. a growing

number of micro-studies have established that

seasonal migration for employment is growing both

in terms of absolute numbers but also in relation

to the size of the working population as a whole.68 The National Commission on Rural Labour (NCRL) putsthe number o circular migrants in rural areas alone ataround 10 million (including roughly 4.5 million inter-state migrants and 6 million intra-state migrants). These localized studies also highlight the importance

o earnings rom migration – ranging rom a sixth (inselected villages in Andhra Pradesh) to hal (in selectedvillages in Madhya Pradesh) to over 60 percent (in selectedvillages in Rajasthan) o the annual income o migranthouseholds.69 However, the quality o employment istypically poor as these seasonal migrants are usuallyengaged in casual work in agriculture, construction,urban inormal manuacturing and services.70

temporary migration for employment in rural areas is higher among poorer quintiles whereas the pattern

64 CSOstatistics(seehttp://mospi.nic.in/press_note_gdp_2ndqr_30nov09.pd).

65 Das(2009).

66 Theguresare27percent(asperNSS1999/2000)and31percent(asperthe2001Census)othenationalpopulation.

67 KozelandParker(2005).

68 Breman(1985,1996),Rao(1994),Rogalyetal.(2001),DeshingkarandStart(2003),Habereldetal.(1999).

69 DeshingkarandStart(2003),Habereldetal.(1999).

70 Dev(2002),basedontheNationalCommissiononRuralLabour(NCRL)study.

yar Rra urba

1983 20.9 31.6

1987/88 23.2 32.9

1993 22.8 30.7

1999/00 24.4 33.4

Tab 1.2: ida mrat rats %

Source: NSSO (2001).




is more diffused in urban areas.71. This suggests thatthe poorest may not migrate as a minimum level o material assets may be required to make the investmentor migration.72 There is considerable debate on thecontribution o rural-urban migration to urban poverty,based on the common perception that migration is thelast resort or the rural poor. This is certainly true or thosewho migrate as a result o “push” actors— escaping debt

traps, euds or oppressive patron-client relationships. These people are likely to be among the poorest andmost disadvantaged in urban areas. They are also likelyto drive down urban wages and thus increase urbanpoverty in the short run. However, there is anotherclass o migrants who are driven by the “pull” actorso more remunerative work or greater entrepreneurialopportunities. These migrants tend to be better o compared to the previous class and they oten maintainsocial and economic links with their villages that enablethem to cope with shocks better. These migrants can be

viewed as rational actors responding to better economicincentives and could contribute to poverty reduction.73

these perennial and emerging sources of vulnerability

remain critical for household welfare. Poorand nearly-poor households are likely to be morevulnerable to these actors, potentially resulting inimpoverishment.

b Prt dacs

though a substantial subset of rural households

remains chronically poor, there is considerable transition in and out of poverty in india.74. Theseestimates o chronic versus transient poverty vary widelydepending on the location, time period, number o years and sample size o the panel data. However, all

studies conrm the importance o poverty transitions.For instance, between 1975 and 1985, 88 percent o households in the ICRISAT villages experienced povertyin at least one year, even though only 22 percentconstituted the chronic poor.75 Since then, livingstandards in these villages have improved substantiallyso that 57 percent o households moved out o povertybetween 1984 and 2001, while only 3 percent ell into

poverty.76 Similarly, the larger NCAER ARIS/REDS panelo 250 villages indicates that 47 percent o householdsmoved out o poverty between 1970/71 and 1981/82while another 26 percent ell into poverty. Hal thehouseholds in the sample remained chronically poorduring this decade.77 These ndings are substantiatedby qualitative work across our states – Assam, AndhraPradesh, Uttar Pradesh and West Bengal.78

the factors associated with emerging from poverty are distinctly different from factors associated

with falling into poverty. Thus, actors such as

income diversication, inormation, aspiration andempowerment are seen as critical or escaping poverty.On the ipside, health shocks, social obligations andassociated indebtedness are the most commonly citedreasons or alling into poverty.

households that succeed in escaping poverty are

often characterized by a favorable initial resource base (with respect to assets, literacy, declining family

size) and a diversified portfolio of activities. Thoughdiversication o economic activity into non-agriculturalactivities might enable some households to escape rom

poverty, the majority o agricultural labor and cultivatorhouseholds may not have the skills, knowledge andresources to take advantage o such opportunitiesso that mobility out o agriculture remains low.79 Thechronic poor, on the other hand, stay poor largely as a

71 NSSO(2001).

72 DeshingkarandStart(2003).

73 DeHaan(1999),Loughheadetal.(2001),KozelandParker(2005).

74 Rigorousanalyticalworkontheseissuesislimitedbythelackopaneldatatotrackconsumptiondynamicsohouseholdsovertime.Asaresult,thisliteratureislargelylimitedtomicrostudiesandresearchbasedonavailablepaneldata.ThisincludestheextensiveliteratureonthesixICRISATvillagesinsemi-aridruralSouthIndiaoriginallybetween1974and1985andrecentlyrevisitedbetween2000-2004(seeorexampleBadianietal.2006a;GaihaandImai2004;WalkerandRyan1990)andtheNCAERARIS-REDSvillages(seeBhideandMehta2004;Gaiha1988)aswellasvillagestudies(seeJayaramanandLanjouw1999orareview).Morerecently,therehavealsobeenmicrostudiesbasedoncross-sectionaldatawithrecallquestions(seeorexampleKrishna(2004and2006).SeeMehtaandShah(2003)orareviewosomeothesestudies.

75 GaihaandDeolalikar(1993).

76 Badianietal.(2006a).

77 BhideandMehta(2004).SeeGaiha(1988)orsimilaranalysisoearlierroundsothepanel.

78 WorldBank(2008b).

79 Drèzeetal.(1992),PalandKynch(2000).




result o their low resource base (including no or badquality land owned, low levels o skills, high dependencyburden, illiteracy) and other structural actors (includingsocial exclusion). These are typically casual agriculturallaborers, small agricultural households, and scheduledcaste and tribe households. The chronic poor also havea strong subsistence orientation which in turn impliesthat they are likely to have lower risk bearing capacity

and are less inclined or able to undertake high-risk high-return activities that allow them to escape poverty. Thus,explicitly incorporating risk attitudes o households isan important step towards understanding the processesunderlying vulnerability to poverty.80

the single most important factor driving households

into poverty is the negative impact of shocks. Theseare chiey health and social obligations (e.g., marriagesand unerals) and severe crop shock, where the typicalhousehold response is greater indebtedness. Aggregateshocks such as drought (including both rainall andirrigation ailure) are also oten associated with entryinto poverty.81 Qualitative work using lie histories alsonds that coping with recurring shocks are a commoneature, especially among poor households.82 We turn tothe incidence o shocks and inormal coping mechanismadopted by households next.

c vrabt t scs83

A range o sources contribute to household levelvulnerability and can trigger shocks, some o them

covariate impacting entire communities and othersidiosyncratic impacting specic households. Uninsuredshocks are costly to households in terms o loss o income, asset depletion, or reduced consumption thatcan perpetuate poverty. In addition, the threat o theseadverse events could lead households to resort to optionsthat mitigate risk but at the cost o income gains. Thus,examining the role o shocks and the coping strategies

adopted by households is an important step towardsunderstanding the processes underlying vulnerability.

the incidence of shocks in rural india is high and

many households, even non-poor households, are

vulnerable to poverty as a result. Findings romsurveys in our states – Jharkhand, Karnataka, MadhyaPradesh and Orissa - indicate that between one- and

two-thirds o rural households report signicant crisisevents in recent years. Households in rural India arevulnerable to idiosyncratic shocks that impact particularhouseholds, such as ill health, death, loss o livestock,etc., as well as covariate shocks that impact the entirecommunity, such as natural calamities, epidemics, etc.84

health problems are the most frequent idiosyncratic

and natural calamities the most frequent covariate

shock affecting households. Other common covariateshocks include severe crop shock (arising rom a majorpest attack or bad seed quality) in all our states and

epidemics (human and livestock) or the three stateswhere this question was asked. Figure 1.5 presentsthe incidence o particular shocks across households.In addition, there is some evidence that even healthshocks may not necessarily be idiosyncratic - a smallstudy in rural Andhra Pradesh nds that 29 percent(4 percent) o households report health (death) shocksas covariate, suggesting a link between health risks andcommunity inrastructure. Similarly, the widespreadprevalence o malaria in Orissa could explain the actthat the incidence o idiosyncratic (health) shocks issimilar or poor and rich households.

unsurprisingly, poor households experience more

health shocks while richer households report

shocks arising from crop failures and livestock

epidemics. (see Table 1.3). In general, the incidence o

covariate shocks is much higher or the top quartile(i.e., the richest households). Only households withsome cultivable land are likely to be impacted by a

80 Forinstance,theMovingoutoPovertystudy(WorldBank2008b)emphasizestheroleoattitudestoriskandentrepreneurshipamongpoorhouseholdsthataresuccessulinrisingoutopoverty.

81 Badianietal.(2006b),WorldBank(2008b).82 See,orexample,Praxis(1999),JayaramanandLanjouw(1999),WorldBank(2008b),Krishna(2004,2006),Swaminathan(1995),KozelandParker(2005).

83 Thissectiondrawsonprimarilyontwobackgroundpapersorthisreport:Devetal.(2007)andBalachanderetal.(2009).Thesedrawontwohouseholdsurveys:the2006SocialProtectionSurvey(SPS)whichincludedruralareasoOrissa,MadhyaPradeshandKarnatakaandthe2005JharkhandLivingStandardsSurvey(JLSS).Thedearthopaneldataconstrainsanalysisotheroleoshocksinexplainingvulnerabilityatthehouseholdlevel.Instead,werelyoncross-sectionaldatatoexaminetheincidenceoshocks.

84 Shocksleadingtoconsumptionshortallscanbe categorizedonthebasiso theirleveloimpact,requencyand severity.See Dercon(2004)ora reviewotheliteratureonrisksacedbyruralhouseholdsindevelopingcountriesandthestrategiesusedbyhouseholdstocopewithconsumptionshortallscausedbyshocks.




Figure 1.5: Health problems and natural calamities are the most common shocks aecting households

Source: Dev et al. (2007) or the rst three states (2006 Social Protection Survey - SPS); Balachander et al. (2009) or Jharkhand (2005) Jharkhand LivingStandards Survey – JLSS).

Notes: 1. The data or Jharkhand is not strictly comparable or the other three states. The two surveys – JLSS and SPS – have dierences in recall periods(three years preceding the survey in JLSS compared to one year in SPS); list o shocks (e.g., JLSS does not include a separate question on human or livestock epidemics, but does include one on social obligations unlike SPS); and comparable inormation on household welare (SPS survey does not have householdconsumption or income inormation). 2. The gures in the graphs are the incidence o the particular shock in the state (i.e., not just among households thatreport a crisis event).

Health, 28

Death, 8Natural calamity, 39

Crop failure, 13

Epidemic, 11

Others, 3

Orissa

Health, 20

Death, 5

Natural calamity, 58

Crop failure, 17

Epidemic, 5

Others, 7

Madhya Pradesh

Health, 16

Death, 5

Natural calamity, 0

Crop failure, 7

Social obligations, 2

Others, 2

Jharkhand

Health, 19

Death, 7

Natural calamity, 38

Crop failure, 8

Epidemic, 5Others, 2

Karnataka

negative crop shock. These households are also likelyto be in higher quartiles. Landless households, on theother hand, will be in the bottom quartile and willexperience only the indirect eects o such shocksthrough changes in the demand or labor. In contrast,the incidence o idiosyncratic shocks (primarily healthshocks) is higher or the bottom quartile (i.e., the poorest

households), aecting them both directly throughout-o-pocket expenses and indirectly through loss o earnings. In the case o Orissa, the incidence o healthshocks is similar across quartiles, possibly due to higheroverall poverty and/or the widespread prevalence o malaria in the state.

Tab 1.3: h cdc scs a rrasds

karataamadaPrads orssa

q1 q4 q1 q4 q1 q4

Natural calamities 50 38 34 89 18 48

Crop ailure 3 18 1 30 2 21Health, death 42 23 31 17 35 37

Livestock epidemic 2 4 0 7 6 11

Other 3 3 8 6 2 2

Source: Dev et al. (2007). Notes: Households are grouped into quartiles onthe basis o their wealth ranking (as inormation on household consumptionor income is not available).




The above ndings are consistent with the literatureon sources o risk and shocks in India.85 These studiesnd that the incidence o shocks is high in rural India,the most common being health and natural disasters.Other signicant sources o shocks include loss o assets, crop ailure, loss o livelihoods (due to adversemarket conditions, environmental degradation, deatho livestock, etc.) and social obligations (including

marriages and unerals). While there is some evidencethat urban households ace similar sources o vulnerability,86 a signicant gap in our knowledgerelates to the household-level incidence o shocks inurban areas.

such shocks can have an overwhelmingly negative

impact on household welfare, often leading to

indebtedness and poverty. For instance, in the ICRISATvillages, crop ailures result in a higher proportion o households alling into poverty, while consecutive cropshocks may result in chronic poverty.87 Communities

also cite health shocks or chronic ill-health as one o the main reasons or becoming, and oten or staying,poor.88 Ill-health implies expenditure on treatment,potential loss o work and oten indebtedness. The poorin particular have little access to ormal insurance andinormal networks have only a limited ability to protecthouseholds against health risks. The coverage o healthinsurance in India, particularly among rural households,is extremely low with less than 3 percent o householdsreporting any orm o health insurance. Coverage isnegligible or the poorest at 0.4 percent compared to

7 percent o households in the richest quintile.89

As aresult, out-o-pocket private expenditure by householdsis estimated to be as high as 76 percent o total healthexpenditure.90 This out-o-pocket expenditure imposes

a considerable nancial burden on households andmay even push households into poverty. Estimates o the impoverishing eect o such expenditure in Indiarange rom an overall poverty increase o 3.5 percentto 6.6 percent in rural and 2.5 percent to 5 percent inurban areas (depending on the methodology andsurvey used).91 There is also some evidence that a largeportion o armer debt also tends to be or meeting social

obligations including marriages and ceremonies.92

d ira cp cass

a common coping strategy in response to shocks is

borrowing; but poor households cope somewhat

differently from better-off households. Besidesborrowing, other common responses include increasinghousehold labor supply (as in Karnataka and MadhyaPradesh), asset depletion (as in Jharkhand and Orissa),and reliance on amilial and other social networks

(as in Jharkhand), depending on the local context(see Table 1.4). For instance, the relatively low relianceon labor market adjustments in response to shocksin Jharkhand and Orissa could be a reection o therelative lack o employment opportunities comparedto Karnataka and Madhya Pradesh. However, poorhouseholds cope somewhat dierently with shocks.Where labor supply adjustment is a signicant copingstrategy, a greater proportion o households in thepoorest quartile respond to shocks by increasing theirlabor supply compared to the households in the richest

quartile (see Table 1.4). In contrast, richer householdstend to resort to borrowing or asset depletion.93 Similarly,ease o access to credit may inuence the extent to whichpoor households can use borrowing as a strategy.94 For

85 Thesestudiesaretypicallybasedonlocalizedsurveys.ForselectedstudiesinruralareasseeSubbaraoetal.(2007)or ruralBihar;GaihaandImai(2002)ortheICRISATvillages;Dufo(2005)andKrishna(2004)orRajasthan;Krishna(2006)orAndhraPradesh;WorldBank(2008b)orAndhraPradesh,Assam,UttarPradeshandWestBengal.

86 Amis(1997),Benjamin(2000)andSupritietal.(2002)orBangaloreandNoponen(1991)orChennai.

87 GaihaandImai(2004).

88 Seeorexample,WorldBank(2008b).

89 Ajwad(2006).Notethat thisestimateisor 2004/05beorethe introductiono theRashtriyaSwasthaBima Yojanaaimedat providingsubsidizedhealthinsurancetothepoor.SeeChapter5oradiscussion.

90 ReportedbyBermanet al.(orthcoming)usingWHO2008statistics.Seealso GovernmentoIndia2005.Inact,healthexpenditureconstitutesabout6 percentopercapitahouseholdexpenditure,butislikelytobehighlyvariableandlumpy(especiallyincaseosurgery).SeeBermanetal.(orthcoming)orananalysisohealthexpenditureusingNSSdata.

91 SeeGargandKaran(2008),Gupta(2009)andBermanetal.(orthcoming).


93 Similarly,inBihar,inadditiontothecopingmechanismsnotedabove,migrationisalsoanimportantstrategy,especiallyorpoorhouseholds(14percentothebottomquintileasopposedto7percentothetopquintile)(Sen,2008).

94 BhandariandShresth(2003)alsondthattheurbanpoorrelychiefyonborrowingtocopewithhealthexpenditures,whiletheurbanrichrelyonpastsavings.




instance, in states like Karnataka and Orissa that havea strong presence o sel-help groups, households inthe poorest and richest quartiles are equally reliant onborrowing. In Jharkhand and Madhya Pradesh, however,a greater proportion o households in the richest quartileresort to borrowing. A large proportion o householdsreport no particular coping mechanism. One possible

explanation, at least or Jharkhand, is that this entailscutting back on consumption (as these households alsoreport no nancial cost incurred due to the shock).95

the most common coping strategy in response to

health shocks is reliance on social networks or

borrowing, while the most common response to crop

failure is to adjust labor supply. Dierences in thecost implications o these dierent types o shocks maybe part o the reason or the dierences in the strategyadopted. Small localized studies suggest that healthshocks are requent but relative low cost compared to

shocks to livelihoods (such as crop ailure). As a result,social networks o riends and relatives may be able tohelp one another with low-cost shocks but may not beable to cope with high-cost shocks or with covariateshocks that impact the entire group. Similarly, borrowingmay not be easible as the single coping strategy whenthe cost implications o a shock are high.

though the evidence presented here is based on data

from four states, these findings are consistent with

those of other studies in different parts of india,

giving us some confidence that the broad patterns

outlined here might be more widely applicable. These

ndings are also consistent with the literature on risk coping mechanisms in developing countries.96 Ex-antecoping mechanisms intended to reduce exposureto risk include diversication o income sources andadoption o low-risk (though potentially low-return)activities. The most common ex-post mechanismsto cope with shocks and smooth consumption arethe ollowing: (a) indebtedness oten at high-interestrates; (b) asset depletion in the orm o spendingrom savings, reducing grain stocks, selling livestock,land and/or jewelry; (c) labor market adjustment byincreasing number o hours worked and/or increasedparticipation by women and children; and (d) supportrom amily and/or community networks.

there is some evidence that such informal coping mechanisms are unlikely to provide adequate protection. There is some evidence rom the ICRISATstudies that consumption adjusts to income uctuationsindicating a less than perect insurance unction,especially among the poor and landless.97 Thesemechanisms provide some measure o insurance, mainlyin the ace o idiosyncratic shocks. However, with thepossible exception o high-interest debt, these strategiesare likely to break down in the ace o covariate shocks.Additionally, there are possible additional long-termadverse implications o these strategies, e.g., withdrawalo children rom education.98 Rising indebtedness inrural areas is a signicant source o vulnerability amonghouseholds, especially among marginal and smallarmers. As much o the debt incurred is or unproductive

purposes (health, household expenditure and social

95 SeealsoBehrmanandDeolalikar(1990).

96 SeeDercon(2004)orasurveyocommonriskcopingmechanismsadoptedbyhouseholdsindevelopingcountries,andRamaswamietal.(2003)orreviewotheliteratureonIndiadrawingonICRISATandotherlocalizedsurveys.SeealsoDufo(2005);Krishna(2004,2006)ormorerecentstudies.

97 SeeMorduch(1999,2004);RavallionandChauduri(1997),andTownsend(1994).SeealsoDercon(2002).

98 JacobyandSkouas(1998),Kochar(1995).

Tab 1.4: T pr cp drt t scs ta t rc

Jarad karataa mada Prads orssa

A q1 q4 A q1 q4 A q1 q4 A q1 q4

Debt 27 18 22 34 33 35 17 13 25 25 27 26

Family support 35 34 36 3 4 0 5 3 4 9 11 8

Asset depletion 20 23 22 4 3 5 7 0 10 10 4 10

Labor adjustment 2 5 2 30 32 24 36 45 28 8 14 5

Other 6 7 7 5 2 13 12 21 7 12 6 15None 11 13 11 25 26 23 23 18 27 36 38 36

See sources and notes to Figure 1.5.




obligations among others) and is rom non-institutionalsources with very high rates o interest, it is likely to beunsustainable.99 As a result, even transitory shocks canhave permanent eects (sometimes leading to povertytraps), especially i coping mechanism are inadequate.

C. imPliCATionS FoR SoCiAl

PRoTeCTion PoliCy

the trends in poverty, inequality and vulnerability

reviewed in this chapter have significant implications

for social protection (sp) policies and programs. Tothe extent that SP policies and spending are responsiveto this evolution, this analysis gives rise to some criticaldebates about potential trade-os in policy making,including the ollowing:

what is the appropriate mix of sp policies and programs? The analysis in this chapter indicates that while povertyhas allen steadily, deprivation along other dimensionsand as perceived by communities remains high,particularly among certain groups. At the same time,households are increasingly vulnerable to the danger o alling into poverty. This indicates a need or a debateon the appropriate mix o SP policies and programs thatcould address these perennial and emerging concerns. Three issues emerge as signicant:

The primary unction or SP policy and programscontinues to be poverty mitigation or thechronically poor. A key concern would be to

improve design and/or implementation o existingprograms to reach particularly excluded groups.

An increased emphasis on SP policies andinterventions that promote exante managemento household risk would also be expected. Thiswould typically imply an increased emphasison insurance-based interventions. In particular,given the especially high importance o healthshocks as a source o vulnerability or the pooresthouseholds, eorts to assist the poor in managingthese shocks would be desirable.

The aggregate shit rom ood decit to oodsurplus, and the extension o reliable ood marketsinto many more parts o the country over time,combined with increased household spending

needs or health, education and other services,one would expect that the relative balancebetween ood and cash in SP interventions wouldshit in avor o the latter.

In addition, progress on some key humandevelopment outcomes, particularly nutrition, hasbeen poor. At the same time, there is a signicant

share o spending on SP interventions. This begsthe obvious question on whether India is usingthis spending as eectively as it could to leveragebetter human development outcomes in the waythat developing countries internationally and inthe region have done in recent years.

what is the appropriate role of states versus the centre

with respect to sp policy and delivery? There remain wideinter-state disparities with respect to poverty and humandevelopment indicators. Poverty remains concentratedin the northern and central states – 61 percent o India’s

rural poor were accounted or by (undivided) Bihar,(undivided) Madhya Pradesh, Orissa and (undivided)Uttar Pradesh. The human development index in thesestates is also lower than other regions in the country.As a result, there is an increasing divergence o state-level needs, arising due to dierences in demographics,poverty incidence, vulnerability and other actors, as wellas dierences in institutions and capacities. However,there remains a dissonance between the continuedcentralization o unding and (on paper, and, to a morelimited extent, in practice)decentralization to district andgram panchayat levels that has occurred in recent years.

At the same time, this very diversity o endowmentsand outcomes would seem to strengthen the case orcentral nancing rom an equity perspective. Theseissues suggest greater exibility would be expected inthe policy/spending mix and program design eaturesavailable to states under centrally-sponsored socialprotection programs (see Chapter 6 or a discussion onnancing and institutions, including the relative role o states in SP policy and delivery).

what does this mean for targeting of resources?

The halving in absolute poverty rates since the 1970simply a shit rom SP policies which are untargetedto policies and programs which attempt to ocusspending more on the still-signicant share who remainin absolute poverty. At the same time, there is a high

99 NSSO(2005b),Dufo(2005).




number o the “near poor” and vulnerable households,with considerable churning around the poverty line. This suggests a re-examination o the basic rationaleor targeting, particularly with respect to geographicallocation o resources. In general, poverty estimatesat the state level (through NSS poverty estimates) andsub-state level (through the primary administrativehousehold targeting tool – the Below Poverty Line or

BPL census) are used or scal allocation o resourcesacross and within states. The basic principle is to increasethe concentration o anti-poverty spending in thosestates and regions which have allen urther behind interms o poverty reduction. The question is whetherthis purpose could be better served through othermeans. For instance, improved scal allocations couldpotentially be achieved through improved systemsor more ne-tuned geographic targeting that takeinto account dierences in endowments andopportunities across and within states.100 However, it

is not clear what the political economy ramicationswould be on such potential over-concentration o anti-poverty spending combined with historically lowexecution in some o the lagging states in terms o unds utilization.

Similarly, the identication o households thatqualiy as beneciaries o various SP programscould be achieved through various targeting tools.International experience suggests a mix o targetingtools, most commonly in combination with some ormo geographic targeting, is most eective at targeting

households. However, this is not a straightorwardexercise or India given the clustering o householdsaround the poverty line and the similarity in variouscharacteristics o poor and near poor households.However, there is sucient diversity o experienceacross states and it would be useul to draw onthe lessons learnt rom this range o experienceo identiying poor households or areas throughalternative methods. Not all methods would be equallyrelevant across states (or instance, community-basedmethods may not be appropriate in highly ragmentedcommunities). Another important consideration isto examine options or building dynamism into thetargeting system. This is necessary both or conceptualand practical reasons. Conceptually, households may

move out o or all into poverty in the period betweenany orm o identication exercise (e.g., the BPLcensuses). Practically, there is a problem o databasemanagement when updating is decentralized with noprovision or eeding into a centralized database o the updated list. See Chapter 8 or a discussion o thecomplexities and challenges o targeting in India.

what are the emerging areas for sp intervention? The analysis also highlights several areas that do notcurrently have a signicant place in India’s SP systembut are increasingly demanding greater interventionsin light o India’s changing economic conditions. Manycountries have aced or are acing similar challengeswith respect to urbanizing and increasingly mobilepopulations.

A gradual increase in programs and spendingtargeted to the poor and vulnerable in urban

areas, particularly small and medium towns,couldbeexpectedtoincreaseovertimeasIndia

urbanizes. The urban context suggests thatit is not sucient to simply transplant ruralinstitutions and policies or eective servicedelivery in urban areas. Instead, given the specicchallenges and opportunities, a general themeo urban development should be to address howpublic programs can leverage poor householdsin accessing opportunities or livelihoods andhuman capital acquisition.

The increase in long duration migration ratessince the 1980s combined with a continued

reliance on seasonal migration as coping orlivelihood strategies or households suggests

the need or a signicant departure rom thecurrent SP system. Essentially, even thoughpeople are becoming increasingly mobile, theSP system as it currently stands is designed ora static population. In the destination villagesor cities, migrants typically remain without anidentity and hence are unable to draw on theirentitlements or SP programs or to claim stateresources or education, health care, water andsanitation and other basic services. A criticalchallenge or SP policy is to design programs thatoer portable benets and can cater eectivelyto this increasingly mobile population.

100 Therecentlyproposedmethodologyorthe2009BPLcensusbytheSaxenaCommitteeposesasimilarquestionbyindicatingthatnearlyallhouseholdsindistrictswith80percentormoreothepopulationbelowthepovertywouldbeconsideredpoor(seeChapter8oradetaileddiscussion).




the following chapters assess the current status and trends in the indian sp system to explore the extent to which it is effectively responding to the challenges presented in this chapter. The rest o this reportexplores more ully some o these policy trade-ospaying particular attention to scal constraints, politicaleconomy considerations, administrative and capacityconstraints. The objective is to assess the most binding

constraints and examine the experience o deliveringSP programs to derive lessons on striking these trade-os most eciently and equitably. Naturally, everypublic SP system has inertia and political economychallenges in reorm. India is no exception, and indeedthe political economy o reorm in the Indian SP systemis considerably more challenging than most.

the subsequent chapters find that certain elements of the reform needs outlined above have happened or are in the process of happening. These include,or example, the move to targeting o the Public

Distribution System, the largest single SP program; an

increased ocus on backward districts in anti-povertyand area development programs; a partial but notablerecent shit in the spending mix towards cash benets;and a sustained drive to provide subsidized healthinsurance to the poor. However, some o the corechallenges remain to be met and policy developmentto this end is at best just beginning and in some casesunder-developed. These include, or example, the needor new urban SP interventions; the need to urtherexpand insurance-based interventions or the poor; thedesirability o making centrally-sponsored anti-povertyspending more exible and responsive to increasinglydiverse needs o dierent states and social groups;and the requirement or eective targeting tool(s) atthe household level. Many countries have aced or areacing similar policy issues and challenges as India. Inthis context, the lessons o other countries in dealingwith some o the trade-os described above may beinormative, as would lessons within India rom well-

perorming to lagging states.



C HA P T

E R

2The Social Protection Policy and Program Mix



CHAPTER-2: The Social Protection Policy and Program Mix 2

india has a vast array of anti-poverty programs

which have been subject to periodic – and only

partly successful – efforts at consolidation and/

or convergence. There are hundreds o anti-povertyprograms in India, both Centrally Sponsored Schemes,and state-specic programs.101 Dening precisely where“area development programs” ends and “anti-povertyprograms” start is not a science. This report thereoreocuses on what can be considered the core anti-povertyor social protection programs which operate nationally.While state-specic programs are oten signicant inspending terms, they are typically less important inlagging states, and in other cases supplement centralschemes by expanding coverage with state resources.

centrally sponsored schemes (css) dominate the

social protection program mix, particularly in a

Chapter–2

The Social Protection Policy and Program Mix

number of poorer states, where css are often the only

sp schemes of any significance. With the exception o PDS, a number o the core SP programs had their originsas central schemes in the 1970s.102 The momentum ormajor expansion o schemes and spending came romconcern about spreading the benets o the GreenRevolution, an issue taken up by Mrs. Gandhi underthe slogan o Garibi Hatao (eliminate poverty). Whilethe names and some design elements o schemes havechanged since the 1970s, the key elements o the mainSP programs have not changed dramatically, thoughsome new national programs such as midday meals andsocial pensions, have added to the policy mix.103

on the face of it, the policy mix in social protection

is impressive for a developing country. “On the books”,

there is an impressive mix o SP programs which includes101 CSShavebeensubjecttoperiodicexpansionandconsolidation,increasingrom65in1969to190in1978-79,beorebeingreducedto75in1980andincreasing

againto201by1985.DuringtheNinthPlanperiod,thisroseto360,beoreallingagainby2005tojustover200(seeSaxena2006preparedasabackground papertothisreport).

102ThoughpublicworksinIndiadatebacktothe12thcenturyromleaderslikeSherShahSuri,andwereusedinthe19thcenturyunderaminereliecodes,theycontinuetobesignicantsourceospendingparticularlyindrought-pronestates.

103 SeeSaxena(2006)ontheevolutionoRuralDevelopmentanti-povertyprograms(APPs)sincethe1970s.




traditional welare/social assistance interventionswhich support ex post poverty mitigation (e.g., PDS;social pensions), those which seek to mitigate risks orhouseholds ex ante (e.g., social insurance), those whichtry to promote movement out o poverty in the shortand long runs (e.g., SGSY and school stipends), andhybrid tools (public works). The main SP schemes dealtwith in this report are outlined in Table 2.1.104

looking at the policy mix across major programs in

light of their objectives and spending rank (table 2.2), it

is clear that the sp system remains largely focused on

programs which deal ex post with poverty mitigation,

and on rural areas. While a primary ocus on ex postcoping interventions is understandable, the policy mixo the SP system has only recently begun to respond tothe evolution o living standards and needs in directionsthat might have been expected. There are three areaswhere the evolution o SP programs and spending hasbeen less and/or later than one might have expectedin the ace o signicant poverty reduction and gradualurbanization. They are:

insurance-based interventions remain in their

inancyintermsocoverageintheunorganized

sector,thoughtheRSBYprogramisasignicant

104 TheterminologyorcategorizationoprogramsollowslargelytheSocialRiskManagement(SRM)ramework:i.e.,riskmanagementstrategiesthatmitigatetheimpactoashock,reducethechancesoashockoccurringandhelpcopewiththeimpact(seeHolzmannandJorgensen,2000).TheSRMcategorizationisquiteclosetocategorizationwidelyusedinIndia.Theconceptso“promotional”and“protective”eectsonlivelihoodsstemromDrèzeandSen(1989).Guhan(1994)addsathirdconcept,“preventative”.Whileotenblurredinpractice,thesetermshavedistinctanalyticaleatures:“promotional”measuresaimtoimproverealincomes;“preventative”measuresseektoavertdeprivation;and“protective”measuresproviderelieagainstdeprivationtotheextentthattheothertwosetsomeasuresailtodoso.SeealsoGentilini(2005)oradiscussionotheseconcepts.

Tab 2.1: majr ctra sca prtct scs, 2009

Sc Tp Dscrpt

Public Distribution System (PDS) Subsidized ood and uel distribution Subsidized wheat and rice, plus kerosene and sugar in moststates. Level o subsidy varies according to whether APL, BPL,AAY or Annapurna household (see Chapter 3).

Mahatma Gandhi NationalRural Employment Guarantee(MGNREG) and SGRY

Sel-targeted public works Unskilled and low skill public works. MGNREG guarantees 100days employment per rural HH per year in all districts. SGRYhad aimed or 100 (non-guaranteed) days in rural districts,with a cash and ood component. Ater 2006 SGRY was limitedto non-MGNREG districts, but was discontinued in 2008 (seeChapter 4).

Swarnajayanti Gram SwarozgarYojana (SGSY)

Targeted credit scheme or groups andsome individuals

Subsidized lending rom banks to groups o BPL people, withallowance or some individual lending, and small APL share ingroups (see Chapter 4).

Indira Gandhi National Old AgePension Scheme (IGNOAPS)

Non-contributory social pensions Monthly cash benets or BPL elderly (originally called NOAPSuntil renaming and expansion in 2007), and state schemes orwidows and disabled people (since 2007 also included in thecentral program) (see Chapter 3).

Indira Awaas Yojana (IAY ) Targeted rural housing Subsidies or rural BPL with inadequate housing or housingconstruction (see Chapter 3).

Midday meals School eeding program Hot meal or children in grades 1-8 in government and aidedschools (see Chapter 4).

Rashtriya Swasthiya BimaYojana (RSBY)

Subsidized health insurance Subsidized health insurance or hospitalization or BPLhouseholds in selected districts, rolling out to nationalcoverage by 2013 (see Chapter 5).

Aam Admi Bima Yojana (AABY) Lie/disability/accident insurance orBPL

Free insurance covers natural death, disability and accidentor rural landless households (see Chapter 5).

Other social insurance orunorganized workers

Subsidized social insurance Variable by state, though central welare unds or selectsectors (e.g. beedi workers) (see Chapter 5).

Specic urban anti-povertyprograms

Targeted urban housing (VAMBAY) andemployment programs or the poor

(SJSRY), now merged under JNNURM

Housing construction and upgradation or slum dwellers,and wage and sel-employment programs or unemployed or

underemployed urban poor (see Chapter 3).



CHAPTER-2: The Social Protection Policy and Program Mix 2

Tab 2.2: majr SP prras b bjcts ad spd ra

Prra e pst rs cp e at rs tat Prta Spd ra

PDS ** * 1

MGNREG + SGRY ** * 2

SGSY *** 6

IAY *** 4

Social pensions *** 5

Midday meal * * * 3RSBY *** 8

AABY *** 7

Soc. insurance unorganized ** * 9

Urban poverty programs ** * 10

Source: Bank sta estimates and Government o India budget documents, 2008/09 (revised estimate)

positivestepinthisregardandnewlegislationin

2008commitstourtherexpansionocoverage.105

The ex ante mitigation arm o the policy mix

is thereore weak. Expanding inormal sectorcoverage o social insurance is a major challengein many developing countries, and one that Indiahas had relatively limited success with until veryrecently, despite a series o central and state-specic schemes.106 Given the increased socialimportance o vulnerability in recent decades,it would be reasonable to expect signicantlygreater attention to ex ante mitigation policiesover time.

promotional interventions in the public sector

continue to receive relatively little emphasis,

particularly given the continuing challenges in

improving human capital outcomes. Overall,saety nets in India remain primarily “nets”rather than “ropes” or “ladders” which seek topromote sustained movement out o poverty.107 While designed with such an objective, SGSYand predecessors such as the Integrated RuralDevelopment Program (IRDP) have generallybeen one o the weaker perorming SP programs,and attract limited resources. The most importantinitiative in this area is the major expansion o midday meals in the early 2000s, the impacts

o which suggest signicant under-exploitedpotential or promotional/demand side SPinterventions. Unlike social security or the

inormal sector, this is an area where an increasingnumber o developing countries – including inthe South Asia region – have had successes inpromotional interventions which contribute to

human capital development through conditionalcash transers (CCTs).

otherthanPDS,SPinterventionsinurbanareas

are negligible and even more strongly biased

towardsexpostriskcoping. Given the increasingimportance o vulnerability in urban areas, thisraises questions about the appropriateness o the current policy mix in urban areas. In resourceterms, Table 2.2 indicates that the situation hasnot changed dramatically rom the period o Lakdawala report in 1993, which ound a rural tourban poverty ratio o 3.5:1, but a rural to urbananti-poverty scheme spending ratio o 35:1. Whileit is not suggested that an appropriate ratio wouldbe parity, the dierences are nonetheless stark.

another important aspect of the sp policy mix is the

balance between food-based and cash interventions.

Food remains a very important element o SP programsin India, with the PDS still the single largest program,and the sharp recent increase in midday meal spending(see below). In addition, up to 75 percent o SGRYcompensation to workers could be in ood (and the

estimate or this alone was`

6,750 crore in 2008/09),and smaller programs such as Annapurna are also ood-based. An important countervailing shit in recent years

105 SeeChapter5.TherelevantlegislationisTheUnorganizedWorkers’SocialSecurityAct,2008.

106 SeeO’KeeeandPalacios(2006)orshortreviewodevelopingcountryexperiencewithexpansion.

107 SeePritchettetal.(2002)andDFIDontheterminologicalandpracticaldistinctions.




is the policy reorm rom SGRY to MGNREG, which reliesentirely on cash or wage payment to participants, andthe introduction and likely uture expansion o RSBY.Overall, however, the share o ood in total SP spendingremains high by international standards, and more sowhen one takes account o state level supplements onthe central subsidy and coverage o distribution costs.With the 2009 proposals or Right to Food legislation,

the spending share on ood could increase urther.

the debate in india on the relative merits of food

versus cash in safety net programs is at times intense,

with a strong emphasis on direct food security as

a key objective (rather than indirect food security

through increasing household incomes). This is animportant debate, but one on which hard evidenceor India is almost absent on the relative impacts onhousehold welare and ood security o ood versuscash.108 Despite this, the issue is assuming greaterprole with the commitment o the Government to a

Right to Food Act, which would enshrine in legislationvarious commitments on ood and nutrition programs,including PDS. Evidence on relative program targetingand leakage perormance in the ollowing chapterssuggests that – whatever the in-principle merits o oodversus cash – India has struggled to operate its ood-based programs in a suciently ecient and transparent

manner to realize the possible nutritional benets o ood programs. Equally, international evidence indicatesthat most developing countries have transitioned awayrom a strong emphasis on ood in their saety nets asthey reach lower-middle income levels.

the last several years have seen several positive

developments in terms of evolution towards a policy

mix in sp interventions which better matches socio-economic developments, and is somewhat closer to

what one would expect in a lower-middle income

country. At the same time, it remains unclear what willbe the impact o a Right to Food Act on this evolution. The key trends include (see Chapter 6 on nancing ordetails): (i) substantial increases in most SP programsin recent years, with an overall increase in terms o share o total central government spending; (ii) a realreduction in the mid-2000s and then a sharp increase inspending on PDS in response to the ood and uel crisis;(iii) a sharp increase in midday meal spending (which is

a step in leveraging improved human capital outcomesrom SP interventions), and (iv) massive expansion o public works through MGNREG. While the initiativesto expand social security coverage or unorganizedsector workers are in their early days in terms o expenditure levels, they would be expected to grownotably as RSBY is rolled-out nationally in coming years.

108AnimportantstudywhichshouldshedlightonthisquestionisunderwaybyateamoIndianresearcherswithundingromtheAustraliangovernment.ThestudyseekstocomparetheeecsoPDSwiththecash-basedMGNREGonhouseholdnutritionaswellasotheraspectsotheprogramsinthreestatesoIndia.SeeJhaet.al.(2010)andGaihaet.al.(2010).



C HA P T

E R

3Protective Programs



CHAPTER-3: Protective Programs

this chapter looks in detail at the design and

implementation of protective social protection

programs and suggests a range of reforms which

would be desirable for india’s poor. The programs

covered include, the Public Distribution System (PDS),social pensions or elderly, widows and disabled people,and rural and urban housing schemes (Indira Awaas Yojanaand Valmiki Ambedkar Awas Yojana respectively) or thepoor. Overall, the need or reorm appears to be mostacute in the PDS, but more in the nature o incrementalimprovements or social pensions. For targeted housingprograms, in particular urban housing programs, theoptions within the current paradigm are more in thenature o incremental reorms, but market-basedinnovations in models o low cost housing or the urbanpoor suggest that experimentation with new paradigms

would be well worth considering. The recommendationsor individual programs are discussed in Section C.

the following sections look at program participation

and its determinants, targeting, and benefit incidence

for major protective sp programs, across states as

well as major wealth and caste groupings. These are

classic social assistance programs that include PublicDistribution System (PDS), social pensions, and IndiraAwaas Yojana (IAY). In addition, it discusses operationaleatures which may be contributing to the observedoutcomes or several programs.

A. PuBliC DiSTRiBuTion SySTem

(PDS) AnD AnTyoDAyA AnnA

yoJAnA (AAy)109

the public distribution system has been subject to significant policy changes over the past 15 years,

Chapter–3

Protective Programs

109Thissectiondrawslargelyon twobackgroundpapers:(i)Ajwad(2006),whichusesHumanDevelopmentProleo Indiasurveydataor2004/05(seeAnnex

1 ordetails);and (ii) Umali-Deininger andDeininger(2006),whichusesNational Sample Survey (NSS) data, togetherwithupdatesrom2004-05NSS 61st

round)databyC.Ravi.ItalsodrawsromtheextensiveliteratureonthePDSbyIndianresearchers,includingRadhakrishnaandSubbarao(1997),Duttaand

Ramaswami(2001),SwaminathanandMisra(2001),Devetal.(2004),JhaandSrinivasan(2001),aswellasthePlanningCommission2005.




B 3.1: Pc t t PDS

The pre-reorm PDS which was in operation till 1992, was criticized or its ailure to eectively reach the poor, urban bias, substantialleakages, poor quality o grain supplied due to decient inventory management and relaxed specication or procurement, lack o transparent and accountable delivery systems as well as negligible coverage and low o-take in states with high concentration o poordue to non-availability o stock. In 1992, GoI introduced the Revamped PDS (RPDS), which ocused on giving higher subsidies primarilyto drought prone, tribal, hilly and remote areas. Despite this, it is estimated that leakages at the national level during 1997-98 amountedto 31 percent or rice and 36 percent or wheata. The RPDS was replaced in mid-1997 by the Targeted PDS (TPDS), which used householdpoverty rather than location as the basis or targeting.

The PDS is the largest saety net program in India (and indeed the world in terms o population covered), and operates by providinga price subsidy to consumers or essential commodities. The most important o these are rice and wheat.b TPDS supplies thesecommodities at prices below the Food Corporations o India’s (FCI) “economic cost”, which equals the sum o FCI’s procurement, storage,and distribution costs. FCI is the implementing arm o the Government o India’s ood grain policy. TPDS has a 2-tiered pricing structureor Below Poverty line (BPL) and Above Poverty Line (APL) households.

In addition, GoI introduced the Antyodaya Anna Yojana (AAY) in December 2000, as a sub-scheme to benet the poorest o the poor.AAY provides a larger price subsidy that received by BPL households. Each AAY household was made eligible or 25 kg o ood grain permonth at a Common Issue Price (CIP) o ` 2 per kg or wheat and ` 3 per kg or rice. In April 2002, the AAY and BPL household ood grainallocation was increased to 35 kg per month. The AAY scheme has since been expanded to cover BPL households headed by widows orterminally ill, disabled or elderly with no assured means o support (2003-04) and all households at risk o hunger (2004-05). The totalnumber o households identied under AAY was 243 lakhs in 2009. The total number o BPL households earmarked or PDS coverageis 652 lakhs – though several states cover a signicantly higher number than the centrally determined number o BPL households. Atinception, TPDS targeted the price subsidy exclusively to the poor, though this was later adjusted to provide a small subsidy to APLhouseholds. The allocation o rice and wheat stocks to APL households is linked to average otake gures o previous years.

The shit to the TPDS was a signicant milestone in GoI’s ood security and social protection strategies. TPDS is operated under the joint responsibility o Central and State Governments. The Central Government is responsible or procurement, storage, transportationand bulk allocation o ood grains, while state governments are responsible or distribution to consumers through the network o FairPrice Shops (FPS), numbering nearly 500,000 nationally. Operational responsibilities including allocation within the State, identicationo amilies below poverty line, issue o ration cards, supervision and monitoring the unctioning o FPS, rest with the State Governments.Under TPDS, the states were requested to issue ood-grains at a dierence o not more than 50 paise per kg over and above the CentralIssue Price (CIP) or BPL amilies. The CIP is the price at which TPDS ood grains are issued or “sold” to state governments. More recently,however, States have been given exibility in xing the retail issue price or TPDS ood grains, except or AAY.

The evolution o PDS is set to take a major turn with the proposed Food Security Bill. In the 2009 electoral campaign, Congress committedto right to ood legislation, promising 25 kg o rice or wheat per month to all BPL households at` 3 per kg, as well as subsidized communitykitchens in all cities or homeless people and migrants. The main eatures o the Concept Note posted by the Ministry o Consumer Aairsin July 2009 or consultation are:

the number o BPL amilies is based on poverty gures o the Planning Commission. While currently based on the 1993-94 poverty

estimates, there are discussions or it to be based on 2004-05 estimates.the note acknowledges that there are state specic variations in the number o BPL ration cards issued, variations in issue priceas well that in entitlements (in quantity and commodities) provided. It states that this variation should be eliminated and thereshould be a central order that should bind the states in the above issues.

it proposes that there should be no sub-categorization o the BPL households into the AAY households.

other schemes such as Annapurna, schemes or welare institutions and hostels etc. may not be continued separately to avoidmultiplicity. TPDS will cover beneciaries o these programs using BPL cards.

moving from a universal entitlement scheme, first

to a geographically targeted supplemental subsidy,

and since 1997 to a targeted approach based on

household welfare levels that is independent of

location. Major developments in the evolution o PDSin the past 15 years, and key eatures o the TargetedPublic Distribution System (TPDS) are outlined inBox 3.1. The evolution is set to take another turn with thecommitment o the new Government to a Food SecurityAct intended to enshrine in law as the right to ood

which was a key plank o Congress’s electoral maniesto. The key eatures o the current drat legislation are alsooutlined in Box 3.1, together with some o the civilsociety views on the consultation drat.

a Accss t PDS – rat card d

In relevance to the importance o Below Poverty Line(BPL) cards or PDS participation, and or beneciaryidentication in several programs which are BPL




110 SeeSaxena(2006)orstate-wisedataasolate2005onstateidenticationoAAYrelativetoquota.

111 ThismoredetailedanalysisbyurbanandruralareasisinAjwad(2006).

targeted, Table 3.1 presents ndings on ration cardpossession. These ndings are complemented by moredetailed distributional analysis o ration card holdingsin Chapter 8 on targeting o social protection programs.

Several observations emerge:

states having among the highest poverty rates

arealsothosewiththehighestratesonoration

card,with more than one third o households inJharkhand not having cards, a third o householdsin Chhattisgarh, and around 30 percent o households in Bihar.

possession o BPL/AAY cards across states also

showsa clearpatternin termso lagging states

reporting BPL/AAY card rateswhich are inmost

casesbelowtheirpovertyrates,andricherstates

havingrateswellabovetheirpovertyrates. Thereare exceptions to this general pattern, such asOrissa and Rajasthan, but in general people in

better-o states are in better position to accesssubsidized rations.

therearevariationsacrossstatesin the shareo

households possessing an AAY card relative tothesharewithBPLcards,conrmingdierential

eorts to identiy their centrally-allotted AAY

quotas. The reasons or this varies, with states likeAndhra Pradesh having low AAY holding due tovery high BPL holding, while others such as Biharand Assam had not done the AAY identicationprocess thoroughly (e.g., as o late 2005, Bihar hadidentied only 40 percent o its AAY quota, againsta national average o close to 75 percent).110

looking at rural and urban areas separately by

state, holding o any ration card is somewhat

higherinruralthanurbanareas,at85andjust

under 79 percent respectively.111 The dierence

may in part reect challenges in establishing

B 3.1: Pc t t PDS

The BPL ration cards will be valid or 5 years, ater which it automatically expires.

the note estimates that with a central issue price o ` 3/kg o rice and wheat, the ood subsidy bill would be ` 40,380 crores andannual requirement o ood grains would be 277 lakh tonnes.

states would pay ood security allowance in case o ailure to oer entitled quantities to eligible BPL amilies through their bank/post oce accounts.

or ensuring transparency and eciency, it is mandatory or all state governments to computerize/digitize ration card databaseas well as TPDS transactions.

states need to set up grievance redress mechanisms.

ood security tribunals should be set up at the tashil/taluka level or expedite adjudication o case against violation o this law.

Reactions to the consultation drat rom civil society have been rather critical. Several critics (e.g. Khera (2009); Himanshu (2009) pointto the act that AAY households would have lower entitlements and that in eight major states the current price o BPL grains is below` 3/kg. They also note the much wider coverage o subsidized rations in southern states already. On the ace o it, there does not appearto be restrictions on top-ups rom state resources, but this is not clear and is important in assessing the validity o these arguments.Beyond that, critics argue that the right to ood goes well beyond PDS rations and should include other entitlements such as nutritionalsupport to children, social assistance, and special provision or urban areas, in line with Supreme Court orders in the right to ood cases. The Right to Food campaign has alternative legislation ramed which incorporates this wider range o entitlements. On the other sideo the argument, others argue just as strongly or transorming PDS rom a ood-based program to a direct cash transer (e.g. Kapur,Mukhopadhyay and Subramanian (2008); Panagariya (2008). The 2010 Economic Survey o India proposes a move to direct subsidies tohouseholds through ood coupons, with a lumpsum entitlement that can be encashed in a Fair Price Shop o their choice. There are alsomixed views on the easibility o the required grain procurement in drought periods such as presently being experienced.

Sources: Department o Food and Public Distribution (http://camin.nic.in), GoI Economic Survey (2010), Panagariya (2008), Kapur, Mukhopadhyay andSubramanian (2008), Khera (2009); Himanshu (2009), www.righttooodindia.org and http://www.righttooodindia.org/data/concept_note_on_rt_act_ood_ministry_040709.pd or the concept note rom the Department o Food and Public Distribution.

Notes: a. Ministry o Consumer Aairs, Food and Public Distribution (2000).b. The program also supplies sugar nationally, and other commodities such as edible oils and coarse grains in some states. Kerosene is also providedthrough Fair Price Shops (FPS), but is not the ocus o this chapter. A useul paper on LPG and kerosene subsidies and usage under PDS is Gangopadhyayet al. (2005), which nds the LPG subsidy to be poorly targeted, while kerosene is notably better targeted.

Ctd...




Tab 3.1: Pssss rat cards b tp ad stat, 2004/05 % sds

Stat A card BPl card APl card AAy card

Andhra Pradesh 76.8 64.5 11.7 0.7

Assam 85.6 25 59.8 0.7

Bihar 67.4 33.5 32.4 1.4

Chattisgarh 69.4 37 23.1 9.3

Delhi 75.2 20.6 54.5 0.1

Gujarat 84.2 39.5 44.4 0.2Haryana 93.6 16.4 76.4 0.7

Himachal Pradesh 96.6 17.3 72.4 6.9

Jammu & Kashmir 87.7 27.8 58.9 1

Jharkhand 62.1 37 22.7 2.4

Karnataka 72.4 52.8 16.6 3.1

Kerala 94.7 36 58.7 0

Maharashtra 90 25.8 61.9 2.3

Madhya Pradesh 75.8 26.6 44.9 4.2

Orissa 78 51.6 23.6 2.9

Punjab 90 4.6 85.3 0

Rajasthan 95.6 22.7 68.9 4

Tamil Nadu 93.8 47.7 45.9 0.1

Uttar Pradesh 83.2 18 60.2 5

Uttarakhand 92.1 27.9 57 7.3

West Bengal 94.1 24.9 66.7 2.6

Other 74.7 28.2 45.3 1.2

Total 83.3 33.7 47.1 2.5

Source: Ajwad (2006) based on 2005 IHDS data.

proooresidencyinurbanareasamongmigrant

households. More noticeable is the share o

households with BPL or AAY cards, which is around42 percent in rural and 22 percent in urban areas.

b hsd prcass PDS ras

in purchasing pds grains at the national level,

between one fifth and one quarter of households (number varies depending on the data source)

reported purchasing pds grains in the mid-2000s, which

represents a significant drop since the late 1990s. Thiscan be seen in Table 3.2 using National Sample Survey

(NSS) data rom various rounds, which shows that therewas a signicant increase in household-level otake orusage rom the early to late 1990s, ollowed by a reversalin overall access by the mid-2000s. The NSS gures or

2004-05 are broadly comparable with analysis rom the2005 IHDS data (both are nationally representative),

which ound that 26 percent o the households purchasePDS grains in the same year, and also ound similarpatterns across the states.112

however, the more interesting part of the story is the difference in trends between rural and urban areas across the decade. For urban areas, overall coveragein 2004-05 was hal that o 1993-94, with the decline incoverage accelerating in the second hal o the period.In contrast, in rural areas, while there was a sharp rise incoverage ollowed by a decline over the period, coveragewas still one third higher than it had been in the early

1990s. In relative terms, rural coverage went rom only65 percent o urban in 1993-94 to over 180 percent by2004-05. For a program which had been subject to urbanbias, this is indeed a remarkable turnaround.113

112 SeeAnnex1andAjwad(2006)ordetailsonIHDSdataanalysis.SeeBox3.2orterminologyspecictothePDSliterature.

113 SeeHowesandJha(1992)onurbanbiasinthePDS,priortoTPDS.




several factors are likely to have contributed to this

trend. The rst is obviously the targeting o PDS, andhow that has played out in the early 2000s. In addition,there are a range o actors, including grain quality issues,higher transactions costs associated with procuring

TPDS grains, increased Government o India (GoI)distribution o grains through other welare schemes aswell as good rice and wheat harvest in 2003-04 that havemore likely inuenced household participation rates in2004-05. The actor which would require more detailedresearch to urther understand this trend is the impacto rising incomes in this period and possible impacts onpreerences or lower quality PDS grains.

household offtake or usage in some states – most

notably bihar, uttar pradesh, rajasthan, and

madhya pradesh - has remained consistently very

low, particularly in several very poor states. Thiscan also be seen in Table 3.2, which reports the shareo household by state that purchased PDS grains in the

previous month or 1993-94, 1999-00 and 2004-05.114 The ndings are supported by an earlier study o PDSood grains availability which ound that Tamil Naduand Andhra Pradesh were the only states where morethan hal o PDS users reported “regular” purchases o

PDS grains, while the gure or Uttar Pradesh and Biharwas 1 percent.115 This is probably due to the act that Tamil Nadu and Andhra Pradesh are states wheresubstantial state scal resources supplement thenational subsidy in order to support state policies o more widespread access.

an important explanatory factor in cross-state

variations(and aggregated demand) in drawing of pds

grains by households is likely to be the gap between

market prices of grains and the price of pds grains

for different ration card categories. The importance

o this actor has been highlighted in previous analyseso PDS and conrmed in the Planning Commissionevaluation o the program.116 The Planning Commission

Tab 3.2: hsd- ta PDS ras - A hsds ad rra/rba, 1993/94, 1999/00 ad2004/05 % hh

Stat

A hsds Rra hsds urba hsds

1993-94 1999-00 2004-05 1993-94 1999-00 2004-05 1993-94 1999-00 2004-05

Andhra Pradesh 45.7 55.9 54.6 47 63.3 62.5 41.9 37.2 31.6

Assam 15.1 32.9 8.4 13.7 34.9 9.2 25.9 20 2.5

Bihar* 3 8.4 2.8 2.8 8.7 2.9 4.2 6.2 2.4

Gujarat 29.4 37.2 24 32.4 46.5 32.6 23.7 19.2 7.9Haryana 3.3 2.9 4.4 2.7 3.2 4.1 4.8 2.1 5.3

Karnataka 44.8 63.8 47.1 41.7 71.2 59.8 51.8 46.5 21.8

Kerala 65.2 72.6 36.7 62.2 75 39.3 74.3 66.1 28.6

Maharashtra 26.1 36.3 21.1 27.3 48.7 30.5 24.4 17.3 7.9

Madhya Pradesh* 8.5 16.7 21.4 6.7 19 24 14.1 9.2 12.1

Orissa 4.7 47.7 19.4 2.9 50.2 21.6 16.6 35.5 6.7

Punjab 1.1 1.8 0.4 0.8 1.7 0.3 1.5 1.9 0.7

Rajasthan 12.6 5.6 10.1 13.4 6.3 12.8 10.2 3.3 2

Tamil Nadu 55 71.4 68.2 52 77.5 80 60.2 60.5 49.8

Uttar Pradesh* 2.9 8.3 6.5 2.6 9.2 7.5 5 5.2 3

West Bengal 14.3 20.8 12.7 7.6 20.8 15.1 32.3 21.1 6.6

Others (incl. UTs) 36.1 36.9 23.2 33.3 39.3 34.9 39.3 33.7 10.6

All India 22.6 31.6 23.3 19.9 34.1 26.6 30.6 24.9 14.7

Source: Umali-Deininger and Deininger 2006, estimated rom NSS 1993-94 and 1999-2000, and report team estimates rom the NSS 2004-05.

Notes: For comparability, 2004-05 gures or Bihar, Madhya Pradesh and Uttar Pradesh are or unsplit states.

114 TheNSSndingsarebroadlyvalidatedromthe2005IHDSdata.SeeAjwad(2006).

115 ReportedinSaxena(2006).

116 SeeorexampleRadakrishnanandSubbarao(1997)andPlanningCommission2005.




Figure 3.1: Household-level otake o PDS grains byquintile, various years

Source: Umali-Deininger and Deininger 2006, estimated rom NSS or1993-94 and 1999-2000, and report team estimates rom NSS or 2004-05.

0

10

20

30

40

1993/94 1999/00 2004/05

Q1

Q2

Q3

Q4

Q5

analysis indicates that in most states (with exception o Tamil Nadu, Himachal Pradesh and several North Easternstates) the BPL grain price moved close to the marketprice between 1999 and 2001, contributing to a generaldemand disincentive. The report also notes that statessuch as Bihar and Jharkhand with lower BPL otakewere those with among the lowest price dierentialbetween BPL and market grain prices, though many

other ineciencies are at work in those states whichreduce otake. Given the sharp increase in open marketprices o grains in recent years, it will be important tosee how the increased PDS/market prices dierential orboth BPL and APL has aected household otake.

c Dstrbta pattrs PDSra ta b sds

with respect to coverage of pds across the income

distribution, there was substantial improvement in

targeting performance with the introduction of tpds. This can be seen in Figure 3.1. All households except therichest quintile had higher coverage rates in 1999-00than 1993-94, while only the bottom two quintiles hadsustained higher coverage by 2004-05. The targetingreorm o PDS in the late 1990s was thus unusual. Thedistributional pattern o public spending improvedeven though coverage among the non-poor overallincreased, except among the richest. By 2004-05, thishad become a more typical targeting outcome o lowercoverage rates among all the non-poor.

despite the improvement in coverage among the

poorest after the introduction of tpds, the large

majority of the poorest households were not

accessing pds grains in any of the years surveyed.

Even with the major reorm o PDS, it has continuedto all substantially short o its stated aim o providingsubsidized grain to the poor. It is dicult to disentanglethe mixture o supply and demand actors in thissituation, but the end result is clear and has beenconsistent over time.

the differentials in access to pds grains between the

rich and poor are far more pronounced in urban

than rural areas. As can be seen in Figure 3.2, thevariation in access to PDS grains across the distributionis ar greater in urban areas, in addition to the muchlower overall coverage rate. While the ratio o accesso poorest to richest quintiles in rural areas was around2.6:1, in urban areas this was 8.9:1, probably reectingmuch lower interest among better o people in urbanareas or the lower quality grain supplied throughthe PDS.

looking at the distributional patterns of pds offtake

across states for 2004-05, there are not clear patterns

across groups of states in the coverage rates among

the poorest relative to the richest. This can be seen in Table 3.3, nonetheless, a ew groupings emerge:

the states which did very poorly on average

otake/usageratestendtodosovirtuallyacross

thedistribution,pointingtoageneralized“system

ailure”. They include Bihar (including Jharkhand),Uttar Pradesh, Rajasthan, and West Bengal. From

survey-based data on relativities between PDSand market prices o rice and wheat, this appearsto aect demand, with relative FPS rice and wheatprices in this group o states notably below all-India relativities.117

Figure 3.2: Household-level otake o PDS grains byquintile and rural/urban, 2004/05

Source: Report team estimates rom NSS or 2004-05.

0

10

20

30

40

Rural Urban

Q1

Q2

Q3

Q4

Q5

117 SeeAjwad(2006)ordetailedFPStomarketpricesbystate.




incontrast, southern states sustain high otake

ratesquiteawayupthedistribution,with aroundhal the third quintile purchasing PDS grains inthe group o states.

TamilNadu provides an interesting case due to

its universal access policy or subsidized grainsevenaterintroductionoTPDS. It is interestingto note that the relative coverage rates betweenthe richest and poorest quintiles are very close tothe national average, indicating the power o sel-targeting in the PDS system due to inerior grainquality and other actors. However, rom a scalviewpoint, the very substantial state-level annualsubsidy (o around just under ` 3,000 crore in2008-09) suggests that such high coverage ratesmay not be scally replicable in most states.

for households accessing tpds, the share of pds grains in total household foodgrain consumption

is substantial at around half, and increased in

the early years of the decade, reflecting in part

the increased per household allocations in tpds in

those years. This can be seen in Figure 3.3. PDS grains

comprised 47 percent o household grain consumptionon average or all households that purchased PDSgrain in 2004-05. Interestingly, the signicance o PDSgrains is true even or those in the upper reaches o the distribution who access the system, though that is

also likely in part to be a product o total ood grainsconsumption having a lower share in both ood andtotal consumption or the rich. It is also signicantthat the share o TPDS grains in total among thosepurchasing grains was higher or all quintiles o thedistribution in 2004/05 than in the late 1990s.

Tab 3.3: hsd- ta PDS ra b t b stat, 2004/05

Stats

qts

q1 q2 q3 q4 q5 Pr/Rc rat

Andhra Pradesh 66.3 68.5 58.8 48.8 30.3 1.7

Assam 18.5 11.4 5.2 3.0 3.7 4.4

Bihar 5.8 2.5 2.9 1.8 1.3 2.7

Gujarat 42.3 30.0 23.3 18.8 5.6 3.0

Haryana 10.2 6.6 3.3 1.6 0.5 8.1Himachal Pradesh 63.3 52.1 48.3 45.5 25.6 1.6

Jammu & Kashmir 49.7 46.8 41.5 29.4 19.8 2.0

Karnataka 69.5 56.9 43.5 39.9 25.9 1.9

Kerala 60.0 44.7 34.5 25.3 19.1 2.4

Madhya Pradesh 37.6 24.5 21.2 14.4 9.2 2.6

Maharashtra 36.3 24.1 20.6 15.2 9.6 2.4

Orissa 42.1 24.6 15.3 10.2 5.1 4.4

Punjab 0.6 0.9 0.1 0.5 0.1 2.4

Rajasthan 16.8 13.8 9.6 5.9 4.4 3.0

Tamil Nadu 85.1 80.9 74.8 62.7 37.2 1.7

Uttar Pradesh 13.0 7.8 5.1 3.9 2.9 3.1West Bengal 22.6 13.8 12.4 8.6 6.3 2.5

Other States/UT 31.1 14.0 11.0 9.8 7.2 2.7

All India 35.6 28.0 23.2 18.5 11.5 2.1

Source: Report team estimates rom NSS 2004-05. Notes: Bihar, Madhya Pradesh and Uttar Pradesh reer to un-split states; Poor/rich ratios o coverage is o bottom two to top two quintiles.

Figure 3.3: Share o TPDS grains in total householdgrain consumption among householdsaccessing TPDS, various years

Source: Umali-Deininger and Deininger (2006), estimated rom NSS or1993-94 and 1999-2000, and report team estimates rom NSS or 2004-05.

0

10

20

30

40

50

60

1993/94 1999/00 2004/05

Q1

Q2

Q3

Q4

Q5




looking at benefit incidence of pds grains, the

situation is somewhat better than for coverage rates

alone, due to higher average offtake in the lower

quintiles. This is shown in Table 3.4. At the same time,the relatively similar average levels o otake acrossquintiles among those accessing PDS is also notable.

d w ar pp t accss PDS?

looking at reasons for not accessing pds in terms of

national averages, unspecified reasons emerge as the

main reason for non-use, followed by irregular supply

of grains in fps. Interestingly, nancial constraints arenot cited as a major reason or not accessing the system,though states such as Jharkhand and several north-eastern states are an exception. The patterns acrosssocial categories and income levels are not dramaticallydierent, though dierences are notable:118

asonewouldexpect,thepooresthouseholds(andSCandparticularlyST)reportnancialconstraints

asamoresignicantreason,with 12.5 percent o the poorest quintile citing nancial constraints asthe main reason or non-use. Also as expected,“no time to use FPS” (which can be interpreted asopportunity costs o the household time beingtoo high relative to the benet o the FPS subsidy)is over twice as high or the richest householdsas the poorest, and quality concerns are morenotable among the better-o.

irregularsupplyisasignicantlybiggerprobleminruralthanurbanareas,andamongSCandST

households relative to those rom other social

categories.

there are also significant variations across states in the main reasons for non-usage of pds. For severalstates, the role o unspecied reasons (which couldinclude price/quality dierentials between market andPDS grains) are very important, while in others (e.g.,

West Bengal and Orissa), the irregularity o supply is amore major issue. Chattisgarh is also worth noting as astate where physical access to FPS appears to be a majorproblem. In addition, while poor quality o PDS grainsis not a major reason or non-usage nationally, it is asignicant actor in several states, including Karnataka,Gujarat and Bihar.As noted, the relative prices betweenBPL and market grains dier sharply across states (evennot allowing or possible quality dierentials betweenPDS and market grains), which is likely to be anotherimportant actor.

Drs ad aa t PDS

the very low household offtake rates in some states naturally raise the issue of leakage and diversion of grains. GoI itsel conrms that leakage and diversionrom the PDS are high, estimated in the most recentevaluation at 58 percent o BPL grains, though thedata underlying that are rom 2001.119 The total is acombination o outright diversion o grains (due to ghostBPL cards, as well as due to diversion in the supply chain),and APL households beneting rom grains subsidized

at BPL prices. Some o the relevant terminology isoutlined in Box 3.2. The results or major states rom thePlanning Commission evaluation are shown in Table 3.5,also showing states with extremely high diversion suchas Bihar and Punjab, where almost 82 and 76 percento BPL grains respectively were estimated to have beendiverted. These estimates are consistent with an earlierstudy by Tata Consultancy Services in 1999 which wasendorsed by GoI in its Mid-Term Appraisal o the 9 th Plan.More recently, the report submitted by the SupremeCourt appointed vigilance committee is extremelycritical o the PDS. According to this report, the PDS

system has “collapsed” in some states (e.g., Rajasthan),working very poorly in others (e.g., Bihar, Jharkhand).120

qt

Ara ta

B tsaccss PDS

Sar tta

bcars%

Sar

tta tacaptrd %

Poorest 23.0 30.5 33.5

2 20.9 24.0 23.9

3 20.4 19.9 19.4

4 19.2 15.8 14.5

Richest 18.6 9.8 8.7

Tab 3.4: Sar PDS ras captrd bcspt ts, 2004/05

Source: Report team estimates rom 2004-05 NSS data.

118 SeeAjwad(2006)ordetailedresultsbywealth,socialcategoryandrural/urban.Thesourceorthesendingsisthe2005IHDSdata.

119 PlanningCommission(2005).

120 MediareportsontheWadhwaCommitteereport.



CHAPTER-3: Protective Programs 1

B 3.2: S PDS tr

Discussions o PDS use a range o terms to describe dierent elements o the delivery chain. These include:

Att r acat o grains is the amount which the Food Corporation o India sets aside or each State/UT in quantityterms or rice and wheat, and includes allotments or BPL, APL and AAY.

Stat ta r t o grains is generally used to reer to the actual amounts that State/UTs draw down on their allotmentsrom FCI. This is expressed in FCI statistics as a percentage o their allotment. Otake is typically less than 100 percent o allotmentor all India (e.g. it was 85.6 percent in 2008-09), but can in principle be above 100 percent, as it was or example or several north-eastern states in 2008-09.

hsd ta r t o grains is a less ocial term but would generally reer to an individual household’s drawdownagainst its monthly quota o grains.

Br stcs are the reserve stocks which FCI and SFCs aim to keep in addition to the requirements o wheat and rice under the TPDS. These stocks orm the so-called “Central Pool” which is kept to meet any emergencies like drought/ailures o crop, as wellas to enable open market intervention in case o price rise. The minimum stocks that are meant to be in the buer stock are asollows (in lakh tones):

Dat Rc wat Tta

1st April 122.0 40.0 162.0

1st July 98.0 171.0 269.0

1st October 52.0 110.0 162.0

1st January 118.0 82.0 200.0

Ctra iss Prcs. Wheat and rice are issued to the States/UTs rom the Central Pool at uniorm Central Issue Prices (CIP)or distribution under TPDS. CIPs o wheat and rice are xed or BPL and APL amilies separately. The CIPs o wheat and rice aresubsidized and have remained unchanged or BPL amilies since July 2000.

laa o PDS grains has a variety o meanings depending on the context. This could be due to actors such as ghost ration cardsor alse use o cards by others than the original owners. It may also in some contexts reer to when grains intended or BPL or AAYhouseholds are sold to households outside those categories. In the Planning Commission report, the term “leakage” includes bothleakage in these terms and diversion as dened below when aggregate gures are provided.

Drs o PDS grains reers to grains which in eect disappear in the distribution channel, or are provided to illegitimatebeneciaries/claimants. The most worrying case o this is when grains disappear altogether rom the PDS system, due to thetand other orms o illicit diversion. This could in principle happen at any stage o the delivery chain ater grains are purchased byFCI, including within the FCI/SFC network, by distributors, by FPS owners et al.

lsss ad ad trasprt reers to 2 percent o grain loss allowed by the FCI to handlers in the distribution chain, includingthose who load procured grain into goods train.

wasta results rom storage or overly long periods or in sub-standard condition, oten in FCI or SFC warehouses, but alsopotentially in Fair price Shops.

Sources: MCAFPD and FCI websites (www.camin.nic.in; http://www.ciweb.nic.in); Planning Commission 2005.

Stat Drs % BPl ras APl sar BPl ras % Tta aa BPl ras %

Andhra Pradesh 20.6 37.0 57.6

Assam 41.7 12.0 53.7

Bihar 81.5 9.6 91.1

Gujarat 42.1 5.0 47.1

Haryana 55.7 11.0 66.7Himachal Pradesh 31.4 14.5 45.9

Karnataka 43.4 27.5 70.9

Kerala 21.7 17.3 39.0

Madhya Pradesh 62.4 3.6 66.0

Maharashtra 26.5 8.0 34.5

Tab 3.5: Pa css stats BPl ra aa PDS, ar 2000s




both goi and nss data confirm widespread leakage and

diversion of pds grains, though also with substantial

variations between states. Using the 2004-05 NSS roundand state-wise otake data rom the Food Corporationo India, it is also possible to compare ocially reportedwheat and rice otake gures by state with reportedpurchases o PDS grains by households (Table 3.6) inorder to get a more precise estimate o the gap between

ocial grain releases rom Food Corporation o India(FCI) and what households ultimately receive. It shouldbe noted that this gap is not entirely explained bydiversion o grains in the distribution channel, nor does

it reect the leakage o subsidized grains to those not inthe relevant BPL or AAY category. There will or examplegenerally be some grains used to replenish buerstocks, plus there will be some share o grains whichare released but in transit at any point in time (e.g., inSeptember 2009, the latter gure was 1.3 percent o allgrains according to FCI’s website). There is also a 2 percentallowance or “losses in handling and transport” which

provides or grain lost along the distribution channelthrough whatever means.

based on the nss data, almost 60 percent of the pds grains released by fci do not reach households, with

Stat Drs % BPl ras APl sar BPl ras % Tta aa BPl ras %

Orissa 23.4 13.0 36.4

Punjab 76.5 13.0 89.5

Rajasthan 32.0 3.0 35.0

Tamil Nadu 15.7 49.9 65.6

Uttar Pradesh 61.3 6.2 67.5

West Bengal 19.2 7.8 27.0

All-India 36.4 21.5 57.9Source: Planning Commission 2005. Notes: Bihar, Madhya Pradesh and Uttar Pradesh reer to un-split states.

Rc wat A


Assam 0.06 15.4 10.6

Bihar 6.9 14.1 9.1

Gujarat 43.0 44.1 43.3

Haryana 15.8 NA 15.8

Himachal Pradesh 55.2 90.0 72.7

Jammu & Kashmir 13.3 73.0 51.1

Karnataka 55.2 65.7 63.9

Kerala 20.8 94.4 70.7

Madhya Pradesh 41.2 62.2 49.2


Orissa 1.3 26.8 24.2

Punjab 5.0 38.5 5.2

Rajasthan 40.7 51.8 40.7

Tamil Nadu 103.2 87.1 87.4



All Others (incl. UTs) 7.2 39.5 24.8

India 24.8 54.4 41.4

Tab 3.6: hsd PDS ta as sar ca ta b stat, 2004-05 %

Source: Report team estimate rom 2004-05 NSS data. Notes: Bihar, MP and UP reer to un-split states. State wise o take data or the matching period takenrom Ministry o Consumer Aairs, Food and Public Distribution (http://www.camin.nic.in).




the figure variable between rice and wheat, with

wheat around 45 percent, and rice a much higher

75 percent. Moreover, in several states – includingBihar, Assam, Punjab, Uttar Pradesh, West Bengal andHaryana – the gap between FCI releases and householdreceipts o PDS grains is over 80 percent.121In contrast,several states do considerably better than the nationalaverages, most notably Tamil Nadu (with 13 percentleakage and Andhra Pradesh with 31 percent). Some o the actors driving such poor outcomes, and the politicaleconomy challenges o signicant reorm o the system,are discussed at the end o this section.

iptat sss t PDS

apart from the generic problems of program

administration discussed in chapter 7, there are

a range of implementation problems in pds which

contribute to the poor outcomes seen. These have

been known or a long time, and include:122

inadequate storage capacity with FCI and State

FoodCorporationsinanumberostates(e.g., inBihar and Jharkhand, there are godowns in lessthan 50 percent o districts). This is one actorcontributing to irregularity o supply to FPS in anumber o states.

thepricingmarginsorFPSowners,andarange

o other actors such as transport costs rom

godowns,needoruprontpaymentongrainsin

moststates,rentalcostsopremisesetc.aresuch

thattheyareinmanystatesnanciallyunviablei

theyoperatetheshopwithoutdivertinggrains.123 The Planning Commission estimates that onlyaround 23 percent o FPS are nancially viable,and that they are concentrated in a ew states(Andhra Pradesh, Tamil Nadu and Maharashtra).In addition, a ull 44 percent o FPS owner costso operation nationally are taken by transport andrental cost, a burden that makes nancial viabilityvery challenging.

households in most states have to pay or their

entiremonthlyrationinoneshot,whichimposes

nancialstrain(though an increasing number o states have ollowed the lead o Kerala and allowor weekly liting by households). Villagers arealso oten poorly inormed o when stocks willbe available, and certainly not in advance. Thismeans that the poorest may not have sucient

cash ready available when the oodgrains arrivein the shop.

allocationsrom GoI are valid only or amonth,

and i the state government is not able to litwithin that time, its quota lapses. This timeramecould be increased to a quarter.

lowqualityooodgrains,anddierencesintype

o local consumption patterns. Earlier reportsrom 2000 ound that hal the stock o FCI is atleast two years old, 30 percent between 2 to 4years old, and some grain as old as 16 years.124

While the data above indicate that the situationmay have improved in the interim, there remainissues o grain type and the act that it is inmany states not o a type consumed (e.g., parboiled versus raw rice) as they are procured romdistant states.

weak monitoring, lack o transparency

and inadequate accountability o ofcials

implementingthescheme. While this is improvingin a number o states with transer o FPS toPanchayati Raj Institutions (PRIs), Sel-Help Groups

(SHGs) and cooperatives, State Food Corporation(SFC) and Departmental ocials in many statesexercise very weak oversight o the system.

FPS in many areas do not open or more than

2-3 days in a month, and card holders are not

allowedtolittheirquotaopreviousmonths.

eorts to raise citizen awareness o their rights

underPDSthroughrelianceonaCitizen’sCharter

wereveryslowtotakeo,andeldworkindicates

thattheirimpactinmanycasesremainslimited.

121 NotethatBiharromearly2007hasswitchedtoa oodcouponsystemorPDSwhichhasalso beenimplementedinstatessuchasAndhraPradeshwhichhavedonesopreviouslyhashelpedtocontrolleakagetoanextent.InitialreviewotheBiharexperiencesuggeststhatthishasalsobeenthecasethere.SeeVashishtetal.(2009)andBox3.3inSectionC.

122See Radakrishnanand Subbarao (1997) ora detaileddiscussion o many othese implementation challenges, mosto which inmost states arestillveryrelevant.

123 SeePlanningCommission2005oradetaileddiscussion.

124 WorldBank(1999).




For example, the Planning Commission PDSevaluation ound that under 20 percent o GPswere aware o a Citizen’s Charter, and that only4 percent o APL card holders and under 1 percento BPL card holders were aware o the Charter. 125

despite these major structural problems, a number

of states are innovating in pds implementation, and

improved performance can be seen in some cases. Stateshave been implementing a nine point action plan orimproving TPDS since 2006. The southern states as usualhave led the way on many reorms intended to addressthe issues above, and increasingly even poorer states –e.g., Madhya Pradesh, Orissa and Bihar – have introducedchanges in policies and implementation mechanisms toaddress the problems o PDS. These are taken up urtherin the conclusions and recommendations section.

B. SoCiAl PenSionS

as with the pds, social pensions aim to alleviate

chronic poverty, though among specified social

groups, i.e., destitute elderly, widows and disabledpeople.126 The Indira Gandhi National Old Age PensionScheme (IGNOAPS) is provided to applicants over 65years o age who are below the poverty line, thoughseveral states provide pensions or those 60 andabove who ulll the criteria.127 As o mid-2009, thecentral transer was ` 200 per month. A number o states top up the benet level rom own resources,with the maximum benet being ` 1,000 as o 2009.Supplementing IG/NOAPS since 2000-01 is theAnnapurna scheme, which covers destitute elderlyeligible or elderly social pensions but not receivingthem. These households receive 10 kg o oodgrainsper month ree through FPS. Also supplementing thisis the National Family Benet Scheme, which pays alumpsum o ` 10,000 to BPL amilies on the death o the primary breadwinner. NSAP was expanded inFebruary 2009 with two new pension schemes or BPL

widows aged 40-64 years and persons with severe ormultiple disability aged 18-64 years, providing ` 200per person per month. There are known as the IndiraGandhi National Widow Pension Scheme (IGNWPS) andthe Indira Gandhi National Disability Pension Scheme(IGNDPS). In addition, until the 2009-10 budget, nearlyall states have operated a similar social pension schemeor destitute widows and disabled people, though

nanced rom own resources.128 Some states also operatestate-specic old age social pensions which oten pre-date the NOAPS, and allow or expanded beneciarynumbers beyond those nanced by the central subsidy.In several states (e.g., Himachal Pradesh and AndhraPradesh), the numbers under state-nanced elderlyschemes are signicant.

in 2009, goi announced two new national schemes:

the indira gandhi national widow pension scheme,

and the indira gandhi disability pension scheme. Theormer covers widows between 40 and 64 years o age,

and the latter covers those with at least 40 percentdisability between 18 and 64 years old. The centre is toprovide ` 200 per month or both groups, estimatedto include around 4.4 million widows and 1.56 milliondisabled people. States are encouraged to double thebenets rom own resources. For orphans and childrenwith disabilities, the Women and Child DevelopmentMinistry is expected to develop a scheme.

until the switch to full cash payment under mahatma

gandhi national rural employment guarantee scheme

(mgnreg), social pensions were the most significant

cash-only social protection transfer, and remain a key benefit for specially vulnerable groups. Theyare also o interest in their reliance on a mixture o categorical targeting with household level BPL criteria.Social pensions have become more important as part o the overall SP program mix in recent years, as indicatedboth by the signicant increase in central subsidies (rom` 75 to 200), and the expansion o coverage to BPLelderly, disabled and widow households.


126 OnNationalOldAgePensionScheme(NAOPS),thatwasextantbeoreIGNAOPSin8states,seeORG-MARG1998or areviewoearlyexperienceandIrudayaRajan(2001)orauseuldiscussionotheprogram.Fordetaileddiscussionotheoperationosocialpensionsinspecicstates,seeMurgai(2006)onKarnataka,andDutta(2008)onRajasthan,bothcommissionedorthisreport,GovernmentoHimachalPradesh(2005),Nayaketal.(2002),andAlam(2004).

127 IGNOAPSwaslaunched inNovember2007 andreplacedthe NationalOldAge PensionScheme(NOAPS),which wasintroducedin 1995.As mucho thedataunderlyingthissectionisromthepre-2007period,theNOAPSacronymisusedatpointsintheollowinganalysis.ThekeydierencebetweeneligibilityorNOAPSandIGNOAPSisthatNOAPSwasbasedonadestitutioncriterion(variablydenedbystate),whiletheIGNOAPSisBPLbased.Theormerstate-wiseallocationstoNOAPSwerebasedonaormulaopopulationover65timeshalthegeneralpovertyrateorthestate.

128 SeeWorldBank(2009)ordetailsondisabilitysocialpensions.




relative to most safety net benefits, the coverage

rates of social pensions among the target groups

are significant and are likely to have expanded

further with the recent policy and financing reforms.

Table 3.7 presents coverage rates or NOAPS, Annapurna,or widows and disability pensions both or 2004-05,relying on the IHDS data. Social pensions account or amore signicant share than most SP programs among

their target groups (except or PDS), with over 8 percento households with at least one member over 65 yearsreceiving NOAPS (and just under 10 percent whenAnnapurna is added), 6.2 percent o all widows receivingthat pension, and around 14 percent o households with adisabled member receiving a disability social pension.129

for social pensions, the survey-based coverage rates

imply under-coverage according to both the central

ceilings for allocations in place at the time of the ihds

data, and administrative data on program coverage.

The IHDS survey-based all-household coverage rate o 0.5 percent implies 5.1 million NOAPS recipients, which iscomparable with a MoF allocation number under NOAPSo just under 6.9 million, and an administratively reported

beneciary coverage o 6.1 million or 2004-05.130 Inaddition, the reliance on 1998 population estimates andmortality rates, under-estimates the size o the elderlycohort who are the target group or the scheme. Roughestimates using 2001 census and assuming a 2 percentannual increase in the aged population, would suggest

Tab 3.7: Cra rats tart rp r noAPS, Aapra, d ad dsabt pss b stat, 2004-05

Stat

% hh t

65+ rcnoAPS

mda aa

noAPS bt arc Rs

% hh t

65+ rcAapra

% hh t a

d rcwP

% hh t

dsabd rcDP

Andhra Pradesh 18.7 1,840 3.2 4 5.6

Assam 3 900 0 0 NA

Bihar 4.1 1,138 3.6 5 8.8

Chhattisgarh 9.3 1,870 0.3 8.8 14.9

Delhi 5.4 2,175 0 2.2 NA

Gujarat 0.9 2,696 0.6 2 NA

Haryana 67.1 3,088 0 16.4 37.2

Himachal Pradesh 13.2 2,690 0.3 25.7 42.9

Jammu & Kashmir 0.9 2,079 0 5.8 6.7

Jharkhand 2.2 1,047 0 8.3 12

Karnataka 6.4 1,218 0 13.9 44.9

Kerala 6.3 1,110 0.2 5 22.2Maharashtra 2.3 2,111 2.4 2.3 6.2

Madhya Pradesh 6.4 1,758 0 6.3 21.4

Orissa 22.2 1,399 8.5 21.3 28.8

Punjab 14.8 1,645 0 4.3 17.2

Rajasthan 7.8 2,902 2.7 5.3 20

Tamil Nadu 2.9 2,254 0.8 5.3 3.8

Uttar Pradesh 5.2 1,943 1.6 4.2 14.4

Uttarakhand 8.4 1,358 0 11 8.7

West Bengal 2.6 1,113 0.9 1.8 4.3

Other (incl. UT) 20.8 2,979 1 5.5 NA

All India 8.3 2,008 1.7 6 14.1Source: Ajwad (2006) based on 2005 IHDS data. Note: Disability pension coverage calculated rom sur vey-based coverage or whole population andcensus-based state rate o disabled people.

129 Thiscannotbecalculatedordisabilitysocialpensionsromthesurveysourceasdisabilityinormationwasnotcollected,butisbasedonthe(conservative)censusestimateo2.13percentoallhouseholdshavingadisabledmember,and0.3percentagepointcoverageothegeneralpopulationagainstthatrate.

130 SeeSaxena(2006)ordetailedadministrativedata.




an updated gure or allocation purposes o closerto 9 million. There seems thereore a pressing need torevisit the population estimates upon which IGNOAPSallocations are based.

there was also major variation across states in

coverage rates, with some states having quite

significant coverage among the elderly and widows,

though most states with a much lower rate for disability pensions. Interestingly, this is not simply arich and poor state story, as even some very poor statessuch as Orissa and Chhattisgarh had high coverage ratesor elderly and widows pensions in 2004-05, reecting inpart their national unding quotas, but also a clear state-specic importance placed on social pension benets.

nationally, the targeting of social pensions across

wealth levels and social category was progressive

in 2004-05, with particularly good performance in

relative terms among the poorest quintile and among

sc and st people. In terms o targeting perormanceo social pensions, the smallish sample size allowsor reliable estimates only on an all-India basis, with

the exception o results rom state-specic surveysin Karnataka and Rajasthan, which conrm generallyprogressive targeting.131 Nonetheless, it is clear thatthere remain signicant inclusion errors, with notinsignicant shares o elderly in better-o householdsreceiving NOAPS benets, and widows in even richhouseholds receiving widow pensions. Interestingly, thecoverage o disability pensions varies very little across

welare indicators, though this may be a product moreo low coverage rates when measured against the wholepopulation base.

in terms of benefit incidence, both elderly and widow social pensions are also progressive, though somewhat less so than coverage alone due to the higher average benefits of recipients in the richest quintile, and other castes. This is also shown Table 3.8.Nonetheless, in terms o concentration o spendingamong the poorest quintiles, these can be consideredamong the better targeted programs in India. These

ndings are strongly supported by evidence rom theSocial Protection Survey (SPS) in three states (Orissa,Karnataka and Madhya Pradesh) which ound that

Tab 3.8: hsd cra rats ad bt cdc sca pss b at, cat ad scacatr, 2004/05 %

noAPS - 65+

cranoAPS-btcdc %

Aapracra

Aapra

btcdc %

wdscra

wds’

btscdc %

DP btcdc %

Poorest 14.8 31.1 4.7 37.9 10.9 32.8 27.6

Q2 8.6 19.5 2.4 26.9 5.9 18.2 16.5

Q3 7.8 15.4 0.9 11.2 5.6 19.4 19.9Q4 7.0 15.6 1.1 22.6 4.9 17.2 11.2

Richest 6.4 18.4 0.1 1.4 2.7 12.5 24.8

Rural 9.4 86.2 2.0 92.0 6.2 70.4 88.1

Urban 4.6 13.8 0.7 8.0 5.5 29.6 11.9

OBC 7.0 34.6 1.9 49.6 6.0 38.2 48.9

SC 15.0 34.4 2.8 25.3 7.7 25.5 21.7

ST 11.6 5.4 3.6 11.3 10.3 10.9 6.4

Other 5.9 20.8 0.6 13.7 3.7 20.7 19.3

All India 8.3 100 1.7 100 6.0 100 100Source: Ajwad (2006) based on the 2005 IHDS data. Note: Coverage rate or NOAPS among households with member 65 and above, or widows as share o households with a widow, and or disabled, as share o all households.

Note: Disability pension coverage calculated rom survey-based coverage or whole population and census-based state rate o disabled people. Note that theother social group category excludes Brahmins.

131 SeeMurgai(2006)andDutta(2008)usingtheKSPS(KarnatakaSocialPensionsSurvey)andRSPS(RajasthanSocialPensionsSurvey)respectively.




rom eld work, it seemsthat therehasbeenin

thepasta lacko clarity insomestateson what

constitutes“destitute”orsocialpensioneligibility

purposes. The centre and most states quitesensibly leave some degree o local discretionin the determination o destitution. At the sametime, eld work (e.g., in Rajasthan), revealed adhoc criteria being applied at local levels which may

unwittingly exclude some o the very poorest. Theimposition o the BPL criteria under IGNOAPS hasremoved this local level discretion.

inanumberostates,specicexclusioncriteria

havebeenoverlystringent,andotenappliedin

amechanicalmanner.A common example wasthat applicants or NOAPS and widow pensionswere not allowed to have a living adult son, andthis is oten applied strictly, even where the sonis absent or ailing to support the parent (even i he is severely disabled and unable to work). Both

the Karnataka and Rajasthan studies ound thata high proportion o social pension beneciariesdid not qualiy according to a literal applicationo all the exclusion rules, despite the act thatthey were considerably poorer than average.While nearly all satised the strictly demographiccriteria (o old age and widowhood), in Karnataka,only 9 percent o old age and 16 percent o widowpensioners met all demographic (includingamily support) and destitution criteria. Thesituation was not much dierent in Rajasthan,but the additional BPL criteria (over-riding allother amily and destitution criteria) alloweda much higher share to be eligible. Only 26percent o elderly pensioners and 9 percent o widowed pensioners would have been eligiblein Rajasthan were it not or the BPL criteria. Evenwhere discretion is applied in sensible ways,the necessity o such discretion naturally opensup possibilities o abuse. The ndings stronglysuggest a need in many states or an overhaulo their social pension rules to reduce exclusionerrors. These amily criteria no longer apply under

new Indira Gandhi old age, widow and disabledpension schemes, but it is unclear whether theseremain applicable or state pension schemes.

C. TARgeTeD houSing

PRogRAmS

a Rra s – idra Aaas

yjaa iAy

as seen in chapter 2, targeted rural housing programs

are a significant element of the indian safety net. Themain targeted rural housing program is IAY, which hasbeen implemented as a stand-alone program since 1996,having been a sub-component o public works schemesprior to that. Its main objective is to provide dwellingunits ree o cost to the rural BPL population.138 As o April 1, 2010, grants are provided to beneciaries with aceiling o 45,000 or new construction in plain areas and` 48,500 or hilly/dicult areas. In addition, up to20 percent o IAY unds are available or upgradingconstruction up to ` 15,000 or each dwelling unit.

Beneciaries can use up to ` 2,200 rom Total SanitationCampaign unds in addition to IAY assistance to constructsanitary latrines. Further, an IAY beneciary can obtain aloan up to ` 20,000 under the Dierential Rate o Interestscheme rom any national bank at an annual interestrate o 4 percent. The house should be registered in thename o the emale household member, or jointly in thename o husband and wie. More recently, the programhas been dovetailed with the Rajiv Gandhi GraminVidhuyutikaran Yojana or rural electrication, allowingIAY beneciaries to get a ree electricity connection.

it is estimated that on an average about 23 lakh houses are built every year under various schemes,

with iay accounting for two thirds of the total,.

and other assistance provided by Housing and urbanDevelopment Corporation Limited (HUDCO), NationalHousing Bank, State Housing Boards and CommercialBanks the remainder.139 IAY enjoys considerable supportsince it creates a valuable asset or beneciaries, leadingto improved economic and social status with minimalrequirements on part o beneciaries.

results on coverage of iay and other housing schemes

are shown in table 3.9, along with median amounts received as reported by households. Several pointsare apparent:

138 SeeSaxena(2006)ordetailsandhistoryothescheme,theComptrollerandAuditorGeneralevaluation(CAG2003a),andthediscussioninDevetal.(2007).

139 The2001Censusestimatedahousingshortageo149.6lakh,witheightstatesaccountingor81percentotheshortage.Theannualrequirementisestimatedat30lakhhousestomeetthebacklog,andabout10lakhshelterlessareaddedeveryyear,suggestingatotalshortalloabout40lakhhousesperyear.




housing-relatedsupportis quitesignicant, withalmost 13 percent coverage o rural households inthe sample.However, this is somewhat misleading,as the recall period on assistance in the survey wasopen-ended, so that this is a cumulative gurerepresenting in eect the share o rural householdswho have ever received housing support.

as with other schemes, there is substantial

variation across states in coverage, though

somewhatlesssointermsomedianbenetlevels.

Some o this is likely to be driven by state-specic

schemes (e.g., Himachal’s state targeted ruralhousing scheme), but in others by more activeuse o IAY unds. The case o Bihar is o particularinterest, as coverage under housing schemes isnotably above the national average (in part due

to a special central package announced in 2004),despite much lower than average coverage onmost SP schemes, and release to allocation in2004-05 was almost double. The act that severalvery low income states have healthy coveragerates may also be a reection o the housingshortage criterion on scheme allocations, witheight states accounting or over 80 percent o housing shortage nationally, and Bihar alonenearly one third o housing shortage.140

while signicant (as would be expected given

the program policy), reported amounts receive

indicateleakagebetweentheprogram-sanctioned

transersandactualreceiptsbyhouseholds. Whileit is not possible to compare the survey resultsvery precisely with IAY allocations, the results are

Tab 3.9: Scs t prd spprt r s, atr r ca cstrct b stat rra , 2004-05

Stat% hh r

rcd bts

mda a spprt rcd b sds `

Bt sm t bd

smatras t bd

s Satar atrs

Andhra Pradesh 28.6 20,236 19,048 14,688 1,836

Assam 1.4 14,667 22,849 8,833 1,964

Bihar 13.3 16,524 15,669 20,000 1,200Chattisgarh 4 – 10,322 5,667 650

Goa 19.7 – 14,000 – 3,614

Gujarat 6.3 28,271 22,250 13,150 1,885

Haryana 2.9 31,200 14,625 19,344 1,775

Himachal Pradesh 8.5 18,000 14,804 8,240 1,338

Jammu & Kashmir 0.8 20,000 27,100 .. 1,000

Jharkhand 9.1 16,925 18,559 12,000 2,000

Karnataka 14.6 22,043 15,994 6,662 1,789

Kerala 16.6 25,169 18,738 5,528 1,874

Madhya Pradesh 5.4 10,500 10,710 6,760 872

Maharashtra 7.2 23,991 22,272 7,442 2,123

Orissa 17.4 18,955 15,203 5,368 785

Punjab 2.4 24,039 9,357 6,400 2,423

Rajasthan 2.6 – 14,428 3,601 1,191

Tamil Nadu 7.2 27,654 17,127 13,774 779

Uttar Pradesh 5.3 13,318 14,449 12,718 1,650

Uttaranchal 14.6 5,000 15,188 22,000 1,253

West Bengal 7.2 13,944 7,767 2,452 1,030

All India 9.6 21,604 15,861 11,822 1,731

Source: Ajwad (2006) based on the 2005 IHDS data.

Note: Recall period is open-ended

140 Saxena(2006).




consistent with eld research or this report whichound a airly consistent “commission” being paidby beneciaries to sarpanchs, MLAs or otherintermediaries o ` 4,000-5,000 on IAY in order toaccess the program.141

targeting of rural housing transfers is mildly progressive, though as with other programs a

significant proportion of households in the upper range of the distribution receive support. This canbe seen in Table 3.10, which presents results by wealth,social category and location. While coverage rates in thetop quintile are notably lower, they remain high even inthe ourth quintile. This nding is mirrored by those romthe three state SP study, which ound similar coveragerates or IAY across the bottom three quartiles, but alsocoverage rates o SC and ST households which were66 and 27 percent higher respectively than the overallpopulation, and more than double those o backwardand other castes.142 A second – and more worrying –

result is that the average level o benets reported bythe rich is considerably above that o the poor or mosthousing-related interventions. However, administrativeindicate that nearly two-thirds o IAY houses since 1996have been allotted to women.

there are a range of problems in iay implementation,

caused in part by its design of large, unencumbered

grants.143 The lump sum payment is large enough toattract substantial “attention” rom local politicians,who may view this as an important mechanism orpatronage or supporters and there is evidence o highproportion o benets being manipulated towards thisend.144 These machinations are natural, since the totalallocation o IAY grants - although substantial - is smallrelative to potential demand based on number o poorpeople without housing.

safeguards built into the design of the scheme have often

been ineffective in practice. For example, payments oreach stage o construction are to be made only when thepreceding stage has been completed, and individuals arerequired to make their own arrangements or construction.In particular, ocials are not allowed to engage contractorson behal o the beneciaries. According to a Comptroller

and Auditor General (CAG 2003b) report on the scheme,almost one-third o IAY unds were misused. O this,almost hal was accounted or by depositing o unds bystate governments into current accounts, civil deposits, ortreasuries outside the government account. The remainder

141 SeequalitativendingsinDevetal(2007),discussioninSaxena(2006),andCAG(2003a)orIAYevaluation.

142 Devetal.(2007).

143 SeeSaxena(2006)oradiscussion.

144 SeePlanningCommission2003,andqualitativendingsoDevetal.(2007)onthesystematicnecessityolargebribepayments.

Tab 3.10: Cra ad da bts tartd s prras b at, cat ad sca

catr rra aras , 2004-05

grp

% hhs r

rcdbts

mda t a spprt rcd b sds `

Bt sm t bd

smatras tbd s Satar atrs

Btcdc

% btscaptrd

Poorest 15.6 20,946 14,010 8,170 1,448 24.6

Q2 13.3 18,420 15,210 11,073 1,751 18.5

Q3 15.1 20,736 16,312 13,537 1,727 24.9

Q4 13.9 24,329 19,692 14,994 1,637 22.7

Richest 5.7 20,269 18,810 13,802 1,935 9.3

OBC 9.9 19,294 17,476 13,721 1,664 32.7

SC 23.1 21,943 15,494 11,832 1,719 44.2

ST 13.3 21,466 15,292 10,835 1,919 10.4

Other 7.7 21,225 15,142 12,032 1,779 12.7


Note: Benet incidence based on results on the question “Money to build a house”; Recall period open-ended. Note that the other social group categoryexcludes Brahmins.




while more detailed analysis is required, available

assessments point to a range of implementation

challenges with vambay, though state programs

such as those of karnataka and kerala are somewhat

better (though at best, only rates as “fair”). Basedon qualitative methods, VAMBAY has been assessedas poor in terms o program eciency, administrativesimplicity, and sustainability, and only air in terms o transparency.147

urban housing policy for the poor is in a dynamic

phase presently, though in programmatic terms is yet

to consolidate new approaches, and it is unclear how

coherent or strategic a vision underlies the current

programs. JNNURM is the umbrella vehicle o the GoIor urban renewal and low-income housing is part o its coverage. At the same time, initial eorts rom statesand cities have tended to ocus on other types o urbaninrastructure. The specic window o JNNURM underwhich housing or the urban poor alls is the Sub-Missionor Basic Services or the Urban Poor (BSUP) or citiesover 1 million population, and Integrated Housing andSlum Development Program (IHSDP) or all other citiesand towns. VAMBAY is subsumed within IHSDP exceptor ongoing projects pending their completion.148 BothBSUP and IHSDP target slum dwellers and the urbanpoor. These beneciaries are eligible or benets upto ` 80,000 or building homes, improving water andsanitation etc., with at least 12 percent o the housingcost to be borne by the beneciary, or 10 percent or SC/ST/OBC/BC and other “weaker sections”.

In parallel, GoI in the 2009 budget announced theRajiv Awas Yojana which aims at promoting a slum-ree India in ve years and would ocus on accordingproperty rights to slum dwellers. It is also meantto provide basic amenities such as water supply,sewerage, drainage, internal and approach roads,street lighting and social inrastructure acilities inslums and low income settlements adopting a ‘wholecity’ approach, including providing subsidized credit. Itis unclear how this scheme will interace with JNNURM. The nal important development is increased eorts in

the private sector to cater to the low income housingmarket as a commercial proposition, though with aocus on households who are low income but not

among the poorest most oten. This is discussed in therecommendations section.

D. DeTeRminAnTS oF

PRogRAm PARTiCiPATion

this section presents results of multivariate analysis

on the determinants of program participation for selected programs.149 The primary objective is toexplore the impact o various actors on the probabilityo program participation holding all other variablesconstant using the 2004/05 IHDS data. While it is notpossible to carry out such analysis or all programs,results are available or social pensions and Annapurna,PDS and housing support. One or more o the ollowingare expected to impact the probability o programparticipation: location o the household (urban or rural),the position o the household on a relative welare

scale, caste o the household, household size,characteristics o the household head, participation o the household in agricultural or animal husbandry, andthe state on which the household resides. Results arepresented or each in turn.

looking at the impacts of wealth on program

participation, the results are in the expected

direction, with poorer quintiles more likely to participate than the reference richest quintile (table 3.12). While this is encouraging, severaladditional observations can be made which strongly

caution against complacency:or several programs (NOAPS, housing, rationcard usage by BPL households or purchasingPDS grains), the signicance levels or the ourthquintile remain very high, and or all programs,signicance levels or the third quintile are highor very high. Well targeted programs shouldnot exhibit such patterns, given the overallpoverty rate.

or all programs, the strength o the eect in mostquintiles is not very strong. Across all programs,

the eect o being in the lowest quintile rangesrom only 1.3 percent (widows and Annapurna) to8.5 percent (housing).

147 Buckleyetal.,op.cit.

148 Seehttp://www.indiaurbanportal.in/JNNURM/2yrs-JNNURM.pd.

149 SeeAjwad(2006).Aprobitmodelwithxedeectswasused.




there is variation across programs in the strengtho the impact o being in specic quintiles. Thecoecients or quintiles across programs varybetween evenly progressive (though small)variations as one moves up the distribution (e.g.,NOAPS and PDS usage) and others where thegradient o coecients between quintiles is lesssmooth (e.g., Annapurna and housing, where thesecond quintile is more likely to participate).

looking at the impacts of caste on program participation, the situation is more complex than for

wealth. This can be seen rom Table 3.13, rom whichseveral observations emerge:

casteisasignicantdeterminantoparticipation

in the programs listed or SC households, and

or ood programs and scholarships or ST

households. This is a positive result, though therelatively weaker position o ST households isalso a cause o concern, and consistent with eldwork nding specic challenges in access or SThouseholds. At the same time, or most programs,being an SC or ST household is less signicantin statistical terms than wealth levels, thoughremains highly so or housing programs or SCand use o BPL ration cards to purchase PDS grain.At the same time, the positive eature o ndingsby caste is that being rom “other” castes and OBCis generally not signicant.

the strengthocastecategories onparticipation

isgenerallyweakevenwheresignicant.

looking at other socio-economic characteristics, the

results on program participation are not strong,

with the exception of rural location (table 3.14). Mosto the indicators which are signicant are in line withwhat would be expected, e.g., household size beingrelevant (though very weakly) or scholarships andsocial pensions. What is more remarkable perhaps is the

“dog that does not bark”, i.e., that both land and animalownership are not signicant correlates o participationin most programs. In contrast, the results on rurallocation are more signicant, though rather weak interms o coecients.

finally, looking at program participation state-wise,

it is clear that location matters as far as program

participation goes, with “location” reflecting a

range of state-specific policy, institutional and other

factors not directly captured in the survey. However,the strength o the locational impacts is not great or

most programs and states. Observations on the state-level results include:

there are noticeable variations across states

in whether the impact on specic program

participation is positive or negative. This iso course to be expected, but the ndingspresent useul shorthand o institutional and

Tab 3.12: Prra partcpat dtrats b at ts, 2004/05

noAPS wd pss Aapra hs spprtBPl Rat card

sd ast 6 ts

Quintile 1 0.0341*** 0.0133*** 0.0126*** 0.0845*** 0.022***

Quintile 2 0.0279*** 0.0079** 0.0157*** 0.0988*** 0.0207***

Quintile 3 0.0172*** 0.0115*** 0.0116** 0.0683*** 0.0142**

Quintile 4 0.0105*** 0.0037 0.0061 0.0453*** 0.0126*

Source: Ajwad (2006) based on the 2005 IHDS data. Quintile 5 as reerence group. ***=signicant a 1 percent level; **=at 5 percent level; *=at 10 percent.

Tab 3.13: Prra partcpat dtrats b sca catr, 2004/05

noAPS Aapra hs spprtBPl card sd ast 6

ts

Other caste 0.0033 –0.0018 –0.0193* 0.0132

OBC 0.0016 0.0014 –0.0154 0.0156

SC 0.0126** 0.0036 0.071*** 0.0195**

ST 0.0058 0.0148** 0.0169 0.0196**

Source: Ajwad (2006) based on the 2005 IHDS data. Brahmin as the reerence group (note that the other social group category excludes Brahmins).***=signicant a 1% level; **=at 5% level; *=at 10 percent.




policy actors in states on specic programs. The ndings – and several relative outliers – areconsistent with examples o high policy prioritygiven in certain states to programs (e.g., Haryanaoers a high elderly social pension due tosupplementation rom the state; UP has a strongemphasis on school stipends; Tamil Nadu has auniversal PDS).

the within-state directions o the impacts on

participationvary notably across programs.Foreach state, the dierent directions o locationalimpacts reect in part dierent policy stances,but also the relative demands o specic programimplementation.

when comparing across programs nationally,

state location – which acts as a proxy for various

geographic, policy and institutional factors – has

highly variable impacts on participation, after

controlling for all other household characteristics

(figure 3.4). There is strong variation across programs inthe importance o state location in explaining programparticipation. For most PDS-related variables, the stateeect explains almost all that can be accounted or.150 Other programs vary, but the eects o state locationcontribute substantially to the explained determinantso participation. There is also a general pattern o stateactors mattering more in programs which are demandingin terms o institutional delivery arrangements.

Tab 3.14: Prra partcpat dtrats b sctd sc-cc caractrstcs, 2004/05

noAPS wd pss Aapra

grtassstac t

s

BPl card sd t ast 6

ts

Rural 0.0106*** 0.0041 0.0019 0.0645*** 0.0343**

HH size 0.0007** 0.0007*** 0.0001 0 0.0012

Female HH head 0.0151*** 0.0907*** 0.0016 –0.0018 –0.001

Age o HH head 0.0009*** –0.0003*** 0 0.0001 0HH head literate –0.004* –0.0025 –0.0015 0.0049 0.0017

HH head completed primaryeducation

–0.0027 –0.0006 0 -0.0044 0.0023

HH owns agricultural land 0.0000 0.0000 0.0000 0.0000 0.0002***

HH owns animals –0.0033 –0.0051** –0.0034 -0.0025 0.0169*

Source: Ajwad (2006) based on the 2005 IHDS data. ***=signicant a 1% level; **=at 5% level; *=at 10 percent.

150 Thoughmuchremainsunexplained,andmoreworkisneededoninstitutionsandpoliciestolookurtherintothe“blackbox”othelocationaleect.

Figure 3.4: Proportion o explained program determinants accounted or by state location, various programs,2004/05


L i f e

i n s u r a n c e

G o v e r n m e n t

a n d m i l i t a r y

H e a l t h

i n s u r a n c e

R a t i o n c a r d

u s e d i n t h e

W i d o w

p e n s i o n s

A P L c a r d

h o l d e r s

B P L c a r d

h o l d e r s

A n n a p u r n a

A A Y c a r d

h o l d e r s

G o v e r n m e n t

a s s i s t a n c e

S c h o o l

s c h o l a r s h i p s

K i s a n c a r d

R a t i o n c a r d

u s e d i n t h e

B o u g h t P D S

g r i a n i n t h e

N O A P S

R a t i o n c a r d

u s e d i n t h e

B o u g h t P D S

g r i a n i n t h e

B o u g h t P D S

g r i a n i n t h e %

o f d e t e r m i n a n t s e x p l a i n e d b y s t a t e s




e. ConCluSionS AnD

ReCommenDATionS

the analysis of this chapter suggests a range of

reforms which would be desirable in protective

programs for india’s poor. Overall, the need orreorm appears to be most acute in PDS, but more in

the nature o incremental improvements or socialpensions, which appear to be perorming alreadyreasonably well (though it would be useul in the nearuture to assess the impacts o the changes introducedunder IGNOAPS). For targeted housing programs, inparticular urban housing programs, the options withinthe current paradigm are in the nature o incrementalreorms. However, market-based innovations in modelso low cost housing or the urban poor suggest thatexperimentation with new paradigms would be wellworth considering, and recent moves by GoI andsome states suggest that there is appetite or greaterinnovation. The options and recommendations orindividual programs are discussed in turn below.

(i) TheBPLsystem

the results in this chapter and chapter 8 indicate that

there is considerable scope to reform the current bpl

system, both the bpl census and ration cards. This is acrucial cross-program reorm, and Government o Indiais currently discussing a serious overhaul o the BPLsystem. Chapter 8 discusses in detail recommendationsor revamping the “backbone” targeting mechanism

or identiying poor households, oering both modestreorm proposals which would retain the existingapproach but with a range o possible improvements indesign, and a more undamental option or rural areas.

(ii) PDS

clearly the “big elephant in the room” as far as

safety net reform in india is concerned is tpds. Thisis or a range o reasons which are presented in this andother reports. Firstly, it remains easily the largest saetynet program. Secondly, it has poor targeting outcomes,

and in many o the poorest states appalling levels o leakage which have persisted over many years. Thirdly,the procurement system on which it relies is becomingincreasingly strained in the ace o gradual liberalizationo agricultural markets in India, both domestically and interms o openness to trade.

looking at results from the poor states in particular,

it is hard to argue that pds comes anywhere near

achieving its food security and poverty alleviation

objectives. however, reform options for pds have

to be assessed with a clear acknowledgement of the

context: technical, political economy, and possibly

legal. This context is o course strongly aected by alsothe commitment o GoI to the Food Security Bill whichwould convert PDS rom a scheme to a legislated right. These include:

reormo PDSis inextricablylinkedtothepublic

procurement system. While the benets o PDSto households are spread across India, the mainbeneciaries o public procurement o grains toeed the PDS are concentrated among armers ina ew states: Punjab, Haryana, some parts o UttarPradesh, and Andhra Pradesh to a lesser extent.Without some reorm o the public procurementsystem – in terms o pricing policy with respect

to the Minimum Support Price and the controlo government in grain procurement morebroadly – there will continue to be large grainstocks purchased each year which need to bedrawn down.

there is a large internal bureaucracy running

PDSwhichislikelytoresistundamentalreorm

options which would undermine their role. TheFCI alone employs around 450,000 people inIndia, and SFCs a urther number. This in itsel is astrong lobby which is likely to resist any changes

in the PDS which would imply either a potentialrole or the private sector in grain provision, ormore undamentally a shit in use o the PDSsubsidy rom ood purchase and distribution tocash or poor households.

despitetheshitattheaggregatelevelromood

decittooodsurplus,thereare–andwillcontinue

tobe–areasothecountrywhichareperiodically

oodinsecure. This reality will continue to supportarguments or a direct ood security role or thestate. At the same time, penetration o private ood

markets has increased sharply in recent years, sothat the actual availability o ood is there with theexceptions o some tribal and dry land areas, andmarket inrastructure o well-developed and sub-markets are increasingly well-integrated. Thus,even with the ood crisis o recent years, in most




areas the challenge is not so much availability perse as price and aordability.

the maturity o the PDS has naturally created

socialexpectationsthatitispartotheabrico

socialpolicy. The results on awareness o PDS(see Chapter 7) are instructive in this respect,and the social constraints o any enorced

undamental change in PDS should not beunder-estimated.

theremayalsobelegalconstraintsontheability

othestatetowithdrawromdirectprovisiono

grainsthroughPDS. The Supreme Court o India,in response to Public Interest Litigation take upby the People’s Union or Civil Liberties in 2001with Union o India, FCI and eventually all stategovernments as respondents, has claried thatArticle 21 o the Constitution on the Right toLie also implies a right to live with dignity. TheSC agreed that one aspect o this was a right toood, with the PDS a central plank o the right. The Court has made various orders subsequentlyin eorts to improve the unctioning o ood-based schemes.151 A point o note is that the initialorder rom 2001 indicated that “what is o utmostimportance is to see that ood is provided to theaged, inrm, disabled, destitute women, destitutemen who are in danger o starvation, pregnantand lactating women and destitute children,especially in cases where they or members o theiramily do not have sucient unds to provide ood

or them”.152 The implications are taken up below.

in light of this context, three reform options are

presented for pds, which could themselves have

variants borrowing from the approaches outlined.

Each approach is outlined in detail below. It is stressedthat none o the options assumes any necessarydecrease in the aggregate level o public spendingdevoted to social assistance or the poor:

anincrementalapproachtoreormwhichwould

retainthecurrentPDSmodelbutwithahosto

improvementsinthepolicyandimplementation

systemstoincreaseefciencyromitsotenvery

poorstate.

anintermediatereormoption,whichwouldretain

a ood-based entitlement program but introduce

private sector participation in grain procurement

anddeliveryandamoreundamentaloverhaulo

thePDSadministrationthroughuseosmartcards.

undamental reorm which allows or cash

transers instead o ood-based transers,

either when the state proves itsel unable to

ulllitsoodtranserobligationsorbyoering

households the choice o grain or the cash

equivalentothegrainsubsidy.153

the overall position of this report is that fundamental

reform options for pds should be considered and

that offering households the option of a cash

transfer - while retaining the core food security

and buffer stock functions of fci, and ensuring pds

grains in areas where access is a genuine issue – is an

attractive option. While there is certainly potential to

improve PDS perormance (as the case o Bihar in Box 3.3shows), there remain a host o structural issues witha SP program so dependent on many intermediariesoperating within such weak governance systems. In thatlight, the incremental approach represents a triumpho hope over experience which cannot be expected toresolve the situation o PDS in much o the country. Thelong term problems o PDS cannot be solved quicklyor with a single prescription or all states and all time.However, oering options which allow householdschoices in how they benet rom the massive publicsubsidy o PDS could allow or exibility, greater

eciency, and accountability or the system. Whilethe proposed Food Security Bill will potentially have amajor impact on the legally possible range o options, itis hoped that it is not too prescriptive, but leaves openapproaches which would appear to have the possibilityto improve the welare o poor households. In this light,the deault provided or in the consultation drat o the Bill or provision o cash where the PDS system isunable to provide adequate and decent quality grainsseems sensible. The system has so clearly demonstratedits inability to do so or so long in so many places thatruling out such an option seems likely to leave manypoor households with a stronger legal right but nobetter a real world situation.

151 Auseulsummaryandbackgroundmaterialscanbeoundatwww.righttooodindia.org.

152 SeeSupremeCourtOrder,o23rd July,2001.

153 ThisoptionhasbeentakenbyarangeoIndiancommentatorsovertheyears,includingmostrecentlyKapuretal.(2008)andPanagariya(2008).




the “incremental approach” to reform largely

follows the line of goi in its most recent evaluation

and the nine point action plan, and would include

several key elements:

introducing a range o measures to make

honestlyoperatedFPSnanciallyviable,sothat

leakageisnotanancialinevitabilityothePDS

atthatlevel. The measures proposed – many o which are in practice in some states - include:

(i) doorstep delivery o grains to FPS at the cost o the state (currently being done in 17 states/UTs);(ii) provision o rent-ree premises by panchayatsor FPS operations; (iii) allowing FPS to sell non-PDS commodities which will both increase theirviability and increase the likelihood o being open

more days in a month. States such as HimachalPradesh and Gujarat are already moving in thisdirection, which is supported by the PlanningCommission in its PDS report; (iv) ensuringthat FPS have a minimum catchment area andturnover o grain which allows or sucient scaleto ensure viability. The Planning Commissionestimates that substantial share o FPS ail to meetthis benchmark. There is an obvious challengeto enorce such a requirement in remote and

inaccessible areas, which are likely to be thosemost reliant on FPS. One option or “squaringthe circle” in this respect could be the use o mobile FPS vans such as Himachal Pradesh isalready using in a number o remote districts; and(v) in line with Planning Commission suggestions,

B 3.3: PDS d cp rr Bar – Bttr rsts a pr stat

As noted earlier, Bihar has traditionally been one o the worst perorming states in PDS, with very low coverage rates, extremely high

leakage o grains and deep dissatisaction among users. In response to this, the Government o Bihar in 2007 introduced ood coupons

in the PDS in an eort to generate greater awareness o rights, accountability and perormance. It should be stressed that the program

was not “state o the art”, either in the technical design o the coupon or in the policy ramework (e.g., in terms o linking coupons

rom one period to releases o FPS or the next period). Despite this, initial evidence rom a World Bank-nanced beore and ater

evaluation indicates signicant improvements in PDS perormance. A pre-reorm baseline was carried out with the Institute o Human

Development in early 2007 and a ollow up survey in 2008 just over one year later with a panel design. The survey was done in oneurban district (Patna) and three rural districts (Aurangabad, Purnea, and Siwan) and the sample size was 1,692 households. Surveys were

also conducted with FPS dealers and village gures, as well as key inormant interviews and ocus group discussions. The key ndings,

presented in Vashisht et al. (2009) were:

overall, around 59 percent o eligible BPL households had received coupons, ranging rom 74 percent in Aurangabad to 50 percent

in Purnea. This gure was higher (84 percent) among AAY households, who were prioritized in all districts.

inormation was critical, and the major sources o inormation on the coupon scheme were local leaders (30 percent), PDS dealers

(28 percent), ocials (15 percent) and riends/amily (9 percent).

prior to the reorm, only 2 percent o rural BPL households were accessing PDS rice and around 60 percent o Patna BPL households.

Following the coupon introduction, this rose to nearly hal o rural BPL households. Those who did not have coupons continued

to have very low access.

the eective transer value to those with coupons was just under 5 percent o median per capita income or BPL and 12 percent

or AAY households, based on the PDS and market price dierential.

or those accessing PDS, the grains now represent around 26 percent o total monthly rice purchases or BPL and 48 percent or

AAY households.

around 90 percent o BPL households rated the coupon system an improvement over the previous system, mainly due to the

sense o reduced cheating o the system by FPS dealers.

there was a secondary market or coupons due to the lack o name and beneciary ID on the coupon, and there were issues or

illiterate beneciaries.

the coupon system per se is unable to address the underlying issue o misidentication o households in the BPL identication

process but was seen to have increased public scrutiny o that process.

delivery o grain by SFC remained erratic even with the reorm and problems such as low dealer ocial margins are as yet

unresolved.

Source: Vashisht et al. (2009).




increase the margin on grains or FPS to 2 percento the economic cost.

deepening ongoing reorms in management o

FPS.States – both rich and poor - are increasinglymoving rom FPS operated by private operatorsto operation by community-based institutions,including PRIs, SHGs, and cooperatives (e.g., in

Tamil Nadu in 2009, almost 90 percent o FPSare run by cooperatives). This seems eminentlysensible in terms o having operators who aremore accountable to their communities and morelikely to operate the FPS on a regular basis. Resultsrom the SPS surveys on saety nets are instructivein this respect. Despite kerosene distribution inPDS being notorious or being high leakage, theincidence o kerosene rom PDS in Orissa is armore progressive than that o grains. A simpleexplanation appears to be that kerosene has beenthe rst commodity transerred to operation by

women’s SHGs in the state.154 By early 2009, about83,000 FPS (out o the 4.98 lakhs shops acrossthe country) had been allotted to cooperatives,women’s and other SHGs, PRIs, etc.

decentralization o grain purchases. This wouldhave several possible advantages, and a numbero states are increasingly exploring this option intheir grain purchasing. Firstly, locally purchasedgrains are more likely to accord with local dietarypreerences, and hence be in greater demand.Secondly, local procurement could spread the

economic benets o the procurement subsidyrom the current concentration in a ew states(two o which are very well-o) to armers inall states. Thirdly, the costs o transportationand storage o grains are likely to be reducedconsiderably. A number o states have started tomove in this direction, including lagging statessuch as Chhattisgarh and Orissa, though how arthis can advance beore hitting resistance on thesupply side in traditional supply states such asPunjab and Haryana remains to be seen.

makingoptionsorhousehold-levelotakeromFPS more exible. The most obvious reorm inthis respect is obviously allowing, as a numbero states already do, or weekly drawing o the

household’s allocation. The only constraint onthis is the FPS being open on a more regularbasis, but that should be addressed through themanagement reorms outlined above. A secondmeasure which may be more challenging rom abureaucratic perspective – but seems desirable –would be allowing BPL and/or AAY households tocarry over their monthly ration rom one month

to another in months when they had less needor their ull ration. Given seasonal uctuationsin PDS to market prices, this could imply somelumpiness. A third option would be allowinghouseholds a more exible mix o grains andother basic commodities up to the value o theirration subsidy, an approach which GoI plans topilot in the coming year (see below).

strengthening monitoring o PDS operations. Anumber o measures to increase transparencyin the operations o PDS are easible within

the current ramework and are indeed beingimplementing in several states. For instance, oneelement o management reorm may be moredirect community oversight in PDS operations, e.g.,through community verication o PDS deliveryquantities where they are not already operatingthe FPS and/or through the involvement o PRIs invigilance committees to monitor FPS. Some stateshave made some progress in implementing asystem o monthly certication by PRIs/vigilancecommittees or delivery o ood grains to FPSand allocation to ration card holders on time. In

addition, public display o BPL lists and o districtand FPS-wise allocations o ood grains or publicscrutiny as proposed under the nine point actionplan would improve transparency. The review o BPL/AAY lists in 14 states as part o this processhas already led to the elimination o 100.51lakh bogus/ineligible ration cards. Concurrentevaluations o PDS perormance by NCAER andIIPA have been commissioned in recent years bythe Department o Food and Consumer Aairs.

strengthening the use o Inormation and

Communication Technology (ICT) in the PDS atthe beneciary end in order to promote more

robust identication and in reducing leakage. This can take a variety o orms, some – such as

154 SeeDevetal.(2007).




in Andhra Pradesh already – simple biometricidentication but not ully integrated into a “smart”system, others involving bar coding and otherapplications. The range o options or greater ICTuse in the PDS system have been exhaustivelyreviewed in a report or the GoI Ministry o Financenanced by the World Bank, which also conducteddetailed easibility assessments in Anand district

in Gujarat and Thane district o Maharashtra in2007.155 In addition, the use o new technologiessuch as GPS or tracking movement o vehiclestransporting PDS commodities. Funds or pilotingthis technology in Chhattisgarh, Delhi and TamilNadu were sanctioned in 2007-08. In addition,computerization o TPDS operations have beeninitiated in several states.

conductinganindependentreviewoFCI’spricingstructure,withaneyetoreducingtheeconomic

costs o grain procurement and handling. It

appears that FCI is inecient in its handling o grains, and the costs o this are naturally borne bythe budget and the end beneciary. Despite this,previous reviews have not been very probing intheir eorts to look at possibilities or improvedeciency in FCI. A truly independent review o their cost structure with a prior commitment by GoIto implement its ndings would seem desirable(though the technical demands o “ecient” costestimation in the ace o such a dominant marketposition should not be under-estimated).

anotheroption is introduction o oodstampsor

coupons,anapproachthatisprevalentinAndhraPradesh and Rajasthan, and was introduced in

Biharin2007. The current ood coupon approachinvolves coupons which are redeemable only inthe FPS network, though there is no reason not toallow or a coupon which would be redeemablealso in approved private ood retailers (see below).Coupons may have attractions as a tracking andleakage-reduction tool i FPS owners are able toreplenish their grain stock based strictly on thebasis o redeemed coupons. In Andhra Pradesh, it

is estimated that the introduction o coupons hasreduced leakage in the PDS by up to 25 percent.

The system has some obvious risks, includingorgery o coupons. Another issue may be thedevelopment o a secondary market or coupons(though how much o a concern this is i poorhouseholds place more value on the cash thangrains is a question). The Bihar experience withood coupons has been closely assessed througha two round survey-based assessment (see

Box 3.3).156 While only around 60 percent o eligiblehouseholds had been provided with ood couponsin the rst year o implementation, access amongthem dramatically increased as a result o thereorm, rising rom only 2 percent to around hal o BPL households. Bar coded coupons/ration cardshave been introduced under TPDS in six states.

the above options can be considered a minimalist

approach to pds reform. the option of allowing grain

purchases with coupons from approved private food

retailers would represent a more bold form of pds

reform which feasibility studies indicate is viable.Some o the potential attractions o such an approachinclude competition between PDS and private traders(which could act as an accountability check and perhapsincentivize eciency improvements in FCI and SFCs),greater requency o availability in areas where FPSopen irregularly, and possibly reduction in the transportand holding costs o PDS or the portion o grainspurchases rom private traders. The United ProgressiveAlliance (UPA) Government in 2007 announced plans topilot such a reorm in 20-50 districts, using coupons or

beneciaries which can be redeemed in neighborhoodstores other than FPS (“kirana” stores), though thereappears to have been limited progress. In addition,beneciaries would be allowed to have a more exibleorm o ration, allowing or purchase o any mix o grains, pulses or other household basics up to the valueo the coupon. This reorm option was also mentionedin the 2010 Economic Survey. While details remain tobe worked out, the initiative seems worth pursuing andevaluating.157

a more technically advanced form of food coupons

could be introduction of “smart cards” in the pds,which could be redeemable also at approved private

155 SeeCal2Cal(2007)oraPDSsmartcardeasibilitystudyproducedatrequestoMinistryoFinance.

156 SeeVashishtetal.(2009)whichanalyzesurveysromapre-reormbaselineandaollow-upsurveyjustoverayearatertheintroductionooodcoupons.

157 TimesoIndia,July3,2007,“FoodcouponstoendPDSmess?”,seehttp://timesondia.indiatimes.com/news/india/Food-coupons-to-end-PDS-mess/articleshow/2165884.cms,lastaccessedonSeptember22,2009.




traders and/or fps.158. A smart card system can acilitatetwo key unctions: individual identication and remotetransaction processing/storage. Smart cards have theability to store and record a large amount o programand authorized biometric inormation (signature orngerprint image) that can be matched to the actualngerprint or signature o individual involved in atransaction. In the context o the ood ration system,

the card can store inormation on the identity o theindividual, eligibility or rations, quantity, price andtime intervals at which he/she could be suppliedrations, etc. Point o Service (POS) terminals are simplemachines that read the cards and have the capabilityo authorizing the transactions via phone lines or theinternet or recording the transactions on the smart carditsel. Further inormation on smart cards is in Box 3.4.

smart card systems are not new to india or to south

asia. Several experiments are already in operation,and the Rashtriya Swastya Bima Yojana (RSBY) healthinsurance program introduced by GoI in 2008 clearlydemonstrates that smart card applications are veryeasible or wide scale use even in poor and lowcapacity settings, provided the right mix o institutionalplayers is involved and there is rigor in standard settingand implementation (see Chapter 5). Indeed, there isdiscussion presently o “piggy-backing” other programson the RSBY cards, and this is technically possible.Another notable small scale private initiative is that o Swayam Krishi Sangam (SKS) in operation in one o thepoorest districts o Andhra Pradesh (in Medak). The card

is being used essentially as electronic passbook to recordall the transactions or micro-nance loans. Recently,GoI has provided in the 2008 and 2009 budgets undsor piloting o a smart card-based reorm in Haryana andChandigarh which would also allow access to authorizedprivate dealers. Box 3.4 gives details on other SouthAsian experiences.

the parlous state of pds as reported by goi, national

researchers and this report, suggests however that a

more fundamental reform of pds is warranted which

would introduce the option of cash transfers.159

The ollowing paragraphs outline two variants o aundamental reorm option or PDS: (i) switching to acash transer or the poor, or oering options or poorhouseholds between ood and cash; and (ii) switchingto a conditional cash transer, in order to leverageimproved human capital outcomes rom the hugespending on PDS.160 Neither option would eliminate theneed or ood buer stocks, nor or the continued use o ood-based transers or specic situations (e.g., whererelie aid is needed due to climactic or other disasters)or specic areas (e.g., remote or dry land areas), andpossibly specic population groups (e.g., those notedin the Supreme Court order above, which largelyconorm to the AAY category presently). Despite theongoing debate around the Food Security bill, Indianpolicymakers appear to be willing to explore suchoptions. For instance, Government o Delhi recentlyannounced a “cash or ration” pilot in one district

which would provide ` 1,100 per month to women inpoor households (an amount which would purchasearound 30 kg o rice at market price as o mid-2009).161 The 2010/11 Economic Survey suggests that the GoIis considering the introduction o ood coupons orhouseholds with a lumpsum entitlement (rather thanspecic amounts or rice, wheat, sugar, etc.) that can beencashed at a PDS store o their choice.162

the elements of a transition from a food to cash

based pds could be the following:

reorm would have to start at the procurement

endothesystemiitistobeeasible,andinvolveareorientationoFCI’sunctions. This essentiallyinvolves a reduction in government controlsover grain markets and procurement operations.Even in such a reormed system, FCI could stillbe expected to play important roles. Firstly, itcould compete with private players in the market,relying on the economies o scale in operations,existing inrastructure, distribution networks andother advantages to be competitive. Secondly,

158 GoIhaslauncheditspilotothisapproachinHaryanaandChandigarh.AndhraPradeshhasalreadygonesomewayinthisdirectionbyrecordingbiometric(iris)identicationoallBPLrationcardholdersinacentraldatabase.Thisallowedorsignicantreductionsinduplicateandghostrationcardholders.SeeCal2Cal(2007)oradetaileddiscussionothetechnologicaloptionsandeasibilityosmartcardsinPDS.

159 See,orexample,RadhakrishanandSubbarao(1997).

160 Inessence,this isthestrategythatMexicoollowedinitstransitionromtheso- called“tortillasubsidy ”totheCCTprogramProgresa(nowcalledOpportunidades).

161 See HindustanTimes, August27, 2009: Pro-poorschemes getthe thumbs-uprom planpanel, see http://www.hindustantimes.com/Pro-poor-schemes-get-a-thumbs-up-rom-plan-panel/H1-Article1-447365.aspx,lastaccessedonSeptember22,2009.

162GoI2010.



CHAPTER-3: Protective Programs 1

and very importantly, FCI could retain a role as

manager o India’s buer stocks o grain and

perhaps their distribution in situations or areas

where they were needed. Finally, to the extent

that specic groups or areas continued to receive

PDS grains, FCI could continue to perorm thatdistribution unction in coordination with SFCs.

i procurement reorm could be achieved,substantialresourceswouldbereeduporuseinacashtranserprogramorthepoor.In essence,

B 3.4: Sart cards d prras

est ssts tr dp ctrs a s sart cards ad PoS t a:

the individual beneciary receives the card rom the welare/Ministry oce where it is “recharged” with the relevant inormationand the amount o rations he/she is entitled to.

once the individual goes to the shopkeeper – public or private - with the card, the transaction is promptly recorded both on thecard and on the POS device that each shop keeper maintains.

the transaction is backed up on the handheld device (Point o Service - POS) or upload on the central database and or beingtransmitted to the bank to reimburse the shopkeeper. Such duplicate storage is to ensure that data is not lost in the interim period.Such mechanism allows or a decentralized processing o transactions when there is no online access to the main database aswould be the case in much o India.

once every week or ortnight, the shopkeeper would take the handheld device (or the inormation contained in it) to a local agency(e.g., a bank or the concerned Ministry oce) to upload all the transactions to the centralized system and to be compensated orthe transactions undertaken during that period, preerably transerring money to the shopkeeper’s bank account.

Smart card systems are not new to India or to the region. Several experiments are already in operation, and RSBY is a major case o apparent success. For example, ICICI has instituted a smart card system or health insurance, and the Army uses smart cards or its healthcards. One notable small scale private initiative is that o Swayam Krishi Sangam (SKS) in operation in one o the poorest districts o AndhraPradesh (Medak). The card is being used essentially as electronic passbook to record all the transactions or micro-nance loans. AndhraPradesh is also piloting smart cards in its social pension program, Kerala operated a PDS smart card pilot in Trivandrum during the rsthal o the 2000s, and states such as Gujarat already use smart cards on a wide scale or purposes such as drivers’ licenses. In neighboringBangladesh, smart cards have been introduced by various institutions, notably Grameen Bank and BRAC, largely or channeling micro-nance activities, but also or other activities. In Pakistan, the National Identity Card is serving also as a smart card as it is used not only orcasting votes, but or purposes such as scholarships.

The inormation ow o smart card use in PDS is reected in the graphic below rom the Cal2Cal report:

Database at Taluka

$

Bank

(4) Permit Generation for Stock upliftment

FPS OWNER’s

Smart Card

F P S O W N E R ’ s

S m a r t C a r d

FPS OWNER’s

Smart Card

FPS OWNER’s

Smart Card

(5) Card brought in for Grain upliftment

(6) Card updated with stock issued

Godown

(2) Generated Challan for Grain upliftment

(1) Update Records, Calculate Demand

( 3 ) P a

y m e n t t o B a n k

FPS OWNER

Source: Cal2Cal (2008).




public unds that are now spent on the large oodsubsidy bill o GoI would be reed up to be used ordirect cash grants to the poor. The analysis o thisreport shows that regular cash grants are subjectto less leakage than ood in nearly all cases, are areasier to administer, and are highly valued by thepoor. There is also no solid or systematic evidencerom eld work o the concern that cash grants

are drunk or smoked by the men in recipienthouseholds, though o course that cannot bediscounted as a possibility.

there are several obvious challenges and issues in

such a proposal. They include:

likely strong resistance rom the stakeholders

outlined above in the discussion o political

economy constraints. This is natural. The mainway o managing this risk is to have a strategy or“reinvention” o the FCI along the lines outlined,

so that it becomes an active player in the newsystem, with important residual unctions likebuer stock management, rather than simply a“loser” in the reorm process.

resistance rom FPS owner groups. Given theexistence o over 400,000 FPS owners, thoughtwould need to be given to how to manage thisrisk. The rst element o a strategy would becontinuing transer o FPS unctions to PRI/CBOswho are not “sole purpose” organizations in theway that FPS owners would be, and hence are lesslikely to resist changes that may be supportedby their communities. Secondly, a sub-set o FPSwould continue to be needed or the continuedPDS unctions which would continue even in areormed system. Thirdly, the government couldas necessary support transitional livelihoodssupport or FPS owners who lost their businessesas a result o reorm (though this has not provennecessary to date in states which have transerredFPS ownership rom private individuals tocommunity groups).

legalimplicationswithrespecttoexistingSupreme

CourtdecisionsandtheproposedFoodSecurityBill. This is an important issue, as any reorm mustbe consistent with the law o the land, more sowhen it ows rom constitutional provisions. One

reading o the SC order is that Government maynot be constrained i it provided sucient cashtransers to the identied groups to allow themto purchase ood. A more demanding readingsuggests that a legal obligation directly to provideood may apply to the groups noted. At thesame time, the expansion o midday meals andIntegrated Child Development Scheme (ICDS),

together with the existence o other programsor the destitute such as Annapurna (and o course social pensions) goes some way towardsmeeting such an obligation i supplemented bya cash transer. Clearly, however, this would needclose consideration o the legal issues and theirimplications or a reorm strategy. Another way o approaching this may be to oer households theoption o grains or cash and letting them decide. This would presumably meet the state’s legalobligations while oering choice to households

in exercising their rights. the existence o areas where ood insecurity is

chronic. Despite the aggregate move to oodsurplus, there is a natural concern about ensuringood security in these areas. It may be thatPDS continues in those areas until there is anassessment o the impact o transition to cash inother areas.

aggregate evidence indicates that caloric intakes

are falling in india, even among the very poor.163 in light of this, moving to cash for pds may seem

counter-intuitive. However, the counter-balances tothat in the above proposal would include: (i) buerstocks remain an important part o the system,possibly with a “buer stock plus” to allow a moregenerous provision or grains or emergency andspecial situations; (ii) the recent expansion o middaymeals may or children provide a caloric oor (seebelow); and (iii) it is proposed that AAY continue toprovide ood or the poorest, as would Annapurnaor a share o the elderly destitute; and (iv) ongoingeorts to improve the perormance o the nutritionalprogram under ICDS could – i eective – provide

improved coverage o poor inants and pregnant/lactating women. Cumulatively, these by no meanssuggest a wholesale withdrawal rom direct provisiono ood or the poor.

163 SeeDeatonandDrèze(2008).




the second variant of a cash-based reform of pds

would be introducing a conditional cash transfer

(cct) rather than a simple cash grant as outlined

above. The basic arguments or such an approach – andthe political economy and legal constraints – are similarto those or a simple cash grant, though conditionalizingtransers may ace more legal complexities. The typeso conditions that could be considered would varyaccording to household characteristics, but couldinclude registration o girl births and school attendanceor households with children. For other householdtypes, conditionality may not be appropriate, especiallythose in the categories outlined above. The obviousattraction o a CCT approach relative to a simple cashgrant would be that PDS spending could be used toleverage improved human capital outcomes, or othersocially desirable goals such as better treatment o girlchildren. The additional challenges would include theadministrative demands o operating a CCT, but the

Janani Suraksha Yojana (JSY) institutional birth grantand other state-specic experience in India suggeststhat such demands can be dealt with.

in light of various constraints and given the

fundamental nature of such a reform, it would be

advisable to experiment with a cash-based pds, perhaps

focusing on more food secure states/districts first. Itwould also be sensible to ensure that the groups coveredunder the Supreme Court order continue to receivegrains, possibly in addition to a cash transer. Such apilot would need careul monitoring and evaluation to

assess impacts and ensure that ood security was notcompromised, but or poorer states in particular seemsa more promising way o ensuring (albeit in an indirectmanner) the right to ood.

(iii) Socialpensions

the evidence of this chapter suggests that social

pensions are a reasonably effective part of the indian

sp system, and their enhancement in coverage and

central financing in recent years is well directed.

In light o this, the reorm options or social pensions

are more o an incremental nature, both in terms o relative spending/coverage priority, and in terms o improvements in current policies and implementation. The main recommendations are:

there is a need in a number o states or better

educationoofcialsandotherinvolvedinsocial

pension administration on eligibility policies.

Field work in several states nds either partialknowledge or problematic interpretations o previous eligibility criteria on “destitution” (nowmodied to BPL) and even the reorms under NSAPare likely to ace some continuing problems o identiying the poor. Following a review o policy,a more thorough awareness raising and perhaps

development o implementation guidelines couldhelp improve the situation.

morebroadly,asprogressismadeonexpansion

o social security to the unorganized sector, itwillbecriticalorthosemanagingsocialpension

policy development to be involved in thinking

throughoptionsorpensionexpansion,andthe

complementarities with social pensions as a

possible“zeropillar”oanycontributorysystemortheunorganizedsector.

centralmonitoringoNSAPperormanceshould

be urther strengthened, despite the relianceonACAratherthanCSSnancingmode. Socialpensions are one o the ew major nationalprograms or which simple consolidatedreporting on various perormance indicators isnot available in annual reports o the Ministry o Rural Development. At a minimum, this wouldbe desirable. A welcome recent initiative is thecomputerization o NSAP beneciaries thatsignicantly increases transparency and enablesthe central Ministry to monitor outcomes. States

are currently in the process o moving to a ull-edged MIS or NSAP.As importantly, the centralMinistry could act as a more eective conduitor sharing o good state-level experience indierent aspects o policy and implementation.

experience suggeststhatthe previousund ow

modelosendingsocialpensiontransersdirectly

to DRDA level is preerable to routing through

state treasuries, and that its reintroduction

should be considered. The strongest argumentor this is evidence o even rich states such asGujarat diverting social pension transers or

other purposes, something that is less likely withDRDA routing. In addition, delays in on-paymentby state treasuries could be avoided with sucha model. However, this potentially entails apolicy decision to make the program a centrallysponsored scheme.




theveriicationprocessorcurrentbeneiciaries

bystatesneedstobemaderegular,andaprocess

orremedialactiondeveloped.Presently, simplechecks such as comparison o census andbeneciary inormation by district is typicallynot done, and has proven very inormative wherehas been done in identiying outliers on the upand downsides (e.g., in Karnataka). This would

allow a more targeted process o perormanceaudit. In addition to state departments, theremay be a potential role in such an enhancedprocess or PRIs.

areviewopaymentsystems orsocialpensions

wouldbedesirableinanumberostates,aswould

athrougheorttoreconcilesometimesdivergent

locallevelandstatelevelreportingonbeneciary

numbersandotherinormation.

(iv) Targetedhousingprograms

while there are clearly some significant challenges

in making the targeting and performance of targeted

housing programs more equitable and efficient,

specific recommendations on improvement are more

difficult to suggest. Nonetheless, some suggestionsinclude:

attemptto developand implement mechanisms

in states or minimizing the signicant rent-

seeking that appears to be happening in IAY.

This is inherently challenging so long as benetsinvolve large lump sums. However, the nature o

rural housing needs and behavior among the poorsuggest that the program can be better adaptedto needs.

ensure that saeguards in current guidelines

are actually enorced. The recent introductiono “permanent waiting lists” based on the BPLlist and the requirement o displaying thesewaiting lists in a public area (e.g., the wall o thepanchayat building) is the rst step in increasingtransparency in the program. In this respect,options such as social audits seen in the Mahatma

Gandhi National Rural Employment GuaranteeScheme may oer an additional mechanism.

A second obvious improvement would be toprovide or direct transers to households via thebanking system or post oces. Such a reorm inIAY in Bihar has been introduced recently, and eldvisits indicate signicant reductions in leakage o unds due to the reduction in intermediation byocials in the benet payment process.

conductadetailedstudyonpracticesamongtherural poor in housing improvement, to explore

optionsorbettermatchingschemedesignwith

needsandpractice.

a longer term option for targeted housing reform

may be exploring possibilities for more market-led

provision of housing, particularly in urban areas.

Experience in some metros may provide guidance here,and exploring the role o the private sector as nancierand constructor but with subsidies to households seemswarranted. There are a range o challenges in market-

based solutions which are particularly acute or theinormal and sel-employed sectors o the workorce dueto diculties in credit assessment, the need to mitigaterisks or lenders, and transactions costs. Nonetheless,small scale experiences o Micro Finance Institutions(MFIs) such as Swadhaar, Ujjivan and BASIX, and interestrom small and medium housing nance companiesindicate both interest in non-traditional market playersin serving the urban poor or housing upgradationneeds. Initial assessments indicate that market-basedsolutions may be possible or households with monthlyincomes in the range o ` 4,500-8,000.164 In addition,

there is a need to integrate housing delivery underIAY into a larger process o acilitating access to sae,sustainable and adequate housing. This could includeaccess to credit in order to meet the unding gapbetween the IAY subsidy and the cost o housing as wellas access to environmentally sustainable technologiesand building materials and services to assist people inconstruction.

the more fundamental question on housing

programs for the poor is the extent to which they should

remain as standalone css, or might more usefully

be allowed for within an sp (or generalized) block grant system.165 The JNNURM approach o having an

164 SeeMonitorGroup(2007)orauseulmarketassessmentobothdemandandsupplysidesolowcosturbanhousingoptions.

165 AproposalalongtheselineshasbeenmadebyKapuretal.(2008)usingIAYandSGSYundsaspartoanenhancedPRIblockgrant.




option within a larger program but requiring morepro-active proposal development and managementon the part o local authorities in order to use centralunds or low-income housing seems worth exploringin the context o IAY also. This would be moreconsistent with giving states/cities greater localdetermination in use o CSS resources. Whatever theapproach, it would certainly seem that innovation is

needed in the area o public subsidies or housing orthe poor. It is also important to view these programs inthe context o the larger housing and habitat policy orthe country.

(v) Conclusion

the recommendations above look at each protective

program in isolation, but would in a more strategic

framework also need to be considered jointly.

This overall interaction and ramework or the socialprotection system is taken up in Chapters 6, 7 and 9.In short, it stresses the critical importance o a social

assistance “pillar” o the Indian social protectionsystem, but also the desirability o consolidation acrossprograms, probably with certain categorical top-ups onbenets and possibly specic eligibility criteria.



C HA P T

E R

4Public Works and Promotional Programs



CHAPTER-4: Public Works and Promotional Programs

In addition to social assistance programs, India has hada long term emphasis on public works programs andprograms which aim to help poor households movesustainably out o poverty. In recent years, both have

been subject to increased political attention, unding,and eorts to improve poverty reduction outcomes. This chapter looks at the experience with public worksin India. It also looks at three key promotional socialprotection programs: targeted subsidized credit or thepoor, school stipends, and the midday meal programin schools.

The key ndings o the chapter are:

Administrative data indicate high coverage o the Mahatma Gandhi National Rural EmploymentGuarantee program (MGNREG) relative to

previous public works programs, with impressiveinclusion o SC/ST and women workers. Whilethe design o MGNREG addresses some o theproblems in previous public works programs, eldstudies highlight several challenges in MGNREGimplementation. The uneven implementation

experience across states provides a richopportunity or cross-state learning to achievebetter and more transparent impacts. A numbero innovations in MGNREG design – including

social audits – seem worthwhile to mainstream inother anti-poverty programs.

Like its predecessors, the Swarnajayanti GrameenSwarozgari Yojana (SGSY) remains a poorlyperorming program, and is currently beingsignicantly restructured under the National RuralLivelihood Mission (NRLM).

While school stipends are expanding, theirtargeting perormance remains modest, and thereis a need to link their receipt more systematicallyto actual attendance rather than enrolment only.

The recent expansion o the midday meal(MDM) program is warranted by the ndings o positive impacts on enrolment, but more work is needed to understand their impact on bothother educational indicators such as retention,and on nutritional outcomes. Government o

Chapter–4

Public Works and Promotional Programs




India studies also point to concerns on leakagecommon to other ood-based SP programs whichsuggest a need or more careul monitoring andevaluation o the delivery mechanism.

A. PuBliC woRkS PRogRAmS

since the 1970s, public works have been an important component of the indian safety net, with a succession

of programs, both centrally sponsored and state-specific. The assessment below ocuses on the majorcentrally sponsored public works programs. Table 4.1describes the evolution o public works programs inIndia since 1980. While changes in workare programshave been requent, much o the development hasbeen rebranding rather than undamental reorm.166 In the 1990s, the most signicant policy shit wasthe increased role or PRIs. However, even this shit,which is clear in the guidelines o workare programs,

has been more mixed than policies might indicate.

Studies suggest that, at least prior to the National RuralEmployment Guarantee Act (MGNREGA), top-downplanning continued to dominate, leaving little scope orcommunity participation.167

the most recent, and fundamental, policy shift in

2006 has been from scheme-based provision of rural

works to a legislatively-backed 100 day employment

guarantee under national rural employment guarantee act (subsequently renamed mahatma

gandhi national rural employment guarantee act

or mgnrega).169 The National Rural EmploymentGuarantee Act was notied by the Indian Parliamentin September 2005 and became operational romFebruary 2006. Initially it operated in 200 backwarddistricts, expanded to an additional 130 districts rom2007 (called respectively the rst and the second phaseo implementation).169 The remaining districts in thecountry were notied under MGNREGA with eectrom April 1, 2008 (the third phase). Currently, theprogram covers the entire country with the exception o

Source: CSE 2008 and GoI Exenditure Budget. Note the 11th Plan allocation or MGNREG is till 2010/11.

Tab 4.1: et pbc rs prras ida, 1980 t 2006

yar Sc Prar bjct Pa Prd Acat ` cr

1980 National Rural EmploymentProgramme (NREP)

To employ unemployed andunderemployed workers to buildcommunity assets

6th

7th

980

1,682

1983 Rural Landless EmploymentGuarantee (RLEG)

To provide 100 days o guaranteedemployment to one member rom eachrural, landless household

6th

7th

500

2,412

1989 Jawahar Rozgar Yojana (JRY) Merged NREP and RLEG 7th

8th

2,100

15,4341993 Employment Assurance

Scheme (EAS) To provide employment during leanagricultural season

8th

9th

5,3405,660

1999 Jawahar Gram Samridhi Yojana (JGSY) To develop demand-driven ruralinrastructure

9th 6,267

2001 Sampoorna Gramin Rozgar Yojana (SGRY) Merged EAS and JGSY 9th

10th

6,20021,440

2004 Food or Work Programme (NFFWP) To generate additional supplementary wageemployment and create assets

10th 6,000

2006 National Rural Employment Guarantee Act(recently renamed Mahatma GandhiNational Rural Employment Guarantee ActMGNREGA)

To provide 100 days o legally guaranteedemployment to all rural households;create community assets and empowercommunities

10th

11th

11,300

111,000

166 CAGreerstothisprocessas“revampingandrechristening”(seeCAG2000).

167 Mehrotra(2008).

168ThishasrecentlybeenrenamedtheMahatmaGandhiNationalRuralEmploymentGuarantee(MGNREG),tothisreportusesthisacronym,MGNREG,toreertotheprogram.

169 Duringthersttwophases,districtsthatwerenotcoveredbyMGNREGcontinuedtobecoveredbySGRYandFFW.



CHAPTER-4: Public Works and Promotional Programs 1

districts that have a hundred percent urban population.MGNREGA guarantees up to 100 days o unskilled work per rural household per year on public works projects. The work is to be provided on demand and is paid on apiece-rate basis such that a normal worker can earn thestate-specic minimum wage rate.

the guarantee makes mgnreg an innovative example

of a rights-based approach to poverty alleviation.

A description o some o the basic design eatures o MGNREG is provided in Box 4.1. There are several aspectso the scheme that distinguish MGNREG rom earlierpublic works programs like the Sampoorna Grameen

B 4.1: k atrs mgnReg

100 days o work per rural household per year guaranteed upon demand. Each rural household is entitled to a ree job card withphotographs o all adult members living in it. A job card holder may then apply or employment and the government is liable to providethe same within 15 days, ailing which a daily unemployment allowance has to be paid to the applicant. Furthermore, work must beprovided within 5 km o the applicant’s residence or there is a 10 percent premium on the scheme wage. How the household distributesthe 100 days among its members is entirely the household’s decision. The scheme is thereore completely sel-targeted and ollows ademand-driven, rights based approach.

State specic agricultural minimum wages used as scheme wage rate, but based on Schedules o Rates which are output-based. Thecentral government in the Union budget o 2009-10 promised to provide a real wage o `100 per day or work done under MGNREG.Payment is based on a rural Schedule o Rates that depends on the amount o work done by a person. This SoR should be set such thatan able-bodied worker should be able to produce the output which could earn him or her minimum wages. Wages are paid ully in cash;a departure rom previous public works programs that typically had a ood component.

Wages paid directly into post ofce or bank accounts. In a move to counter corruption in udging job cards and muster rolls and improvetransparency in wage payment, the Government o India announced that all MGNREG wages, with eect rom April 1, 2008, should bepaid directly into worker bank or post oce accounts that will be opened ree o charge. The intention is that this would help separate theimplementing agency rom the payment mechanism thereby reducing room or raud and harassment.

Provision o adequate worksite acilities. The Act mandates provision o certain basic acilities at the worksite to acilitate manual labor. These include provision o shade; drinking water; crèches or women to leave their children; and rst aid acilities to attend to the injuredin case o an accident.

Several provisions o the Act avor participation o women. For one, the Act mandates that one third o the workers be women. Second,it ensures equal wages or both men and women, with the latter typically having to do less work to earn the minimum wage as set in theSchedule o Rates. Finally, the scheme provides or childcare acilities or children below the age o six (i more than ve such children arepresent at a worksite). This in addition to the provision o work locally (within 5 km o one’s residence) makes MGNREG work a easibleoption or women.

Focus on labor-intensive rural development works, with a heavy ocus on water/irrigation activities as well as connectivity. In additionto the list o specic types o works allowed under the Act, there is a provision or addition o other types o works based on consultations

between the state and the central government. Overall the scheme maintains a 60/40 labor capital ratio. Contractors and machines areexplicitly banned.

PRIs and communities play a central role in MGNREG implementation. Unlike previous public works and SP programs, PRI leaders andcommunities are meant to identiy the shel o works through discussions in the Gram Sabha. PRIs also participate in the execution (atleast 50 percent o works by value are to be implemented through the Gram Panchayat), supervision and monitoring o works (includingthrough social audits). This represents a signicant shit rom earlier public work schemes such as the SGRY which revolved around centralrules, with PRIs only involved in supportive implementation or distribution unctions.

A dedicated administrative structure or MGNREG implementation. Unlike previous public works programs, there is a specic provision o administrative costs, borne by the centre and supplemented by states. There is a dedicated cadre o MGNREG ocials and unctionaries atthe district, block (program ocer) and gram panchayat (employment secretary) level that are responsible or implementing the program.

Emphasis on accountability through the use o ICT tools and by relying on communities and third party monitoring. Managementinormation systems (MIS) have been established or administrative data on employment generated and assets created at the lowestlevel. Field based monitoring is supposed to be done through national eld-level monitors reporting to the central Ministry as well as

local vigilance and monitoring communities. Community-based monitoring through social audits is also happening in some states.In terms o total expenditure on the program, the Central Government bears 90 percent o all the costs. This includes wage costs andthree quarters o the non-wage component (including materials and most administrative, subject to a maximum limit), working on anassumed 60:40 labor capital ratio. States are responsible or providing unemployment allowance should it ail to provide work within 15days o it being demanded. This penalty creates a strong incentive or the State Government to provide work.

Source: MGNREG operational guidelines (www.nrega.nic.in) and various government orders.




170 Inaddition, someo theearliest studiesocus theMaharashtraEmployment Guaranteeprogram,including Acharyaand Panwalkar(1988), Devand Ranade(2001),GaihaandImai(2002),Gaiha(1997)andRavallionandDatt(1995)ontheMaharashtraEmploymentGuaranteeprogram.

171 TheseincludeeldstudiesonbehalotheMinistryoRuralDevelopmentbytheProessionInstituteNetwork(e.g.,CBGA2006orAndhraPradesh,Chhattisgarh, JharkhandandMadhyaPradesh;IHD2006,2007orBihar,CDA2006orGujarat,ISWSD2006andothers– availableathttp://www.nrega.net/pin/)andtheComptrollerandAuditorGeneral’sreportonMGNREGinPhaseIdistricts(CAG2007).ThereisalsoanimpressivebodyoresearchbytheRighttoFoodmovement

(availableatwww.righttooodindia.org,seealsoDrèzeandOldiges2009,DrèzeandKhera2009,BhatiaandDrèze2006,Khera2006,Sivakumar2006)andothers publishedintheEconomicandPoliticalWeekly(e.g.,Mehrotra2008,Ambastaetal.2008,Shah2007,Jhaetal.2008,VijayShankaretal.2006,AakellaandKidambi2007a,b,AiyarandSamji2006,Narayanan2008);andsomeotherinstitutionalstudies(e.g.,CSE2008,PRIA2006,2007,2008,Sharmaetal.2009).Seeorthereerencesattheendothereportorulllistoeldstudiesandotherpapersconsulted.

172 Despitecommitmentstoullruralprogramcoverage,theshare ovillagescoveredby employmentschemespriortoMGNREG hasbeenar lessthancomplete. Analysisrom2002NSSvillagedataindicatesthatonly49percentovillages(56percentopopulation)reportedanypublicemploymentprograminthepastyear(O’KeeeandPalacios2006).reerencesattheendothereportorulllistoeldstudiesandotherpapersconsulted.

173 O’KeeeandPalacios(2006)basedonMinistryoRuralDevelopmentdata.

Rozgar Yojana (SGRY) and Food-or-Work (NFFWP). First,it recognizes the ‘right to work’ as a legal right. The stategovernment is legally bound to provide employmentto a household within 15 days o its demanding work.I it ails to do, the household is entitled to receive anunemployment allowance. In this the MGNREG isdierent rom the supply based approaches adopted byearlier public work schemes and is closest in spirit to the

Maharashtra Employment Guarantee Scheme (MEGS)initiated in the 1970s. Second, wage payments underMGNREG are entirely in cash, unlike previous programsthat also had a ood component. Third, MGNREG was therst social protection program that devolved signicantresources to the gram panchayat level. Another keyinnovation was the detailed operational guidelines at thecentre and state dening procedures and clear divisiono responsibilities or implementing the program (i.e.,unbundling saety net service delivery). Finally, thedesign o MGNREG emphasizes to a greater degree

than in previous public works (and other SP) programstransparency mechanisms and accountability.

The discussion below ocuses on the perormance o MGNREG as well as its main predecessor programs, i.e.,the Sampoorna Grameen Rozgar Yojana (SGRY) and theNational Food-or-Work Scheme (NFFW). The discussionexamines the coverage and targeting o these programsand presents key challenges with respect to programimplementation. The discussion draws on the extensiveliterature on public works in India, including a Ministry o Rural Development sponsored study o the Sampoorna

Grameen Rozgar Yojana (CMD 2005) and concurrentevaluations by the Planning Commission (2000) andthe Comptroller and Auditer General CAG (2000) or theSampoorna Grameen Rozgar Yojana, CAG (2007) or theNational Rural Employment Guarantee).170 The analysiso coverage and targeting in public works programsprior to the introduction o the Mahatma Gandhi

National Rural Employment Guarantee is undertakenusing administrative and household survey data romvarious rounds o the National Sample Surveys (NSS)and the 2005 India Human Development Survey (IHDS)survey. In the absence o nationally representativesurvey-based data or MGNREG, an important source o inormation on program perormance is administrativedata reported by the ocial website (www.nrega.nic.in).

The chapter also draws on the large number o studieson policy design and implementation experienceo the program in the last our years.171 This is not acomprehensive review; instead the discussion hereocuses on perormance and implementation challengesbased on the experience to date. Though the majority o these studies are small-scale and based on purposivelyselected samples (typically poor and backward areas),a surprisingly consistent story emerges with respect toMGNREG’s perormance in the eld.

a Cra pbc rs prrasprior to mgnreg (and its immediate predecessor -nffw), administrative data indicate that provision of public works employment under sgry had been well below the target 100 days for the rural poor.172 Aggregate employment generated by the main publicworks programs in the rst hal o the 2000s (prior tothe advent o NFFW and MGNREG) was just 600 millionperson days – around hal the level o the mid-1990s.173 While not direct coverage rates, Figure 4.1 presents totalnumber o “persondays” generated in public works by

state (using administrative data) relative to BPL andagricultural households in 2003/04. The provision o employment on average was below 10 days per BPLhousehold nationally and in most states, and less than5 days looking at all agricultural laborer households inall states except Assam. There is also some cross-statevariation in administrative persondays under public




works. These gures are pure averages based onaggregate administrative gures, and so need a survey-based source or more ocused inormation on targetgroups o interest.174 However, they clearly indicatethat the program commitment o up to 100 daysemployment per rural poor household in SGRY wasnever close to being met.

household survey data confirm low and falling

coverage on public works from the late 1980s to early 2000s (prior to mgnreg). Figure 4.2 presents results romthe last our large NSS rounds. At the all-India level, thecoverage rate is lower in each subsequent period, allingrom 4.8 percent in 1987/88 to 1.9 percent in 2004/05. Though works reliance is likely to vary by year depending

Figure 4.1: SGRY workdays per agricultural worker and per BPL household by state, 2003/04

Source: O’Keee and Palacios (2006) based on Ministry o Rural Development; Labor Year Book 2002-03; BPL rom indiastat.com.

0

5

10

15

20

25

30

A P

A s s a m

B i h a r

C h h a t

G u j

H a r

H P

J & K

J h a r k

K a r n

K e r

M P

M a h a

O r i s

P u n j

R a j

T N

U t t a r

U P

W B

D a y s p u b l i c w o r k s

Ag. workers

BPL HHs

174Thereareproblemswithadministrativedatawithrespecttoemploymentgenerationandimpliedcoverageo SGRYand NFFW.Calculationo“mandays”inadministrativedatahashistoricallybeendonesimplybytakingtotalprogramexpenditure,assuminga60:40labortomaterialsratio,andbackingoutthenumberoworkdaysgenerated.Surveyresults,andpreviousanalysisoworkareschemesbytheComptrollerAuditorGeneral(CAG),PlanningCommission’sProgrammeEvaluationOce(PEO)andothers,indicatethatthisresultedinquitemisleadingadministrativeestimatesoemploymentgeneratedbypublicworks(e.g.,wagesharesintotalworksspendinginthelate1990sinBiharandOrissawere28and32percentrespectivelyaccordingtoPEO).

Figure 4.2: Household coverage rates o public works by state and all-India, 1987/88 to 2004/05

Source: O’Keee and Palacios (2006) and report team estimates using various rounds o the NSS.

0

2

4

6

8

10

12

14

16

18

A P

A S B

I

G U

H A

H P

K A K

E M P

M A O

R P U

R A

T N

U P

W B

I n d i a

% H H p a r t i c i p a t i n g i n p u b l i c

w o r k s

1987-88

1993-94

1999-00

2004-05




on exogenous actors, most states (except Maharashtraand Orissa) record much lower employment generatedin 2004/05 compared to earlier years. In a number o cases, these state-specic coverage rates exhibit armore pronounced inter-temporal variance, sometimeswith a dierent pattern to the all-India (see Figure 4.2).In addition, the NSS until recently only reported thosehouseholds as covered where more than 60 days o

public works was undertaken in the previous year,which suggests that such coverage gures are verymuch a lower bound in light o the much lower averageemployment estimated. This has been changed rom the62nd round in 2005/06 to a “how many days employed onpublic works” type question. Results rom other state-specic surveys in act indicate a signicantly bettercoverage perormance in poorer states (see Table 4.2).

this trend has been reversed with the introduction

of mgnreg which has emerged as among the largest

safety net programs in the world. Within the rst year

o its implementation and covering just 200 districts,38 million rural households had been issued with a jobcard (see Table 4.3). By 2008/09, this gure has morethan tripled to 101 million rural households registered.In the same year, about 45 million households – a thirdo rural households – were provided employment.Assuming an average household size o ve, the numbero participating households was higher than the entire

population o Bangladesh.175 This is unprecedented scalewhen compared to any similar program in the world. Inthe Indian context too, this is a major achievement withrespect to program coverage relative to prior publicworks schemes. For instance, SGRY and NFFW togethergenerated 1,116 million person days in 2005/06. Incomparison, MGNREG had generated 905 million persondays in the rst year o implementation alone, and withpartial coverage o 200 districts.

administrative data indicate that employment

generated under mgnreg has been much higher

than in previous public works programs, though still less than the 100 day guarantee. The averagenumber o person days o employment generated perparticipating household has increased rom 43 to 52 (48)person days or Phase I districts (all districts) between2006/07 and 2008/09 (see Table 4.3). Although just10 percent o participating households exhausted their100 days entitlement in 2006/07, this gure rose to about14 percent by 2008/09. Interpreting these numbers is notsimple as they are likely to reect a certain rationing o

% hhs partcpat

orssa mP Jarad

SGRY 22.9 4.0 9.7

FFW 6.3 17.8 4.4

Tab 4.2: Pr-mgnReg pbc rs cra rats

r stat-spcc srs

Source: Dev et al. (2007) or Orissa and MP, based on the 2006 SP survey (thesample size o participating households in the Karnataka sample was toosmall); Balachander et al. (2009) or Jharkhand, based on 2006 JLSS.

175 DrèzeandOldiges(2009).

Tab 4.3: Cra mgnReg s adstrat data, 2006/07 t 2008/09

Pass

2006-07 2007-08 2008-09

i i ii i+ii i ii iii i+ii+iii

Households issued job cards (mn) 38 44 21 65 47 25 27 100

Households demanded employment (mn) 21 .. .. 34 .. .. .. 45

Households provided employment (mn) 21 23 11 34 22 12 12 45

% Rural households provided employment 39% 43% 33% 39% 40% 35% 23% 33%

Number o person days emp. generated (mn) 905 1087 350 1437 1131 509 523 2163

Number o person days per HH employed 43 47 32 42 52 44 45 48

Number o person days per rural household 17 20 11 22 21 15 10 16

% Registered households provided emp. 56% 53% 52% 52% 46% 46% 43% 45%

HHs provided 100 or more days o emp. (mn) 2 3 1 4 3 1 2 7% participating HHs provided 100 or moredays o employment

10% 13% 5% 11% 15% 10% 18% 14%

Source: MoRD administrative data rom the state-wise Monthly Progress Reports (www.nrega.nic.in), last downloaded in January 2010. Data on number o rural households rom 2001 Census.




employment as eld studies report widespread unmetdemand or work. Secondly, state-level data indicatessignicant variation across states on employment daysgenerated per household and the share o householdsexhausting entitlements, e.g., nearly hal the householdsin Rajasthan as against negligible shares in most states(more on this below). However while the provision o 100 days o guaranteed employment remains a distant

goal, employment generation under MGNREG has beenmuch higher than under any other wage employmentprogram in the past – it provided nearly 43 person dayso employment per household in its rst year (despitelimited coverage) compared to 26 person days generatedby the pan-India SGRY in 2005-06.176

employment generation in phase i districts is higher

than that in the phase ii and phase iii districts, but

has recently stalled. The Phase I districts are not onlyamong the poorest in the country (and hence onewould expect higher demand or the scheme) but have

also had relatively more time to build and establishprocesses or the smooth unctioning o the program.177 In consequence, a matter o some concern is the stallingo employment generation in Phase I districts between2007/08 and 2008/09 at 21 person days per ruralhousehold (see Table 4.3).

despite the rise in registration, there is a significant,

and increasing, gap between those registered with

mgnreg job cards and those actually demanding

work (see table 4.3). At the same time, the gap betweenthose demanding and provided work is negligible.

This indicates at least two likely eatures o demandmaniestation. The rst – and benign element o thegap - is that households may well register with nocurrent intent to undertake public works, exercising animplicit insurance/guarantee unction o the program,which has value even i not exercised (e.g., by possiblyreducing need or seasonal migration, or by allowingriskier but higher yield cropping choice). The second –and more worrying - is the process through which work

is “demanded” under MGNREG. While the scheme isramed as an on-demand and rights-based one, inpractice, worksites have to be opened in a localitybeore people are likely to come orward or work. This in turn requires a quorum o people expressing ademand or work. This “chicken and egg” issue suggeststhe importance o the supply side even in such ademand-driven program, a point reinorced by the act

that provision o employment is very high once workershave “demanded” employment in program terms. This isdiscussed urther below.

in addition, work provision in mgnreg, like previous

public works programs, does not adequately reflect

seasonality. At the national level, aggregate annualpublic works employment, prior to MGNREG, actuallyran counter to expectations, with lower employmentprovision in years with lower than average rainall or themost part (though this should be interpreted cautiously,as both rainall and employment provision are highly

variable locally). Evidence rom the MaharashtraEmployment Guarantee Scheme also conrmsemployment drops sharply during the monsoons whenmarket-based work is also least likely to be available.178 This seasonal pattern appears to have continued andemployment in MGNREG is also seasonal, peakingroughly in February-June and reaching its lowestusually in July-October (see Figure 4.3).179 This is partlybecause the majority o works allowed under MGNREG(more on this later) cannot be executed during themonsoons. This is reinorced by budgeting practices

which concentrate disbursements or works in the nalquarter o each scal.

program outcomes have been quite variable across

states and even across districts within states,

reflecting both demand and supply side effects.

Greater variability can be seen on the supply o actualemployment to those registered.180 States such asAndhra Pradesh, Chhattisgarh, Madhya Pradesh andRajasthan stand out as high perormers with respect to

176 Mehrotra(2008).

177 DrèzeandOldiges(2009).178 SeeAcharya(2005)andSubbarao(2003)orseasonalityintheMaharashtraEmploymentGuaranteeScheme.

179 Seewww.nrega.nic.inoradministrativedataonemploymentgenerationbystateandbymonth.

180 Similarly,in Orissa,employmentgeneratedp errural householddeclinedbetween 2006-07and 2007-08ater reportso embezzlementin2006-07. Thiscouldhavebeenbecausegreatervigilancepostsocialauditsresultedin“real”reportingasopposedtoinfatedguresthatwerereportedearlier(asupplysideeect). Alternatively,thiscouldhavebeenbecauseemploymentactuallydeclinedwithcorruptionplayinga“dampening”roleondemand.DrèzeandOldiges(2009)suggestthatbothactorsmayhaveplayedarole.Insomestates,lowdemandmaydrivelowparticipation;e.g.,KeralaprovidesoneexamplewithyouthturninguporMGNREGworkbutgoingawayoncetheyrealizedthatitinvolvedmanuallabour(JacobandVarghese2006).




Figure 4.4: Coverage o MGNREG by state, 2008/09

Source: MoRD administrative data rom the Monthly Progress Reports (www.nrega.nic.in).

Notes: States sorted in ascending order o employment generated under MGNREG.

0

20

40

60

80

100

0

20

40

60

80

100

P e r s o n d a y s p e r r u r a l H H

% R u r a l H H s p r o v i d e d e m p l o y m e n t

% Rural HH emp Person days per rural HH

P u n j a b

H a r y a n a

K e r a l a

G u j a r a t

M a h a r a s h t r a

K a r n a t a k a

O r i s s a

J h a r k h a n d

W e s t B e n g a l

B i h a r

U t t a r a k h a n d

U t t a r P r a d e s h

T a m i l N a d u

A s s a m

H i m a c h a l P r a d e s h

J a m m u & K a s h m i r

A n d h r a P r a d e s h

M a d h y a P r a d e s h

C h h a t t i s g a r h

R a j a s t h a n

the percentage o participating households as a share o rural households as well as person days o employmentgenerated per rural household (see Figure 4.4). However,the program is yet to make a dent in states like Biharand Orissa where the incidence o poverty and hungerare high, indicating likely supply-side constraints in

the provision o work rather than a lack o demand. The contrasts are even sharper at the district level withMadhubani in Bihar generating only one person day perrural household in 2006-07 in contrast to 111 persondays in Dungapur, Rajasthan.181 Rajasthan, in particular,has easily the highest employment ratio among major

Figure 4.3: Seasonality in MGNREGs work provision, 2006/07 to 2007/08

Source: Ravi and Engler (2009).

900000

800000

700000

600000

500000

400000

300000 N o . o f h o u s e h o l d s

O c t 0 6

D c e 0 6

F e b 0 7

A p r 0 7

J u n 0 7

A u g 0 7

O c t 0 7

D e c 0 7

F e b 0 8

A p r 0 8

J u n 0 8

Madhya Pradesh

Andhra Pradesh

Uttar Pradesh

average of 10major states

200000

100000

0

181 DrèzeandOldiges(2007).




states, reecting partly its long history o public worksas part o amine relie, a massive public awarenesseort on the part o civil society in the state and ocuson enorcing transparency mechanisms.

b Tart pbc rs prras

prior to mgnreg,the targeting of previous public works

programs appears to be have been more progressive

than all other social protection programs (except

annapurna), with the coverage rate in the poorest

quintile and among st households high relative to

other groups.182. Results rom both IHDS and NSS orSGRY/FFW rom 2004/05 are presented below. Analysisin Table 4.4 indicates very progressive coverage acrossexpenditure (NSS) and wealth groups (NCAER), thoughoverall coverage is low even or the poorest. Nonetheless,the high relative coverage rates in the bottom quintile andparticularly among ST households places public works

as the second best program perormer in distributional

terms.183 Like most programs, however, the considerablyhigher average benets among the richest make thebenet incidence somewhat less progressive (thoughstill the second best program on that indicator also -see Chapter 8 or a comparison o targeting outcomesacross programs). Note that the two data sources arenot directly comparable. As mentioned earlier, the NSSestimate only includes households where more than

60 days o public works was undertaken in the previousyear. The IHDS estimate includes only households whereat least one individual reported participating in publicworks as one o their main occupations in the previousyear. As a result, both estimates are very much a lowerbound estimate o coverage.

the positive targeting performance of pre-mgnreg public works programs from national data is supported by recent evidence from a three state study of sp programs in orissa, karnataka and mp. Particularlyor the Food-or-Work program, coverage in the lowest

quartile was relatively high (around 57 percent higherthan the population average), while coverage amongST households was well above the population average,by almost 80 percent in the case o SGRY.184 Similarly,Planning Commission reports nd evidence o relativelygood targeting in these programs – e.g., a large share o SGRY belonged to households below the poverty line,lived in kutcha houses and had received only a primaryeducation or less.185

earlier analysis on public works schemes indicates

that average benefit incidence (such as that presented

above) underestimates the gains to poor households

from increased spending on works.186 The literature onpublic works schemes (and transer schemes generally)typically assesses targeting in terms o averageincidence. This may be misleading in cases where thereare marginal adjustments in budgets (as is happeningthrough MGNREG). Table 4.5 presents the results basedon 1993/94 NSS. The marginal odds o participation arethe highest or the poorest quintile, the probability o participation o those in the poorest quintile is higherthan those in the richest quintile. As a result, expansion o

182This nding is consistentwith international evidence o targetingperormance o publicworks programs.For example,in Argentina’s Trabajarprogram,80percentobeneciarieswereormthepoorestquintile,whileinChilethesharewascloseto100percent.InBangladesh,around70percentobeneciariesotheFood-orWorkProgramwereinthelowestincomebracket,whileinIndonesia,thepost-crisisthanadministrativetargetingmethodspublicworksprogramwasmuchmorelikelytoreachhouseholdwhohadsueredlargeshocks.SeeSubbarao(2003)anddelNinnoetal.(2009)orasummaryointernationalstudies.

183 Notethattheaveragehoursworkedperdayandthemedianwageratesdonotdiersignicantlyacrossthelowerourquintiles.

184 Devetal(2009).


186 LanjouwandRavallion(1999).

grp% hhnSS

% hhihDS

Bt cdcihDS

Poorest 2.8 1.5 34.2

Q2 2.4 0.9 17.5

Q3 2.0 0.8 16.2

Q4 1.3 0.5 15.3

Richest 1.1 0.2 16.9

OBC 1.4 0.7 36.3SC 2.5 0.6 17.1

ST 3.5 2.8 33.8

Other 1.5 0.4 11.4

Total 1.9 0.8 100

Tab 4.4: Cra SgRy/FFw b pdtr/at ad sca rp, 2004/05

Source: NSS: Bank sta estimates based on 2004/05 NSS; IHDS: Ajwad (2006)based on 2004/05 IHDS data.

Note: Estimates reer to coverage across qu intiles based on monthly percapita expenditure (NSS) and asset ownership (IHDS). Benet incidencereers to the percentage o benets captured, estimated assuming equalnumber o work days across quintiles. The nature o the works question inNSS does not permit benet incidence analysis.




the program is likely to be pro-poor. This is a particularlyimportant nding in terms o the potential o MGNREGor including the poor in a more intensive manner thanprevious public works schemes.

mgnreg is a universal right rather than a targeted

program, but administrative data indicates impressive

inclusion of sc/st households and of women relative to previous public works schemes.

(see Figure 4.5).187 The share o SC households in MGNREG employmentincreased gradually while that o ST householdsell during this period. This may be on account o aconcentration o STs in phase 1 districts and a gradualdecline thereater as the program spread to otherdistricts o the country. Nonetheless, the proportion o

participating SC and ST households was consistentlyhigher than their share in the country’s population(about 16 and 7 percent respectively). More encouragingwere numbers on participation o women – nearly hal the person days generated in MGNREG are or women.Only in ve states (Assam, Jammu and Kashmir, Punjab,Uttar Pradesh and West Bengal) was the share o womenlower than one-third. This is a major improvement in

emale participation relative to SGRY, estimated at only12 percent all-India by a Government o India evaluation(similar to CAG ndings on JRY and EAS o only around16 percent emale beneciaries).188

evidence from field studies also indicates that the

program is reaching vulnerable households, but

further confirmation by national or state-level

household surveys is required. Even in the initial stageso implementation in 2006, several studies indicate thatcoverage rate among SC/ST households was high inrelative and absolute terms with respect to registration

or work. In their survey o 100 MGNREG worksitesspread across six northern states, Drèze and Khera (2009)nd that a majority o those employed in the programbelong to the most disadvantaged sections o society.SC/ST workers together accounted or over 70 percento their sample, 81 percent o their sample workerslived in a kuccha house, 61 percent were illiterate and72 percent had no electricity at home at the time o thesurvey. Shari (2008) nds that holders o the Antodaya(AAY) ration card are more likely to participate. Gaihaet al. (2010) nd in their study o Andhra Pradesh,

Maharashtra and Rajasthan, that SC/ST and landlessworkers were more likely to participate in MGNREG.Despite this, benet incidence in terms o days workedon the program is regressive in AP and Maharashtra, i.e.,relatively better-o workers worked more days thanacutely poor workers. This is in contrast to Rajasthanwhere poor participants benetted disproportionatelymore than others. These nuances in the targetingperormance o MGNREG point to the importance o household-survey based inormation or examiningthese issues nationally. A recent study using 2006/07NSS data or Phase I districts in act indicates that less

than hal the wages accrue to the ocially poor.189

qt

Ara dds

partcpat rar A

mara dds

partcpat rar m

Poorest 1.23 1.16

Q2 1.13 0.93

Q3 1.04 0.80

Q4 0.86 0.92

Richest 0.83 0.55

Tab 4.5: Ara ad ara dds partcpat da pbc rs prras, 1993/94

Source: Lanjouw and Ravallion (1999).

187 Notethatlikemostpublicworksprograms,thenatureothemanuallaborinvolvedresultsinalowproportionodisabledprogrambeneciaries(lessthanone percentototalparticipantsin2008-09).

188 SeeCMDstudyorMinistryoRuralDevelopmentonSGRY(2005);PEOEASevaluation(2000).

189 Bhalla(2010).

Figure 4.5: Participation o women, SC and ST workersin MGNREG, 2006/07 to 2008/09

Source: www.nrega.nic.in.

Notes: This reers to the share in person days o employment provided orwomen, SC and ST workers.

41

25

36

43

27 29

49

31

25

0

10

20

30

40

50

60

Percentage of women

Percentage of SC Percentage of ST

2006/07 2007/08 2008/09




c iptat

public works programs prior to mgnreg were plagued

by major implementation problems related largely

to lack of accountability in public works design,

financing and management. Several issues emergedrom government and external assessments o publicworks prior to MGNREG.190 These include issues such as

top-down planning o works, with little community orPRI participation; poor quality o assets created; leakageo unds and parking o signicant unds in depositand other accounts (parked unds show up in publicaccounts as executed but in act remain undisbursed -see Chapter 6); evidence o corruption in many orms(e.g., udging o muster rolls, payment o lower thanprescribed wages, presence o contractors, etc.); lack o reliable records, in particular muster rolls; and lack o both strong administrative M&E and absence o “bottom up” monitoring through mechanisms such associal audits.

the design of mgnreg assuages several of these

concerns. MGNREG was the rst program in Indiathat had an exceptionally detailed institutionalarchitecture and implementation processes outlinedin the operational guidelines issued by the Ministryo Rural Development.191 This unbundling o service delivery and clear assignment o roles andresponsibilities is critical or eective implementation.PRIs and communities are given a central role inplanning, execution and oversight o MGNREG,signaling a signicant shit in design. There is also astrong emphasis on transparency and accountabilityin MGNREG, a design eature that is highly relevant orother anti-poverty programs.

despite this strong design, some of the challenges

noted above remain, while the demand-driven design

of mgnreg has introduced new challenges in ensuring

a right to work . This requires a high degree o awarenesso rights and entitlements under the program and theprocess through which to “demand” and apply or work. This also requires unds, institutional structures withadequate and appropriately skilled sta, and strong M&Esystems to ensure adherence to operational guidelines

and transparency saeguards. Another challenge isthat the program aims to not just generate short-termemployment but also to create sustainable livelihoodsor the uture. This has implications or the quality andrelevance o assets created.

progress in implementing mgnreg has been uneven

and both administrative data and field studies note

the highly variable roll-out pace and effectiveness across states. This variation is attributable, at leastin part, to dierences in the level o preparednessand innovation by state governments. There hasbeen considerable state-level innovation in the areaso accountability and community-based monitoring(e.g., social audits), use o technology or monitoring(e.g., a web-based Management Inormation System)and nancial inclusion (e.g., biometric smart cardsor payments through post oce accounts). Many o these innovations have since been mainstreamednationally into program design. States like AndhraPradesh, Rajasthan and Tamil Nadu or instance havetaken active steps to establish institutional structuresand systems or monitoring and accountability(see Box 4.2).

a large number of field studies of implementation

experience in a number of states provide useful insights

on the implementation experience of mgnreg to date.192

Demandorwork

the notion of “demanding” and applying for work has

not yet been firmly established. In principle, peoplehave to demand work in order or work to be provided.In practice, very ew job card holders ormally applyor work while the majority tend to wait passively orwork to be provided. At the same time, there appearsto be considerable latent demand or work – i.e., notall people who demand work are provided work, whileeven those who are provided work would like moredays o employment. For instance, almost all workersinterviewed at 100 MGNREG worksites in six northernstates were ready to work or 100 days in a year, whereasonly 13 percent had actually done 100 days o MGNREGwork in the previous year.193 Part o the reason is poor

190 SeeCAG(1997and2000);PEO(2000);Nayaketal.(2003),ARC(2006)andmorerecently,Mehrotra(2008).

191 Themostrecentversionotheseguidelinesisavailableatwww.nrega.nic.in;stateshavealsoissuedstate-specicguidelinesollowingthecentralguidelinesasaormat.

192 Seeootnote173andthereerencesattheendothereportoradetailedlistoeldstudiesconsulted.

193 DrèzeandKhera(2009).




awareness o the process o demanding work.194 Somestudies also note that there is little awareness that thisis a universal right or rural households and not limitedto specic groups. In consequence, potential applicantscan be excluded based on certain characteristics(e.g., widowed, single women headed, elderly etc.)or documentation (e.g., ration card). In some cases,workers are deliberately mis-inormed that work wouldbe provided when available (i.e., not necessarily ondemand). Awareness campaigns need to stress the actthat all are eligible or the program and that workersneed to demand work, in quorum or individually, inorder to get it.

at the same time,very few instances of the unemployment

allowance being paid are recorded. Oten applicationsor work are not ormally recorded, with the result thatunemployment allowance is not paid out in the eventwork cannot be provided within the specied period. While ailure to pay the unemployment allowance isperhaps excusable in the initial implementation periodwhen the mechanism or timely opening o worksites wasnding its eet, this is not the case as the program maturesinto its ourth year o operation. This is important or tworeasons. The rst and most obvious is that the “guarantee”o the Act is not as intended unless the allowance is paidin a timely manner. The second is that states – which have

B 4.2: S stat- ats pt mgnReg

Rajasta

According to ocial statistics, 90 percent o rural households in Rajasthan were provided MGNREG employment in 2008/09 o which 41percent were provided 100 days o employment. While ocial gures may overestimate the coverage o the scheme, Rajasthan is also wellknown or implementation o various transparency saeguards – a act corroborated by many localized surveys. Muster rolls are presentat most worksites, daily attendance is taken in ront o workers, wages are paid based on group work and measurement and job cardsare updated at the time o payment. Awareness o entitlements and processes is high. An active civil society played an active role in thecampaign or the right to work and the right to inormation and has strongly promoted community monitoring through social audits. Inaddition, the state government has put in considerable eort to improve worksite management practices. Mates (work site supervisors)are trained to maintain muster rolls; they assign tasks to workers; record their output; and ensure worksites acilities are available. Allsuch activities help improve productivity and increase transparency, allowing the program to be scaled up. Some problems persist – e.g.,Rajasthan continues to have a poor record on payment o minimum wages and has not yet revised its Schedule o Rates to make it MGNREG-riendly. On the whole, however, Rajasthan’s success could be attributed to the long history o public employment programs in the stateand more importantly to an active civil society that has or years worked on other related movements like the Right to Inormation.

Adra Prads

The movement here is driven by the government which has undertaken signicant eorts to innovate and improve the delivery o the program, setting up administrative machinery and systems in readiness or MGNREG. Some o the best practices adopted by thegovernment include a ocus on monitoring and accountability by using ICT tools and relying on communities. The ormer included thedevelopment o a web-based Management Inormation System with a local language interace that handles registrations, work estimates,muster rolls and wages to ensure correct and timely payment o wages and allows open access to reliable, timely and comparableinormation rom the eld. AP was the rst state to institutionalize social audits as early as 2006, with a ocus on ollow-up action by theadministration in the atermath o such audits. AP also undertook several time and motion studies to revise the rural SORs to reect thehigher labor intensity and regional variation in MGNREG work. In addition, AP was among the rst states to introduce payment o wagesdirectly into workers’ post oce or bank accounts (opened in the name o the women within the household).

Ta nad

The state o Tamil Nadu has used administrative monitoring eectively to increase transparency under MGNREG. In some districts, a dailyaudit is done o the nominal muster rolls (NMRs). All NMRs are closed by 11 am each day and the inormation is passed rom village toblock and then to the district level monitoring oce through an SMS. Inspection ocers visiting worksites then check details with entriesin the NMRs. Regular monitoring in this way has helped reduced the scope or ‘ghost workers’. Similarly, while only 50 percent o MGNREGworks are mandated to be undertaken by the Gram Panchayat, Tamil Nadu makes it compulsory that all works are undertaken by thevillage body. Finally, the state (along with Kerala) has the highest proportion o women participating in MGNREG – about 4 out o every5 beneciaries are women, a number that is also conrmed by many social audits. However, lack o childcare acilities at the worksitescontinues to remain a problem.

194 Basicawarenessotheprogram’sexistencedoesnotsuce;itisinormationabouttheprogramentitlementsandtheprocessbywhichtoaccesstheseentitlementsthatmatters.Thisiswhereawarenessislowest(seee.g.,DrèzeandKhera2009).Studiesthathaverevisitedsamplelocationsbetween2006and2007indicatethatawareness,thoughstilllargelylow,hasincreasedovertime(seeorexampleCBGA(2006,2007)andIHD(2006,2007)orChhattisgarhandBihar).ThisisdiscussedinmoredetailorallSPprogramsinChapter7.




to nance the allowance rom their own budgets – willhave ar stronger incentives to improve implementationo MGNREG i the unemployment allowance provision ismade a reality.

Fundsandleakage

the utilisation rate for mgnreg funds is fairly high relative

to

other

sp

programs

,but

field

studies

indicate delays in the transfer of funds to gps. In2008/09, about 25 percent o MGNREG unds wereunspent, but the ability o states to spend on MGNREGvaries considerably, with und utilization rates rangingrom 56 percent in Tamil Nadu to 89 percent in Rajasthan. There are also signicant variations across districts withinstates, with some districts (e.g., in Orissa and Karnataka)even reporting expenditure in excess o available unds.195 Given the demand-driven nature o the program, undsare supposed to be released on the basis o state proposals(rather than pre-determined allocations). Each state is

required to submit a state annual work plan and budgetproposal (AWPB) to the Ministry o Rural Development. The release o unds depends on the actual utilization o unds previously released (including the balance let overrom the previous nancial year). Like other CSS, undsare released directly to the district. Additional unds canbe requested only ater 60 percent o the allocation toany administrative unit (GP, block or district) has beenexhausted. In practice, some eld studies point to delays

in the release o unds, partly due to ailure to releasethe state’s matching share and limited capacity relatedto work provision as well as nancial management (e.g.,timely completion o utilization certicates, etc.). This inturn delays the opening o works, intermittent openingand closing o works and/or delays in wage payments.

there is some evidence of leakage of funds. Several eld

studies indicate evidence o leakage and report severalways through which accountability mechanisms arebeing subverted (more on this below), including throughudged muster rolls, misuse o job cards and accountpassbooks, wage payments below the program wage,etc. Though the CAG report on the 200 Phase I districtshighlights several such irregularities, it does not presentevidence o large-scale diversion o unds. However, arecent study compares the MGNREG administrative datawith NSS household survey data (2006/07) or the Phase Idistricts and nds that 50 percent o unds allegedly spenton wages are in act some orm o leakage.196

Stafngandcapacity

key administrative and technical staff needed for scheme functioning have still to be appointed in a number of states. The sheer scale and the administrative-heavy design o the program197 ideally require a dedicatedcadre o proessional administrative and technical sta toimplement (see Box 4.3 or the structure proposed by the

195 AccountabilityInitiative2010.

196 Bhalla(2010).

197 Forexample,householdsmustberegisteredortheprogram,everysubsequentworkapplicationmustberecorded,andpaymentowagesislinkedtomeasurementoworkdoneevery15days,andsoon.Similarly,theprogramcallsorparticipatoryplanningoworks,adetailedprocessoadministrativeandtechnicalsanctionoworks,andaheavyemphasisonreporting.

Administration (MGNREG)

District council ( Zilla Parishad )

Block council (Panchayat Samiti )

Village council (Gram Panchayat )

Local Government

District Coordinator [Assistant Engineer]

State Employment Guarantee Council

Block Program Ocer [Junior Engineer/PTA]

Employment Guarantee Assistant

(Gram Rozgar Sewak )

B 4.3: mgnReg ptat acs




operational guidelines).198 States were supposed to setup Employment Guarantee Councils and appoint thesekey ocials – Program Ocer at the block, EmploymentGuarantee Assistant at the GP level as well as a dedicatedcadre o engineers at the district and block level. Manystates experienced signicant delays in appointmento these ocers – e.g., the CAG audit in 2006-07 oundthat these POs had not been appointed in 70 percent o

the blocks surveyed in 19 states. Instead, existing Block Development Ocers (BDOs) were appointed as POs. The PO is a key player in administration o MGNREG,being the lynchpin linking the community and higherlevels o the system in terms o planning, nancing andother implementation aspects. The same report oundthat about 20 states had not appointed EmploymentGuarantee Assistants (EGAs) in hal the panchayatssurveyed and had not constituted the mandated panelo accredited engineers at the district and block level toassist in estimation and measurement o work. While eld

studies report progress in the appointment o POs andEGAs in recent years, the lack o adequate technical sta remains a critical constraint to opening worksites andcontributes to delays in work measurement and wagepayments as well as poor quality o assets. The increasein the administrative costs borne by the center – rom2 percent initially to 6 percent – may ease the pressureon states in this regard.

in addition, the capacity of pris to conduct their

intended functions is very weak . The generally lowcapacity o PRIs to carry out a range o MGNREG

unctions – including planning, execution andoversight - expected o them is a more dicult challenge.Dierences across states in the degree o devolution topanchayats are also a actor. Participatory planning bycommunities and acilitated by the panchayat ocialshappens only rarely. In principle, gramsabhas have a keyrole to play in identication o works to be undertakenunder MGNREG. In practice, there is evidence that gramsabhas have diculty carrying out these responsibilitiesin many states.199 As a result, the MGNREG shel o workscontinues to be identied either by the Sarpanch orkey ocials in the gram panchayat or by the block or

district administration. Given inadequate technical

sta, this in turn implies poor selection o works andat least in the initial year o implementation, relianceon the shel o works prepared or previous programs.In a radical shit, GPs are required to manage undsaveraging ` 12 lakhs in 2008/09, with no previousexperience. Training and technical support to PRIs,particularly at the gram panchayat level, or betternancial management, participatory resource planning

and project management unctions are essential.

Programwages

a common challenge with respect to wages has been the

tension between the program commitment to payment

of agricultural minimum wages and the reliance on

piece rates for wage payment. As per the operationalguidelines, wages are to be paid either on a time-ratebasis or a piece-rate basis. The ormer are based on dailyminimum wages, where the implementing agenciesare supposed to ensure productivity norms are met.

The latter are based on the district rural Schedule o Rates (SoR) that determine the wage based on actualwork done. The guidelines stress that these piece-ratesshould be such that an average worker is able to dothe work required to earn the daily minimum wage. Inpractice, eld studies note the prevalence o primarilypiece-rate system,200 with the actual wage paymentoten alling short o the ocial agricultural minimumwage. This is true even in otherwise well-perormingstates like Rajasthan, where even administrative dataindicated an average MGNREG daily wage o ` 59 as

opposed to the ocial minimum daily wage o ` 73(see Table 4.6). Note however that administrative dataare more accurately described as “wage cost per day”(i.e., total expenditure on unskilled wage divided bytotal persondays generated) rather than the actualwage received by households. The latter are possiblylower than that indicated by the administrative guresreported in Table 4.6.

this discrepancy is due in significant measure to

the exacting rural schedules of rates (sor) that

call for high productivity levels. The existing SoRs

assume a level o capital intensity and mechanization

198 See,orexample,Ambastaetal.(2008)ordetailedsuggestionsontechnicalandadministrativestarequiredtoimplementtheprogram.Inactpreviouspublicworksprogramssueredromaseriousshortageoqualiedengineers/supervisorstomonitorpublicworksprograms,asaresultowidespreadvacanciesandwithoutthesanctionoadditionalpositionstomeetanincreasingvolumeoworks.

199 Seeorexample,Besleyetal.,PRIA(2007).

200 TherearesomeexceptionsinstatessuchasBiharwherethetime-ratesystemwasmoreprevalentIHD2008.




not appropriate to a labor-intensive scheme such as

MGNREG. In addition, SoRs do not adequately allowor dierences across areas (e.g., with respect to soil,typology or climatic conditions) or across groups (e.g.,with respect to age, disability or gender). SoRs also otendo not revise rates in line with the agricultural minimumwage.201 With the current SoRs, workers (particularlywomen, elderly and disabled people) can nd it dicultto earn the minimum wages. There is an urgent needto revise these SoRs or MGNREG. A number o states,including Andhra Pradesh, Bihar, Gujarat, Haryana,Karnataka, Orissa, Tamil Nadu and Uttar Pradesh, haveindeed addressed this issue through revisions to the

rural SoRs. These revisions are based on work, timeand motion studies that, in some states, dierentiateproductivity norms by region (soil, typology), gender,

age, etc.202 An additional problem commonly reported

by eld studies is delays in wage payments (beyond theprescribed 15 days o work completion), largely drivenby the lag between work completion and measurementdue to the shortage o technical manpower.

the average mgnreg wage has risen steadily in most

states since the introduction of the program. In somecases, this is the result o the revised time and motionstudies that enable workers to earn at least the minimumwage. In others, it is the result o increases in the ocialagricultural minimum wage. Most recently, the 2009/10budget revised the MGNREG wage upwards to at least

` 100 per day. In general, the ocial minimum wage,and in most cases, the average MGNREG wage rate,is much higher than the average agricultural wage

Tab 4.6: Rra da ad ara arctra as ad mgnReg ara a cst

Stat

2004-05 2006-07 2007-08 2008/09

A a -a

A a -a m. a

mgnReg“a” m. a

mgnReg“a”

ntda

mgnReg“a”

Andhra Pradesh 37 28 80 86 80 83 80 83

Assam 30 16 66 67 76 73 80 77

Bihar 45 26 77 70 81 80 89 85

Chhattisgarh – – 62 62 68 68 75 73Gujarat 55 30 50 56 50 64 100 68

Haryana 58 23 97 97 135 124 141 120

Himachal Pradesh 13 – 73 69 75 75 100 99

Jharkhand – – 77 79 86 82 92 90

Jammu & Kashmir 32 – 70 69 70 70 70 68

Karnataka 49 28 66 67 74 72 82 81

Kerala 56 28 125 121 125 118 125 120

Maharashtra 53 32 69 104 – 90 69 75

Madhya Pradesh 41 27 62 60 67 64 91 73

Orissa 45 14 55 53 70 77 70 90

Punjab 32 – 98 94 102 101 98 111Rajasthan 44 9 73 51 73 59 100 88

Tamil Nadu 61 31 80 80 80 77 80 80

Uttar Pradesh 48 26 58 56 100 93 100 99

Uttarakhand – – 73 73 73 74 100 85

West Bengal 45 32 68 70 72 79 75 78

India 61 45 – 65 – 75 – 84

Notes: Average daily wage rate in agricultural occupations (based on 2004/05 NSS) rom Mehrotra (2008); minimum wages rom MGNREG website(www.nrega.nic.in/wages.pd, http://nrega.nic.in/Min_wages_new.pd); MGNREG wage is calculated as “wage cost per day” (i.e., total expenditure onunskilled wage divided by total persondays generated) rom Drèze and Oldiges (2009) or earlier years and report team estimates or 2008/09.

201 SeeAmbastaetal.(2008)andVijayShankeretal(2006)oradiscussion.

202 APorexampleundertookaspecictimeandmotionstudyordisabledworkers.




(particularly or women) (see Table 4.6).203 Typically,several o the better targeted public works programsset program wages slightly below the prevailing wagerate or unskilled labor (e.g., Chile and Argentina). Thisis because the program wage vis-à-vis the marketwage and the nature o the work are both commonlyused elements o the sel-targeting design o publicworks programs. Indeed, evidence rom MEGS also

suggests that the access to the program was heavilyrationed and the targeting perormance worsenedwhen the minimum wage was doubled in the late1980s.204 However, MGNREG coners a right to work toall rural households (and not just poor households).As a result, the sel-targeting element is limited to theexpectation is that the nature o the work (unskilledmanual labor) would attract mostly poor households.In this context, higher real program wages are seenas obvious advantages or participating households. There would be cause or concern only in the event the

supply o worksites is inadequate to meet demand orwork, leading to rationing o employment in a mannersuch that the poor are excluded.

Qualityoassets

a consistent concern on public works in india has

been the quality of assets created; this continues

to remain a concern for mgnreg. It is very dicult toestimate the economic impacts rom assets in Indianpublic works schemes. Given the importance o rateso return on assets in assessing total program impact,

this is unortunate, though a common problem inpublic works programs worldwide. A challenge or theMGNREG will be developing cost eective methodsor estimating rates o return on assets.205 Qualitativeevidence is available rom Government o India andother evaluations however, largely related to indicatorso quality o assets rather than rates o return. A commoncriticism o public works is that they are “washed awaythe next monsoon”. One actor is that the objective o asset creation runs a very distant second to the primaryobjective o employment generation.

there is inadequate planning of works both with

respect to timing and relevance for local needs and

little attention paid to maintenance of the assets

created. Inadequate participatory planning o worksabove implies that works planned under the MGNREG aremostly not integrated with wider village level planning,most notably under the Backward Region Grant Fund(BRGF). As a result, the works selected may have littlerelevance or importance or the local community ormay well be redundant. Recently, there are some eortsunderway to promote greater integration in villageplanning. A key constraint to building high quality assetsis the lack o technical support to communities as inputto planning MGNREG works (e.g., through resourcemapping exercises) as well as the shortage o technicalsta in designing and supervising works. A largenumber o works, particularly those related to waterconservation, remain incomplete, either due to lack o technical support to GPs or the onset o monsoons. For

example, Orissa completed only 7 percent o MGNREGworks in 2008/09, while Uttar Pradesh completed 61percent o works.206 In many cases, poor planning andlack o maintenance result in completed assets allinginto disuse.207 Realizing the objective o creating durable,productive rural assets will be key in ensuring broaderrural development through increased agriculturalproductivity, with MGNREG essentially providing aninsurance unction.

several of the works on the approved list of works

are not universally suited for all geo-climatic zones

and seasons. Works allowed under MGNREG are largelyrelated to water conservation and road connectivity.In 2008/09, nearly two-thirds o activities undertakenrelated to water and soil conservation activities (seeFigure 4.6). While well suited to arid and drought-proneareas where such works can be undertaken practicallythroughout the year, some states (e.g., Assam, Bihar) areattempting to develop works that are suitable or ood-prone and water logged areas. There is also a proposalto expand the list to allow more orestry activities. Fieldstudies also report the need or expanding the scope o

203 SeeorexampleGaihaetal(2009)andMehrotra(2008).However,thishasgenerateddebateattheminimumwageinvenuestatesinabove 100.

204 SeeGaiha(1997)andRavallionetal(1993).

205 EvidenceromtheFoodorWork PrograminBangladeshprovidesagood exampleoeorts tocalculatesuchrateso return.Theseoundsubstantialbroadereconomicgainsromassets(e.g.,themarginalproductivityobothlandandlabourwasaround27percenthigherinvillageswiththeprogramrelativetovillageswithouttheprogram).


207CSE2008.




approved works to those not capable o hard manuallabor, e.g., to include more women- and disabled-riendlytype o works.208 In addition, in areas where such ruralinrastructure is already well-developed, there is a caseor expanding the permissible list o works to includesocial inrastructure development activities (these arealso “soter” work options or vulnerable groups) likerelated to provision o social welare or communityservices, etc. Work is also allowed on private lands o SC/ST and BPL households and some states have extendedthis to small and marginal armers. Some new types o

works, such as social orestry, have recently been addedto the approved list and discussions on convergingMGNREG with other government programs (e.g., SarvaShiksha Abhiyan, ICDS, watersheds) are ongoing.

mgnreg has done better than previous programs with

respect to maintaining the mandated labor intensity

of works. In 2008/09, approximately 69 percent o expenditure was on wages and 27 percent on materials(the remaining 4 percent went towards administrativecosts). There are wide variations in the labor shareacross states, ranging rom 54 percent in Jharkhand to

100 percent in Tamil Nadu (not including administrativecosts).209 In act, there is anecdotal evidence o attempts

to increase the 60:40 labor to material ratio or to maintainit or each work as opposed to an average across worksundertaken.210 The latter step could potentially restrictthe range o productive assets o varying labor intensitythat could collectively meet village-level inrastructuregaps. Higher labor intensity naturally increases thetranser to the poor in the short run, but an appropriatebalance needs to be struck in order to ensure thelong-term returns o high quality assets. Internationalexperience rom Argentina and South Arica, suggeststhat large variations in labor intensity across sub-

categories o works are not uncommon (e.g., in SouthArica, the share o labor ranged rom 6-86 percentaccording to the type o works undertaken, and inArgentina rom 30-70 percent).211

Adherencetoguidelines

evidence from the field suggests poor adherence to

transparency safeguards. The operational guidelinesprovide or several transparency saeguards, includingmaintenance o muster rolls at the worksite, paymento wages in public in the rst two years and through

worker bank or post oce accounts since (with pay slipsto be distributed in public), and community oversight

Figure 4.6: Main types o works under MGNREG, 2008/09

Source: www.nrega.nic.in.

Drought proong, 7

Water conservation andharvesting, 21

Flood control and protection, 3

Rural connectivity, 18

Other approved activity, 1

Renovation of traditional waterbodies, 9

Land development, 15

Irrigation on SC/ST land, 20

Micro irrigation works, 5

208 NotethatthiscanalsobeachievedbyrevisingtheruralScheduleoRatesthroughtimeandmotionstudiesordierentsub-groupsothepopulationasdiscussedearlier.


210 Seeorexample,IHD2006,IWDS2006.

211 Subbarao(2003).




through village vigilance committees and social audits(more on this below). In practice, unavailable andudged muster rolls continue to be a serious issue. Jobcard entries are rarely made. In act, job cards are notalways in the possession o the household; instead theSarpanch or other local ocial may hold it. The problemsare exacerbated by low awareness o processes as wellas high levels o illiteracy among MGNREG workers.

in an attempt to reduce corruption and improve

transparency in wage payments, from april 2008 mgnreg wages are supposed to be paid through household

accounts with banks or post offices. Though a step in theright direction, several new implementation challengesemerge. The coverage o banks and post oces in ruralareas is oten patchy implying the need or bankingcorrespondent or similar models to bring banking servicesto the household (see Chapter 7 or a discussion). In manystates, the delays in wage payments are exacerbated.Some eld studies also note that women may not have

access to their earnings i the bank account is opened inthe name o the male household head. Some eld studiesreport instances o corruption where village leaders,ocials, contractors or intermediaries manipulate eventhis system to siphon money rom workers (e.g., throughalse entries in the account passbooks, withdrawingmoney directly rom worker accounts, etc.).

despite the ban on contractors, field studies indicate

the presence of contractors in several states. Forinstance, the Drèze and Khera (2009) study nds that morethan a quarter o the 100 MGNREG worksites surveyed

in six northern states were managed by contractors; inJharkhand, this gure was more than hal.212 The surveyalso ound that workers, especially women, reportedlower harassment and greater adherence to the program’stransparency norms in contractor-ree worksites. Asa result, corruption levels tended to be higher wherecontractors are involved, largely due to udging o musterrolls. On the other hand, contractors can also bringwith them project management expertise that couldpotentially result in better quality o assets. This projectmanagement expertise needs to be transmitted to themates (worksite managers) that are appointed rom thepool o MGNREG workers under the program.

field studies largely indicate the absence of mandated facilities at worksites. The guidelines provide or acilitiessuch as rst aid, shelter or shade, drinking water and crèchesor children (provided there are at least ve children belowthe age o six). The absence o the child care acilities atthe worksite is a particularly critical gap as it potentiallyconstrains the participation o women in MGNREG. Severalstudies note that women are discouraged rom working

on MGNREG as they either have to leave their children athome or unattended at the worksite.

Monitoringandevaluation

The design o MGNREG makes huge additionaladministrative demands on the public works deliverysystem and requires a level o accountability whichprevious programs have ailed to achieve. Intensivemonitoring and evaluation o program outcomes isthereore critical to learn whether the strengthenedprovisions have had the intended impact.

there is indeed a strong emphasis on monitoring

in mgnreg – a significant departure from previous

public works (and other sp) programs. MGNREG hasa management inormation system (MIS) or tracking allactivities related to the program at the highest level o disaggregation, i.e., the household (www.nreg.nic.in).Besides the usual inormation captured in previousprogram reports (such as nancial and physicalprogress), the MGNREG MIS captures details on workers(i.e., registration, job cards, muster rolls, employmentdemanded and provided) as well as on works (shel o

works, work in progress). However, the large scale o theprogram, level o disaggregated inormation required,requency o transactions to be recorded and limitedinrastructure and connectivity at the village level allimpose ormidable challenges or keeping the MISupdated. In consequence, there are delays o as longas six months in some states in updating inormation inthe MIS. In act, in compiling the administrative data onprogram perormance or this report, we have relied onthe monthly progress reports (MPRs) rather than the MIS. These are based on the consolidated data entered at thedistrict level and are relatively up to date, though withless depth o inormation than the MIS. This backlog o

212 Evidenceontheextentorelianceoncontractorsinpreviouspublicworksprogramsissomewhatmixed.AMinistryoRuralDevelopmentevaluationoSGRYCMD2005oundcontractorswerereportedtobeinvolvedinonly14percentoassets.Thisissubstantiallylowerthanthatreportedbyotherstudies(Seeorexample,theAFCSGRYprogrammeassessmentortheGovernmentoOrissa2005,PlanningCommision(2000),DeshingkarandJohnson(2003)orAndhraPradeshandWorldBank(2005a)Kerala,Karnataka,RajasthanandWestBengal).Inaddition,theAndhrastudyoundthat,inthelargemajorityocases,Sarpancheswerethecontractors–andingosomeconcernorMGNREG.




inormation weakens the transparency unction o theMIS and reduces its relevance as a project managementtool or real time decision making.213 This backlog canbe avoided using a transactions-based MIS as it makesdata entry mandatory at the same time as the process(e.g., the job card is printed by the application as soonthe inormation i entered at the time o registration,rather than a manual issuance o the job card, ollowed

by entirely separate data entry).114 MGNREG has also

systems or eld monitoring o the program usingnational monitors as well as third party monitoring byindependent agencies. A network o institutes has beenestablished or independent concurrent monitoring o the program and has generated a body o research onthe perormance o MGNREG in the eld across states.215 However, there are no national or state-wide rigorousevaluations o impact (see Box 4.4 or potential channels

o impact o the program).

B 4.4: Ptta cas pact mgnReg

There is no rigorous national or state-level impact evaluation o the program, making it impossible to estimate the impact o MGNREG on key parameters such as poverty, labor markets, and the local economy. Absent rigorous evaluation, some ndings romearly simulations o likely scheme impacts estimated prior to introduction o the program are o interest to look at the potential o MGNREG to impact various social outcomes.a These simulations suggested that the program could potentially increase casual laborsupply during the lean season i the program wage rate was xed at just over ` 60 (in 2005 prices). The incremental labor supplyimpact was negligible at wage rates above ` 60. Note that these estimates were based on an assumption o a ull guarantee – i.e., everyhousehold who wanted work got it subject to a 100 day limit. This nding is o interest given the rise in the program wage rate sincethe introduction o the program and the evidence o rationing (i.e., rather than a guarantee). The simulations also predicted signicantpositive lean season poverty reduction impacts o MGNREG, with progressive distribution o gains. More recently, an evaluation o the

impact o MGNREG in one district in Andhra Pradesh also suggests positive impact on ood consumption and savings o participatinghouseholds (Ravi and Engler 2009). Another, also in Andhra Pradesh, suggests positive impacts in terms o reducing child labor amongparticipating households (Uppal 2009).

In principle, MGNREG could be expected to have an impact on wages and employment o participating households as well as non- participating households.b A priori, it would appear that the insurance and associated productivity impacts would be stronger i households perceived MGNREG as here to stay and i local MGNREG work was available at scale. I the program is seen as an unreliablesource o employment, as eld studies indicate is the case in some states, households would be less likely to change their labor supplydecisions (e.g., with respect to migrating or work or doing other casual work). To the extent MGNREG does in act provide a minimum ooror rural wages, it could also impact the private market or casual labor. This would imply gains/losses or those who do not participate inthe program. However, in light o the widespread nding o excess demand and rationing o work, it seems likely that the bulk o thesespillover eects to non-participants would be lost. Whether or not this impacts poverty would depend on whether it is mostly the poorwho participate (on the assumption that the sel-targeting mechanism works and only the poor turn up or work) and the opportunitycost o their participating in MGNREG (instead o doing some other work). Note that even among the poor, it is the able-bodied poor whowill be in a position to participate. Also, depending on social norms and the extent households make joint labor supply decisions, impacts

could vary between men and women. Anecdotal evidence rom some eld studies indicates some impact on local labor markets through rising casual wages and reduced migration. For instance, the IIPA (2006) study nds slightly lower incidence o migration among MGNREG households than among non-MGNREG households, more so in Bihar than in Jharkhand (see also Drèze and Khera (2009) and Khera (2006)). There is anecdotal evidencethat this constrains labor supply and aects agricultural wages in Punjab and Haryana (see or instance a series o articles by P. Sainath(2008) in The Hindu based on eld visits to various states).

There also several potential ways that MGNREG could impact uture livelihoods and rural governance, but the evidence rom eld studies suggest these channels o impact might be weak as yet. In addition to these direct income gains (or losses or those who hirecasual labor), there are potential spill-over benets through gains rom the assets created, i.e., potential increases in uture livelihoodopportunities and incomes. Field reports o poor asset quality indicate that this second-order impact is unlikely to have made itsel elt just yet. Finally, with its emphasis on empowering communities and local governments, MGNREG also has the potential to impact ruralgovernance. In practice, however, this has been the hardest to operationalize, implying that it might be too early to see such impacts.

Notes: (a) See Murgai and Ravallion 2005. The simulations are based on the 1999/2000 round o the NSS. (b) Evidence rom the MEGS in the 1980ssuggests a positive insurance unction o public works, with attendant impacts on production decisions - income variability among landless agricultural

households in EGS villages was signicantly lower than that o non-EGS villages (Walker 1986, Scandizzo et al 2007). Similarly, there is some evidence o private casual wages rising in response to MEGS (Gaiha 1996).

213 Forinstance,DrèzeandOldiges(2009)pointouthowprogramocersotendonothavealistoactiveworksitesintheirblock.

214 SeeMehtrotra(2008)andHirwayandSingh(2006)oradiscussion.

215 ThisProessionalinstitutional Network(PIN) includesIndian Instituteso Management(IIMs), IndianInstituteso Technology(IITs),National Instituteo RuralDevelopment(NIRD),AdministrativeStaCollegeoIndia(ASCI)andothers.




the use of social audits is one of the most interesting

innovations in mgnreg program delivery and can

be replicated in other social programs, with the

potential to reduce fraud and corruption and to

make public delivery systems from accountable. Socialaudits are mandated by the operational guidelines, butew states, with the notable exception o Andhra Pradeshand Rajasthan, have made progress in implementingthese in the eld. In Rajasthan the process was drivenlargely by high community-level activism that hadits roots in the Right to Inormation movement.216 InAndhra in contrast the government drove the processby establishing an independent social audit society andpartnering actively with CBOs and NGOs to initiate auditsin the eld.217 These two states represent very dierentsuccessul models (see Box 7.5 in Chapter 7) that are o interest or other states attempting to institutionalizesocial audits. Besides initiating the process o socialaudits, it is also important to move rom “answerability to

accountability”, i.e., the district and block administrationneeds to be responsive to the issues raised at the publichearing at the end o a social audit.218 Unsurprisingly,there is evidence o resistance, sometimes violent, tothis process. An extreme maniestation was the murdero an activist while initiating a social audit in Jharkhand. There have been sporadic incidents even in Rajasthan. There remains, however, a strong case to continue towork towards greater transparency and accountability.

B. PRomoTing movemenTouT oF PoveRTy in The

ShoRT AnD long TeRm

as noted in chapter 2, india’s safety net program mix

has historically exhibited a relatively low emphasis

on interventions which seek to promote sustained

movement out of poverty, either in the short run (through livelihood support), or the long run (by

incentivizing human capital acquisition). However,the situation has changed markedly in recent years with

respect to long run programs. The major expansion inspending on midday meals in schools represents an

important development in strengthening such objectivesin India’s saety net. In addition, there is a seriousattempt to restructure the livelihood support programsunder the aegis o the National Rural Livelihood Mission(NRLM). This section looks at three programs which seek to promote movement out o poverty: (i) targeted ruralcredit programs; (ii) school stipends/scholarships; and(iii) the midday meal program.

a Tartd rra crdt prras

as with public works, india has an extended history

of targeted credit schemes for the rural poor. Thisbegan through the Integrated Rural DevelopmentProgram (IRDP), which was universalized rom 1980, andsupplemented by various training and input schemesover the subsequent two decades. In 1999, all theseschemes were merged into the Swarnajayanti GrameenSwarozgari Yojana (SGSY), which is conceived as an

integrated micro-enterprise development programor the rural poor, emphasizing sel-help group (SHG)ormation, capacity building, and access to credit andmarkets.

while irdp concentrated on individual beneficiaries,

sgsy lays greater emphasis on social mobilisation

and shg formation. SHGs are also given awarenesstraining in the importance o regular savings and creditdiscipline in an attempt to build up mutual supportsystems and a greater sense o sel-condence. However,the district administrative oces (DRDAs) responsible

or administering the programme generally lack therequisite skills in social mobilisation, and linkages withNGOs, which could have acilitated this process, havealso been weak in many states. In addition, lendingby banks is a major problem area, with both credit tosubsidy ratios considerably below program norms(resulting in under 40 percent o the targeted creditamount being mobilized), as have been average loansizes estimated at ` 22,995 in 2007/08).219

(i) Coverage

the coverage of sgsy is very low, a reflection in part of relatively low (and falling real) spending, and of

216 SeeorexampleSivakumar(2007)andseveralassociatedarticles(includingamanualorconductingsocialaudits)attheRighttoFoodwebsite.

217 SeeAakellaandKidambi(2007a,b).DetailedguidelinesareavailableonlineattheGoAPMGNREGportal.

218 SeeSen(2007)oradiscussion.

219 SeeSaxena(2006),RadhakrishnaCommitteereport(2009).




a range of program design and implementation issues

which have plagued the program and predecessors

since inception. Analysis o nationally representativedata nds a coverage rate o 1 percent o householdsnationally or SGSY, with only a ew states (Rajasthan,Himachal Pradesh, Maharashtra and Chhattisgarh)reaching 2 percent coverage.220 Madhya Pradesh is theonly state that stands out as having notably higher

SGSY coverage (at over 4 percent), though generally thepoorer states have somewhat higher coverage rates inrelative terms. Just as interesting is the high variabilityin reported benets rom the program, and the act thatthe median benets are well below those suggestedby administrative data. The last point is consistentwith reports rom qualitative work or this report andother studies which have noted regular payment o “commissions” by beneciaries or bank ocials andothers (see below).

the low coverage rates of sgsy are confirmed by other

data sources. The state-specic surveys undertakenor this report (2005 SPS and 2006 JLSS) nd that only3.3 percent o households were covered by SGSY inKarnataka, Madhya Pradesh (the highest coverage statenationally) and Orissa, and only 1.6 percent householdsin Jharkhand.221 Beneciary numbers reported by theMinistry o Rural Development also indicate low coverage. Though nearly 31 lakh SHGs were ormed in the rstten years o the program, only about 22 percent wereable to obtain credit to take up economic activities.222 Assuming they were all rom separate households, this

would be around 0.35 percent o rural households.

(ii) Targeting

evidence on targeting is more mixed, depending on the

data source and whether coverage is examined across

the distribution of household wealth or per capita

expenditure. The IHDS data nd coverage across wealthlevels to be progressive (see Table 4.7), and SC coveragenotably higher (though still low). Earlier data rom NSSnds that coverage was progressive in the late 1990s,but very mildly so.223 However, the state-specic surveys

(SPS or Karnataka, Madhya Pradesh and Orissa and JLSSor Jharkhand) nd that SGSY is regressive in coverage.

In Karnataka, MP and Orissa, the coverage rate or SGSYin the top wealth quartile is over two thirds higher thanor the poorest quartile, while more than 80 percent thiscoverage rate was more than 80 percent higher in thehighest compared to the lowest per capita expenditurequintile. O the range o saety net programs reviewedin the study, SGSY was ound to be the least eectiveprogram in serving the poor, or a variety o reasons.Given that SGSY is targeted to below poverty line or BPLhouseholds, these results indicate that more research isneeded on the distributional aspects o SGSY.

the analysis also gives cause for concern with respect to benefit incidence across the distribution

and social categories. Progressive coverage rates aremore than oset in terms o benet incidence by themuch higher average benets reported by the rich, andamong OBC households. This can be seen in Table 4.7,where the richest quintile captures almost hal o theprogram benets, while the poorest quintile capturesunder 8 percent. In caste terms, OBCs capture over60 percent o the total benets. This is interesting in lighto the 50 percent program reservation or SC and ST.

220 IntheNCAERsurvey,therewasacombinedquestionoSGSYoranyinsurancepayout.Giventheverylowcoverageoinsurance,thisistakeninattachedasacloseapproximationoSGSYcoverage,andinanyeventisatbestanupperboundoSGSYcoverage.

221 SeDevetal(2007)andBalchander(2009).

222 RadhakrishnaCommitteereport(2009).

223 SeeO’KeeeandPalacios(2006).

% hhmda hh btsa SgSy hhs

% btscaptrd

Poorest 1.3 1,712 7.7

Q2 1.0 5,430 15.4

Q3 0.9 3,685 10.4

Q4 0.6 10,025 16.7Richest 0.7 26,430 49.7

OBC 1.0 11,001 62.6

SC 0.9 9,484 27.0

ST 2.5 1,560 5.2

Other 0.4 4,576 4.7

All India 1.0 7,681 100

Tab 4.7: Cra SgSy b at, scacatr ad cat, 2004/05

Source: Ajwad (2006), based on 2005 IHDS data.




(iii) Implementation 224

there are a range of fundamental implementation

challenges faced by sgsy which suggest a serious

assessment is needed of its potential in the indian

safety net, and the current delivery modalities. Thescope o poverty reduction through SGSY is limitedboth by the debt-capacity o the poor and by the high

cost o appraising, monitoring and enorcing small loanagreements. The rst limitation is in theory oset bysubsidy, but it attracts rich borrowers to the scheme,and thus creates political and administrative problems. The subsidy element has led to large scale corruptionon the part o lower level unctionaries who certiy non-eligible beneciaries as being BPL. Even when the poorare selected there is oten no intention on their part tocreate assets; the subsidy is the main attraction. It hasalso led to corruption on the part o bank sta, and on thepart o borrowers themselves, some o who sell o theirassets and pocket subsidy, or who borrow by proxy or

non-target group borrowers. Because o the distortiono objectives, lending policy under SGSY tends to bedriven by the availability o subsidised unds ratherthan by the eective demand or credit. Problems in theselection o viable activities and inadequate capacitybuilding o beneciaries combined with supply-sideissues with the banking sector results in inadequateow o credit under SGSY.225

apart from such “big picture” concerns, there are a

number of other factors in design and implementation

of sgsy which have, until recently, received inadequate

attention in policy evolution of targeted credit programs. they include:

Lackomarketsandinrastructure.Unless creditis accompanied with adequate inrastructuralsupport by way o extension, marketing, etc. theresult is inructuous lending. SGSY is generallysuccessul where inrastructural and institutionalsupport is available. These are the regionswhere many people even without the subsidywould have taken to entrepreneurial activities.However, the ailure by the poor to use assets

protably stems rom several actors, o whichcontrol over markets is an important actor. Thepoor are not able to secure economies o scale

because o indivisiblities in marketing costs andlow risk bearing capacity. Low price receivedby poor or their products is also because o interlocked output and capital markets, lack o value addition technologies, poor organisationalbase and insensitive government policies. Theseproblems need to be attacked by the sameagency, which is not possible in government

system. Whereas NGOs could take initiativein some o these sectors, they cannot changeexploitative marketing inrastructure.

Lack o repeated contacts between lenders

and borrowers. SGSY suers rom a basicmisconception that the provision o credit is a one-time event rather than a continuing relationshipbetween lender and borrower. It is unrealistic toexpect the larger share o borrowers to “graduate” just on the basis o an “injection” o credit (themedical terminology is signicant), even i

provided in sucient “doses” (which was untilnow not usually not the case). Most loans in SGSYare a one-time aair, and the bank eels relievedwhen the le is closed. In the case o GrameenBank o Bangladesh, most borrowers start withsmall loans, but as the relationship with the bank improves, more loan is given to the same person,thus making their interaction and relationship lastor a long-term, recovery and resh loans oten gohand in hand. This also improves the capability o the poor to utilise the loan protably. Their stakein repayment is also higher. In India, since loan istaken only once in a lie time by most borrowers,the tendency is not to pay and become deaulter.

Over-ocus on asset ormation. There is still anunder-emphasis on activities which requireno xed assets at all such as a large number o trading, service and even simple processingactivities. Thus the mix o activities in India isvery dierent rom other large micro-enterpriseprogrammes in Bangladesh, the Philippinesand Nepal or instance, which nance a muchlarger component o petty trading and service

activities suitable to the poorest o the poor. Theirdiscouragement in India (due to a preoccupationwith asset ormation) has restricted the type

224 ThissectiondrawsromSaxena(2006).

225 Thisincludes inadequatebankingcoveragein ruralareas,shortage omanpower inruralbank branchesas wellas lacko proessionalprojectappraisal andmonitoringteamsinruralbankbranches.




o livelihood activities that can be nanced,and has led to overcrowding in those which arenanced (milch animals or instance). Instead o responding to a demand-led pattern o lendingopportunities, banks are still restricted to a list(albeit an expanding one) o “approved” activities.In practice the range o activities or which loanswere available was quite narrow. On the demand

side, certain protable enterprises were quicklysaturated because o too many loans or singleproessions and their protability declined. Sinceindicators or monitoring are target and notachievement based, retention and protability o assets purchased are never monitored.

Neglect o consumption and savings. SGSYcompletely neglects savings, on the mistaken belie that the poor cannot save at all. The distinction madeby banks between the acceptable use o credit orproductive purposes and its unacceptable use

in consumption is an articial one in the contexto poverty. About two thirds o the borrowingo the poor in India is or consumption purposes(all o it rom the inormal sector) o which threequarters is or illnesses and household needs inthe lean season.226 In the absence o any systemor encouraging even minuscule but regularsavings a great deal o SGSY credit gets diverted toemergency consumption needs.

Existingproblemsomicro-enterprises.Designerso SGSY do not look into the existing problems o

the already established micro-enterprises. Thus,how can one empower the rural poor to becometailors, weavers, shopkeepers, or cattle ownersi the present problems aced by those alreadyowning these assets are not looked into? Ratherthan give subsidy to new enterprises it wouldbe ar better to solve the problems aced by theexisting units, whether these are in design, or inmarketing or working capital.

in light of these problems, sgsy is now being

restructured as the national rural livelihood

mission (nrlm) for promoting rural livelihoods. TheRadhakrishna Committee report (2009) made severalrecommendations with respect to the design andimplementation that signal a signicant departure rom

the old SGSY model. The NRLM aims to ensure greatercoverage among BPL households by mobilizing atleast one member rom each BPL household into SHGs.Drawing on the experience o relatively successulmodels such as the Kudumbasree model in Kerala andthe Indira Kranti Patham (IKP) model in Andhra Pradesh,the NRLM proposes to ederate SHGs at the villageand block level. NRLM also proposes enhancing the

subsidy under the program and to introduce an interestsubsidy or SHGs. Though the Radhakrishna reportacknowledges the requent misuse o both backend andront-end subsidies,227 the report emphasises the needor retaining the subsidy in principle, both to incentivizepoor households to enter the program and to insureagainst the associated risks o entering sel-employment. The NRLM provides or an enhanced capital subsidyto cover the risk in the transition o poor householdsrom wage to sel employment. In addition, an interestsubsidy or loans up to ` 1 lakh is also provided to poor

households. The experience rom SGSY indicates that thesubsidy proved to be a major source o corruption and adisincentive to lend, on account o low recoveries.

in addition to promoting self-employment, the nrlm

also promotes wage employment for the poor through

the introduction of placement-oriented skill training

model for youth as “special projects”. An exampleo such an approach is the training and job placementprogram under the Employment and Marketing Missionin Andhra Pradesh. This is an autonomous governmentagency which promotes employment or youth in remote

areas by linking them with ormal sector employers andnancing short-course training (see Box 4.5). Given thatthe end objective o NRLM is productive employmentopportunities, the proposal to direct a proportion o unds towards making young people employable in thegrowing range o employment opportunities providedby India’s economic growth is a welcome policy reorm.

a multi–tier dedicated implementation structure is

proposed with a national agency at the centre supported

by agencies for implementation at the state, district

and sub-district levels. The NRLM at the national level is

intended to serve as a nancial and technical resource tothe state organizations and its mandate includes acilita-tion o partnerships with civil society organizations andinstitutions, analysis and dissemination o best practices

226 MahajanandRamola(1995).

227 TheexperienceromSGSYindicatesthatthesubsidyprovedtobeamajorsourceocorruptionandadisincentivetolend,onaccountolowrecoveries.




B 4.5: ept grat ad mart mss egmm

The Employment Generation and Marketing Mission (EGMM) is an initiative o the Department o Rural Development, Governmento Andhra Pradesh that strives to provide employment to economically and socially underprivileged rural youth in Andhra Pradesh.With an objective o “onejoboreveryruralamily”, EGMM provides skills training to rural youth and nds employment or them in theorganized sector. EGMM was originally set up as the Employment Generation Mission in 2002 under the Andhra Pradesh Societies Act2001 and was later rechristened as Employment Generation and Marketing Mission, to bring within its scope marketing support to thesel-help groups, women entrepreneurs and the non-arm sector.

The EGMM model works on a PPP mode with partnership between the public sector, private sector and the poor (see gure below).

The state government mobilizes rural youth or general skill development, with some training programs tailored to specic industriesor sectors. On completion o training, placement assistance is oered. These include the rural retail academy (with partners such asReliance Fresh, McDonalds, Spencers, etc.), the security academy (partners include Group 4, Securicor, etc.) and a general trainingacademy or English, sot skills and computer training. There are also models where private sector organizations partner in training aswell as placement. These include Dr. Reddy’s Foundation and Tally in service sector, among others. The training modules in the EGMMare careully chosen based on industry demand and specically designed or certain sectors that have growth potential and capacity toprovide employment.

The mission is headed by the district collector in each district. Each district also has a project director and the District Rural DevelopmentAgency (DRDAs) and Integrated Tribal Development Agency (ITDAs) are active partners. There is also a project management team

comprising proessionals recruited on a contract basis; this has a cell at the state level and a team o district managers or each district.At the grass root level, the mission is carried out by the district manager through Job Resource Persons (JRP) whose main job is toidentiy and motivate youth in opportunities rom EGMM. Women Sel Help Group (SHG) networks in the villages provide major impetusin this and oten assist the JRPs in this process. The budget or EGMM is mainly rom the state government Remote and Interior AreasDevelopment (RIAD) budget and SGSY unds through the DRDAs.

From 2005-06 to 2008-09, over 226,000 youths have been trained out o which 183,000 have been placed in various organized sectors.Annual salaries range rom ` 45,000 upwards in metros and ` 24,000 upwards in semi-urban areas. Absent rigorous impact evaluations,studies that quantiy changes in the lives o the participating youth and their amilies are o interest. One such study in the districts o Karimnagar, Anantpur, and Chitoor where youth were trained by the security academy and subsequently placed as security guards incities indicated reduced dependence on money lenders and increased ownership o assets by their amilies.

Source: Dutta (2008). See also EGMM website (www.egmm.ap.gov.in).

The SHG

Network

EGMM

State Government

Provides infrastructure

support

provides funds

provides placement

assistance

provides training

mobilises rural

youth

supports mobilisation

of rural youth

82000 rural youth trained and65827 provided empployment

in 2007-08

provides infrastruc ture

and training support

privete sector

provides

empployment

and technical and institutional innovations, training andcapacity building, monitoring and evaluation, promotingconvergence with other anti-poverty programs and otherrelated unctions. The state-level umbrella organizationsare seen as critical in the ormation o and hand-holdingsupport or SHGs, given that DRDAs are ill-equipped or

such social mobilization. Unlike under SGSY, PRIs aregiven an active role in the mobilisation o communitiesand in exploring the possibility o giving the responsibilityor the execution o selected panchayat activities (suchas civil works, maintenance o common property etc.)to SHGs.




b Sc stpds

india has an extended history of providing school

stipends from both state and central levels.

most states have some form of school stipend

in operation, at least for selected groups such

as tribal children. This combines a number o centrally-nanced stipend schemes (e.g., or disabled

children, ST girls), and state-specic schemes (e.g.,Uttar Pradesh provides stipends to all SC, ST andOBC children in primary school). This school stipendprogram is intended to boost enrollment, attendanceand retention in school.

coverage of schools stipends is fairly high at almost 10 percent nationally, but with large inter-state

variation. Table 4.8 presents results on coverage rates

or school stipends or major states, using householdsurvey data rom the 2004/05 IHDS data. These ratesare estimated among those with school age children(6-18), while the median stipend amount is the transerreceived in the previous year among householdsreceiving stipends. Coverage exhibits major variationsacross states, with several states covering up to one tho children. Some patterns stand out and are consistent

with national and state policies:

several states with high tribal populations have

expectedlyhigherthanaveragestipendcoverage,

thoughOrissaisanexception.

in contrast, several poorer states have very low

stipend coverage, including Bihar, Orissa and

Rajasthan.Uttar Pradesh is a notable exceptionor a poor state with low tribal population, andthis share is likely to have increased sharply sincewith the expansion o state-unded OBC stipends

in recent years. stipends stand out as one area where southern

and richer states have lower than average

coveragerates,in part perhaps because o higherprivate schooling rates but also driven by state-level policies.

thereisalsosignicantvariationinstatelevelso

stipendsreportedpaid. In contrast to the patternor many other programs, however, it is generallythe poorer states (though with Madhya Pradeshand Assam as notable exceptions) which report

higher median stipends receipts. More specically,some o the more tribal states such as Jharkhandand Chhattisgarh continue to have a healthypicture, and both J&K and Tamil Nadu standingout with high median payments among thosereceiving the stipend. Note that these numbersneed to be interpreted with caution as the medianbenet amount does not distinguish betweenhouseholds that have a single or multiple childrenreceiving a stipend.

looking at the same findings in distributional terms,

stipend coverage is quite progressive in terms of simple coverage rates, but expenditure incidence exhibits

a much more mixed picture, as the median annual

levels of stipends reported vary sharply across

the distribution in a regressive manner in terms of

both wealth and social category. This can be seen

Stat

% hh t

cdr ad6-18 ars

mda bts

a hh tstpds, ` pa

Andhra Pradesh 2.0 4,043

Assam 13.1 226

Bihar 0.6 2,563

Chattisgarh 29.0 1,788

Delhi 0.5 1,243

Gujarat 10.9 423

Haryana 0.8 582

Himachal Pradesh 8.0 839Jammu & Kashmir 0.8 4,023

Jharkhand 10.7 1,556

Karnataka 6.6 893

Kerala 0.6 1,040

Maharashtra 5.0 1,666

Madhya Pradesh 16.1 740

Orissa 3.4 2,606

Punjab 1.6 308

Rajasthan 1.1 1,200

Tamil Nadu 2.3 17,638

Uttar Pradesh 31.4 759Uttarakhand 28.3 691

West Bengal 1.8 400

Other 7.2 1,652

All-India 9.6 1,224

Tab 4.8: Sc stpd cra ad rcpts

rra ad rba aras, 2004/05

Source: Ajwad (2006), based on IHDS data.




in Table 4.9. In terms o benet incidence, the poorestquintiles captured only 12 percent o total benets, incontrast to the richest capturing 34 percent. Again, acaveat in the interpretation o these ndings is that themedian amount received per child in the householdis not known. Interestingly, despite the prevalence o

Tab 4.9: Cra ad rcpts sc stpds bat, sca catr ad cat, 2004/05

% hh t

cdr 6-18rc

stpd

mda bts

r hh rcstpd

` aa

Sar tta bts

captrd %

Poorest 9.7 627 11.7

Q2 14.4 883 21.6

Q3 9.6 730 12.5

Q4 8.2 1,585 20.1

Richest 6.5 3,592 34.1

Rural 11.5 983 70.8

Urban 4.3 3,018 29.2

OBC 9.6 1,501 49.8

SC 14.6 860 24.3

ST 14.3 740 7.0

Other 4.2 1,349 11.6

Total 9.6 1,224 100

Source: Ajwad (2006), based on IHDS data.

SC/ST stipends, the share o total benets capturedby ST households is almost exactly the same as theirshare in the sample and or SC households it is less,while OBC households capture a higher share o totalstipend spending than their share in sample. However,this needs to be interpreted in the light o state-specicschemes, in particular the major expansion to OBCsthat was occurring in Uttar Pradesh during the period

o the survey.

at one level, these school stipends can be considered

conditional cash transfers, though they differ

notably from ccts internationally in having weak – or

in most cases, absent – enforcement of attendance

requirements, being based largely on enrollment

in school in practice. In the past decade, there hasbeen a growing reliance in developing countries onconditional cash transers (see Box 4.6 or internationalexperience with CCTs). These provide a cash transer –oten targeted to the poor or other specic groups –conditional upon households undertaking speciedactions with respect to education, health, and insome case nutritional interventions. CCTs rely on twochannels or aecting demand: (i) reducing the incomeconstraint on households; and (ii) providing a specicincentive to undertake desired behavior. In this way,saety net transers can become not only a short term

B 4.6: itrata prc t Cdta Cas Trasrs CCTs

The design o CCTs diers across countries, most notably in the scope o actions required by households to receive benets. While several

Latin American countries require education, health interventions and nutritional programs or children (and in some cases mothers andeven elderly), others such as Bangladesh and Pakistan ocus on educational attendance only. Despite the variation, the menu o actionsrom which countries choose their conditions or CCTs is similar, and includes:

educationCCT components typically require school enrollment and attendance around 80-85 percent o school days in 1-3 monthperiod. Most countries cover primary and secondary levels, while some countries also target specic groups (e.g., girls in theBangladesh secondary school stipend).

health/nutritionCCT components typically ocus on children up to 2-3 years o age, though in some countries up to primarystart age. Several countries also include pregnant and lactating women, and Jamaica goes urther to include also 65+, disabledand destitute adults < 65. Households are required to undertake a regular schedule o health care visits (or child and sometimesother amily members), commonly including growth/development monitoring, vaccination, health/nutrition education in somecountries.

With respect to targetingobeneciaries , approaches also vary, but most programs have a combination o geographic and householdlevel targeting (though Turkey, or example is nationwide, and Honduras uses geographic targeting only). With respect to geographic

targeting, two main considerations are typical: (i) some indicator o locality marginality (e.g., malnutrition data in Honduras, marginalityindex in Mexico); and (ii) supply side capacity to deliver (e.g., Mexico and Nicaragua – within certain distance o education and healthacilities, Colombia requires adequate services, a bank and database). With respect to household level targeting, proxy means testing hasbeen most common (e.g., Mexico, Turkey, Jamaica, Colombia).

A challenge in cross-sectoral CCTs has been institutional coordination. Dierent countries have dealt with this in dierent ways,including: (i) Social line ministries: Brazil, Jamaica, Nicaragua, Kenya, Mexico; (ii) Presidency/social cabinet: Colombia; Dominican Republic;(iii) Specialized public agencies: Honduras, Sri Lanka, Pakistan; and (iv) Social Investment Funds: Chile, Turkey, El Salvador.




source o poverty mitigation, but also hopeully helpleverage improved human capital acquisition, whichcould contribute to longer term and more sustainedpoverty reduction. While most widespread in LatinAmerica (where both middle income countries such

as Mexico and Brazil, and lower income countriessuch as Nicaragua and Peru use dierent ormso CCTs), CCTs are increasingly being tried or pilotedby other developing countries, including Bangladesh,Pakistan, Kenya, Cambodia, Turkey and India(see Box 4.6).

as a concept, conditional cash transfers are not a

new to india. In act, the rst CCT scheme wasintroduced in India as early in 1994 (a Haryanagovernment state scheme in 1994). Since then,many programs have been introduced both by

the centre (primarily to promote positive humandevelopment outcomes or the girl child) as well asstates, some o which are listed Box 4.7. However,in many ways, these programs unction as cashtransers rather than conditional cash transers andthe implementation o these programs dier in many

B 4.6: itrata prc t Cdta Cas Trasrs CCTs

A number o CCTs have been subject to rigorousimpactevaluations, and ndings are as ollows:

on household consumption , the results are generally positive (especially where transers are large), including: (i) in Mexico,households randomly assigned to the CCT program group had consumption that is 13-18 percent higher. In addition, householdsappear to invest about 25 cents out o every peso transerred by the CCT program in productive assets, so that, by investingtransers, beneciary households increased consumption by about 24 percent ater six years on the program; (ii) in Nicaragua, CCThouseholds have 13 percent higher consumption, implying decreases in the extreme poverty rate o 15 percentage points, and inthe poverty rate o 5 percentage points; (iii) in Colombia, CCT households have 15 percent higher consumption than matched set

o comparison households; but (iv) in Ecuador, there was no signicant program eect o the CCT on consumption, explained atleast in part, by a massive 17 percentage point reduction in child labor

on educationaloutcomes, evidence is generally positive with respect to improved utilization o services, though results on theend outcome o educational attainment remain very sparse. However, evidence rom evaluations in 9 countries, nds: (i) positiveprogram eects on enrollment, including those with the most robust evaluation strategies; (ii) impacts are larger among groupsthat had the lowest probability o enrollment at baseline: CCT programs may help reduce “inequality o opportunities”; (iii) Largerprogram eects in countries with lower baseline enrollment levels; (iv) Larger program eects in transition grades with highdropout rates; (v) with respect to learning outcomes, evidence is mixed, and draws primarily on Mexico, where the CCT increasedyears o schooling but did not lead to higher scores on standardized tests.

on utilizationohealthservicesandhealthoutcomes, evaluations have ound increases in coverage o some services (or example,growth monitoring or children, preventive check-ups or adults), but not others (or example, immunization rates). Evidence romone country (Mexico) also suggests that CCT program reduced child morbidity and mortality, and improved adult health status

on childnutritionalstatus ,the evidence is inconclusive. For example: (i) in Mexico, evidence on impacts on child height is mixed,in part due to technical issues in comparison over time; (ii) in Nicaragua, the CCT program reduced stunting by 5.3 percentagepoints, but result is only borderline signicant; (iii) in Honduras, there was no signicant eect o the CCT on child height;(iv) in Colombia, the CCT reduced stunting among children younger than 2 years o age by 6.9 percentage points, but had noeect on children aged 3-7 years at baseline; (v) in Brazil, the CCT appears to have had a negative eect on child height andweight, perhaps because households believed that their children needed to be malnourished to be eligible or transer

A natural concern in considering CCTs is the supplyside , and the extent to which it is reasonable to condition transer receipt on useo absent or poor quality educational or health/nutrition services. Several countries have avoided this problem by requirements o minimal supply side presence; others have attempted to address it by building additional inrastructure or nding alternatives ordelivery. Others such as Bangladesh (or girls’ secondary education) and Pakistan Punjab (or emale school stipends in grades 6-8) havenot, and despite this the eects on enrollments appear to be positive, with or example a net program impact o 9 percentage points inPakistan Punjab. A urther point o interest on the supply side is inclusion o only public schools in the program (as in Punjab) or bothpublic and private schools (as in Bangladesh). Some countries, like Bangladesh and Mexico, have also sought to improve quality throughincentives (pay-or-perormance schemes or providers in parallel with the CCT).

While strong universal conclusions are dicult on the CCT experience, several conclusions seem robust: (i) CCTs are well targeted to

poor households and have helped provide a consumption oor; (ii) CCTs signicantly increase the utilization o education and somehealth services; (iii) evidence on the impact o CCT programs on “nal” outcomes in education, health and nutrition is less clear-cut;(iv) the institutional ramework and administrative systems or implementation remains a big and country-specic issue; and (v) importantknowledge gaps remain about “optimal” program design:

Source: Fiszbein and Shady (2009); de Janvry and Sadoulet (2006); Chaudhury and Parajuli (2006).

Ctd...




respects rom the international experience notedabove. This is largely due to the lackluster trackingand enorcement o the conditionality associated withthe transers. This in turn is partly due to supply-side

constraints and partly the result o poor monitoringand evaluation systems. Another challenge in theeective implementation o these programs is thatthe institutional inter-ministerial ramework oradministering such cross-sectoral programs is stillbeing established in India.

c md-da as

the midday meal school feeding program in schools

has expanded rapidly in the past decade, and is an

increasingly important plank of educational and broader social policy. while midday meals have been

delivered in some parts of the country from as early

as the 1950s (in tamil nadu) and 1980s (in gujarat),

the major expansion came only after 1995, and more

particularly 2001. While cooked midday meals were

B 4.7: or Cdta Cas Trasrs CCTs ida

Conditional cash transer schemes in India are more than 15 years old, with the rst scheme “ ApniBetiApnaDhan” started by theGovernment o Haryana as early as 1994. Some o the programs introduced both by the centre (primarily to promote positive humandevelopment outcomes or the girl child) as well as states since then are listed below.

k ctra spsrd CCT prras ida:

IndiraGandhiMatrisahyogYojana was started in 2009 by the Ministry o Women and Child Development. This Conditional MaternityBenet Scheme aims to provide cash to pregnant and lactating women in response to ullling specic conditions like registration o

pregnancy, iron ortication during pregnancy, attendance at counseling sessions, registration o birth, immunization and orticationas well as exclusive breast eeding or the new born child. A budget allocation o ` 3.6 crores has been made or this scheme in2009-10.

Dhanalakshmi was launched in March 2008 by the Ministry o Women and Child Development and covers 11 blocks across seven states. The scheme provides cash transers (and insurance coverage in certain cases) to the amily o the girl child (preerably to the mother) onullling certain specic conditionality’s or the girl child: registration o birth, immunization, enrolment and retention in primary andsecondary school and marriage ater the age o 18 years.

JananiSurakshaYojana was launched under the National Rural Health Mission in 2005. The main objectives are to reduce maternaland neo-natal mortality by promoting institutional delivery and or making available medical care during pregnancy, delivery andpost delivery period. All women receive cash assistance i they have their baby in a government health centre or accredited privateinstitution. Eligibility criteria and incentives in rural and urban areas dier across low and high perorming states (with respect toinstitutional delivery rates).

BalikaSamriddhiYojana was started in 1997 and covers girl children (born on or ater 15 August, 1997) in BPL amilies in rural and urban

areas. An eligible girl child is entitled to a post-birth grant amount o ` 500/- and annual scholarships or each successully completed yearo schooling as long as she is unmarried and attends school regularly until the Xth grade.

S stat spsrd CCT prras

Ladli was launched in August 2005 in Haryana and Delhi. Parents are given ` 2500 per child per year or ve years, on the birth o theirsecond daughter. The transer is invested in Kisan Vikas Patras or similar savings scheme. In addition to being unmarried at 18, the childmust be enrolled in school/early child care centres and ully immunized as per age or her to receive regular payments.

DeviRupakYojana was introduced in Haryana. I parents undergo sterilization ater the rst or second child they are given a monthlypension or 20 years. The amount varies i the rst child is a male or emale.

KanyaJagritJoti was introduced in Punjab in 1996-97. An amount o ` 5000 is invested in the name o the beneciary with the LieInsurance Corporation. The child gets a scholarship o ` 100 per month at the age o 6 to 12 years. The rate o scholarship is doubled atthe age o 12 to 18/21 years. At the termination o the scheme, the beneciary gets a lumpsum amount o ` 5000 plus bonus accruedthereon, provided the parents continue to ollow the two child amily norm and also the child passes at least Matriculation. This scheme

has about 8000 beneciaries every year.KanyaVidyaDhanYojana was introduced in Uttar Pradesh in rural and urban areas. The scheme provides a sum o ` 20,000/- to each girlwho passed intermediate examination rom U.P Board and belongs to BPL amilies.

ApniBetiApnaDhan was introduced in October 1994 in Haryana. This scheme pays mothers ` 500 within 15 days o the birth o a girlchild, to meet her nutritional requirements. An amount o 2,500 is also invested, within 3 months, in an ‘Indira Vikas Patra’ or other similarsavings scheme in the name o the new born baby. Eligibility is restricted to socio-economically disadvantaged amilies belonging toSC/ST and BPL amilies, and only i they have three or ewer children.




mandated rom 1995 (with two years given to put thesystem in place), they remained the responsibility o states until 2001, and experience across states was verymixed in terms o perormance. A key step towardsexpansion was the 2001 Supreme Court order, whichordered states to provide the meal with minimumcaloric content in all government and aided primaryschools.228 Although initially only primary students

were covered, in October 2007, the scheme was urtherrevised to cover children in upper primary (classes VIto VIII) initially in 3479 Educationally Backwards Blocks(EBBs) and rom 1st April, 2008 across the country. Thescheme receives budgetary support rom the centers asa CSS, or which the nominal GoI allocation has increasedby more than six times between 2002/03 and 2008/09.While the center nances the grains and transportation,states retain the responsibility or several elements o implementation, including cooking inrastructure andprovision o cooks.

at present the midday meal scheme is the world’s largest school feeding programme and feeds about

118.46 million children in over 9.5 lakh schools

across the country. Administrative data suggests that

coverage o children as a proportion o those enrolledin schools is over 90 percent in most states (see Figure4.7). This is however a likely overestimate o coverageas enrolment as the administrative data reported byschools and enrolment is a primary criteria or eligibilityto receive grains to serve schools meals. Inormationrom household surveys might be more inormative inthis regard.

household data from the nss suggests much lower

coverage rates, more so in urban areas, with wide

variations across states (see table 4.10). Karnataka, Tamil Nadu, Himachal Pradesh and Chhattisgarh perormrelatively well with over 70 percent o rural householdsreporting having received midday meals at-least oncein the last year. Bihar, Jharkhand, Rajasthan and UttarPradesh however report less than one third the coverage(less than 20 percent) in these states. The situation inurban areas across India and in a majority o the statesremains ar worse with less than hal the coverage

rates in rural areas. It is possible that household survey-based data underestimates coverage as the estimatesare or households with at least one child aged 6-10rather than those where a child o that age is enrolled

228As pertherecentlyrevisednutritionalnormsorMDM,everyprimarychildshouldreceive450calories,12gmoproteinsperdayandadequatequantitiesomicronutrientslikeiron,olicacid,vitamin-Aetc.andupperprimarychildshouldreceive700caloriesand12gmoproteinswithadequatemicro-nutrients.

Figure 4.7: Coverage o midday meals according to administrative Data (among children enrolled in primaryschool), 2007-08

Source: Ninth Report o the Food Commissioner’s appointed by the Supreme Court 2009.

Note: States sorted in ascending order o coverage.

67 6771 75

79

87 88 90 9295 96 97

100 100 100 100

0

20

40

60

80

100

120

G u j a r a t

J h a r k h a n d

B i h a r

U t t a r P r a d e s h

M a

d h y a P r a d e s h

D e l h i

N a g a l a n d

W e s t B e n g a l

M a h a r a s h t r a

J a m m u & K a s h m i r

U t t a r a k h a n d

A n

d h r a P r a d e s h

A s s a m

C h h a t i s g a r h

O r i s s a

R a j a s t h a n

%




in a government/aided primary school. However, instates with relatively low rates o private schooling, thisis unlikely to be a major concern since it is commonlyknown that children attending private school enrollin government school to avail o the MDM. One o thereasons or lower coverage in urban areas could be dueto the relatively higher reliance on private schooling.

though the midday meal (mdm) program is universal

in coverage (for all children enrolled in government

and aided schools), coverage among poorer sc/st

households is relatively higher than that among

richer and general caste households, particularly in

urban areas (see table 4.11).229 In urban areas, 41 percento the poorest households reported children benettingrom midday meals compared to about 10 percento the richest households. Given that the program isuniversal rather than targeted to the poor, the coverage

o children rom households in the richest quintile is also

quite high, at least in rural areas at over 30 percent o the richest households. Part o the reason or the sharpdrop in coverage o children rom the richest quintilein urban areas could be the act that a much higherproportion o these children are enrolled in privaterather than public schools. As expected there are state-wide variations. An analysis o the 3-state SP survey datands that the proportion o participating ST householdsranged rom about 90 percent in Madhya Pradesh to75 percent and 71 percent in Orissa and Karnataka. As aras the economically poor are concerned, the proportiono participating households rom the poorest quartile

was even more varied at 82 percent, 76 percent and59 percent in the three states respectively.

multivariate analysis of determinants of midday

meal coverage from the three state sp survey also

confirms a range of factors which are positively

associated with taking of school midday meals by

children. These include being rom poorer households,being an SC household (though not ST), having highersocial capital, and women’s participation in communitylie. This can be seen in Table 4.12, which presentsndings rom a study o Orissa, Karnataka and Madhya

Pradesh in 2006.

while systematic, reliable national studies on the impact of midday meals are not yet available, studies from a variety of states consistently report positive

Stat

% hh a sds t atast cd ad 6-10 ars

Rra urba

Andhra Pradesh 54.8 26.2

Assam 32.9 7.7

Bihar 17.7 7.9

Chhattisgarh 77.4 30.9Delhi 3.5 10.7

Gujarat 62.6 22.4

Haryana 36.5 7.2

Himachal Pradesh 73.2 32.4

Jammu & Kashmir 3.0 0.2

Jharkhand 19.6 5.6

Karnataka 77.0 34.8

Kerala 56.1 41.0

Maharashtra 66.7 27.9

Madhya Pradesh 61.8 21.7

Orissa 60.3 26.9Punjab 7.0 1.2

Rajasthan 36.3 8.9

Tamil Nadu 77.4 44.6

Uttar Pradesh 27.0 7.2

Uttarakhand 52.7 11.7

West Bengal 63.9 31.8

All-India 45.7 21.7

Source: Sta estimates, based on 2004/05 NSS.

Tab 4.10: Cra dda as, 2004/05

% hh a sds t at

ast cd ad 6-10 ars

Rra urba

Poorest 51.7 41.5

Q2 48.7 35.9

Q3 46.8 31.3Q4 42.9 28.0

Richest 30.9 9.9

OBC 42.8 25.4

SC 49.2 28.7

ST 55.0 26.9

Other 43.0 14.9

Total 45.7 21.6

Tab 4.11: Cra mDm b pr captapdtr ad sca catr, 2004/05

Source: Sta estimates, based on 2004/05 NSS.

229 SeealsoGaihaetal(2007).




hh caractrstc Cct

Wealthlevel:

Poorest quartile 0.888**

Second quartile 0.484*

Third quartile 0.399*

Socialgroup:SC 0.629**

ST 0.286

HH social capital index 0.687**

Women’s participation inmeetings and elections

1.502**

Household size 0.513**

Tab 4.12: Dtrats partcpat – karataa,orssa ad mada Prads 2006

Source: Dev et al (2007).

Notes: ** = signicant at 5% level; * = signicant at 1% level. Reerencecategories are the richest quartile (or household wealth) and other castes(or social group).

impacts on school enrollments, with particularly

positive impacts on girls. Drèze and Kingdon (2001)using the PROBE survey data nd that school meals areassociated with a 50 percent reduction in the proportiono girls who are out o school. Also emale school (initialand current) enrolment is about 11 to 15 percentagepoints higher when the local school provides a mid-day meal than when it does not.230 Equally, giventhe universal coverage o MDM, it is dicult even indedicated studies to measure precisely the net impactson enrollments. Nonetheless, all studies which have

looked at the impact nd increased enrollments whichare attributed to the program. These ndings areconsistent with eld work or this study.

while impacts on enrollments appear to be positive,

recent field reports also point to positive outcomes

on other educational outcomes such as attendance,

retention, and attainment. however, more systematic

work is still needed to understand these impacts.231

An important study that looked at this aspect comes

rom the PROBE survey in India, which ound that schoolmeals have a positive and signicant eect on girls’grade attainment. The probability o completing primaryeducation was 30 percentage points higher or girlsliving in villages with a School Feeding Program thanor other girls.232 Another study using the longitudinalsurvey data in 2002 and 2007 in Andhra Pradesh usingpropensity score matching methods nds that there

were signicant impact o midday meals on test scoreso older children o older cohort (born between January1994 and June 1995).233 Given the need to look overlonger time periods or more complex outcomes, it willbe important to continue studies o impacts on theabove indicators. For instance, a study in Madhya Pradeshsuggests that the enrollment impacts at grade 1 maynot persist as strongly in higher grades, but generalizingrom that experience would be unwarranted.

even less is understood on the net nutritional

impacts of the midday meal program. While impacts

on education outcomes have been the ocus o moststudies to date, there are very ew rigorous studies onthe nutritional impact o the MDM scheme. There aretwo elements to consider on nutrition. The rst is thenutritional content o the meal itsel, over which therehas been much debate in recent years with respect tothe cost allowance per meal and the level o dietaryvariation provided or. The second is the extent towhich school meals are complements to or substitutesor home meals. The two studies that look at the latterquestion nd signicant substitution eects in the

home or midday meals.234

However the net eect o having MDM might still be positive. Evidence romMadhya Pradesh suggests that school eeding reducesdaily protein deciency o participants by 100 percentand calorie deciency by almost 30 percent, even ateraccounting or possible substitution eects at home.235 The same study also nds that the daily nutrient intakeo a child increases by 49 percent to 100 percent o thetotal transers made. Another study using longitudinaldata in Andhra Pradesh in 2001 and 2007 nds positive

230 DrèzeandKingdon(2001).

231 SeeSen (2010)or asummary othe eldstudieson educationalrelatedoutcomesoMDM. Thesearelargelysmall-scalestudies withtheestimateso impacttypicallybasedontheperceptions(typicallyoparentsand/orteachers)oronschool-leveladministrativeinormation(suchasregisters,etc.)ratherthansurvey-baseddata.Asaresult,generalizationsaredicultandpointtotheimportanceorigorousassessmentsoperormanceandimpact.

232 DrèzeandKingdon(2001).

233 Singh(2008).

234 SeeBlue(2005)orstudyoUdaipur,andAridi(2004)orMP.

235 Aridi(2007).




changes in weight-or-age and height-or-age betweenthese two years attributable to the MDM program amongthe younger cohorts (born between January 1994 andJune 1995).236 This eect is particularly strong or childgroups whose amilies have been aected by drought.But there was no eect on nutritional outcomes amongthe older cohorts or both drought and non-droughtaected groups. This suggests that more work would be

desirable to understand the net impacts, and perhaps tothink through how the content o school meals can bedesigned to take account o home eeding responses. The experience o states such as Tamil Nadu andGujarat, which have provided meals over and above theminimum requirements, could provide useul lessons inthis respect.

the available studies and goi assessment of the program point to a number of ongoing challenges in ensuring effectiveness. implementation of mdm has experienced several challenges related to timely

and adequate procurement, transport, storage,cooking and distribution of food.237 The 2006 revisedguidelines have introduced greater exibility or stateswith respect to distribution channels, e.g., through SHGs,VECs, mothers’ groups, etc.238There is signicant variationamong states in terms o inrastructure like kitchensheds, cooking utensils and drinking water.Overall goodperormers are Tamil Nadu, Kerala and poor perormersare Punjab, Mizoram, Tripura and Himachal Pradesh(see Table 4.13). Despite a decade having passed since theprogram was rst introduced, a nationwide CAG auditound that in 11 Indian states, classrooms were still used

to store grains and cook meals.239 Ensuring hygiene andquality is another major challenge. The CAG audit orquality test o grain also revealed that in three o theour states surveyed, the rice served “was adulteratedand not t or human consumption”. O more concernis the nding that logistics o cooking and serving canbe a source o distraction to school sta, leading to areduction in teaching time. Government evaluations o their own program estimate a loss o about 11-30 hoursper week in 6 states and up to 41 percent o teaching time

in Orissa.240 A World Bank study in Rajasthan also oundthat 68 percent o sample teachers spent more than1 hour or more than 17 percent o their allotted teachingtime on preparing and serving the school meal.241

C. ConCluSionS AnD

ReCommenDATionS

both public works and promotional social protection

programs have received increased political and

budgetary priority in recent years. This seems a sensibleeort to get greater leverage on poverty reduction andhuman capital ormation rom the saety net. Given thatsignicant spending on these programs, particularly

236 Singh(2008).

237 SeeorexampleCAG(2008).

238 Priortothenewguidelinestoo,severalstates,includingpoorstatessuchasOrissa,hadexperimentedwithdierentdegreesoallowinglocalcontroloveruseo publicundstopurchasetheoodormiddaymeals,primarilytothispointinprocuringsupplementalitemstothebasicration,suchaseggsorsomevegetables.Thishasobviousattractionsromanutritionalviewpoint,butalsopossiblyintermsosomelocallinkagestolivelihoodactivities.

239 CAG(2008).

240 CAG(2008).


Stats

% Scst

tcsds

% Scst

ctss

% Scst stra

r dratr

Andhra Pradesh* 19.9 – –

Assam – 27.6 –

Bihar – 25.6 –

Chhattisgarh 27.6 100.0 100.0

Gujarat* 32.4 93.2 0.5

Himachal Pradesh – 0.0 –

Jharkhand – 12.9 –

Karnataka* 54.5 – –

Kerala* 88.2 100 –

Madhya Pradesh* – 7.4 –

Maharashtra* 3.9 8.0 70.9

Punjab* 0.0 0.0 0.0

Rajasthan* 0.0 48.1 65.2

Tamil Nadu 96.3 80.8 83.7

Uttar Pradesh* 6.5 88.6 12.0


Tab 4.13: irastrctr r mDm

Source: Annual Work Plan & Budget documents, 2007–2008.

* AWP&B o 2006–2007, quoted in Seventh Report o the Oce o theSupreme Court Commissioners.




MGNREG and mid-day meals, can be expected tocontinue, it will be increasingly important to ensure thatthe desired equity and public expenditure eciencyobjectives are achieved. The ollowing sections providesome recommendations in this respect.

Pbc rs

many of the appropriate reforms of public works policy

are already reflected in the guidelines of mgnreg,

which in several ways represents the most serious

effort to date to address many of the institutional

and implementation problems encountered in previous

works (and indeed several other) programs. In manystates there has been greater political and institutionalcommitment to trying to “make the program work”.Examining the implementation experience o MGNREGin the last our years suggests some lessons or improvingthe delivery o the program in states that are not doing as

well as others. It also identies some areas that warrantincreasing attention as the program matures.

the variable implementation experience across states

offers several valuable cross-state learning. Oneo the biggest challenges in implementing MGNREG isto match the expression o demand with the supply o worksites and employment opportunities. It is vital toaddress the constraints – ormal and inormal – on thisprocess. At the broadest level, this goes to the heart o what a rights-based, demand-driven approach means inpractice. Some states have done better at establishing

systems to improve the responsiveness o supply to thedemand or work. This has typically involved attentionto or innovations in the ollowing areas:

Establishing the implementation structure

early in the game and ensuring adequate sta

withthe appropriateorientation andskills. Thisincludes serious and sustained eorts at buildingcapacity at all levels o the delivery process,oten in partnership with the State Institute orRural Development. Under the Act, a portion o unds are available or capacity building o those

involved in MGNREG implementation, includingPRIs. Using these unds eectively will be a criticalelement o program success over time.

Generating awareness o the rights and

entitlements under MGNREG as the rst step

towardsestablishingarighttowork. Over time,

there has been some evolution o IEC campaigns interms o moving rom the dissemination o rightsto an emphasis o the need to and the means bywhich individuals can demand that right. It is alsonecessary to make communities aware o theunemployment allowance provision in the Act orthe guarantee unction to be credible. It is vitalto deepen awareness raising eorts on MGNREG

entitlements, in close collaboration with civilsociety and using strategies that are tailored to alargely illiterate audience.

Leaprogging technical manpower constraints

(e.g.,theshortageoengineersattheblocklevel)

by developing detailed technical specications

o MGNREG works or dierent geo-climatic

conditionsasapreparatorystage. This minimizesthe technical input required at the block and GPlevel at the planning stage and while startinga worksite. This can be done without the aid o

technology (e.g., as in Madhya Pradesh) or withtechnology as an integral part o a transactions-based Management Inormation System (e.g., asin Andhra Pradesh).

Streamliningtheowoundsinvariouswaysso

astopreventundingdelaystoconstrainopening

o worksitesor payment o wages. For instance,some states (e.g., MP) make available advanceunds (linked to the volume o MGNREG work)with GPs that makes it easier to open worksitesin response to demand. In addition, some states

have reduced delays in payment o wages romthe GP to worker post oce accounts (e.g., byplacing a “oat” with post oces to make wagepayments while waiting or unds transer; andby mandating that the GP MGNREG account andaccounts o MGNREG households to be in thesame branch).

Revisingtheruralscheduleorates(SoRs)through

detailed time and motion studies or dierent

localesandgroupstoenablea“normal”workerto

earntheminimumwageatMGNREGworksites.

Partneringwithcivilsocietyorganizationstoworkassupportagencies on a variety o areas, includingorientation and capacity building o MGNREG sta,awareness generation and mobilization amongworkers, promoting participatory planning o works, and enhancing accountability.




Emphasizing the commitment to transparency

and accountability. While the design o MGNREG contains many saeguards in termso transparency and accountability, actualimplementation on this ront has been highlyvariable. This includes institutionalizing socialaccountability mechanisms, making the MIS up-to-date, and a continued emphasis on monitoring

and community mobilization.

in addition, increased attention by policy-makers

and implementing agencies on improving the quality

and relevance of assets created under mgnreg is

warranted as the program matures. This is critical i MGNREG is to have any long-term impact on the ruraleconomy and uture livelihoods. In addition, the creationo appropriate, durable and productive assets couldpotentially help garner the support o non-MGNREGparticipants or the program and a stake in improvingprogram outcomes. There are many elements to this

increased ocus on the second objective o the Act:

Explore options or a wider range o works

authorized under MGNREG to reect variable

needsandtodovetailwithotherprogramssoastocontributetowardsacoherentvillagedevelop-

ment plan. The list o eligible works needs tobe exible enough to incorporate seasonality,dierences in geo-climatic conditions and theneeds o specic groups, particularly those notcapable o hard manual labor. As experiencegrows, this would be worth looking at rom

several perspectives, some o which are currentlyunder discussion. The rst is the range o worksthat could be implemented in ood-prone, water-logged, heavily orested or mountainous areas. The second is the range o possible works whichcould be oered to all MGNREG workers, andwhether some “soter” work options – e.g., relatedto provision o social welare or communityservices or vulnerable populations – couldbe introduced which have positive socialexternalities. The third is looking at the specicneeds o sub-groups or whom special eorts

may be needed to provide appropriate work, e.g.,disabled people who may not be able to carryout hard physical labor. The ourth is exploringoptions or MGNREG to nance the laborcomponent while the community (or other linedepartments) co-nancing works that may not

be on the approved list o MGNREG works but arepart o the larger village development plan.

Revitalize Gram Sabhas and institutionalize the

directinvolvementocommunitiesinidentication

oworksundertakenunderMGNREGinawaythat

isintegratedwiththelargervillagedevelopment

plan. This has to date been the weakest element in

the chain, largely because gramsabhas are otennot held. I the Act’s objective o empoweringcommunities and strengthening grassrootsdemocracy is to be achieved, it will be importantto ensure that the role o gramsabhas anticipatedunder the Act is made a reality. This includesensuring gramsabhas are held regularly, buildingthe capacity o gram sabhas in participatoryplanning, community oversight and otherrelevant areas and the mobilization o groupssuch as SHGs and CBOs to have their prioritiesreected through the gramsabha process.

Establish systemsorprovidingin-timetechnical

inputsorassetplanningandevaluation,beyond

the currently mandated technical supervision

during asset creation. This includes providingtechnical inputs (e.g., through village-level resourcemapping to ascertain the technical easibilityo dierent types o works) to the gram sabha during the planning process and developmento shel o works. Similarly, monitoring o thequality and durability o assets created willincreasingly become important. In this respect,

MGNREG could draw on international experience(e.g., Bangladesh’s Food For Work program) ondeveloping cost eective methods or estimatingrates o return on assets. In addition, the use o technology such as GIS in both planning andmonitoring would be invaluable.

an additional issue for consideration is whether

any element of direct human capital formation can

be factored into mgnreg as it matures. Presentlythere is no provision under MGNREG or skill ormationamong workers. This may be something that could be

considered in due course with the view o enhancingnot just current but also uture livelihoods. One optionto consider is the South Arican public works programwhich provides or two days training per montho work or those undertaking public works. Whilesuch an approach obviously requires a supply side




agency – probably on a contracted-out basis – whichcan provide useul training, it seems a useul option toconsider in uture development o MGNREG.

a final issue is that public works for the poor remain

restricted to rural areas. Recently, policy-makershave started to discuss the possibility o designing asel-targeted public works programs or the urban poor.

Such programs already exist in the works schemes o anumber o developing countries such as Ethiopia, Liberia,Colombia, and some other Arican and Latin Americancountries. Drawing on the experience o these countries,or example the role o urban communities in identicationo beneciaries, planning and execution o works, andoversight, would be useul in designing an urban publicworks program or Indian cities and towns. In act, oneo the north eastern states is planning to introduce anemployment guarantee or urban areas as a state-undedscheme. Combining such a program with vocational ortechnical training would enable young participants to

upgrade their skills and also compete in the labor market.An example o such an approach is being developed inKenya or youths living in urban slums.242

Prras t prt tt prt t srt ad

r

(a) Targetedruralcredit

the government has recently undertaken a significant

overhaul of the sgsy in the form of the national

rural livelihood mission. The main reasons or SGSY’sand predecessor programs’ weak perormance stronglysuggested the need or a undamental reorm that wentbeyond marginal improvements. In many ways, therestructuring o the existing program into NRLM goes along way in doing this.

the nrlm moves away from the precisely defined credit

program for the poor as exemplified by sgsy and irdp and

instead includes a range of livelihood support options

for the poor. this is consistent with the options in the

sp block grant proposed within the “3+2 strategy”

outlined in the executive summary. The rationale behindsuch a restructuring and reorientation is necessary or avariety o reasons: (i) the nature o labor markets across

and within states varies suciently that a “one size tsall” credit program seems increasingly inappropriate;(ii) the livelihood support needs o individual groupsand poor households that go beyond credit are alsodiverse, and uniorm CSS have ailed to respond to this;(iii) the growing penetration o both commercial banksand other non-bank players such as MFIs make thechallenge or the poor making them “bankable” rather

than being the sole source o ormal credit.

such an approach would require greater effort by

states to develop state specific poverty reduction

strategies for the effective use of central subsidies

for livelihoods promotion. The NRLM design givesstates a air degree o exibility in trying dierentapproaches to livelihood support; some urther optionscould be explored in this regard:

using reputable MFIs as a channel or credit

delivery where theyhave a presence.MFIs havea strong interest in developing a sustainedrelationship with BPL clientele, and more diverseand community-based sources o inormationon borrowers, allowing or a more inormedassessment o risk in the lending transaction. Theyare also more likely to enorce repayment, reducingrent-seeking opportunities seen presently, andprovide appropriate support services to theirmembers. MFIs oten have savings as an integralelement o their relationship with clients, so thatcredit provision is reinorced by savings that canact as cushions against household shocks. At the

same time, a signicant issue would be the relativeterms o SGSY lending and those o most MFIs totheir existing clientele, and such an option woulddemand some degree o harmonization betweenMFI nancial, reporting and other procedures andthose o government.

where local labor markets are stagnant and/or

migrationisalreadysignicant,nancingsupport

services or poor migrant workers which would

reducesome o the economicand socialcosts o

migration, and increase its benets. There are

already interesting small-scale examples o suchinitiatives, e.g., in southern Rajasthan with workersmigrating to Gujarat. Some o the services thatcould be provided include: (i) reliable remittancemechanisms; (ii) support or children o migrating

242 SeedelNinnoetal.(2009).




workers either in situ or in destination sites toensure that they do not drop out o school; and(iii) provision o reliable inormation on labor marketconditions in destination areas, probably througha contracted-out service provider contract.

(b) Schoolstipends

while the evidence on school stipends suggests that they are not as well targeted as many safety

net schemes, their objective is distinguishable. the

position of this report is that they will continue to

be an intervention worth expanding, though with

serious thought about some design elements. Themore pertinent concerns with school stipends seemto be two-old: (i) in their current orm, where stipendsare based on enrollment and not attendance and thuswith no assurance that the intended outcome is beingpromoted, stipends are less likely to achieve the goal o improved human capital acquisition among the poor;

and (ii) stipend schemes do not provide choice orhouseholds in schooling, being linked to enrollment onlyin government and aided schools. This may reduce theirpotential welare impacts not only or the household,but also or the education system, by increasing themarginal costs o private schooling and reducing theaccountability o the public system that might otherwisebe encouraged by households “voting with their eet”.

there seem solid arguments for exploring ways in which

to make stipend receipt conditional on a specified level

of actual attendance rather than simply enrollment,

which in itself may not contribute to human capital investments. The obvious challenge that such a transitionwould present is operating an eective system to recordand veriy school attendance. However, evidence roma growing number o countries which have introducedconditional cash transers based on a specied level o school attendance indicates a range o positive eectson attendance, and other household welare indicators. Though several central and state-specic CCT programsexist in India, these operate more as cash transersrather than conditional cash transers. Key challenges

in the eective implementation o these programs asCCTs include the monitoring and enorcement o theconditionality and a weak institutional ramework orsuch cross-sectoral programs. In addition, supply-side

constraints in the provision o services, particularly inrural areas, could also play a role.

the arguments on introducing a demand side element

to stipends through either expansion to private

unaided schools or use of education vouchers

redeemable in private schools are more complex. Itis probably not possible to think about any wholesale

shit to systems like vouchers which would berelatively new in the Indian context, and one whereinternational experience – particularly in developingcountries – is ar more limited. However, this shouldnot preclude piloting in states where the conditionsare appropriate, or perhaps in areas in selected stateswhere the participation in private schooling by poorhouseholds is more pronounced (e.g., in urban areaswhere the experience o a pilot in urban Delhi wasairly positive).243

(c) Middaymeals

Like MGNREGA, the mid-day meals program is alsoconceived as a universal right rather than a targetedprogram. Mid-day meals are a universal entitlement orall children enrolled in government or government aidedschools. With the recent expansion, midday meals havebecome an increasingly important part o the Indiansaety net. While the national level impacts o middaymeals in educational, nutritional and other dimensionsremains to be understood in depth, the evidenceavailable suggests that MDM have had positive eectsat least on enrolments. As a result, the MDM program

provides an interesting example o a major demandside SP intervention which has great potential. In thiscontext, a stronger ocus on monitoring and evaluationis warranted. This requires establish systems to monitorthe perormance in the eld with respect to inputs(such as already being done or example or schoolinrastructure or providing meals), outputs (besidesadministrative data on children availing o MDM) andoutcomes. The latter requires conducting more widelyrepresentative studies on the various impacts o middaymeals, in particular nutritional impacts. In addition,

while several concerns on coverage and implementationhave been addressed through the recent expansion andrevised guidelines, more can be done to reduce thevariability in perormance across states.

243 CMSSocial(2009).SeealsoShahandBraun-Munzinger(2006)oracriticalreviewotheexperienceoelevencountrieswitheducationvouchers,withadiscussionolessonsorIndia.



C HA P T

E R

5Social SecurityClosing the Coverage Gap



CHAPTER-5: Social Security: Closing the Coverage Gap 10

in addition to social assistance programs aimed at alleviating existing poverty, many social protection systems insure against a range of shocks that can often lead to poverty.244 These social security schemes

generally include provisions or old age, disability anddeath o the breadwinner under the umbrella term, pensions.245 Many countries have also tied healthinsurance coverage to membership in social securityschemes which require contributions or premia whileothers have opted or general revenue nancing.246 Thischapter is about the schemes that operate in India todayor both organized and unorganised sector workers. Inaddition, based on recent experience, it outlines thinkingabout how to expand pension and health insurancecoverage to the vast majority o India’s unorganized labor

orce. Closing the “coverage gap” is an important policyobjective in India and many developing countries.247

expanding coverage of social protection programs

was a major plank of the common minimum program

(cmp) of the upa government and remains a priority.In 2006, a major report was produced by a specialcommission under the auspices o the Ministry o Labour and Employment (MOLE). The Commissionprovided a diagnosis o the situation o social insurancecoverage among unorganized workers, laid out possibleapproaches to the problem, and set ambitious targetsor coverage over a multi-year period. Framework legislation was passed in December 2008. In the lastew years, the MOLE has achieved notable success

Chapter–5

Social SecurityClosing the Coverage Gap

244 Otherimportantsourcesoincomeprotectionsuchascropandlivestockinsurancearenottypicallycoveredbysocialinsuranceprograms,butarecriticali ntermsoprotectionagainstcovariateshocksintheruralsectorincountrieslikeIndia.ItisalsoworthnotingthatlumpyexpendituresorweddingsarealsoimportantintheIndiancontext.

245 Unemploymentandcashbenetsormaternity(asopposedtomedicalinsurance)areotencoveredbygovernmentsponsoredsocialinsuranceschemes.Therearemoralhazardproblemsinbothcases,especiallywithregardtounemployment.Moreover,thedenitionandmonitoringounemploymentorunorganisedsectorworkersisdiculttoadminister.ESISoersanunemploymentbenet.

246 SeeWagsta(2007)orasummaryotheongoingdebatebetweenthesemodels.

247Foradetaileddiscussionoextensionosocialinsurancecoverageinthecontextopensions,seeHolzmann,RobalinoandTakayama(2009).




in expansion o some orms o social insurance, inparticular or health insurance or the poor under theRashtriya Swasthya Bima Yojana (RSBY) program. RSBYoers many lessons on expanding social insurancecoverage to unorganized workers.

the structure of the chapter is as follows: section

a provides a brief description of the labor force in

the unorganized sector based on secondary material and analysis of survey data. It ocuses on the actorsthat are likely to be important or any attempt to reachthese workers through new programs, especially thosethat may require workers to help nance the schemethemselves. Section B then looks at pension and healthinsurance schemes in place prior to 2007. These can beseparated into those that are mandated or organizedsector workers, mostly public sector and large privaterms, and those that are targeted to the unorganizedsector – mostly small rms and the rural labor orce.Section C then ocuses on initiatives since 2007 to addressthe ”coverage gap” in social insurance, in particular thedesign and initial experience with the RSBY healthinsurance scheme or BPL workers. Conclusions andrecommendations ollow.

the key messages of this chapter are:

despite general agreement on the size o the

unorganized sector, there is less understanding

o its heterogeneous nature, especially asapply to the implications o these dierencesor initiatives to expand pension and health

insurance coverage. thelimitedevidenceavailableshowsthatcoverage

is closely correlated to income/consumption

levelsaswouldbeexpected.Pension and healthcoverage has historically in India been extremelylow in the bottom hal o the income distribution,with lie insurance moderately higher and higheroverall than other types o insurance.

therearemanyschemesdirectedatunorganized

sector workers operating at present including

national and state government programs and

an increasing number o non-governmental programs, including microinsurance schemes.

However, there is no overarching policy

ramework nor – with the notable exception

o RSBY - systematic monitoring o their

perormanceorimpact.

thereareimportantlessonstobetakenromthese

programswhichindicatethatdierentapproaches

areneededtoreachouttounorganizedworkers

withsocialsecurity.For example, there is evidencethat unorganized sector workers are willingto contribute or their insurance and pensioncoverage. In addition, eective outreach has beenachieved usually as a product o collaboration

between Government, insurers, and intermediaryorganizations o unorganized workers. Morestudy is needed however, especially with regardto the role o intermediaries and the scalability o dierent schemes.

large scale coverage expansion will require

government subsidies to address the question

o aordability and incentives or unorganized

workers, and oversight in order to mitigate

raud and/or mismanagement. However, thegovernment can partner with market and non-

governmental actors to avoid creating newlayers o bureaucracy to implement schemes.On the other hand, given economies o scale,the need or portability o benets and theexigencies o supervision, the government’s rolecan useully include initiatives to create robustand harmonized systems or identication o beneciaries, recordkeeping and benet delivery.

achieving critical mass and establishing the

credibility o a new policy to expand coverage

couldbeacilitatedintherststagebytappinginto

existinggrouparrangements(tokeeptransactioncostslow)andocusingonhouseholdswithsome

ability to smooth consumption (aordability)

i provided access to the right instruments. Thisapproach recognizes the complementary roles o saety nets and insurance programs.

the RSBYprogramispath-breaking,notonlyor

social insurance expansion, but or the health

system and social protection programs or the

poor more broadly. While it is relatively earlydays o implementation, the RSBY program has

numerous design eatures and a learning-by-doing approach to implementation which reectslessons o Indian and international experience. The program has the potential to help poorhouseholds mitigate the impacts o serious healthshocks and the approach that has been taken with




regard to a variety o implementation challengescan be harnessed to improve other programs.

A. SoCiAl PRoTeCTion

CoveRAge AnD The nATuRe

oF The unoRgAnizeDlABoR FoRCe

definitions of the informal or unorganized sector

vary but there is some consensus that approximately nine of ten workers in india belong to this category. The report o the National Commission or Enterprisesin the Unorganized Sector (NCEUS) cites two denitionsthat result in estimates o the inormal sector rangingrom 85.8 to 91.3 percent o total employment. TheWorld Bank has cited contrasting denitions yielding arange o 86 to 93 percent.248 Jhabvala et. al. (2003) note

that the System o National Accounts (SNA) denitionresults in signicantly lower estimates o around75 percent o the labor orce.

social security coverage is also difficult to measure

and varies depending on the type of risk covered. For example, there many more accounts open at theEmployees’ Provident Fund Organization (EPFO) thanthere are contributors in any given month. Some o these workers have changed jobs and are being doublecounted. Others have died and no one has closed theiraccounts. Still others have moved into the unorganized

sector but are still eligible or benets at some pointin the uture. Finally, both in schemes or civil servantsand the major ormal sector schemes, recordkeepinghas always been problematic. Aside rom the problemthat this causes or individual members, it makes it verydicult to assess trends in coverage or the impact o new policies.

survey data provide evidence that unorganized sector workers are heterogeneous in ways that will directly

influence any attempts to expand social security

coverage. Table 5.1 shows that earnings vary widely. This inormation is important or policymakers seekingto expand coverage by showing that workers all roughlyinto three categories:

the rst group is individuals with high incomes –proessionals, large landowners etc. – that shouldbe able to avail themselves o voluntary savingsand insurance schemes already available in the

market (typically with tax preerred status).the second group is the one or which anythingother than very marginal expenditure on premiaor contributions would likely be unaordable andcould actually reduce current welare unduly bylowering consumption levels below subsistence.

nally, there is a third group that may be in aposition to benet rom insurance and pensioncoverage and could aord to pay or a signicantportion o the required premia. The rst group isnot a public policy priority while inclusion o the

Tab 5.1: Dstrbt rad sctr rrs ad 20-50, b ars dc, 2004/05

ic Dc ic Ra Rs Sar % Cat Sar %

1 <=11000 11.8 11.8

2 >11000 & <=16800 11.0 22.8

3 >16800 & <=21600 11.6 34.4

4 >21600 & <=27000 11.6 46.1

5 >27000 & <=35000 11.6 57.7

6 >35000 & <=42000 10.6 68.2

7 >42000 & <=54000 8.6 76.8

8 >54000 & <=72000 8.9 85.8

9 >72000<=105000 6.8 92.6

10 >105000 7.4 100

Source: Authors’ calculations based on IRES survey data. Bank sta estimates.

248 Forexample,dierentdenitionsareappliedinJhabvalaetal.(2003),NCEUS(2006)andAhmedandNarain(2010).Thesedenitionsrevolvedaroundvariantsothelegaldenitionoorganizedsectorwherebyenterpriseswith10ormoreworkerswerecoveredunderparticularlaborstatutesand,intheory,shouldbecoveredbycertainsocialsecurityprograms.




second group, while desirable and high priority, islikely to require public subsidies to nance socialinsurance. The third group would also be a likelytarget o an attempt to expand insurance andpension coverage, and the relative use o publicsubsidies to incentivize participation is a keyquestion.249

in addition to differences in ability to pay, the data suggest other differences that could affect potential

coverage expansion plans, in particular membership of

unorganized workers in groups that could facilitate

program administration. For example, the data allowor an estimate o membership in certain types o groupsthat can or already do oer some social security totheir members (see Table 5.2). While the gures shownsuggest perhaps only one in seven unorganized sectorworkers belongs to some kind o group, it is also the casethat membership in MFIs and SHGs has been increasinggeometrically in recent years and would already be

higher today than these 2004 data suggest. Giventhe low coverage base, the inclusion o these groupswithin SP programs would be a signicant increase inpercentage terms. As discussed in the next section,one possible approach would involve encouragingexisting groups such as micronance institutions(MFIs), Sel-help groups (SHGs), co-operatives or otherorganizations to ‘plug in’ to a well designed system inorder reduce transaction costs.

the spontaneous demand for micro-insurance and

participation in lic, uti and state welfare schemes (described in the next section) demonstrates that

some workers are both capable and willing to

purchase insurance and to contribute financially

to their own social security. This revealed demandhas been identied in other studies both or Indiaand other countries with similar characteristics.250 On

the other hand, it is clear that ormal sector schemesthat are designed around stable wages that arerelatively easy to monitor and employer mandatesare not easily extended to these workers. A dierentapproach is required at least until other actors thatrestrict the ormalization o the labor markets areaddressed.

as illustrated in the next section, several recent

initiatives to extend coverage in india are intuitively

based on a strategy of identifying those parts

of the unorganized sector labor force that can

practically be attracted into participating in social security schemes. Implicit in their design is the needto consider actors such as transaction costs, incentivesor voluntary take up, and aordability. Theseinitiatives are so ar largely uncoordinated and arenot part o a national strategy. Nevertheless, theseinnovations and experiments oer important insightsinto which approach may be saleable as well asnegative lessons.

Tab 5.2: urad sctr rrs tat ar brs rps b ars dc

mbrsp % Dc

ic

Dc Trad u war Fd

Trad

Asscat Cp Sct S-hp grp Tta

1 0.10 0.10 0.23 0.78 8.27 9.49

2 0.33 0.08 0.64 1.25 4.56 6.87

3 0.93 0.24 0.95 1.91 2.54 6.57

4 1.05 0.11 1.05 1.71 2.77 6.70

5 1.50 0.24 1.08 2.69 2.53 8.04

6 1.83 0.58 1.39 2.56 1.89 8.25

7 1.53 0.25 1.53 3.75 1.25 8.32

8 1.47 0.34 1.09 3.90 2.19 9.00

9 1.59 0.68 1.50 5.21 2.49 11.47

10 2.29 0.69 2.52 5.91 1.22 12.62

Source: Bank sta estimates based on IRES survey data.

249 AsimilarcategorizationismadebyMadeshwaranetal.(2006).

250 ForIndia,seeMadheswaranetal.(2005a)andDror(2006).ForIndonesia,seeAngeliniandHirose(2004).




targeted subsidies for social insurance expansion

that aim to identify households falling in the bottom

third of the income distribution can complement these

initiatives. The RSBY program is a promising example o such a program. However, the experience – describedin detail below – shows that good recordkeeping, theright incentives and other design details are crucial indetermining program success.

B. SoCiAl SeCuRiTy SChemeS

oPeRATing in inDiA

government-sponsored and administered programs

have dominated pension and health insurance

provision in india. The most extensive mandatoryschemes or pension and health were both set up tyyears ago. In health, the Employees’ State InsuranceScheme (ESIS) is the largest insurer, ollowed by

schemes that cover central government, deense andrailway employees.251 Public sector health insurerscover ten times as many people as their private sectorcompetitors. In pensions, ormal sector employerswith at least 20 employees are mandated to join theEmployees Provident Fund Organization (EPFO).252 Workers covered by this scheme have denedcontribution and dened benet pensions as well

as lie insurance. The dened contribution schemealso unctions as a orced savings mechanism orother purposes ranging rom children’s marriage tounemployment. The central government contributes1.16 percent o the covered wage bill or these ormalsector workers. Meanwhile, civil servants have a non-contributory, dened benet pension scheme that isununded and has changed little in the last century

(see Table 5.3).253

the problems with these schemes have been well

documented and the potential for expanding their coverage significantly appears to be limited.254

Pension and health schemes or civil servants, orexample, are essentially occupational schemes thathave resulted in large ununded liabilities. Meanwhile,the EPFO and ESIS have, among other problems,serious issues with evasion and arrears o employersthat actually are mandated to participate. Like manyschemes designed or ormal sector workers, neither

is well suited to incorporate most unorganized sectorworkers. In act, coverage in the EPFO scheme hasincreased slowly since it was established by a specialAct in 1952. Measured on the basis o aliates, theshare o the labor orce (including the inormal orunorganized sector) covered has increased romabout one to ve percentage points, or roughly onepercentage point per decade.

251 GuptaandTrivedi(2005),Table2.252 Employer-administeredprovidentundsthatmeetcertainrequirements,includingbenetsthatareatleastasgenerousasthoseoeredbytheEPFO,canreceive

anexemption.Currentlyaboutonequarteroaliatesbelongtotheseexemptunds.

253A new,denedcontributionschemewas introducedorederalgovernmentemployeeswherebyworkerscontributetenpercentobasicwageplusdearnessallowanceandthegovernmentasemployermatchesthiscontribution.ThisreplacestheolddenedbenetschemeorederalcivilservantshiredaterJanuary2004.SimilarschemeshavebeenadoptedbyseventeenIndianstategovernmentstodate,albeitwithdierentstartingdates.ImportantexceptionsincludeWestBengalandKerala.

254 FortheESISsee,GuptaandTrivedi(2005).FortheEPFOandcivilservantpensionschemes,seeWorldBank(2001).

Tab 5.3: k dcatrs adatd sca scrt prras

Prra Stattr cra

wrrs crd*

tsads Tp bts

Par ta/ctrbt as

% aEPFO Employees o registered rms

with more than 20 employees47,000 DC and DB pension, lie,

disability, withdrawals orother reasons

12 employer12 employee

ESIS Employees o rms using powerwith more than 10 employeesor 20 without power

8,400 medical, sickness, maternityunemployment, uneral

4.75 employer

1.75 employee

Civil servicepension

Civil servants at ederal andstate level

24,000 DB pension or those hiredbeore; DC or new hires

None in old DB scheme; 10% eachor employer and employee

* Figure is or 2009 rom EPFO Annual Report; note that independent survey data suggest that the gure or active contributors (as opposed to openaccounts) is much lower than the number o aliates. Figures or civil service are based on survey data; Figures or ESIS reported taken rom website.

*** reers to total spending including administration or 2005-06.




the failure of mandated schemes to reach the vast

majority of workers is clear. Workers covered byormal social security mandates or health insuranceand pensions represent less than ten percent o theestimated labor orce in India. Lie insurance, much o it voluntary and subsidized through the LIC, is moreprevalent with around one th o households reportingthat they have some kind o policy.255

in distributional terms, social security coverage

is concentrated in the upper part of the income

distribution. As shown in Figure 5.1, pension coverageis strongly concentrated in upper income groupsand is only signicant in the top hal o the incomedistribution. Not surprisingly, it is also concentrated inurban areas and least prevalent among the backwardcastes.256 In act, survey data or 2004 shows thathouseholds rom the richest quintile constitute morethan hal o all households with health insurance. As

discussed in the next section, the new RSBY healthinsurance program targeted at BPL households hasstarted to change this picture.

life insurance coverage is also concentrated among the better-off, being biased towards urban areas and with low prevalence among backward castes. Only3.6 percent o households rom the poorest quintile report

that a member o the household has lie insurance, while48 percent households rom the richest quintile reportthe same. Coverage rates in urban areas are more thandouble rates in rural areas. There is considerable variationin lie insurance coverage rates across caste groupings.

in addition to the formal sector schemes, there are a number of central and state government initiatives aimed at the informal sector. These initiatives allroughly into three categories – welare unds, NGOso various types and schemes oered by several largeproviders. There is some overlap between the last two

Figure 5.1: Lie insurance and pension coverage by income decile

Source: 2004 IRES Survey.

0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10

Income decile

p e r c e n t o f w o r

k e r s c o v e r e d Life insurance

Pensions

255Thesourceohealthinsurance(publicorprivate;providedthroughemployerorpurchasedindependently)isnotknownromthesurvey.Thisisalsotrueorlieinsurance,thoughtheGovernment-ownedLieInsuranceCorporationoIndiaunderwrotearoundthreequarte r soalllieinsurancepoliciesatthetimeothesurvey.

256 Ajwad(2006).




types since many micro-insurance schemes use thepartner-agent model or microinsurance.257

welfare funds include those administered centrally

through the ministry of labor at the goi as well as a

variety of state level schemes. The centrally-sponsoredschemes include welare unds cover ve occupationalgroups including three types o miners, cine workers

and the largest group – beedi workers. They are nancedby a cess on the particular commodity produced. Thetotal number o workers actually covered is not known,but a rough estimate would be around 4-5 million. TheMinistry o Labour and Employment reported spendingin FY2004-05 o around one billion rupees.258 Theschemes provide a variety o services including medicalservices, lie insurance, education and housing.259

the state level schemes for unorganized workers vary

significantly both in terms of coverage and benefits

provided and importantly, no aggregate estimates of

membership exist. For example, during the last decade,state governments in West Bengal, Andhra Pradesh andRajasthan have introduced pension schemes to provideincome in old age to unorganised sector workers. Therst scheme was introduced in 1998 in West Bengal orlandless rural workers ollowed by a scheme or certainoccupational groups in the urban areas with incomesunder 3500 per month in 2002. The schemes in Rajasthanand Andhra Pradesh are more recent having beenestablished in 2008 and 2009, respectively. In AP, theprogram is available to members o SHGs. The parameterso the dierent schemes vary. The match is 20 rupees per

month in West Bengal, 30 in Andhra Pradesh and up to1000 per annum in Rajasthan. There are other importantdierences including the use o private asset managersand market investment returns in AP and Rajasthanwhile government manages the und and determinesthe interest rate in West Bengal. The common eatureis that they are dened contribution schemes wherethe subsidy rom the government takes the orm o amatching at deposit into an individual account.

a parallel initiative based on the same defined contribution model was activated in may 2009 by the pension fund regulatory development authority (pfrda). The PFRDA has established an inrastructureand rules which allow any adult citizen to make voluntarycontributions to the New Pension Scheme (NPS). Thisworthwhile initiative suers however, rom at least twodesign problems. First, up ront costs or recordkeeping

(paid to the Central Recordkeeping Authority (CRA))are very high relative to the potential contributions o most unorganized sector workers.260 Second, there isno obvious incentive to sacrice liquidity and deerconsumption until the specied retirement age o 60. The matching contribution schemes mentioned abovewould help address this issue but so ar, the stateschemes have not been linked to the NPS.261

a small scale version of the prfda scheme is already operating in india in the form of the ‘micro-pension’product of the unit trust of india (uti). The rst client

in this partner-agent arrangement was SEWA, a well-known MFI that provides loans to low income women inthe state o Gujarat (and is expanding into other states).In spring 2006, around 30,000 women joined their DCpension scheme where contributions o around 200rupees per month are invested in a balanced und investedin bonds and equities. Individuals must maintain a savingsaccount with SEWA bank. (There are around 200,000such accounts opened at present). Contributions arecollected ollowing the standard mechanism or savingaccount deposits. Appointed collectors (currently 75-80individuals) accept cash contributions, issue deposit slips,and make record in each members’ deposit book. Threetimes a month, a special script with standing instructiongets triggered to record debit on the member’s savingsaccount and credit on the side o the retirement savingsscheme.262 To simpliy operation, subscription amountsmay only be changed once a year. Corresponding datawith the new contributions and details o the accountsis then exported to an excel spreadsheet and providedto the UTI-Ahmadabad oce. Although an obvious

257 ThismodelhasbeenencouragedbytheIRDA,especiallythroughtheissuanceoitsmicroinsuranceregulationsin2005.SeeRothetal.(2005).

258 NCEUS2006,p.23.259 Interestingly,theschemesdonotoeroldagepensions. However,therearespecialarrangementsorincludingbeedi workersintheEPFOschemebasedonakindocessleviedontheindustry.Onestudyoundthatthereweremanyproblemswithcompliancewiththisarrangementinpractice.SeeMadheswaranetal.(2005b).

260 Recognizingthisact,thePRFDArecentlyrequestedthattheGovernmentoIndiacoverthesecostsintheearlystageotheprogram.

261 Thecentralgovernmenthasrecentlyintroducedamatchingincentiveo 1000inthe2010-11bueget.

262 SEWAgetsacommissiono3 percentothetotalreceiptsromUTI(whichsupposedly getsnettedoutothe returnintheprocessounit pricecalculation).Thecommissionisnotlikelytobesucienttocoveralloperationalexpensesothescheme–althoughitwouldbediculttosegregatethecostotheschemeromotheradministrativeexpendituresoSEWA–anditbenetsromimplicitoperationalcross-subsidies.




candidate, to date this scheme has not been integratedinto the NPS.

the experience of kerala – the state with the highest

level of social security coverage through a variety

of welfare funds – is also instructive. There are anestimated 55 such schemes covering a wide variety o occupational groups ranging rom headload workers to

cashew nut armers with dierent packages o benetsand contribution levels. Some have memberships thatnumber only a ew thousand. The success in terms o coverage (estimated to be 54 percent o inormal sectorworkers) contrasts with the high level o administrativecosts which, in some cases are many times the benetspaid out to workers. Even the larger schemes such asthe Labor Welare Fund and the Agricultural WorkersFund spent 61 and 44 percent o contributions onadministration.263

an important set of programs to provide life

insurance to unorganized sector workers are offered by the government-owned life insurance corporation

(lic). The older o the two biggest schemes is calledJanashree Bima Yojana (JBY).264A list o 44 occupationalgroups, chosen to target those living near the povertyline, determines the potential universe o eligibleworkers. The scheme pays rupees 20,000 in the case o natural death, 50,000 in the case o accidental death orpermanent disability and 25,000 or partial permanentdisability. There is also a scholarship o 300 rupees perquarter per child paid to workers who send their children(up to two) to grades 9-12 or a maximum o our years.

The package is nanced by a premium o 200 rupeescollected through ‘nodal’ agencies, i.e., groups thatmust include at least 25 workers. A number o groups,ranging rom SHGs to relatively small occupationalgroups, have signed up with JBY acting as ‘nodalagencies’ and reecting a growing tendency to rely onthe partner-agent model in this area. A second scheme,the Aam Aadma Bima Yojana (AABY) was introduced inOctober 2007 with similar lie insurance coverage but

aimed at rural landless laborers. In both cases, there isan important subsidy element (hal o the premium inJBY and the entire premium in AABY) that is nancedrom a central government grant to the LIC. A majorproblem with these schemes is that they are generallyrun as ‘unnamed’ policies with little or no direct contactwith the beneciaries. In one state-level survey o theJBY where BPL workers were supposed to be covered,

the results revealed an extremely low awareness o theentitlement to these benets and claims have tended tobe much lower than what would be expected.

in health insurance, the main initiatives until recently

were those of microinsurance and mutuals. The earlysuccess o the Karnataka’s Yeshashvini scheme265 – amutual with state government nancial support – is oneo the largest rural health insurance programs in theworld with around 2 million members, has led to greatinterest in other Indian states and beyond. It appearsto owe much o its success to having been able to link

to a network o reputable hospitals around the state.In addition, a number o micronance institutionshave set up such schemes including SEWA in Gujaratand SKS in Karnataka.266 Box 5.1 outlines the mainmodels o unorganized sector worker health insuranceschemes operating in India presently. As mentionedabove however, the scalability o disparate group andNGO-sponsored policies is questionable given theirgeographic concentration and limited coverage.

experiences with health insurance in rural india have

run into much greater supply side constraints.267 Some o the recent experiences with national schemesare outlined in Box 5.2. Acharya and Ranson (2005),or example, point out that the state o Gujarat hasmore than three times the number o hospitals perpopulation and twice as many beds compared to theaverage in India. In the same paper, the authors reviewour community-based health insurance schemes inthe state. Even in this limited sample, the wide rangeo models and products is evident. Two o the schemes

263 Themembershipothe twoundsin 2001wasroughly500 thousandand1 million,respectivelyaccordingtoIrudayaRajan(2004).Kannan (2002)alsoindicts

manyoKerala’swelareundssayingpointedlythat“…asystemthatwasestablishedtoservetheinterestsoworkers…hasultimatelyturnedouttobeanexerciseinsel-servingorthebureaucraticinterests.”

264 ForadescriptionseeILO(2006).

265 SeeRothetal.(2006)oracasestudy.ItisworthnotingthattheIRDAhasexplicitlypromotedruralinsurancethroughregulatorymandatesthatrequireacertainshareoinsuranceportoliostobesoldinruralareas.

266 ILO(2005)oundthatadozeninsurancecompanies–publ icandprivate–nowoer46singleriskproductsand37riskpackageproductsto‘disadvantagedgroups’inIndia.Thereportcitesawiderangeoproductsincluding42orlie,9orhospitalization,5orcriticalillness,29oraccidentaldisabilityand2orpension.

267 SeeDufo(2005)oranexampleinthecaseothestateoRajasthan.




operate with insurance company partners while two runthe schemes internally. Reimbursement levels vary rom` 2000 to 15,000 and the services covered (in-patientversus outpatient etc.) dier. Premium levels varywidely as does the level o implicit or explicit subsidy.Finally, two o the our schemes operate computerized

databases and two do not. In short, these and a serieso other published case studies illustrate that manygroup schemes are being introduced to meet demandbut that there has been little convergence on the

approach, much less coordinated eorts at the public

policy level.268

the rajiv aarogya sri scheme in andhra pradhesh is

an innovative case of large scale health insurance

coverage expansion by a state government. Started in

2007, catastrophic health insurance or a limited rangeo hospital procedures are covered or all BPL workers in

the state. The results have been impressive, with 800,000

operations documented and a nominal coverage o

B 5.1: ma ds at srac r rad rrs ida

There are a ew basic models o community-based social insurance: (Devadasan et al., gives a useul typology and overview, notingaround 20 community-based health insurance schemes. See also Ahuja and Narang (2005).

the insurer-agent model, where the NGO/MFI or other ounder acts as intermediary between members and the insurer, in Indiatypically one o the public insurance companies (though SEWA has in recent years also involved private commercial insurer in itssocial security scheme). This model has been relied on by large organizations such as SEWA and Buldhana, and much smaller onessuch as Navsarjan in Gujarat and BAIF in Maharashtra. (Acharya and Ranson, 2005).

the ounding organization acting as the direct insurer, but is not the provider o the insured services. This applies both to some

NGO schemes (Yeshasvini in Karnataka; Dhan in TN) and more occupationally-based programs (e.g., Tribhuvandas Foundation).(Kuruvilla et al., 2005, or a detailed discussion o Yeshasvini, and also ILO, 2005b).

the ounding organization is the direct insurer and the main provider o the insured services. Examples include ACCORD in TN,Kasturba Hospital scheme in Maharashtra; Students’ Health Home in West Bengal.

268 Casestudiesinmicro-healthinsuranceexperiencesinIndiaincludeAcharyaandRanson(2005),Garand(2005),Radermarcheretal.(2005).Whilethecasestudiesareuseulinthemselves,thediversityothepackagesoeredbytheseschemesmakesthemdiculttocompare.Theanalysistodatehasnotledtoresultsthatcouldbeextrapolatedornationalpolicyoranattempttoscaleuptheseprograms.Toourknowledgetherehavenotbeenpublishedcasestudiesocontributoryoldagepensionschemesorlieinsuranceexceptdescriptiveaccounts(e.g.,thedescriptionotheLICJBYschemeinILO,2005a).

B 5.2: Rct ad attpts t pad srac cra t rad rrs ida

In just the last ve years there have been a series o attempts to expand coverage that have ailed to achieve their targets or have beenabandoned.

In 2001, the Government piloted a new LIC program – Krishi Shramik Samajik Suraksha – in 50 districts. The scheme was operated throughLIC and covered lie, survivor and pension insurance or agricultural workers, based on a contribution rom the worker o 1 rupee per day,with a ` 2 per day contribution rom GoI. It aimed to achieve coverage o 1 million agricultural workers within three years, though had

reached around a quarter o its target by the time o closure three years later. According to NCEUS (2006), the ailure was in large part dueto the ununded mandate on local governments and lack o nancing or administration.

In health, a major initiative was launched in 2003. The Universal Health Insurance Scheme (UHIS) is a voluntary contributory scheme orBPL households, covering medical costs o hospitalization, loss o income during short term illness, and death. There is a contributionsubsidy rom GoI ranging rom ` 200-400, so that the net contribution rom the contributor ranges rom `165 to ` 300, depending onhousehold size. In parallel, a scheme or unorganized non-BPL households was introduced. Outcomes on UHIS appear also to have beenlimited in the initial phases, with only around 400,000 households covered in the rst year o operation (less than 5 percent o them BPL)and a urther 31,000 households up to January 2005.

In 2004, GoI introduced a social insurance scheme or unorganized sector workers (excluding agriculture), intended to be piloted in 50districts nationwide and targeting around 2.5 million workers. The scheme was to be managed by EPFO in collaboration with ESIS orprovision o health services. It was voluntary and contributory or those with monthly incomes under ` 6,500 and provides or old age,medical, and accident insurance. GoI would contribute around ` 250 annually per worker. Premia or workers were ` 50 per month orworkers to 35 years and ` 100 above that. Employers were meant to contribute a urther ` 100 monthly. Workers cover the employer

contribution themselves in addition to their basic contribution when no employer is identied. The scheme had negligible penetration,with an estimated enrollment in mid-2005 o less than 10,000.




more than three-quarters o the population.269 Thescheme owes its success to direct leadership by theState Chie Minister who has devoted signicanthuman and nancial resources to the implementationo the scheme as well as strong incentives or one o thecountry’s most expansive hospital networks.

this brief review reveals an uncoordinated set of

insurance and pension schemes aimed at expanding coverage but lacking an overarching policy

framework . Table 5.4 presents a range o programs,by no means exhaustive, o programs aimed at theunorganized sector already. The total coverage o these schemes is not likely to exceed ten percent o theunorganized labor orce or any given type o insurance,although presumably, it is growing. While some havebeen studied, there is a surprising dearth o inormationon what actors lead to success or could be scaled upunder the right circumstances. Several things do seem

clear however. First, demand exists. Second, lack o

coordination or harmonization o schemes leads tohigher costs via duplication o administrative structures.Moreover, these schemes lack portability, an especiallyimportant eature in the context o rural to urbanmigration and an evolving labor market.

C. ReCenT iniTiATiveS To

exPAnD SoCiAl SeCuRiTy

CoveRAge

social security coverage has been low for decades in

india, due largely to the more general phenomenon

of informality, the causes of which are beyond the

scope of this report. What is clear, however, is thatany large scale social security system will have to copewith the reality o the unorganized sector or decadesto come. Recognizing this, the Government o India has

introduced a number o important initiatives that have

Tab 5.4: Sctd srac ad ps prras t rad sctr

na prraestatd mbrsp

000s**Tp rs

crd

Government Universal Health Insurance 1000 Health

Central Welare unds (5)* 4500 (est.) Health, education, housing, other

Kerala Welare unds (55) 4900 Varies, all kinds

Karnataka Labor Welare und 675 Lie, health

Andhra Pradesh Labor Welare und 1000 Lie

Tamil Nadu construction worker welare und 631 Lie, health, pension, other

Tamil Nadu Voluntary Health Service 125 Health

Maharastra Mahadi workers und 150 Lie, health, other

West Bengal Provident Funds (2)*** 1800 Old age

Non-

governmental****

LIC – JBY scheme 3570 Lie

UTI – pension scheme 100 Old age

Yashivini – Karnataka 2100 Health

Karuna Trust – Karnataka 14 Health

Spandana 386 Lie

Shepherd 15 Lie

SEWA Gujarat 100 Lie, health, pension, other

People’s Rural Health Promotion Scheme 75

ASA 66 Lie and Health

* includes beedie, mica, limestone, iron ore and cine workers unds. ** memberships are double counted in some cases since both groups and providers areshown here. *** includes both urban and rural provident unds. **** list is not exhaustive and excludes, among others, lie and health insurance or ICICI clients.

Sources: Irudaya Rajan (2004); Roth et al., (2005); LIC 2006; NCEUS 2006.

269 Thisisduetotwoactors.First,inAPtheeligibilityorBPLstatusarelaxresultinginaveryhighproportionothepopulationallingintothiscategory.Second,BPLhouseholdsareautomaticallyeligible,i.e.,thereisnoenrolmentprocess.




broad political support. In October 2007, Prime MinisterManmohan Singh announced three major initiativesaiming to address the coverage gap. These included anew lie insurance scheme or landless rural laborers,an expanded social pension scheme or the elderly, anda new health insurance scheme or households livingbelow the poverty line (BPL). This section reviews theseinitiatives with a special emphasis on the most promising

o the programs, the RSBY health insurance scheme.

the social pension scheme, a traditional cash

transfer scheme, already existed and is discussed

in detail in chapter 3.270 It is administered by stategovernments which apply their own eligibility criteriaand partly nanced by the central government basedon an estimate o the number o poor elderly personsin each state. The 2007 initiative modied this ormulathereby increasing the overall central budget allocationor the program. As o early 2010, 18 state governmentswere making the ull matching contribution and taking

advantage o this additional allocation. Eleven stateswere contributing less than 200 rupees.

the life and health insurance programs were new

programs, although there had been previous attempts (see box 5.2) and some parallel programs already

existed. In the case o the lie insurance scheme, theAABY ollowed the standard top-down approach usedor other schemes: the benet package was dened, the

premium set and a public insurance company was paida lump sum amount based on the estimated number o beneciaries. Implementation details were mostly let tostate governments. This was an ‘unnamed’ policy in thatthere was no direct contact with beneciaries and no listo policyholders. Not surprisingly, claims have been low.Estimates suggest that only one quarter o potentialclaims were ever made.

A very dierent and much more promising approach wastaken with regard to the new health insurance program,known as Rastriya Swasthya Bima Yojana271 or RSBY. Theollowing section describes the RSBY, its design and theearly experience o implementation.

a k paratrs ad prata

ds RSBy

the objective of rsby is to protect below poverty line

(bpl) households from major health shocks that involve hospitalization. This protection aims at makingtreatment more aordable so as to increase the amounto health care that a household can purchase but also tolimit the disastrous nancial impact that households otenexperience through out o pocket spending.272 RSBY is aclassic demand side intervention using a sophisticatedversion o a voucher combined with targeting. Table 5.5shows the main parameters o the program.

270 TheNationalOldAgePensionSchemewasrenamedtheIndiraGandhiNationalOldAgePensionSchemein2007.

271 TheEnglishtranslationotheHindititleis“NationalHealthInsuranceScheme”.

272 AccordingtotheWHO,Indiahasoneothehighestratesooutopockethealthspendingintheworldat78 percentototalhealthspendingand94percento privatehealthspending.Dataromthe60thNationalSampleSurveyshowthatamongthebottomtwoquintilesotheruralpopulation,47percentwereorcedtoborrowtonancehospitalization.

Tab 5.5: k paratrs RSBy

Paratr Dscrpt Addta cts/caatsBenets covered Cost o hospitalization or 700+ procedures at empanelled hospitals up

to 30,000 rupees per annum per household plus 100 rupees transportcost per visit up to 1000 rupees.

Pre-existing conditions are covered;minimal exclusions; day surgeries covered;

Eligibility criteria Must be on the ocial state BPL list; limited to ve members o thehousehold including household head, spouse and three dependents

All enrolled members must be present tobe enrolled; inants are covered throughmother

Premium and ees 30 rupee registration ee per household per annum paid by household;

Per household premium payment determined through competitivebidding process;

Average premium or active districts isaround 580 rupees

Policy period One year starting the month ater rst enrolment in a particular district Enrolment period is our months

Financing 75%/25% Government o India/State Government The ratio is 90%/10% in Northeast states

and Jammu and KashmirSources: www.rsby.gov.in




the benefits of the scheme are delivered through

a contractual arrangement between insurance

companies and state governments. The process is clearlyspelled out273: State governments sign a memorandum o understanding with the central government, advertise,set up technical and nancial review committees toassess tender documents, select an insurance companyand sign the contract. The current policy period is one

year, though it is under consideration whether a moreextended period or each tender would be desirable.

the insurer must be licensed to provide health

insurance by the insurance regulatory development

authority (irda) and must meet several other minimum

criteria. The insurer must agree to cover the benetpackage prescribed by GoI through a cashless acilitythat in turn requires the use o smart cards which mustbe issued to all members.274 In practice, this makes itnecessary or the insurer to contract a qualied smartcard provider.

the insurer must also agree to engage intermediaries

with local presence such as ngos, mfis, etc. in order

to provide grassroots outreach and assist members

in utilizing the services after enrolment. It mustalso provide a list o empanelled hospitals that willparticipate in the cashless arrangement. These hospitalsmust conorm to certain basic minimum requirements(e.g., size and registration) and must agree to set up aspecial RSBY desk with smart card reader and trainedsta. The list should normally include both public andprivate hospitals.

the financial bid is essentially an annual premium

per enrolled household which is determined

in a competitive bidding process. The insurer iscompensated on the basis o the number o veriedsmart cards issued, i.e., households covered. Eachcontract is specied on the basis o an individualdistrict in a state and the insurer agrees to set up anoce in each district where it operates. While morethan one insurer can operate in a particular state, onlyone insurer can operate in a single district at any givenpoint in time. The hardware and sotware specicationslaid down by GoI imply inter-operability across districtsand states. In other words, an RSBY member rom one

particular district can use his or her smart card at anyRSBY empanelled hospital in the country.

the operation of the system involves three stages –

enrolment, hospital transactions and monitoring, discussed in turn below:

Enrolment. State governments must provide anelectronic list o eligible BPL households to the

insurer in a pre-specied ormat. The list shouldbe posted in each village prior to the enrollmentand the date and location is publicized in advance.Mobile stations are set up at local centers and areequipped with the hardware required to collectbiometric inormation (ngerprints) o themembers o the household and to print smartcards with a photo. The smart card, along withan inormation pamphlet describing the schemeand the list o hospitals, should be provided onthe spot once the beneciary has paid the ee o

30 rupees.Aside rom the beneciaries themselves, theinsurance company’s representative or contractormust be present. A district-level, state governmentocer, known as a Field Key Ocer or FKO mustalso be present and must insert his or her own,centrally-issued, smart card to veriy the legitimacyo the enrolment. (In this way, each enrollee can betracked to a particular state government ocial).At the end o the day o enrolment, the list o households issued smart cards is downloadedrom the FKOs card and centralized at the district

level and eventually state level. This is the basisor the payment o the premium.

Transactionsathospitals. The smart card entitlesits bearer to a list o pre-specied in-patientservices in the month ollowing enrollment.So, or example, i enrolment in a particulardistrict begins in February, the card can be usedrom March 1 until the end o February o theollowing year.

The transaction process begins when themember visits the hospital and her card isswiped. I a diagnosis leads to a procedure, theappropriate prescribed package is selected in

273 TheprocessfowdocumentcanbeoundontheRSBYwebsite.Italsolaysoutprocesseswithregardtootherdetailssuchasreplacementolostordamagedsmartcardsandothercontingencies.Thesamesitecontainsdocumentationonthedierentstepsinvolvedinimplementingthescheme.

274 ThesmartcardsarenominallypaidorbyandbelongtotheGoI.




the sotware menu and the procedure is blocked.When the patient leaves the hospital, the card isagain swiped and the pre-specied cost o theprocedure is deducted rom the 30,000 rupeetotal on the card. The transaction is recorded onthe hospital’s computer and on the card itsel. Areceipt is printed and provided to the member. Transport costs are to be paid by the hospital to

the patient in cash.

Monitoring. Data on enrolment is downloadedrom the FKO cards and aggregated or eachdistrict. Insurers are also required to submit datato the GoI in a pre-specied ormat on regularbasis. Payments o premium to the insurer arebased on the FKO data. Transaction data is alsosubmitted by the insurer which receives data romeach hospital. A separate set o pre-ormattedtables are generated or the insurer and or thegovernment respectively. This allows the insurer

to track and settle claims. It also helps the insureras well as the government to identiy anomaliesand patterns that may lead to on-site audits. Thestate governments are able to monitor utilizationo the program by members and to some extent,begin to measure the impact o the program.Periodic reports are to be made publicly availableon the internet and through published reports.

b Rata bd t RSBy ds

the design of the rsby is based on at least three key premises:

Program design must address the practicalsituation on the ground rom the perspective o the beneciary household.

The design details must be allowed to adaptover time through “course corrections” based onevidence. This, in turn makes it necessary to havetimely data on key indicators and concurrentevaluation.

Sustainability o the program depends onincentives o the key players being aligned withthe objectives o the program.

these premises are reflected in everything from

the use of technology to the approach taken to

contracting insurers. From the perspective o the

beneciary, or example, a number o design choiceshave made the system attractive and easy to use. Forexample, in contrast with most government schemes,households are not generally provided choice as towho provides services, especially with regard to privatesector options. In addition, the ‘ront end’ o the systemis user-riendly. Enrolment is brought to the household’slocation even in remote villages. The thirty rupee cost

is nominal and only one visit is generally required toreceive a working smart card. There are no complicatedexclusions and pre-existing conditions are coveredand the only eligibility condition is to be on the BPLlist. As ar as hospitalization, the smart card allows orpaperless, cashless transactions. The last point is crucialsince raising a large amount o money and then waitingor claims to be reimbursed may simply not be possibleor many BPL households.

an important element of the design is the direct

interface required between the insurer and the

policyholder. Experience with other schemes inIndia with ‘unnamed’ policies oten result in lowclaims because individuals are not aware that they arecovered. In this case, the need to obtain the household’sbiometric inormation orces the insurer to make directcontact. In addition, the 30 rupee payment cannot bemade on behal o the beneciary. This not only makesit necessary to have direct contact, it is also thoughtto provide some level o ownership, despite the smallamount involved.

another important feature of the scheme is

interoperability. By standardizing the specicationsor sotware and hardware, the smart cards issued by aparticular insurer in a particular district can be used inany RSBY hospital throughout the country. In contrast,other schemes targeted to BPL amilies are state-specic and benets are not portable across state linesor between rural and urban areas in the same state. Thisis especially problematic or some o the poorest statessuch as Bihar where a signicant proportion o theworkorce is migrant labor.

ultimately, the true indication as to whether the

beneficiaries can effectively participate in the program will be reenrollment and utilization rates. At present,there are no data available on reenrollment rates, butone post-enrolment survey data ound that all RSBYmembers intended to enroll again. The second yearo enrolment is about just starting in several districts




and should be available by late 2009. Although it ispremature to base any conclusions on early utilizationdata, the incidence o hospitalization will be crucialtoward assessing perormance.

the approach to monitoring rsby is different than

that applied to most centrally-sponsored social

programs, both in terms of intensity and focus.

Monthly and sometimes weekly data on enrolmentand utilization ows rom insurers to state and centralgovernment. Reports based on these submissions willsoon be available on a public website with inormationavailable at a highly disaggregated level. Types o medical procedures can be tracked by hospital and dataare available down to the village level. Administrativedata is an important element o program monitoring. Inaddition, continuous eedback is collected through eldvisits and spot audits, although levels o state governmentengagement vary widely. Finally, with technical supportrom the World Bank and GTZ, GoI is also planning aseries o surveys that will capture important patternsnot visible through the administrative data.

perhaps the most important element of the rsby

approach is the attention given to aligning the

incentives of the stakeholders. The business modelapplied relies on the dierent actors to pursue theirinterests in a way that contributes to the sustainabilityo the program.

the main players are the central and state

governments, the insurance companies, the hospitals

and the beneficiaries. As mentioned above, there isstrong political support at all levels or the extension o social security coverage. For state governments, the actthat the central budget covers three-ourths o the costo the program is a signicant incentive to participate.Although some state governments considered theimplementation requirements to be onerous, the actthat key processes had been worked out by the GoIhelped make this more palatable. A vigorous campaignto explain the benets o the scheme to each stategovernment also proved crucial.275

insurance companies have an incentive to maximize enrolment since their market-determined premium

is paid on the basis of the number of households

enrolled. Hospitals have an incentive to attract RSBY

members as a potentially major source o revenues. Inprinciple, this can be the case even or public hospitalswhich can create societies that allow them to retaina share o the revenues that they collect. Insurers, incontrast, have an incentive to monitor participatinghospitals in order to avoid excessive claims throughraudulent or unnecessary procedures.

since the contracting process is repeated over time, insurers would have additional incentive to meet other performance criteria that will be considered in future bidding rounds. This behaviorcan be reinorced by proactive state governments thatuse the inormation gathered through monitoring insubsequent tender processes. For example, surveyso RSBY hospitals and post-hospitalization surveyso beneciaries can be used to monitor quality andcapacity o acilities over time. Other examples includeadherence to guidelines or the enrolment process,the quality and timeliness o data submission and the

alacrity o claims payments to hospitals.

to summarize, the rsby program has been designed to

respond to the ‘ground realities’ from the perspective of bpl households, allow for evidence-based adaptation of program details and, most importantly,

align incentives for stakeholders to ensure sustainability. The early implementation experiencehas, to a large extent, validated this approach. At thesame time, a number o problems were encounteredand the program has not yet stabilized.

c ear ptat prc

there was great uncertainty during the early months

of the program. What would the insurers bid or thepremium and would there be sucient competition?Would the smart card technology that the program reliedupon work as it should under dicult eld conditions?Would state governments implement the scheme asintended? What other problems might arise?

the level of the premium was especially important

since the goi had set a cap on the subsidy. As it turned

out, the winning bids in the rst round were belowthis cap. In general, the sotware and hardware didoperate as planned, although there were glitches suchas the limited supply o smart card printers required or

275 SeeSwarup(2009)oradetaileddiscussion.




hospital side. Second, modications o the scheme thathave been made during this period should increaseutilization. These include a shorter enrolment period(rom six to our months) and the addition o maternitybenets to the list o procedures covered. Finally, somestate governments are now becoming proactive by

sponsoring health camps or coordinating with hospitalsto reach out to RSBY members.

utilization alone will not deliver positive results

unless hospital quality meets certain standards.

This is a medium term challenge or state governmentsand the GoI made more dicult by the dearth o inormation on hospital quality and lack o experiencein this area.280 Over time, a database that can be usedto monitor progress could be developed and stategovernments could increasingly take the evidenceproduced into account in the bidding process or insist

on certain thresholds or empanelment. To the extentthat RSBY generates a signicant revenue stream orboth hospitals and insurers, there should be someleverage to promote better quality.

in sum, the rsby has demonstrated that it can

reach the target population and attract state

governments, insurers and hospitals to actively

participate in the program. Whether the programsucceeds in the longer run however, depends onwhether the millions that have enrolled are able to avail

o the potential benets in terms o higher utilizationand lower out o pocket costs.

d ipcats bd t RSBy

if the rsby achieves the scale envisioned by the

goi, there would be important implications beyond

the bpl population and even beyond health

insurance. The RSBY approach can be used to coverworkers beyond the BPL list. In several states non-BPL households that are the target o government

programs such as construction workers, are receivingthe same package as RSBY members. The 2010budget reected the decision to expand coverageto NREGA workers. The existence o processes and

280 Onlyrecentlyhastherebeenaneorttobuildahospitalaccreditationprocess.

Figure 5.2: Household enrolment in RSBY by month, February 2008 – August 2009

Source: Administrative data rom MOLE database. See www.rsby.gov.in or state level gures.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

T h o u s a n d s o f h o u s e h o l d s e n r o l

l e d

Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10




technological inrastructure related to the smartcard reduce the marginal cost o implementationto a level that makes these non-BPL group schemeseasible. Given the known exclusion errors o the BPLlist, providing coverage to non-BPL households is animportant step.281

the approach and platform of rsby may also be useful

in delivering other social programs. An obviouscandidate is the Public Distribution System (PDS) whichis one o India’s largest and oldest schemes, but also oneo the most corrupt. In principle, poor households areentitled to essential commodities such as subsidizedrice, grain, sugar and kerosene. Massive leakages havebeen document with as much as two-thirds o the riceand grain never reaching the beneciaries. There havebeen several proposals to reorm the scheme includingshiting the huge budget or the scheme rom in-kindto cash transers. However, this proposal would runup against signicant resistance rom the bureaucracy

and 400 thousand shop-owners that distribute thesecommodities.

using the rsby approach in pds could lead to

improvements through two channels – competition

and accountability. This could be achieved byadapting the smart card technology used in the RSBYprogram to serve an analogous unction or PDS (seeChapter 3). As in RSBY, smart cards would containbiometric inormation o the household in questionin order to identiy beneciaries and would swipe thecard at a reader in the ration shop. The card would be

debited each time as per the price and amount o thecommodity and data would be uploaded to a centralserver. Instead o an insurer, the PDS distributor wouldbe compensated by the relevant government agencybased on the uploaded records. These cards wouldwork at any shop in the country, so beneciaries o theprogram would have choice o provider, just as in thecase o RSBY hospitals.

in other cases, the identification process embedded in

the smart card could simply be used to verify that

a particular individual had received the intended

benefit. For example, pension receipt under the NOAPScould be biometrically veried periodically, reducing

the number o ‘ghost pensioners’. Similar applicationscould be used in other programs such as conditionalcash transer programs that require verication at theprovider end (including perhaps, private providers suchas schools). For certain programs, the platorm couldallow or portability o benets or migrants who areotherwise tied to the place where they appear on the BPLlist until the next census. This eature is likely to become

more important in the ace o massive anticipatedurbanization in the next ew decades.

finally, it is important to note that there are efficiency

gains to be attained in converging on a single

platform rather than duplication administrative

structures for the large number of social programs

that india extends to poor households. On the otherhand, trying to stack too many programs and unctionson the RSBY platorm itsel could be counterproductive.Piloting such ideas careully rather than orcing theissue too quickly seems advisable.282

the rsby may be the first social sector program

in india that simultaneously takes into account

the perspective of the poor, focuses on getting the

incentives of the various players that have to deliver

the benefits right and encourages changes over time

based on evidence. The experience o the rst year or sohas been positive, particularly in terms o demonstratingthat the target population can be reached (despite thepoor quality o the BPL list). However, the real successo the scheme will come only when RSBY members are

shown to have increased access and aordability o decent hospital care. This outcome depends, in turn, oncentral and state governments ensuring that insurersperorm and that obstacles are removed rom the patho poor households that need hospitalization. It will beespecially important in the next ew years to monitorprogress in this regard through MIS data, surveys andeld reports. The oversight o a complex program likeRSBY with tens o millions o members, two dozenstate governments, a dozen insurers and thousands o hospitals will require a strong institutional presence atthe center, probably in the orm o a stand-alone agency.

The aster this institutional capacity is developed, themore likely that the RSBY will succeed.

281 Inatleastonestate,Kerala,thegovernmentisextendingtheschemetoallhouseholdswhileonlysubsidizingthoseontheBPLlist.

282 Inthecontextothe2009electioncampaign,onestategovernmentattemptedtointroduceanewcashtranserprogramontoasmartcardalongwithaseparatehealthinsuranceschemeaternothavingreceivedpermissiontodosounderRSBY.Theeortwaseventuallyabandoned.




D. exPAnDing SoCiAl

SeCuRiTy CoveRAge in

The Coming DeCADe

this section explores the options for india as it seeks

to expand social security coverage. It looks rst ascurrent proposals or expansion, beore examiningthe range o actors that are relevant in determininga easible expansion strategy. These include demandside issues, various aspects o program administration,and design elements o dierent types o socialinsurance.

The RSBY scheme aims to cover sixty million households.For a variety o reasons discussed above, this isunlikely to happen in the ve year period originallyenvisioned. Nevertheless, at the current rate o increase, tens o millions o people that have neverhad health insurance will be covered in the next ewyears, a remarkable achievement. As the program isextended beyond the BPL population, its reach could beeven greater. The RSBY scheme is likely to be the bestopportunity or expanding social security coverage inthe next decade.

in contrast, the nascent effort to expand pension

coverage requires more thinking. Take up byunorganized sector workers is not likely to reach themagnitudes achieved by RSBY unless at least two o thelatter programs distinctive eatures can be emulated.First, workers must be provided with direct incentivesto give up their liquidity and save or old age. Sincetax incentives reach very ew people, only matchingcontributions can provide such an incentive. Second,incentives or providers (in this case pension undmanagers) to attract clients is required. Group schemesthat already exist and state sponsored schemes coulduseully be integrated with the NPS while district levelcontracting o identied and targeted householdscould be attempted. In sum, while the NPS conceptis sensible, its implementation to date has not takenthe incentives to beneciaries and providers ully intoaccount.

In the case o workers whose risks could eectively beinsured, a target level o consumption smoothing couldbe dened, perhaps in relation to the poverty line. Through actuarial analysis, the cost o this insurancecould be calculated and revised according to actualexperience over time. Box 5.3 presents the example

The rst step in designing a scheme is to set the benettarget and eligibility conditions. For example, an inationindexed annuity o 6,000 rupees per year would be higherthan the ination adjusted national rural poverty line and

slightly lower than the urban equivalent. In this example,we set the eligibility age or receipt o benet at 60.(At 500 per month, the target benet is 2.5 times the currentsocial pension paid by NOAPS and the eligibility age is veyears lower.)

The contribution rate required to generate this pension leveldepends on the rate o return on the invested unds ater charges,the number o years o accumulation and lie expectancy.Adapting the calculations o Shah (2005) or the case o a workercontributing rom age 24 to age 60 and investing conservatively,a contribution o roughly 5 rupees per day or 1825 per annumwould result in a high probability that the DC scheme would atleast reach our lower target benet. This calculation is based on historical returns or government bonds. A diversied portolio thatincluded other assets such as equities could yield a higher pension, but with correspondingly higher risk. (A maximum age o joining andvesting requirements could be incorporated.)

The nal step in the design is to determine the incentives to participate in the scheme as well as its aordability. The gure below showsthe share o income that the required contribution would entail by earnings decile were the worker to make the entire contribution andwhere there was a 1:1 matching contribution. The share without the match reaches levels likely to discourage participation in the lowerdeciles but with a match, the range is between 2-5 percent. Combined with the high rate o return that the match implies, it seems easiblethat the scheme could attract participation along with other actors, such as transaction costs and institutional trust.

B 5.3: istrat a ctrbt basd d a ps sc

decile

% o

f i n c o m e

12%

10%

8%

6%

4%

2%

0%

3 4 5 6 7 8




o a dened contribution (DC) pension scheme thattargets a pension level o about 500 rupees per monthat age 60. In this example, the premium works out toabout 5 rupees per day or a worker that contributesregularly rom the age o 26, but this assumption is onlyillustrative. The principle, however, is that the benettarget determines the stream o contributions that areneed to preclude any ununded liability rom arising as

well as to ensure that the target benet level is achievedwith a high degree o probability. A dened contributionarrangement is also able to cope with variable incomesand the absence o a reerence wage. It is also, at leastin principle, portable since the balance could be shitedinto an EPFO account or even into the new DC schemethat applies to new civil servants or vice versa.

an important design principle is that the premium

or contribution level should be affordable to a

significant share of the target population in the

unorganized sector. In the DC scheme example in

Box 5.3, the contribution level would represent between3 and 11 percent o the earnings o unorganized sectorworkers in deciles 3 to 8, according to the survey data.In order to attract voluntary take-up and participation,some matching contribution or premia would berequired. A 1:1 matching contribution would halve thosepercentages and simultaneously provide a signicantincentive or voluntary participation in the orm o animplied 100 percent rate o return beore investmentincome is taken into account. Note that in each case,the eligibility rules as well as the target benet and

incentive levels would be set in relation to the ‘socialpension’ parameters in such a way that did discourageparticipation. For example, the potential accumulationin the DC scheme would be taken into considerationwhen determining the age at which an individual couldparticipate in the contributory scheme as well as thecontribution amount.

available data, various studies and real world

experiences show however, that a large portion of

the unorganized sector in india is capable and willing

to contribute to their own social security.283 Many

existing schemes are contributory, although in mostcases, there is a direct or indirect subsidy to cover actualexpenses. It is also important to note that most o theinitiatives under way around India today involve groupsthat are organized either on an occupational basis or onsome other basis such as MFIs, SHGs or cooperatives.In addition to acting as a credible intermediary withinsurers, these organizations can keep transaction

costs relatively low.284 In short, the available evidencesuggests that individuals participating in groups andhaving some minimal willingness to pay contributionsare the best candidates or inclusion in any newcontributory schemes.

realistically however, group schemes are not likely

to reach the scale possible through state and

central government programs. The RSBY and NPS arethe two most important central government programsor expanding social security coverage at the moment.In terms o reaching unorganized sector workers At the

same time, Indian states are larger than most countries,and several have undertaken important initiatives in thisarea. In health insurance, the Aarogyi scheme in AndhraPradhesh has by ar the largest coverage with the olderYeshaswini scheme in Karnataka coming in a distantsecond. Andhra Pradesh introduced its co-contributionpension scheme or ten million sel-help group membersin 2009.

clearly though, some households will not be able

to afford anything beyond a nominal contribution

and neither contributory insurance nor pensions is

relevant. For example, the recently released summaryo the NSS 61st round consumption survey showsthat ten percent o rural households spend less than270 rupees per month on a per capita basis. Out o thismeager sum, more than 90 percent is spent on oodand other basic necessities. Furthermore, insuranceor those already widowed or disabled or contributorypensions or the elderly (or soon to be elderly) areirrelevant. For these households, well targeted transersare needed simply to survive rom one day to the next.Improved targeting o saety net programs285 discussed

283Madheswaranetal.(2005a)indthatbetween67-75percentounorganizedsectorworkerssurveyedwerewillingtocontributeorvarioustypesoinsurance.Onaverage,agriculturalworkerswerewillingtomakeamonthlypaymento624,607and696rupeesoroldage,deathandsickness,respectively.Two-thirdsothoseunwillingtocontributecitedpovertyasthemainreason.Dror(2006)oundthathouseholdswerewillingtopay,onaverage,559rupees peryearorhealthinsurance.Intheareaopensions,‘micropension’schemeshaveemergedsuchastheoneoperatedbySEWAortheorworkersindairycooperativesinGujarat.

284 Ahuja(2005)makesthispointinthecontextohealthinsuranceprovision.

285 Forexample,theNSAPprogramthat,inadditiontooldageandwidows,paysdeathandmaternitybenetstopoorhouseholds.




in Chapter 8 and expansion o coverage would helpachieve this primary objective.

the other criteria relate to implementation;specifically,

efficient recordkeeping, asset management, insurance

provision. A key policy decision in all three areas is therole o government versus private sector providers. Onemodel would involve the creation o a new bureaucracy

that would administer the new schemes and perorm allthree unctions. This is what is done already in the caseo pensions and lie insurance or ormal sector workersin the orm o the EPFO. One potential advantage o suchan entity would be economies o scale in administration.However, the experience o parastatal monopolies suchas the EPFO in Asia as well as other parts o the world isthat they are not adept at managing assets or avoidingthe creation o large ununded liabilities that oten leadto nancial insolvency. Service standards and lack o technological innovation in the absence o competitionare oten cited as problems in these institutions.

Applying the current ratio o sta to active contributorsin the EPFO to a new scheme or the unorganized sectorwith participation o say one o every ve workers, wouldresult in the expansion o the civil service by around200,000 employees.

the alternative to direct public provision and

administration is to use existing non-governmental

entities and restrict the role of government to:(i) providing targeted subsidies and (ii) regulating

these entities and setting basic standards. This modelalready exists in India in several orms already mentioned,

with RSBY as the best example. In addition, many otherschemes alling into the community based or micro-insurance category could be incorporated under anumbrella program that provided matching contributionsor premia but set certain standards in terms o benettargets, eligibility conditions, investment policy andrecordkeeping, among others.

there are several potential advantages to this

approach:

rst, by harnessing existing groups including

SHGs, coops, MFIs, etc., transaction costs couldbe kept low, especially where recordkeeping at

the individual member level was already takingplace. This is particularly important in the earlystages o any national initiative since achieving aminimum scale and using existing recordkeepinginrastructure will help keep administrative costratios low during the start up period.

a second advantage o this model would be thepromotion o competition on the basis o costand quality o services.

third, many unorganized sector workers haveno experience or direct interaction with ormalnancial sector institutions so that groups canserve as an eective intermediary.286

perhaps the greatest challenge for either approach,however, will be that of tracking participants and

the financial flows associated with each of them.Recordkeeping must be accurate, timely and reliablei the scheme is to gain the trust o participants

who can opt out o the scheme at any time (unlikethe mandated schemes such as EPFO). Even a smallnumber o errors that result in nancial losses earlyin the lie o the scheme could irreparably damage theimage o the program. Recordkeeping clearly doesinvolve large economies o scale and this has led somecountries to centralize this unction while maintainingcompetitive and decentralized provision o otherservices.287

for several reasons, the challenge of tracking flows of money and individuals will be particularly

daunting in india. The lack o a unique and universalnational identication (ID) so ar has been a challengeor many public programs. Several existing (ID) systemsoperate in a disconnect, by nature o their mandateprovide only or a limited coverage, and would otennot meet requirements sought or a modern publicbenet program. For example, tax registration coversonly income tax payers. Registration systems o various welare unds are believed to be operationallyoutdated.

the scenario could improve dramatically in light of the high priority that has been given by the new

administration to implementation of the national,

286InonestudyorKarnataka,morethansixtypercentounorganizedsectorworkerschosetosavethroughSHGscomparedtoaround23percentinbanksand postoces.

287 ExamplesintheareaopensionsincludeMexicoandSweden.ItisalsoworthnotingthatthePFRDAActalsoenvisionedacentralizedrecordkeepingagencywhileallowingassetmanagementandannuityprovisiontobecontractedouttotheprivatesector.




biometric id.288 A unique ID would acilitate identicationor a wide variety o social programs. Some universalrequirements could be introduced in respect to the datacollection as part o the registration process to ensureminimal inormation requirements and compatibility o member’s data across agencies.

computerized record management makes any

program more transparent and flexible. Still todaymany public programs in India rely on archaic systemso paper records that are generally very limited intheir capacity to provide or, e.g., data aggregationand analysis, duplicate records checks, and eectivecoverage assessment. Furthermore, cross-eligibilitychecks or multiple programs may virtually beimpossible. Investment in computerized administrationand processing systems would be necessary or thesuccess o any large scale program. Still, with a highlysophisticated computerized core o operation, someelements o administration will probably continue tooperate with paper records (or example, managemento signature sheets or benet disbursement). Buteven this is not a dogma anymore – the boundaries o technology today are being tested by introducing, e.g.,paperless biometrics-based identication systems.

programs with systematic personalized record-

keeping provide much greater capacity for adding

new benefits and improving existing schemes. Exampleso the schemes that would oten not have updatedmembership records include various micro-creditprograms (operating on a group basis) and conventionalsocial security programs where employer is responsibleor premium payments (in some cases, the agency doesnot collect records and/or centralize o the coveredindividuals until the time o their retirement). As longas operations o such programs lack personication,capacity to introduce new benets or acilitate targetingwill remain limited.

the access gap can further be reduced by means

of various technological innovations. Severalmechanisms are being tested where conventionalinrastructure ails to provide or connection betweenthe local communities and some remote centralizedoperational core. Opportunities o both the on-lineand o-line communications are being explored. For

example, it seems that the inrastructure o the ruralInternet kiosks can provide a backbone or some publicbenet programs. At the same time, in places where theon-line connectivity is still beyond the reach, the smartcard technology can acilitate ecient o-line recordmanagement.

operations of the cash collection and dispersed

systems in the unorganized sector pose serious challenges. Conventional nancial intermediaries areoten ill prepared to deal with mass transactions o very small amounts in remote, dispersed, and poorlyeducated communities. Penetration o commercialbanks in the rural areas in India remains low. Whilethe India’s extensive Postal system seems operates inalmost every corner o the country, the adequacy o itsaccounting mechanisms and capacity to assume newtasks remains to be evaluated. In generally, operationalsubsidies, partnerships with local intermediaries, andvarious innovations – all will help the eort o coverage

extension.

both in india and abroad, a number of interesting

and relevant innovations have been adapted to the

needs of both public and private sector in extending

the coverage of financial services. Low cost ATMsdeveloped at a raction o cost o the conventionalmachines, equipped with nger print identication andlong-lie batteries acilitate cash distribution in remoteareas (some interesting and quite competitive prototypeshave been developed in India). Point-o-service (POS)devices installed in local shops and gas stations can

use regular telephone lines to process on-line cashdisbursement transactions. Special branches on wheelsmake conventional banking mobile, enabling regularand schedules visits in the remote communities. Finally,mobile phone banking is an emerging phenomenonthat utilizes comprehensive penetration o the newcommunication networks. All these solutions oerimmense opportunities but also come with limitations(e.g., mobile phone banking works when money hasbeen deposited in a bank account, etc.). A combinationo various solutions would likely be required.

india’s dynamic and growing economy will lead to greater demand for solutions that allow full

portability of benefits. It is not clear i and when

288 Aewmonthsaterthe 2009elections,theGovernmentoIndiaappointedtheormerhead oInosysandwell-respectedreormadvocate,NandanNilekanitoheaduptheeortandallocatedsignicantbudgetaryresourcesortheeort.




some centralized public record-keeping platormcould or should be developed. At the same time, theregulatory mandate can provide or opportunities o standardization in the product design. (In particular,or the retirement programs, the plans with a denedcontribution benet oer greater portability by thegeneric nature o their design). Furthermore, someo-shelve sotware products and utilities could be

promoted (and provided to participating groups at lowor no cost) as basic record-keeping platorms acilitatingeasy implementation o the regulatory standards.

the discussion in this section then suggests that

any new, contributory scheme targeted at the

unorganized sector should be:

basd tart cspt stbjcts dd b pbc pc

ardab t a scat sar trad sctr rrc

fb t ad at cstras

aca sstaab basd t prcptat assts atc abts

adstrd sc a a s as t trasact csts tt cprs t

accrac ad tss rcrdp

accssb ad prtab trt tctr ad da basd a iD.

e. ConCluSionS AnD

ReCommenDATionS

india’s unorganized labor force is vast and

heterogeneous and this reality must be taken into

account in any attempt to extend coverage of

social security programs. One important distinctionis between households that are either too poor tocontribute or have already experienced the shocksthat could otherwise be insured through contributory

schemes. In these cases, social assistance i.e., cashtransers on a means-tested basis are the appropriate

1.

2.

3.

4.

5.

6.

intervention. These programs are dealt with in Chapter 3.At the same time, a large proportion o households wouldbenet rom ex ante interventions that allowed or risk pooling and were made more aordable through directsubsidies. Among these households, a subset is alreadyparticipating in a number o uncoordinated attempts– mostly through group arrangements – to provideprotection against a range o lie-cycle risks. Some are

sponsored by government, such as welare unds whileothers are NGO-based initiatives that oten involvemicroinsurance.

the lessons from some of the schemes that already exist

in india should be distilled and applied in the process

of adopting a new national policy for extending

social protection coverage. These experiences couldprovide policymakers with inormation ranging romthe actors aecting voluntary participation to datathat could help with actuarial calculations o cost.289 Implementation lessons might include estimates o the

costs o specic transactions, such as processing a claimor issuing a statement and the potential savings romthe scale economies usually ound in administrationand recordkeeping operations. Comparing notes acrossexisting schemes might yield useul inormation abouthow to eciently use technology or how to set upprocesses to certiy eligibility and veriy claims. In somecases, there may be evidence that supports governmentaction through better regulation or direct provision o public goods. The case o unique identiers, alreadymentioned, is likely to be one such case.

many of the existing schemes use a form of the partner-agent model and this approach has several

advantages over the alternative, the creation of a new

layer of government bureaucracy with potentially

lakhs of employees. In particular, the PA model hasbecome increasingly relevant in India in recent yearsas nancial sector reorms have resulted in competitivemarkets or insurance and asset management and haveled to the creation o specialized regulatory institutions. This avorable situation should be exploited in order toreduce costs and preempt the problems observed with

monopoly, quasi-state entities that cover ormal sectorworkers. The key question is whether this ‘bottom up’

289Unorganisedsectorworkersand subsetstherein will exhibitmortalityand morbiditypatternsthatmay dier greatlyromthe typicalclienteleo insurancecompanies.Forexample,thelietablesusedbyLICarebasedonannuitantsmostowhomarehigherincomeindividualswithmuchlowermortalityratesthanthegeneralpopulation.Adatabasethatsystematicallycollectedthisinormationcouldbeusedtoproduceactuarialtablesthatwouldserveasabenchmarkorassessingcostswhendesigningtheschemeaswellassupervisingprovidersoncetheschemewasoperational.




approach can be successully scaled up with governmentsupport. Answering this question could begin with aseries o meetings that could bring together potentialgroup participants (SHGs, MFIs, coops etc.), insurancecompanies, asset managers, regulators, governmentministries and researchers.

initially targeting existing groups such as shgs and

mfis is recommended for several reasons including for reducing transaction costs, achieving effective

risk pooling290 and ensuring a minimum critical mass of voluntary take-up in the early stages of the

program. However, there are tradeos involved insuch a strategy. First, while the number o such groupshas been increasing rapidly in recent years, coverageis still relatively low and regionally concentrated(predominantly in the Southern states).291 Second, anysubsidies involved in such a scheme should not beexpected to mainly reach the very poorest households.Various studies have shown that membership in

groups tends to be concentrated in the second andthird quintiles rather than the bottom quintile.292 Asmentioned above, or many o these households, thecondition that would have been insured already exists(e.g., lie insurance or widows). In these cases, ex-post transers in the orm o social pensions seem theappropriate policy response.

at least three measures are required if these initiatives

are to be successfully scaled up.

rst, in order to take advantage o economies

o scale, to ensure portability and to acilitate

supervision, some common standards wouldhave to be developed, particularly in the areaorecordkeeping. A good example is a universalstandard or identication o covered workersthat, in itsel, would be a public good with manyother uses. Another is a ratings system or SHGsand other groups based on objective criteria.

second, appropriate contribution and insurance premia would be calculated based on rigorous

actuarial calculations that were adjusted over

timetoreectexperience. This would help ensurethat ununded liabilities (or example, those thatarise when guarantees are oered) did not ariseand compromise nancial sustainability. It wouldalso make any subsidy involved explicit andtransparent.

direct government subsidy is the third element

o successul coverage expansion. In order toencourage voluntary take up among low incomesegments o the unorganised labor orce, therequired premia and contributions would have tobe subsidized. This subsidy would have to be setat a realistic level given budget constraints.293

the rsby provides a model of coverage expansion that

effectively encompasses these elements to provide

catastrophic health insurance coverage to tens of

millions of unorganized sector workers and their

families. The scheme is notable or its scalability andrelative transparency achieved through a combination

o standardized processes and innovative use o technology. By contracting out service provision, ithas allowed competition to set the premium leveland enough exibility to adjust this over time. It hasalso dened a targeted subsidy which appears to besustainable in the broader scal context. All o theseeatures make it a good practice example or urtherprogress in reducing India’s coverage gap.

achieving widespread coverage in an effective manner

is not possible without the development of information

systems that allow the goi to track members of these

programs and the financial flows (contributions,

premia and benefits) efficiently. Innovative use o technology may be part o the answer, but in order tokeep costs down, existing inrastructure such as postoces and banks will have to be harnessed. In addition,and especially during the rst phase o implementation,the recordkeeping that already exists or groups such asSHGs and MFIs should be utilized and, where necessary,

290 Thesegroupsare,orexample, inamuchbetterpositiontoensurethatallmembersparticipateinahealthinsurancescheme,reducingadverseselectionproblems.

291 AsGhate(2006)reportshowever,thegrowthinthenumberoSHGslinkedwithbankshasincreaseddramaticallyandregionaldisparitiesareshrinkingsomewhat.292 Seeorexample,BasuandSrivastava(2005)ortherelationshipbetweenincomelevelandmembershipinSHGsinAndhraPradesh.Inthesamevein,Ghate(2006)

concludesthat“Micronanceisbestsuitedtoreachtheeconomicallyactivepoor,whichmayexcludesomeinthelowestdecileortwoothepopulationthatsuerromoldage,illhealthordisability.”

293TheGoIalreadysubsidizesmembersotheEPFOwithanannualcontributiono1.16percentothecoveredwagebill.Inaddition,avorabletaxtreatmentosuperannuationproductsandthePersonalProvidentFund(PPF),amediumtermsavingsinstrument,resultsintaxexpendituresoanunknownamountthatmostlyaccruetohigherincomeworkerswhopayincometax.Itcouldbearguedthatamatchingsubsidyothekinddescribedherewouldbebothmore

progressivethanandhaveamorepositiveimpactromapublicpolicyperspectivethanexistingsubsidies.




upgraded so that it is possible to ‘plug in’ large numberso participants in a cost eective manner. Bothgovernmental and external assistance could be madeavailable to groups willing to participate and meetingrecordkeeping standards (including compliance withthe unique ID system) should be a condition or receipto subsidies. A centrally managed recordkeepingsystem is one option, but common standards that

allow supervision entities to monitor eectively area minimum prerequisite. The time and resourcesrequired to design and construct a national system o this kind should not be underestimated but getting theimplementation machinery right at the beginning willavoid bigger problems down the line. At the same time,India is a world leader in MIS applications so that state o the art solutions are possible i policymakers accord theissue the importance it merits.

finally, although not mentioned above, there are many

disparate and disconnected initiatives in progress by

central and state governments in india that should

be brought under a consolidated national policy

framework . The passage o the Social Security Act atthe end o 2008 is a positive step towards establishingsuch a ramework. It now requires implementation. TheSocial Security Board envisioned under this act can serveas a coordinating body bringing various eorts underone umbrella, spell out a national policy complete withtarget benet levels, costing, subsidy and strategy orphased implementation. In light o the importance o implementation issues and, especially recordkeeping,a special advisory group to make recommendationson these aspects with the best available technicalsupport rom public - private sector partners in Indiacould be ormed.



C HA P T

E R

6Financing and Institutions for Social Protection



CHAPTER-6: Financing and Institutions for Social Protection 1

like other public interventions, effective social

protection systems rely on a mutually supportive

web of appropriate policies, capable and empowered

institutions for implementation, and transparent and

adequate financing. This chapter provides an overviewo nancing and institutional aspects o SP programs, key

determinants o SP system eectiveness in India. It rstexplores nancing sources, mechanisms, and patterns inrecent years or the major centrally sponsored schemes o social protection, beore examining the rapidly evolvinginstitutional ramework or SP program delivery.

the key findings from the chapter are:

nancingoSPinterventionsinIndiaissignicant,

at over 2 percent o GDP. I one adds ormalsector pensions, the SP spending share rises to

around 4.3 percent o GDP. In international terms,nancing o saety nets in India is adequate, butthere remains a major agenda in getting betterpoverty reduction impact rom spending.

within SP programs, nancing priorities have

shitedsomewhatduringthe2000sinapositive

Chapter–6

Financing and Institutions for Social Protection

direction, though spending on insurance-basedprograms outside the ormal sector and urbanprograms remains remarkably low. Lookingat international evidence across developingcountries, insurance-based interventions couldbe expected to be a major source o spendinggrowth on SP programs over time.

despite clearly progressive allocation o SPresources across states, actual state-wiseexpenditureson SPprogramsareregressive. Thelimited analysis on intra-state SP expendituressuggests that some states reinorce the regressivepattern o transers across districts.

looking ahead, there are our major challengesor India in nancing o its social protectionsystem: (i) sustaining roughly the current shareo public spending as overall spending rises;(ii) continuing to adjust the composition o spending to greater emphasis on ex anterisk mitigation and promotional programs;(iii) increasing the exibility o unding rom thecentre to states in terms o how it can be used or




dierent SP interventions, while strengtheningthe emphasis on spending outcomes; and(iv) deepening a range o administrative andinstitutional reorms in SP service delivery whichcan contribute to greater expenditure eciency(see Chapter 7 on administrative and publicexpenditure management issues).

institutional roles and responsibilities or SPservice delivery have evolved rapidly over the

pastdecade.However, the evolving assignment o institutional responsibilities or SP programs hastypically not been inormed by a clear alignmento unctions, unds and unctionaries, thoughMGNREG provides a promising example o theway orward.

A. FinAnCing oF SoCiAl

PRoTeCTion PRogRAmS

a Arat spd ctra

spsrd SP scs

several observations can be made in looking at

central spending on sp interventions in recent years (see table 6.1):

India spends asignicant shareo resources on

socialprotectionprograms.At 2.2 percent o GDPin 2008/09 rom the central level, SP spending ismore than double public spending on health (ataround 1.0 percent o GDP). There is approximately

Tab 6.1: Spd ajr SP prras, 2002/03- 2009-10

Source: GoI Expenditure Budget, various years. GDP and state level total expenditure rom RBI: Valmiki Ambedkar Awas Yojana (VAMBAY) was merged withJNNURM in 2008. Data or 2006-07 include Vambay, JNNURM and SJSRY. State level SP spending calculated based on 3 percent o total state level expenditureby year. Note: Spending data or all programs are revised budget allocations rom the Expenditure budget documents o various GoI budgets and not actualaudited expenditures.

Prra 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-092009-10

acatd

Food subsidy – primarily or PDS 24,200 25,200 25,800 23,200 24,200 31,545.6 43,627.2 42,489.7

Kerosene/LPG Subsidies + reight 4,735 6,372 3,553 2,930 2,625 2,730 2,724 2,866

NSAP and Annapurna 680 618 1,055 1,183 2,481 2,892 4,442 5,109

Central Labour welare unds 102.7 104.2 109.5 160.3 162.3 263.6 259.2 269.9

RSBY NA NA NA NA NA NA 204 308

IAY 1,552.5 1,710 2,607 2,475 2,625 3636 7,919 7,920

SGRY 8,642 9,640 4,590 7,650 2,700 3,420 6,750 NA

SGSY 656 720 900 899.8 1,080 1,620 2,113 2,115

Welare schemes or SC 741.6 766.9 803.2 951.9 1,169.6 1,582.3 1,690.8 1,674.2

Welare schemes or ST 960.7 871.8 1,016 1,370.2 1,611.6 1,637.7 1,894.3 2,578.7

Welare schemes or disabledpeople

203.2 207.9 203.0 220.8 220.4 226.0 242.3 271.4

Midday meal 1,237 1,375 1,507.5 3,345.3 5,348 6,678 8,000 8,000

Urban SP programs (VAMBAY,JNNURM, SJSRY)

361.9 333 402.6 342.6 313.4 358 530.2 535

Employment Guarantee(MGNREG) +NFFW (till 05/06)

860 0 1,818 4,050 10,170 10,800 30,000.19 30,100

Total central SP expenditure 44,933 47,919 44,365 48,778 54,707 67,389 110,396 104,237

Total central SP expenditure as

% o total GoI expenditure

11.12% 10.10% 8.77% 9.59% 9.41% 9.50% 12.25% 10.21%

Total central SP expenditure as

% o GDP

2.0% 1.9% 1.5% 1.5% 1.4% 1.6% 2.2% NA

Estimated state level SP

spending as % o GDP

0.54% 0.61% 0.58% 0.51% 0.52% 0.55% 0.54% NA

Total central plus estimated state

level SP spending as % o GDP

2.54% 2.51% 2.08% 2.01% 1.92% 2.15% 2.74% NA




an additional 0.54 percent o GDP in additionspent rom state level budgets, making or a totalo 2.74 percent on saety net programs. I one addsto saety nets spending that on public pensions (aurther 2.1 percent o GDP in recent years), totalSP spending is around 4.8 percent o GDP andaround the same level as public spending on theeducation system.

while the nominal level o spending has increasedrapidly during the second part o the 2000s(having been airly at in the rst hal o thedecade), core SP spending as a share o total GoIspending (plan and non-plan) actually declinedin the early years o the decade beore a partialrecovery in the last two budget years, with a typicalrange between 9 and 11 percent o total centralspending (and a tendency to be on the higherend o the range in years preceding nationalelections). It is also notable that the GDP share o

SP spending has had upticks in the years leadingup to national elections, though in the case o 2008/09 there was also the likely upward impacto SP responses to the ood and uel crises.

over the period shown, there has been an

appreciableshit–whichisalsoshowninFigure6.1

awayromPDSasashareototalGoISPspending

towardsanincreasedshareorpublicworks(under

MGNREG), and some marginal increases or IAYandsocialpensions. There was also an appreciableincrease in the share o midday meals by the mid-decade which has largely been sustained sincethen. However, the most notable areas o lowexpenditure within social protection – urbanSP programs and social insurance outside thecivil service and ormal sector – have remained

negligible proportions o total to date.

most sp css require financial contribution from states,so that goi spending does not represent the entire picture even for central schemes. A typical nancingsplit on SP CSS has been 75:25, though the two largestschemes (PDS and MGNREG) have a much lower stateshare, as does RSBY which is likely to increase in comingyears. MGNREG requires only around 10 percent o totalrom states (i.e., 25 percent o non-labor costs, with anassumption o 60:40 labor and other costs split), andPDS requires only transportation and other logistical

costs rom states, with commodities provided ree o charge to the states. In addition, north-eastern and hillystates have special treatment in most schemes, withhigher central shares in total SP spending.

in addition, there are a range of state-specific sp programs which in some cases account for non-

negligible shares of total sp spending at state level.

It is very challenging to put together a ull picture o

Figure 6.1: Share o main CSS in total central SP spending, 2002/03, 2006/07 and 2008/09

21%

2%

3%

64%

3%

2%0%

4% 1%

2002-03

24%

2%

5%

54%

7%

0%

2%

5%1%

2005-06

33%

2%

7%

42%

7%

4%

0%4%1%

2008-09

Urban SP programs

Public works (SGRY/FFW/NREG) SGSY

IAY PDS

Midday meal NSAP/Annapurna

Central Labour Welfare Funds Welfare schemes for SC, ST, PWDs

Source: GoI Expenditure Budgets, various years.




state-specic SP schemes. Overall the situation is highlyvariable across states, with some such as Orissa andBihar having until recently virtually no state-nancedSP schemes o any note in spending terms, while othershave had major outlays on state-specic schemes inaddition to their CSS counterpart unds. Interestingly,while poorer states in general have a higher share o central spending in total SP outlays in-state, there are

several examples o state-specic schemes even inpoorer states (e.g., Jharkhand spends signicant shareson state-specic schemes which in some cases replicateCSS; UP has an unemployment allowance or educatedunemployed youth). Some o the motivation or stateschemes – particularly where they mirror CSS – may bethe desire or states to “take credit” or programs.

given the variability of state-specific sp programs,

the demands of css counterpart funding relative

to total state expenditure, and incremental state-

specific policies on even css, it is challenging to

estimate a precise figure for states’ own spending on sp programs. Additional spending on other programsis highly dependent on state policies and scal capacity,so that state SP spending as share o total is variable(e.g., in the mid-2000s in HP, SP spending was around1.9 percent o state expenditure, while Rajasthan spent2.3-2.5 percent, Orissa over 3 percent, and Jharkhanda much higher 18 percent).294 In contrast to the centralgovernment, own-spending on PDS is generally lowin states. However, there are notable exceptionssuch as TN which in its 2008/09 budget allocated

2,988 crore or PDS due to it being universal and ata very low purchase price, and AP’s PDS allocationincreased rom 1980 crore in 2008/09 to ` 3,500 crorein 2009/10. Another highly variable spending item untilrecently has been social pensions, due to the benettop-up provided by many states.295

based on the set of states for which sp spending

data was analyzed in detail, a crude (and probably

conservative) estimate is that about 3 percent of total

state spending is allocated to the core sp programs

outlined above, with significant additional funds on

area development and relief programs in a number of

cases.296 This estimate needs to be treated with caution,but seems useul in assessing orders o magnitude o SP spending at the state level, and having a sense o aggregate SP spending in India. The three percent o total state level expenditure would have accounted or` 26,783 crore in 2008/09.297 This would be close to anadditional 25 percent spending above GoI expenditures,or around 0.54 percent o GDP SP spending rom the

state level. Allowing or specics such as TN and AP’sadditional commitments on PDS, the gure may wellbe higher, and more work is needed to develop robustestimates o state-level spending.

in international terms, safety net spending of around

2-2.5 percent of gdp is above what most countries

at india’s level of income spend (figure 6.2). This is areection o the political importance that attaches to SPprograms in India. As the Figure indicates, India spentwell above its South Asian neighbors on SP programs asa share o GDP in the early years o the decade (and theshare has been even higher in recent years), as well asother larger countries in the Asia region such as Chinaand Indonesia. At the same time, international evidencerom countries at all dierent income levels (includingthe OECD) suggests that saety net spending generallytops out at 2-2.5 percent o GDP, so that it is probablynot reasonable to expect saety net spending in GDPterms to increase ar beyond the current GDP share thatone observes in India in recent years.

international evidence also suggests that the

major driver of increased spending on sp systems as

countries get richer is expansion on social security/insurance spending. This can be seen in Figure 6.2, inwhich the major distinction between middle and higherincome countries is their spending on social insurancerather than saety nets. It would be surprising i Indiadoes not ollow a similar trajectory over the coming 2-3decades, more so as current social insurance spendingis almost entirely concentrated on the ormal sector,which accounts or less than 10 percent o the labororce. The rapid expansion o RSBY health insurance orthe unorganized sector suggests that an expansion in

social insurance spending may already be underway.

294 SeeWorldBank(2006d),variousstateeconomicreports.

295 WiththeincreaseocentraltranserorNOAPSin2007/08budgetto 200perelderlypensioners,andthesubsequentassumptionocentralnancingowidowanddisabledsocialpensions,manystateshaveseenasignicantreductioninsocialpensionspending.

296 Usingguresromthemid-2000s,thiswouldaccountoronlyaroundhaloownRDspendinginallstates,whichseemsaconservativeestimate.

297 SeeRBIortotalstatelevelexpenditurebyyearatwww.rbi.org.in.




Figure 6.2: Spending on social assistance and social insurance by region, early 2000s (% GDP)

S e n e g a l

M a l d i v e s

P h i l i p p i n e s

B o s n i a & H e r z e g o v i n a

L e b a n o n

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P a k i s t a n

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G u a t e m a l a

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C z e c h R e p u b l i c

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H o n d u r a s

I r a n , I s l a m i c R e p . o f

U k r a i n e

S o u t h A f r i c a

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M a l a w i

E t h i o p i a

D j i b o u t i

M a u r i t i u s

0

1

2

3 P e r c e n t a g e o f G D P

4

5

6

7

8

Source: Weigand and Grosh (2008).

0 2 4 6 8 10 12 14

SSA

SAR

MENA

LAC

EAP

ECA

OECD

% of GDP

Soc.Ins

Soc.Ass

b Stats acats r CSS SP

Prras

looking beneath the aggregate level, it is

important to look at both allocations and actual

expenditures of sp css funds across states.

All CSS have allocation ormulae which shouldin principle be redistributive. The allocationormulae or some major programs are outlined in Table 6.2.




Tab 6.3: Cr d sars b stat r rra at-prt prras

Stat Tas Frc 93-94 eprt grp 93-94 Adjstd Sars


Assam 1.513 3.866 3.222

Bihar 19.265 18.476 18.476

Gujarat 2.11 2.547 2.123

Haryana 0.721 1.498 1.249

Himachal Pradesh 0.272 0.631 0.526

Jammu & Kashmir 0.191 0.781 0.651

Karnataka 5.011 3.934 4.259

Kerala 1.094 2.293 1.911

Madhya Pradesh 11.018 8.859 9.365

Maharashtra 9.905 7.922 8.419

Orissa 7.59 5.774 6.451

Punjab 0.262 0.728 0.607

Rajasthan 2.665 3.88 3.234

Tamil Nadu 5.546 4.987 4.987

Uttar Pradesh 20.365 20.333 20.333

West Bengal 5.479 8.601 7.169

North Eastern statesand Union Territories

0.235 1.147 0.967

Source: Saxena (2006).

while the general base for many schemes is the state poverty share, this is subject to an adjustment factor proposed by the lakdawala committee in the

late 1990s, which ensured that the reduction in the app allocation of specific states did not fall by

more than 15 percent from the previous allocation formula. Prior to 1997/98, allocations were basedon a methodology o estimating rural poverty thanwas subject to considerable criticism (hereater the“Task Force” method). When this was dropped inavour o NSS poverty estimates, certain stateswould have had their allocations all sharply. As

a result, a compromise was reached which ensuredthat allocations according to NSS poverty rates wouldbe no less than 15 percent below those using the Task Force methodology. The adjusted ormula is now usedor SGSY, SGRY and IAY (the latter with an additionalactor o housing shortage), and or TPDS, bothurban and rural poverty are taken in account. Thecomparison o state-wise allocations according tothe Task Force, Expert Group and Adjusted Shares areshown in Table 6.3. While or most states the adjustmentsare rather marginal, there are some obvious “winners”in the adjustment process, including AP, Maharashtra,

Tab 6.2: Acat rs r sctd SP CSS

Prra Acat r acrss stats

PDS Based on state rural and urban poverty rates or 1993/94 adjusted or population growth, and subsequent adjustment

SGRY Based on state rural poverty rates or 1993/94 adjusted or population growth, and subsequent adjustment

MGNREG Initially 200 backward districts as dened by the Planning Commission based on merging o RSVY and NFFW districts,using agricultural productivity per worker, SC/ST share and casual agricultural wage rates by district. Now covering alldistricts o the country.

SGSY Based on state rural poverty rates or 1993/04 adjusted or population growth and subsequent adjustment

IAY 50% on adjusted state rural poverty estimates and 50% on housing shortage

NOAPS 50% o state-specic NSS poverty rate or population x over 65 years population by state. Now 100% o state-specicpoverty rate under IGNOAPS.

Source: Saxena 2006.




Orissa, and MP. There are also a ew “losers” but theimpacts are not dramatic, including West Bengal,J&K, and Kerala.

are these allocation principles adhered to in practice?

The short answer is broadly yes, though Table 6.4below - using allocation data rom 2004/05 or majorSP programs - indicates that allocations in practice do

not precisely ollow the norms. Overall, the observedpatterns suggest that in general states which perormwell in terms o unds/ood otake are rewarded atthe margin in allocations, and vice versa or poorerperormers. O note is that:

most southern states do better in terms o actualallocations than the ormula alone would suggest,with some such as TN and AP doing considerablybetter than ormula.

Assam and “other” (primarily NE states) also doconsiderably better than the simple allocation

ormula would suggest.

conversely, several lagging states get somewhat less – in the case o Bihar/Jharkhand andUP/Uttaranchal considerably less – than ormulawould indicate.

as would be expected, the geographic targeting o NFFW program results in a very dierent allocationpattern across states, whereby most lagging

states do considerably better than ormula (withthe notable exception o UP/Uttarakhand).

using actual allocations, despite the variations seen

above, an encouraging distributional picture emerges

across states when comparing allocations on general

(i.e., non-geographically targeted) sp programs. Thiscan be seen in Figure 6.3, which shows a strong positivecorrelation between the allocation shares or majorprograms (PDS, SGRY, SGSY and IAY) and the share o major states in total poor people in India. The gure usesdata rom 2004-05, but the general picture is similar or

most o the decade.

Tab 6.4: Fra sar r SP CSS ad acta acats % tta b stat, 2004/05

Adjstd

acatr

Acta pdtrs % b stat

SgRy SgSy iAy PDS BPl 4 prras nFFwP

Andhra Pradesh 5.64 5.22 5.31 7.31 6.97 6.58 6.05

Assam 3.22 7.20 7.20 7.55 3.27 4.70 8.24

Bihar

(+ Jharkhand) 18.48 17.36 17.38 25.68 12.95 15.43 24.27

Gujarat 2.12 2.29 2.00 2.10 2.97 2.69 1.98

Haryana 1.25 1.21 1.18 0.71 1.02 1.03 0.14Himachal Pradesh 0.53 0.51 0.49 0.31 0.66 0.58 0.15

Jammu & Kashmir 0.65 0.60 0.61 0.38 1.19 0.96 0.24

Karnataka 4.26 3.90 4.01 3.78 5.11 4.67 1.45

Kerala 1.91 1.75 1.80 2.34 2.55 2.33 0.27

Madhya Pradesh(+ Chhatisgarh)

9.37 9.21 8.81 5.61 8.76 8.51 12.99

Maharashtra 8.42 7.71 7.92 6.71 9.56 8.80 7.67

Orissa 6.45 5.91 6.07 5.88 6.93 6.57 11.04

Punjab 0.61 1.34 0.57 0.47 0.61 0.74 0.35

Rajasthan 3.23 2.96 3.04 1.98 3.00 2.88 1.75

Tamil Nadu 4.99 4.57 4.69 3.67 8.34 6.91 2.40

Uttar Pradesh(+ Uttaranchal)

20.33 18.63 19.13 14.77 16.38 16.77 13.57

West Bengal 7.17 6.57 6.74 7.89 7.24 7.15 5.67

Others 0.97 3.06 3.05 2.85 2.50 2.67 1.76

India 100 100 100 100 100 100 100

Source: GoI, MoRD and Food; Bank sta calculations.




c Stats pdtr prracr CSS SP prras

while the allocation formulae for sp css are broadly

in line with poverty rates, the more interesting

distributional story lies in actual program expenditures

and their diversity across states. The story o state wiseexpenditure execution on SP CSS is oten characterized asone o poorer states ailing to use their ull allocations at theexpense o better-o states. While this is correct to someextent, the situation is somewhat more complex. While

certain poor and low capacity states have indeed beenperennial laggards in spending execution on programs(e.g., Bihar, Jharkhand, Chhattisgarh), this is not true orall poor states, nor is it true or all programs even amongthe laggard states (e.g., Bihar has executed relatively wellon IAY in recent years). The situation on specic majorschemes is presented below, ollowed by the aggregatepicture across major programs in recent years.

with respect to pds, and focusing on bpl/aay - the

group of interest – it is clear that offtake is highly

variable across states. In spending terms, the major

program remains PDS or which state-specic otakenumbers are presented in Figure 6.4, with otake orBPL/AAY and APL separately. The low income stateson average have a considerably lower average TPDS

otake or BPL/AAY in the period, with all but MP belowthe national average. At the same time, it is the middleincome states which had a notably higher otake thanthe higher income group. Clearly more actors are atwork than simply state income levels, with absorptivecapacity, need, price dierentials between PDS andmarket grains, and other actors at work.

looking at the next biggest program, workfare, a somewhat clearer pattern emerges, with the poorer and ne states clearly with lower average offtake in terms of both cash and food (though notably

worse on food offtake in relative terms). At the sametime, the grouping is by no means uniorm, as poorerstates such as MP, Orissa and particularly Rajasthanmanaged very good and in some cases excess otakerelative to allocations, while mid-range income stateslike West Bengal were among the weakest perormers. The signicantly greater shortall o the poorer states onaverage or ood than cash is also o interest, as this maybe related to the higher administrative and logisticaldemands o ood delivery relative to cash. (Figure 6.5)

looking across several of the major sp programs

combined for the most recent year for which full data are available (2006/07), we see that there were large variations in expenditure releases by state per rural poor household.298 This broad pattern holds or

Figure 6.3: Correlation between major CSS SP program share in total allocations by state and state share o totalpoor in India, 2004/05

Source: GoI; Sen and Himanshu 2007 or poverty estimates.

0

5

10

15

20

25

0 2 4 6 8 10 12 14 16 18 20

Allocation share (%)

P o v e r t y s h a r e ( % )

298 Notethatthisistotalspending,owhichaportiongoesonadministrativecosts,plusisubjecttoleakagebetweenreleaseandreachinghouseholds.Theamountsshouldthereorenotbeinterpretedasactualamountsreceivedbyhouseholds,whicharereportedromsurveysourcesinChapters3and4.




Figure 6.4: TPDS BPL/AAY otake by state, 2002-05

Source: Ministry o Consumer Aairs, Food and Public Distribution, various years.

0 20 40 60 80 100 120

GujHP

MahaPunj

APKarnKeral

TNWB

BiharChhatJhark

MPOrisRajUP

India

% of allocation

Figure 6.5: SGRY otake on cash and ood, 2004-05

Source: Saxena 2006.

0 50 100 150 200

GujHP

MahaPunjHary

AP

KarnKerala

TNWB

BiharChhatJhark

MPOris

RajUPNE

India

% of allocation

Food

Cash

the earlier years o the decade also. This can be seen in Table 6.5. A ew points emerge, including:

southernstatesdoconsiderablybetterinreleases per poor rural household, with states such asAP doing particularly well, at around 2.5 timesthe unweighted national average. For the oursouthern states overall, they average over twicethe national poor rural per household allocation or

non-MGNREG main programs, and approachingtwice once MGNREG is included.

conversely,mostlaggingstateshaveconsiderablylowerperpoorruralhouseholdreleases,though

even within them there is variation, with statessuch as Rajasthan notably better perormersand the poorest states such as Bihar and Orissaparticularly low.




the majornorth-easternandhilly states dovery

wellonaverageintermsoallocations, perhapsreecting the lower matching und requirements. This holds even i one excludes J&K which is amajor outlier on the upside.

totalspendingperpoorruralhouseholdnationally

ontheseprogramswassignicant,at` 9,065in

2006-07, or over 40 percent o the annual rural

household poverty line. Assuming an average5 person household, the per poor rural householdspending on these programs was around42 percent o the annual rural poverty line.299 Sucha gure needs to be interpreted with caution, asa portion o spending goes on administrativecosts, plus is subject to leakage between release

and reaching households. The amounts shouldthereore not be interpreted as actual amountsreceived by households, which survey sourcesindicate are ar lower, and are reported rom

survey sources in Chapters 3 and 4 (and below orOrissa rom administrative sources).

the relationship between state poverty rates and

spending per rural poor household is negative,indicating that the ex post outcomes in sp css releases

are regressive across states. This can be seen inFigure 6.6, which presents average spending per poorrural household by state or 2006/07 or SGRY, SGSY,IAY, PDS and MGNREG combined. A similar patternholds or earlier years in the decade, and i one excludesMGNREG.

another way of looking at the expenditure

performance across states on the main css sp

programs is to compare their adjusted allocation

norm of total central spending and the outcomes of actual expenditure from the centre on the main css.

This is presented in Table 6.6 using data rom 2006/07on the 5 main CSS programs, and the patterns largely

Stat Prt had Ct % ep pr rra pr 4 prs Rsep pr rra pr 4 prs +

mgnReg Rs

Andhra Pradesh 15.8 17,701.7 21,823.8

Assam 19.7 18,639.6 24,218.1

Bihar 41.4 3,868.0 4,984.3

Chattisgarh 40.9 6,160.1 10,760.6

Gujarat 16.8 7,141.5 7,763.1

Haryana 14 8,793.2 9,623.6

Himachal Pradesh 10 22,244.7 27,565.1

Jammu & Kashmir 5.4 82,088.5 87,321.7

Jharkhand 40.3 4,169.9 7,717.5

Karnataka 25 12,095.1 14,899.5

Kerala 15 12,929.5 13,302.5

Madhya Pradesh 38.3 5,569.9 11,075.7

Maharashtra 30.7 7,156.2 7,613.8

Orissa 46.4 4,500.9 6,766.5

Punjab 8.4 7,395.2 8,216.3

Rajasthan 22.1 7,036.8 11,357.1

Tamil Nadu 22.5 14,221.8 14,915.2Uttar Pradesh 32.8 6,080.9 7,014.9

Uttaranchal 39.6 6,042.5 6,934.3

West Bengal 24.7 6,392.7 7,461.0

India 7,091.1 9,065.8

Source: MoRD Annual reports, various years. Bank sta calculations. The 4 programs are PDS, SGRY, SGSY and IAY, with MGNREG added in nal column.Poverty head counts rom NSS 61st round 2004/05.

Tab 6.5: epdtr rass pr pr rra sd r ajr SP CSS, 2006/07

299 The2004/05monthlyruralpovertylinewas 356.3perperson,orannually 21,378perhousehold.




conorm to the picture above, though there are somenotably better lagging state perormers such as MP.

the relative spending performance across states is

driven by implementation differences, as allocations

are far more progressive.Dierences in implementationperormance are driven by a range o actors, somerelated to state-specic policies and procedures, andsome to institutional capacity at dierent levels withinstates. These issues are taken up in the remainder

o this chapter, and on a program-specic basis inChapters 3 to 5.

d itra-stat SP pdtrprrac

given significant heterogeneity of living standards

within states, it is also important to look at intra-

state expenditures on sp programs. In principle, someo the regressivity seen in cross-state spending could beoset by geographically pro-poor release across districts

within states.300

Such analysis is not readily available inconsolidated orm. The ollowing discussion thereoreocuses on a ew states or which district level SPexpenditure analysis has been done, taking selected SPprogram spending or Rajasthan, Jharkhand, and Orissa.

Figure 6.6: Average spending per poor rural HH on main SP programs and poverty headcount by state, 2006-07

Source: Spending rom Annual Report 2007-08 o MoRD and www.nrega.in; HCR: Planning Commission (URP 2004/05); Rural poor households based on state-wise projected rural population in 2005 rom 2001 Census. State-wise rural poverty rate in 2004-05 divided by the average household size (NSS 61 st round) to

obtain rural poor households.

AP

AS

BI

CH

GU

HR

HP

JR

KA

KE

MP

MAOR

PB

RN

TN

UP UTWB

IN

5 0 0 0

1 0 0 0 0

1 5 0 0 0

2 0 0 0 0

2 5 0 0 0

3 0 0 0 0

10 20 30 40 50

HCR

Expenditure per rural poor household Fitted values

StatAdjstd

acat r 5 prras

% %

AP 5.64 8.4

Assam 3.22 6.0

Bihar (+ Jharkhand) 18.48 11.0

Gujarat 2.12 2.5

Haryana 1.25 1.0HP 0.53 0.8

J&K 0.65 1.3

Karnataka 4.26 5.6

Kerala 1.91 2.3

MP (+ Chhattisgarh) 9.37 12.4

Maharashtra 8.42 6.8

Orissa 6.45 5.1

Punjab 0.61 0.6

Rajasthan 3.23 4.2

Tamil Nadu 4.99 7.6

Uttar Pradesh(+ Uttaranchal)

20.33 14.5

West Bengal 7.17 6.4

Others 1.37 3.5

India 100 100

Tab 6.6: Spd t a CSS r2006/07 ad adjstd acat rs

300 SeeWorldBank(2006d),orgeneraldiscussionointra-statevariationsinhouseholdlivingstandardsandaccesstoservices.




The data suggest that there are signicant variationsacross states, across programs, and in some cases acrosstime in their intra-state expenditure patterns. Looking atthe gures, one can see:

in Orissa, Table 6.7 shows a clearly regressivepattern o spending across regions on the mainRD SP programs (SGRY/NFFW, SGSY and IAY), withspending per poor household in 2002-05 roughlytwice the level in richer coastal regions as in thepoorest southern regions. This is not to say thatthe southern regions are ignored, as the RLTAPprogram and other initiatives indicate. However,it conrms on an intra-state basis in a very poorstate that expenditures on these programs remainregressive in geographic terms.

in Jharkhand or 2001-04, Figure 6.7 shows thatdistricts that were more backward typically spentless per person than less backward areas on thesame SP programs. This trend may well be oset

once tribal program spending is included, butor SGSY, SGRY and IAY and area developmentprograms, the geographical pattern at districtlevel is mildly regressive.

or Rajasthan, the correlation between SGRYspending and BPL share by district was positivebut not very strong or improving between2001 and 2005, while the correlation or SGSYimproved sharply rom 2003/04 to a high level,

indicating highly progressive intra-state spendingacross districts.

overall, therefore, it appears that intra-state

spending patterns on key sp programs in some states

are reinforcing the distributional concerns that are

evident on a cross-state basis, though more state-

specific analysis is needed to confirm the findings.

As with the cross-state analysis, absorptive capacityand other actors are at work, so that there is no simplepolicy prescription or how to address the spendingdierentials issue within states.

nSS r

Prra SpdAa spd pr BPl

sd

Coastal (poverty rate = 32 %) ` 965

Northern (poverty rate = 50%) ` 1453

Southern (poverty rate = 87%) ` 961

Aa spd pr prsd nSS

Coastal ` 1867

Northern ` 1300

Southern ` 966

Tab 6.7: Ara sd spd SgRy/nFFw, SgSy ad iAy b r, 2002-05:BPl ad b t prt sds

Source: NSS 55th round, Bank sta estimates, BPL and spending rom GoO.

Figure 6.7: Intra-state SP spending

Source: GoK. programs = SGRY, SGSY, IAY and area development programs.Index rom RD Dept, GoJ.

Source: GoR or spending and BPL by district.

Jharkhand: Spending on APP by districts, 2001-04

Fig. *: Correlation between district APPexpenditure and backwardness

10

15

20

25

30

35

0 100 200 300 400 500 600 700

District per capita expenditure

B

a c k w a r d n e s s I n d e x

SGRY Spending &BPL Share

SGSY Spending &BPL Share

Rajasthan: Spending on SGRY/SGSY by district,correlation with BPL share

0.3

0.6

0.9

2001-02 2002-03 2003-04 2004-05




Fac srcs r SP prras

at both state and central levels, general revenues

remain the overwhelmingly dominant mode of

program financing. While the spending split betweencentre and states varies by program, in nearly all casesboth levels nance rom general revenues. The mostnotable exception is that o various central and state-

level welare and provident unds or specic groups o unorganized sector workers. Most o the central welareunds are nanced through a sector-specic cess (e.g.,or the Beedi Workers Welare Fund, a cess on all beedisproduced; or construction workers, a cess o 0.3 percenton the value o construction undertaken). At the statelevel, the nancing patterns are more mixed, thoughmany require a contribution rom workers, governmentsand employers in some cases.301 Apart rom welareunds, the notable major CSS SP program with mixednancing is the midday meal, which in principle benetsrom the education cess levied by GoI. A nal exceptionto the practice o general revenue nancing has been theamous Maharashtra Employment Guarantee program,which has raised unding rom a small tax on all thoseemployed in the organized sector.

in india – and the large majority of developing

countries – there has been very little analysis of the

general equilibrium effects of different financing

sources for sp programs. In most developingcountries, analysis o both equity and eciency aspectso cash transers have tended to ocus on the direct

distributional impacts, using partial equilibrium analysis.A second important dimension is the indirect eects o programs, which looks at the impacts o transers andtheir nancing modes on the level and composition o supply and demand in the economy. While such work does not yet exist or India, analysis rom Mexico on theindirect eects o cash transer programs provides auseul example o CGE modeling o such impacts, and itsimplications or dierent nancing models.302 Indirecteects would through three main eects:

a redistribution eect rom the patterns o tax tonance cash transers

a reallocation eect, which will arise i the incomeelasticities o demand among those nancing theprograms dier rom those receiving transers

a distortionary eect to the extent that programnancing is done through changes in distortionarycommodity taxes and subsidies (e.g., i nancingis done through reduction in distortionarysubsidies, this will improve second order eects,and vice versa i such subsidies are increased tonance the program).

in conclusion, the evidence on financing of major sp programs suggests that sp programs which are

designed on redistributional lines become mildly less so when one looks at allocations across states, and

actually regressive when expenditure releases are used. This is not a problem amenable to easy solutions,as aws in implementation are oten driving some o the poor spatial distributional outcomes. However, theconclusions section oers some suggestions which maybe worth considering.

B. inSTiTuTionAl RoleS AnDReSPonSiBiliTieS in SP

PRogRAmS

even with sensible policies and implementation

procedures, programs are only as effective as the

institutions responsible for their implementation.

This section looks at some overarching institutionalissues in SP program implementation, whileChapters 3, 4 and 5 explore program-specic institutionaland implementation issues. Overall, institutionalarrangements or SP programs are in a state o uxwhich results in a considerable degree o heterogeneityacross states, sometimes signicant gaps between de jure and de acto roles o dierent institutional actors,and divergences in institutional priorities, both betweenlevels o administration and between administrative andelected institutions.

sp programs in india are characterized by a vast range

of institutional actors. This has several dimensions:

at central and state levels, programs are spread

across a range o Ministries and agencies,including Rural Development and/or PanchayatiRaj, Food Distribution, Social Welare, Labor,Urban Employment and Poverty Alleviation,

301 SeeILO(2004).

302 SeeCoadyandHarris(2004).




Human Resource Development, Tribal Welare,Food Corporations etc.

across levels o administration, central, state andsub-state ocials are involved, with the relativeimportance o the three shiting in SP programsover time in terms o dierent elements o implementation in SP programs.

at sub-state levels, there are roles in SP programsor administrative and elected ocials which varyacross states both de jure and in practice, andacross programs.

community groups such as SHGs and cooperativeshave in a number o states been given roles inimplementing SP programs, and/or monitoringtheir perormance.

there are several important institutional trends with respect to major sp programs in recent years,

including:

the increased reliance on CSS, combined withincreaseduseodirectundtranserstodistrict

level,hasincreasedtheroleothecentrevis-à-vis

statesinmajorSPschemes. This has attractions interms o the equity unction o SP programs, withgreater scope or cross-state allocation o unds.At the same time, it may reduce the incentivesor states to monitor programs nancially, andother unctions.

theincreasedimportanceoSPundsowsdirecttodistrictlevelpresentssomedierencesacross

statesintermsotherelativerolesoZillaParishads(ZP)anddistrictadministrationrepresentativesin

DRDAs.While in principle the DRDA should be achannel or elected representatives to have a rolein program planning and disbursements, the roleo ZP ocials is highly variable.

the emerging role o PRIs (in particular GramPanchayats (GPs)) in aspects o SP program

implementation. While MGNREG represents themost thorough eort to date to give GPs a centralrole in SP service delivery,303 other programs have

in either central rules (e.g., SGRY) and/or state-levelimplementation (e.g., PDS through handing overFPS to PRIs; IAY in local beneciary identication)

given strengthened implementation unctions toGPs and gramsabhas. This shit is evident in theEleventh Plan document that seeks to use PRIsas the “primary means o delivery o essentialservices that are critical to inclusive growth”.

despite the increased de jure role o PRIs, eld

researchindicatesthatstatesandadministrative

channels/line departments continue to play a

substantial role in program implementation,

though this varies across states and programs.

The de acto outcome o institutional roles isdriven in large measure by the misalignment o unctions o PRIs with unding levels and controlsover resources, and the lack o capable personnelor executing those unctions.

onamorestate-specicbasis,communitygroups

are assuming new roles in SP service delivery.

Examples include operation o FPS by SHGs andcooperatives in several states; involvement o communities in social audits o MGNREG, otenwith acilitation by NGOs; involvement o VECsand womens’ groups in preparation o middaymeals, and in some cases supply o additionalood items or the meal.

in a number o states, or specic programs,

NGOsandCBOshavebeengivenapromotional

or acilitating role in program implementation.

Examples o this trend include contracting o NGOs or capacity building and other support toSHGs seeking to access SGSY credit, acilitating

roles in promoting community oversight andsocial audits, and reliance on worker associations,MFIs and trade unions in mobilization o membersor participation in social security schemes orthe unorganized sector. Another recent exampleis the role o dierent grassroots organizationsin outreach or the RSBY program. While statesand researchers are generally positive on thecontribution o NGOs in program implementation,there is also skepticism in some quarters on therisks o “NGO capture” in cases where NGOs are co-

opted by the public system as part o its network (and NGOs such as MKSS have deliberatelyavoided ormalizing their engagement with the

303 InMGNREG,GPs(andatblockanddistrictlevels,panchayatsamitisandzilaparishadsrespectively)areexpectedtoidentiysub-projects,mobilizeandorganizebeneciaries,assistinopeningworksites,insomestatespaybeneciaries,andplayaroleinmonitoringthroughthegramsabha.




state in order to retain a more independent voicein program monitoring and mobilization).304

while the situation is evolving rapidly with respect

to institutional actors in sp service delivery,

this has increased the diversity of institutional

arrangements across states. This has naturally resultedin uncertainty – and in some cases resistance - within

states as new institutional modalities or SP servicedelivery mature. Overall, the experimentation that ishappening both within CSS institutional design, and instate-specic implementation modalities is a welcomedevelopment in light o implementation problems thathave long plagued SP programs. At the same time, someo the ux is less positive in that it appears to be drivenby genuine lack o coordination and even conusion onthe part o policy makers with respect to institutionalassignment o responsibilities. The ollowing paragraphsdiscuss these issues.

a starting point in examining institutional roles in sp programs is legal assignment of responsibilities.

Interestingly, neither rural development nor povertyalleviation gures in any o the lists o central, stateor concurrent subjects under the Seventh Schedule,Article 246 o the Indian Constitution. The State Listincludes Agriculture, Water, Animal Welare, Land, andFisheries, whereas Economic and Social Planning is givenin the Concurrent List. The State List includes ‘Relie o the disabled and unemployable’, but no general povertyalleviation unction.305

in contrast, the 73rd

and 74th

amendments to the constitution are more specific in allowing – though

not mandating - assignment of sp program functions

to panchayats by individual states.306 For rural areas,the SP areas where states may assign unctions to PRIsinclude rural housing, poverty alleviation programmes,public distribution system, social welare, and welareo “weaker sections”, particularly SC and ST. For urbanareas, the 74th amendment allows urban local bodiesto have responsibilities or urban poverty alleviation. This de jure power is supplemented in practice bydirect assignment o unctions to panchayats under the

guidelines o central schemes such as MGNREG.

the fact that the 73rd and 74th amendments are non-

mandatory with respect to devolution of functions

to pris has resulted in very variable devolution of sp

(and other) programs across states, and often lack

of clarity within states over which institutions are

empowered to undertake specific program-related

activities. Despite the specicity o the list o serviceswhich can be assigned by states to PRIs, the situationvaries greatly on whether – and i so in what detail – stateshave subsequently empowered PRIs in specic areaso service delivery.307 As the power o PRIs in servicedelivery is derivative o states, such assignment bystates is critical. The situation in dierent states can bedescribed as ollows:

most states have not subsequently assigned

specicSP-relatedactivitiestoPRIsinacoherent

manner, so that PRIs have no specic mandate

instatelegislation(thoughtheymayderivethis

romcentrallegislationandprogramguidelines).

At the same time, program specic initiatives ina number o states are increasing the eectivedelegation o activities to PRIs and communitygroups on a more piecemeal basis.

in a number o other states (e.g., Rajasthan

and Karnataka), unctions have been explicitly

devolvedtopanchayats,butinbroadtermswhich

result in concurrent responsibilities between

states under existing legislation and PRIs. Thisresults in lack o clarity on assignment o specicactivities within the broad devolved heads, and

overlap o unctions across levels o government/administration.

onlyKeralahasdevolvedactivitiesinaninclusive

manner in terms o subject areas and with a

reasonabledegreeospecicityin terms o specicactivities and roles o dierent actors. This avoidsthe issue o concurrent powers which many statesencounter.

as a result, pri capacity for implementing sp programs

is highly variable across states. Given the largevolume o unds currently being administered by

panchayats under the Backward Region Grant Fund

304 SeeJenkinsandGoetz(1999)orauseuldiscussiono“stateostered”civilsocietyorganizationsandtheirroleinservicedelivery.

305 Saxena,(2006).

306 TheollowingparagraphsdrawonWorldBank(2006b).

307 Stateshavebeenencouragedtooperationalizethe73rd Amendmentthroughsevenround-tablesorganizedbytheMinistryoPanchayatiRajaswellasregularStateothePanchayatReports.




(BRGF), MGNREGA and other central schemes, buildingcapacity to administer these schemes as well as generalskills related to planning, nancial management andprocurement becomes critical. Recent initiatives suchas the Panchayat Empowerment and AccountabilityInitiative (PEAIS) seek to address this issue. The PEAISincludes providing training to unctionaries and electedrepresentatives on roles and responsibilities as well as IT

and FM systems to panchayats.

the importance of css in the sp sector adds further

complications to assignment of institutional

responsibilities, as css guidelines increasingly spell

out institutional responsibilities which may or may

not be consistent with assignments in individual

states. In addition to the lack o clarity within states onassignment o institutional responsibilities or specicservice delivery tasks, the guidelines o CSS increasinglyintroduce roles or PRIs in program implementation. Themost thorough example is MGNREG, but other schemessuch as SGRY, SGSY (to a modest extent), and IAY alsomandate a PRI role. Two points to note in this respectare: (i) that dierent central schemes presently havevery dierent degrees o PRI participation, reecting inpart their age and the state o the devolution debate atthe time o raming and; (ii) there is oten a mismatchbetween CSS-assigned institutional roles and moregeneral assignment o devolved unctions to PRIs withinstates.308

one shortcoming of institutional assignments of

responsibility for sp programs in the past has been a tendency to concentrate responsibilities for multiple

program functions at specific – and sometimes

inappropriate – levels of the system. This leads todiculties in enorcing accountability, in part due toconcurrent responsibilities within states. To date in mostschemes, there has been a tendency to cluster unctionsat specic levels o the system, rather than assigningspecic activities to the most appropriate level. In somecases, the clustering is de jure (e.g., SGSY), and in othersde acto (e.g., SGRY). For example, districts – throughCollectors and BDOs - and states have historically played

a major role in all aspects o SP implementation, romprioritization o activities (e.g., works selection; prioritylending areas) to oversight. This has contributed to

program challenges such as lack o responsiveness o schemes to local needs and weak local accountabilitydue to oversight rom a distance.

it is clear from the above that the assignment

of institutional responsibilities for sp programs

has often not been informed by a clear alignment

of functions, funds and functionaries, though

mgnreg is a promising case of efforts to improve the situation.309 The dominance o CSS in SP with the needor state and sub-state level implementation createschallenges or developing an appropriate institutionalramework. In this respect, it is important to have analignment o unctions to be carried out by dierentactors (administrative and elected public sector, NGOsand communities themselves) which reects – ormobilizes – the capacity o unctionaries at dierent levelsto undertake the assigned unctions, and is supportedby sucient unding and control over spending or eachlevel to perorm its anticipated unctions.

unbundling the key activities that are needed in

individual sp programs would therefore seem a sensible

first step towards more appropriate assignment of

implementation responsibilities. The guidelines orMGNREG provide just such an example, and should actas a model or uture reorms o SP CSS. At the same time,or CSS, there should be closer consultation with stateson which unbundled unctions most sensibly sit at whatlevel o the system, and with elected or administrativeagencies. An example o such an “unbundling” is

presented in Annex 1 or SGRY, looking at both de jureand de acto assignment o the unbundled activities.Annex 1 also presents an indicative ormat or activitymapping developed by the Ministry o Panchayati Raj,in response to the recommendations o the EmpoweredSub-Committee o the National Development Council(NDC) on Financial and Administrative Empowermento PRIs. In broad terms, these unctions can be dividedinto six major categories. Within these major categorieso activities will be a range o sub-activities which needurther enumeration and assignment:

policydevelopmentandstandards planning

assetcreation(and/orbenetdelivery)

308 Seealsotheadvisorydated19.01.2009romtheMinistryoPanchayatiRajtostatesondelineationorolesandresponsibilitiesoPRIsinCSSs/ACAs.

309 SeeWorldBank(2006d),oradetaileddescriptionandapplicationothe“3Fs”rameworkorIndia,andWorldBank(2004)orinternationalevidence.




program operation (including HR, FMandother

supportunctions)

M&E

with respect to policy development standard setting,

it is clear that the centre and states should continue

to play a major role. Given the patterns o nancing,and the desire or a signicant degree o equity in

programs across space within the country, it makessense or the centre and states to continue their majorrole as policy developers. However, there are issues inhow these policy and standard setting unctions arecarried out within and between the centre and stateswhich will require a resh look in light o the evolving SPpolicy and program mix.

a first issue in policy and standard setting is how

to promote greater coordination at central and

state levels across line agencies. In the past, theconcentration o SP programs in the Ministry o Rural

Development and Ministry o Consumer Aairs, Foodand Public Distribution meant that the coordinationchallenges in developing a coherent SP policy weremore limited. However, the situation is already changingand can be expected to change urther in coming yearsin several ways. Firstly, greater eorts will be need ondevelopment o appropriate SP policies and programs orurban areas, increasing the role o both urban Ministries.Secondly, the anticipated expansion o social security tothe unorganized sector will involve Ministry o Labor andEmployment more actively in SP service delivery (as well

as a range o third parties such as insurers, intermediaryorganizations o unorganized workers et al). Thirdly, theincreasing role o SP interventions to support humancapital ormation (currently midday meals, but alsostipends or education and pilot CCTs or early childinterventions) will require increased coordination withother social sector Ministries such as Human ResourceDevelopment, Health and Family Welare, and Womenand Child Development. Finally, the increased role o local institutions in delivery o SP programs will requirecoordinated eorts between line agencies and theMinistry o Panchayati Raj. Simply relying on the lead

o Rural Development and Food Ministries, and/orexpecting bilateral coordination between ministries willincreasingly be inecient and insucient, and is likelyto increase the tendency to substitute broad-basedpolicy development and oversight with “guidelinedevelopment” within specic schemes.

there are different options for how to improve the

coherence of sp policy development and standard

setting, but all would imply an explicit institutional

mechanism for more strategic and coherent action

at both central and state levels. Dierent countrieshave approached such coordination challenges withdierent institutional responses. Some have tried tobring programs increasingly under the purview o asingle Ministry (such as Labor and Social Protection/Welare), others have created coordinating institutionsor structures under the oce o PM or President. These may be ambitious options or India, given theinstitutional interests and history in the sector. A moremodest option would appear to be creation - with alead role or the CS, Planning or Finance Departments instates, and or Finance perhaps at the centre – o a SocialProtection Task Force or Agency. This could involve allministerial players, and deal with policy issues in SP o amore strategic or cross-cutting nature.

there have been efforts at the sub-national level in recent years to try to promote greater institutional

and delivery platform harmonization across agencies

responsible for sp and other targeted programs.

Uttar Pradesh approved such an agency in 2008,called the Saety Nets Authority with an importantstandard setting and harmonization unction acrossdepartments responsible or programs targeted tothe poor. The mandate or the Authority seemed veryappropriate. In 2008, the Delhi Government introducedthe Convergence Mission. This initiative, as the name

suggests, is a concerted attempt to streamline servicedelivery o multiple targeted programs. To achieve thisvision, the Government intends to bring the programson a common platorm, strengthen the implementationmachinery at lower levels, and incorporate civil societyorganizations as partners in overseeing the entireprocess (see Box 6.1). Some states, notably Kerala, haveshown great progress in convergence across programsat the local level through the involvement o PRIs.

a second important aspect of this issue in india is the

degree of policy freedom that states could be given

in policy adaptation and mix in major sp programs.A common criticism o CSS has been that states haveinsucient policy leeway in adapting CSS programdesign to the needs o specic states. While thisconcern has been somewhat less in recent years (e.g.,as states have been given more leeway in adapting local




B 6.1: mss crc: isttta rr tartd prras D

Like other states/UTs, Delhi has a range o social programs - both CSS and local programs - which seek to target the poor and vulnerable.

These are administered by nine dierent departments, including Social Welare, Health, Education, Urban Development, Food and Civil

Supplies, and Labor, among others. Many o the programs overlap in design as well as target populations, implementation and reporting

arrangements. However, no single entity has a comprehensive overview o programs in terms o type o intervention, beneciary

population, delivery system, spending, etc. From the point o view o the target population, this multiplicity implies understanding various

eligibility rules, making several applications and engaging with multiple authorities in accessing benets. This is oten very challenging.

In 2008, the Delhi Government introduced the Convergence Mission. This initiative is a concerted attempt to rationalize and convergeservice delivery o multiple programs, with a view to improve access and outcomes. To achieve this vision, the Government intends to

bring these programs on a common platorm, strengthen the implementation machinery at lower levels, and incorporate civil society

organizations as partners in overseeing the entire process. In operational terms, this has involved the ollowing processes:

(a) Dening institutional responsibilities and implementation structures. At the UT level, a registered society, the Samajik SuvidhaSangam, is responsible or implementation. The SSS is also responsible or coordination with the participating state departments. Atthe grassroots level, over 90 Gender Resource Centers (largely managed by NGOs and CBOs) serve as the principal agency or outreach,beneciary identication and service delivery.

(b) Rationalization o programs. The Mission, with inputs rom the Commissioners o the Supreme Court, reviewed the social programsadministered by the nine departments with respect to their relevance, eectiveness o implementation arrangements, and eligibilitycriteria. The rationalization process entailed merger o some schemes (within and between departments), closure o some, and theexpansion o coverage or scope o others. This is a massive achievement. However, even urther rationalization as the current o programsremains high at 35 programs. This is seen as a dynamic process.

(c) Development o common beneciary database. The Mission has adopted a new targeting method, which supersedes the previousBPL system. Vulnerable households are now classied as per three criteria: (i) Residence - those living in slums and resettlement coloniesand the shelterless or precariously housed; (ii) Social deprivation – single unprotected children, child-headed households and householdswith elderly, disabled, single women, persons suering rom specic illness such as HIV/AIDS, tuberculosis or leprosy; and (iii) Occupationalvulnerability – those households that are primarily dependent on earnings rom casual work with irregular wages and poor workingconditions. A subset o households is considered most vulnerable. While the move towards identiying vulnerable households on thebasis o non-income dimensions is a positive step, translation o these criteria into clear, measurable and veriable indicators remainsa concern. In addition, the reliance on MC’s eld service units (see below) or the enumeration o households has raised problems inexecution o the proposed targeting method.

(d) Establishment o a common delivery platorm. The next step is to develop a common delivery platorm that provides access toall programs using a biometric card system. The GRCs would provide a single point o contact between beneciaries and government.Common ormats or enrolment in various programs have been developed, along with simplication and streamlining o documentationrequirements. Enrolments through biometric cards are planned in order to minimize raud and acilitate ecient and integrated delivery

o benets. Similarly, the intention is to develop common systems or inormation, reporting, and monitoring.Mission Convergence is an ambitious and welcome initiative. Delhi has a very complex governance structure. This presents ormidable

challenges to such an initiative that redenes administrative and local power structures. I successully implemented, this could potentially

increase cross-program coherence, streamline delivery and demands on administrators and beneciaries, and increase transparency. It

can also serve as a model or other states; or instance, Uttar Pradesh also announced in 2008 the ormation o a Social Saety Nets

Authority to perorm a coordination unction across state departments and programs.

institutional arrangements in program delivery), theoverall room or states to adapt the policy mix acrossmajor SP programs remains limited. In addition, specicelements o the CSS policy ramework remain in some

cases more rigid than would be desirable (e.g., therestrictions on types o works allowed to be undertakenunder public works programs).

for planning, the connections between levels of the system – and between administrative and elected

mechanisms – remain the biggest challenge. In the area

o planning, several government and donor-supported

initiatives have ocused in recent years at district level,with the objective o achieving greater cross-program

convergence on priorities, in the process reducing

risks o duplication o use o unds. The guidelines o MGNREG again provide a useul example o eorts to

promote greater coordination in planning between GPs,blocks and districts, though eld work reveals that such

coordination remains to be realized eectively in moststates. However, the challenges o achieving eective




310 www.indiastat.com,citingMoPR,GoI.

district planning should not be underestimated. Thediculties in coordinating planning eorts withinstates include:

at the higher levels, there is oten inadequate

coordination between centre and states (and/or

DRDAs), so that communication o likely allocationsor SP programs in the coming budget year arenot known in advance, and at times not well intothe budget year. This makes planning at state andlower levels challenging, as orward planningexercises do not have sucient inormation onthe resource base to make inormed decisions.

there is limited attention in allocation o

institutional responsibilities to the economies

o scale/scope and the potential externalitieso

dierentprogramactivities.An example is publicworks planning, where GP-level decisions on watermanagement works or construction o link roadsmay – in the absence o coordinated action at a

wider geographic level – result in works which ailto maximize wider-area benets and eciencies.Oten, multiple district plans are prepared withoutan integrated vision or the district as a whole.

capacity or planning at sub-state level is

typically low, so that close technical support

is oten required to acilitate such planning

exercises.Data rom the Ministry o PanchayatiRaj indicate that as o 2005-06 several stateshad not yet constituted District PlanningCommittees (e.g., UP, Gujarat, Goa, Assam, and

Andhra Pradesh), so that a basic building block o eective district planning was absent.310 Thissituation is gradually improving and by 2009,19 states had constituted DPCs.

even where district planning mechanisms are inplace (which is the case in the majority o largestates), there is an inherent tension betweenthe tied nature o SP (and other) program undsand the intention in district planning to givepanchayats, DRDAs and other local agencies aless constrained voice in the planning process.

on operational aspects of program operations, the key decisions on roles and responsibilities between

levels and between elected and administrative

machineries need to be taken by states, within the

guidance provided by the constitution. While atone level such a proposition is obvious in light o thediversity o institutional capacities across states, animmediate question is how ar the centre can drivespecic institutional assignments o roles on a scheme-specic basis. A desirable compromise between theinterests o states and the centre would seem to be across-scheme assessment involving both parties o appropriate and easible assignment o unctions andspecic activities in major SP programs. The case o Kerala is the best practice to date o moving rom suchagreements to a generalized but specic assignmento activities or PRIs (and by deault administration) inprogram implementation.

for urban areas, the roles of locally elected

bodies, municipalities and line agencies in sp program

administration remain even less clear than for rural

areas in many states. While analytical work is growingon institutional roles in rural areas, the urban landscaperemains relatively under-examined. This is an areawhere the Ministry o Urban Employment and PovertyAlleviation, in collaboration with states and cities, has arole to play in sharing knowledge on existing institutionalarrangements in urban SP programs, and good practiceamong states.

on m&e, there are likely to be roles for all levels of

the system, but in different capacities which build on

the comparative advantage of each. Some elements o a desirable division o responsibilities might include:

orthecentre,therecouldsensiblybethreerolesinM&E:(i)workingwithstatestodevelopcommon

administrativemonitoringsystemsandindicators.

These could be enhanced at state level as capacityallows, but some minimum standard setting onprogram reporting would be a valuable centralunction. The collaboration between the centralMinistry o Rural Development and the NationalInormatics Centre (NIC) on sotware developmentor MGNREG provides a good example o thevalue-added o the centre in SP programs, as doesthe sotware certication unction o NIC within

the RSBY program; (ii) within CSS budgets, makingexplicit allowance or M&E unctions in allocations,including capacity building within states; and(iii) strengthening the evaluation o CSS SP




programs, in particular moving beyond thepresent system o concurrent evaluations to morerigorous methods o impact evaluation whichproceed rom reliable pre-program baselines.Such a unction is anticipated under MGNREGguidelines, though the anticipated central rolein this regard has yet to be rolled-out in practice.More generally, the Planning Commission has

argued recently or an Independent EvaluationOce which would have an arms’ lengthrelationship to the implementing Ministries, andhave a more analytical evaluation unction thanthat o the CAG, which tends to ocus more oncompliance issues rather than impact evaluationper se.311

or states, there is a need to reconsider what

rolescaneectivelybeplayedinM&E. The needto “push down” certain monitoring unctionsmay require a narrower role or states in uture.

Nonetheless, several important tasks couldsensibly be retained, including: (i) responsibilityor nancial internal and external audit o programs, including capacity building at lowerlevels or generation o records needed to conducteective audits; (ii) consolidation o lower levelmonitoring reports, and synthesis o trends as atool or policy renement and reorientation asneeded; and (iii) with nancial support rom thecentre, deepening a culture o impact evaluationin programs.

at the sub-state level, the challenge will be tobalancethestrengthsolocallevelactorsinbeing

“closetotheaction”withtheneedtohavesome

distance between those implementing dierent

aspectsoprogramsandthosemonitoringthem.

A threshold issue in this respect is a more explicitassignment in most states o responsibility orspecic service delivery activities in SP programsbetween sub-state levels and between elected andadministrative channels. However, several generalprinciples seems desirable: (i) communities, boththrough gram sabhas and through acilitated

processes such as social audits, should be givena stronger authorizing environment or programmonitoring o all SP programs, as allowed or underMGNREG, and support provided to perorm such

unctions. Such unctions would be more dicultto perorm in urban areas where communityinstitutions are less developed, and options likelocalized third party monitoring may be required;(ii) the role o the block level in monitoringshould be explored more closely, as a potentiallayer which balances the desire or being close tothe source o implementation with the need to

minimize GP monitoring their own execution o activities. The extent to which the unctions o theblock in this respect would most useully amountto oversight or some closer orm o monitoringneeds urther consideration. At a minimum, theblock would continue to be an important layer inconsolidating program perormance inormation,and using this to inorm coordinated action acrossGPs where the nature o program suggests it (e.g.,public works which involve cross-GP coordinationor impacts); (iii) the district level is perhaps the

most dicult to assess in terms o potential M&Eroles. It is in principle too ar away rom the sourceo implementation to monitor eectively, but nothigh enough to have much capacity to conductmore rigorous evaluations.

the biggest challenges for sp programs in terms of

institutional assignment of roles will continue to be

two: (i) mismatch between centrally-mandated rolesunder specic programs or sub-state actors and the inpractice level o devolution and capacity o PRIs; and(ii) lack o clarity on the relative roles o administrative and

PRI delivery channels within states, particularly wherede jure and de acto responsibilities are misaligned.

C. PoliTiCAl eConomy oF

inSTiTuTionAl ReFoRm in

SoCiAl PRoTeCTion

the political economy of sp policy and institutional

reforms is complex, and will require intensive efforts

to build consensus on reforms. In particular, it will

be important to ensure that the interests o perceived“losers” o SP and broader economic reorms are takeninto account. While reorms that involve expandedcoverage or new types o interventions are unlikely to

311 http://www.business-standard.com/india/news/independent-oce-to-evaluate-govt-schemes-soon-montek/75523/on.October9,2009.




be controversial, there are strong interests in preservingthe status quo in SP programs among a range o actors,including administrators, politicians, contractors andothers. Simply cutting programs or excluding certaingroups o beneciaries or institutional players isthereore unlikely to be successul unless incentives orinstitutions and households which will be aected byreorms can be part o the reorm package. The political

economy o SP reorm is challenging in all countries,and governments in India would benet rom moreinnovation in their eorts to create a broader societalunderstanding o the need or and benets o reorms.

some of the political economy challenges that the

sp system confronts if it is to become more coherent




consolidation and reorm o the SP system

within a coherent strategy will run counter tothe past experienceo scheme-driven initiatives

by a plethora o Ministries, and the observedtendency o each new government at bothcentral and state levels to want new SP programsclearly distinguishable rom their predecessors.Reducing these natural bureaucratic and politicaltendencies will be very challenging. A rst step isobviously having an integrated SP strategy whichis driven by the top politicians and bureaucratsat central and state levels, with strong inputsrom civil society in its development, including

opposition parties. However, even i such astrategy process can be developed, it will beimportant or it not to become a “one shot”exercise, but to have institutional coordinationmechanisms in place which explore programduplication and exploit synergies.

givingstatesamoreexiblehandinuseocentral

SPresourceswillbeachallengingtransormation

both or central administrators (whose pasttendency has been to dene the parameters oruse o central unds quite tightly) and politicians

(who not unexpectedly seek political attributionor centrally-nanced schemes implemented bystates). The rst o these challenges in perhaps

easier to address through development o moreoutcome-based monitoring systems. The secondis more dicult in a democracy.

in a number o programs, there are presently

signicantrent-seekingopportunitiesorarange

oactors.Such opportunities are acilitated by thecurrent complexity o the SP program mix, butalso by the number o intermediaries who otenare involved in the interactions o poor peoplewith the SP system. The generic identity o suchocial intermediaries and unocial middlemenis generally well-understood, but minimizing thepotential avenues or their continued roles has onlyrecently become a more explicit goal o SP policydesign. While it is too early to say, even apparentlynaïve blanket bans on certain actors in legislationand/or guidelines (such as the ban on contractorsunder NREGA) do appear to help. However, a morecomprehensive approach will require a more

thorough modernization o SP business processes.Examples where such approaches already appearto be making headway include greater reliance ondirect transers to beneciaries through bankingand postal systems, and innovations in use o ICTin SP program delivery.

amorerecentanduiddevelopmentinthepolitical

economyoSP(andmuchother)servicedeliveryis

howincreaseddecentralizationoresponsibilities

to panchayats – in particular GPs – generatesdierent patterns o contention, cooperation

and collusion between newly elected panchayatocials and traditional loci o inuence amongadministrators and higher level politicians such asMLAs and MPs. An essential rst step in promotingdecentralization o SP service delivery as a tool orcontestability and hence accountability will begetting a better empirical understanding o thediversity and evolution o experience. This wouldinclude how the gradual increase in the role o panchayats is proceeding (and what actors –such as limited control o resources and very lowcapacity), and the extent to which panchayats

eectively promote accountability in SP servicedelivery or are captured by local social, politicaland administrative elites.312

312 Jha,Bhattacharyya,GaihaandShankar(2008)onMGNREGprovidesuseulempiricalinsightsintothedynamicsoprogramcaptureandthevariationsbystateorthecasesoRajasthanandAP.




thenalmorenascent,butpotentiallypowerul,

element in the political economy o SP reorm

is the role o communities and civil society in

promoting more eective poverty reduction

outcomes rom spending. In this respect, thestrengthening o the “authorizing environment”or communities in SP service delivery in recentyears is encouraging. This is both cross-cutting,

through reorms such as the Right to InormationAct, and program specic, such as the anticipatedrole o social audits in NREGA, and new roles orcommunity groups such as SHGs in delivery o some SP services (e.g., running Fair Price Shops).However, there is no guarantee o “trickle down”to citizens in terms o awareness o their emergingentitlements. The role o NGOs, media and otheractors in this respect cannot be under-stated,as various political and administrative actorsat local level may not have strong incentives

to promote such citizen-based accountabilitymechanisms. Notable examples such as MKSS inRajasthan demonstrate the potential impacts o such partnerships.

D. ConCluSionS AnD

ReCommenDATionS

Itisclearthatsocial protectionis in an exciting

phaseintermsopolicyevolution,nancinglevels,

and institutional arrangements. At the sametime, the situation presents an unnished agendawhich in some ways lacks a coherent vision or thesystem which is inormed by the socio-economicdevelopments outlined in Chapter 1, andinstitutional capacities. Looking at the nancial

and institutional aspects o SP programs

covered in this chapter, some conclusions and

recommendationsareasollows:

Fac SP prras

broadly speaking, india’s share of public spending

on safety nets is reasonable, and indeed quite high

as a share of gdp by international standards of low

and middle income countries. its main challenges are

therefore fourfold:

sustaining roughly the current share o publicspending as overall spending rises.

adjusting the composition to spending to greateremphasis over time on ex ante risk mitigation (i.e.,social insurance programs or the unorganized

sector) and promotional programs (includingthose linked to human capital ormation,discussed in Chapter 4).

increasing the exibility o unding rom thecentre to states in terms o how it can be used ordierent SP interventions, while strengtheningthe emphasis on spending outcomes.

deepening a range o administrative andinstitutional reorms in SP service delivery whichcan contribute to greater expenditure eciency.Many o the operational reorms are discussed

in Chapter 7.

the notable exception is the area of social insurance,

where the share of public spending can be expected to

increase notably as india enters middle income status,

and where the imbalance between social security

spending on the organized and unorganized sectors

would be expected to shift in favour of the latter.

In the medium term, international experience andsocial expectations in India would suggest signicantlyincreased spending on social insurance or the largeuncovered share o workers. It will be important that this

increased expenditure priority not be at the expense o social saety net spending, but rather is nanced rom acombination o reallocation rom non-merit spending,growth in aggregate scal resources, and contributionsrom workers themselves. In practice, expanding socialsecurity to the unorganized sector is likely to require not-insignicant public subsidies to incentivize participation,as one sees or example with RSBY and certain pensionschemes.313 In addition, eective social insuranceprograms can in part be expected to be sel-nancingin two ways: (i) they should help control additional

demands on the saety net that might otherwise arisedue to actors such as population ageing; and (ii)international evidence suggests that eective socialsecurity systems can actually contribute to growth in a

313 Forinternationalexperienceonmatchingsubsidiestoincentivizeparticipationinpensionprogramsorinormalsectorworkers,seeHolzmannetal.(2009).




variety o ways, rom enabling higher risk/higher returnproductive activities to cushioning the impacts o growth-enhancing reorms or those who lose out romthem in the short run.314

Thespecicproposalothisreportisthatcentral

SP programs over time aim or a “3 + block”

strategy. This would involve 3 core CSS SPprograms or “pillars”, combined with an SP block grant rom which states could nance other SPprograms - or supplement benets under the corepillar programs - more tailored to the poverty andvulnerability prole o the individual state. Thiswould also involve signicant expansion in urbanareas. This could promote both a more coherentand less duplicative SP system, but also givestates more leeway to adapt the SP policy mix tothe needs o the poor in individual states in lighto available economic opportunities. The threecore pillars proposed are:

amajor socialassistanceprogram. The obviouscandidate or this is a signicantly reormed PDS,merged or specic groups with existing socialpension programs.315 Chapter 3 gives more detailson the options or reorm o PDS proposed by thisreport, with a preerence or a predominantly cashtranser approach.

a public works program, or which MGNREGwould be the building block, as well as pilotingexpansion in urban areas. There are severalbenets o a reliable public works program at this

stage o India’s development: (i) by its demand-driven nature, it can be responsive to shocks in away that longer run programs typically can not.In this way, it unctions as a “quasi-insurance”program or the extended period during whichmore structured insurance is expanded to theunorganized sector; (ii) the positive targetingoutcomes o sel-targeted works; and (iii) thepotential or multiplier eects rom asset creationand community mobilization distinguish publicworks rom other SP programs.

abasicsocialsecuritypackageorthoseoutsidethe ormal sector which could be expanded

in terms o coverage and scope o benetsas institutional capacity and scal space isdeveloped. The core types o insurance whichGoI aims to expand include lie, disability, old agepension, and health, and the RSBY program isalready an important step orward in this regard.Chapter 5 gives suggestions on institutional,nancing, sequencing and other aspects o an

expansion strategy.

beyond the three “pillars”, states could receive an

additional transfer and implement state-specific

sp interventions. How this is programmed couldvary according to state-level priorities, and includeinterventions such as livelihood support o dierentorms, targeted housing, interventions to incentivizeuse o basic social services (such as CCTs), nutrition and/or early childhood care, specic urban SP programs,or other options as proposed by states. A secondarybenet o such an approach would be strengthening o

complementarities between CSS and state-sponsoredschemes in order to control unnecessary duplication.A common core national SP system under the threepilars could promote portability o basic entitlements,and be increasingly useul as mobility o workers andhouseholds increases.

in terms of promoting both more effective spending

on sp, the “3+block ” proposal would allow more

cross-program flexibility to states – or possibly

districts - in deciding their sp expenditure priorities,

while still maintaining a common national core sp

system. It would also allow or greater adjustment inlight o poverty levels, key vulnerabilities, etc. This couldbe done in a variety o ways, possibly using a menuapproach to SP programs, and a exible orm o socialprotection block or matching grant which consolidatesresources rom existing SP CSS.316 This is an approachwhich has received increased attention in India in recentyears as policymakers seek to get greater impacts romSP spending. Given current nancing channels romthe centre to states in India, a more exible grantingmechanism or SP programs to states could take

dierent orms – as a more “bundled” anti-poverty CSS,as Additional Central Assistance (ACA) along the lines

314 SeeWorldBank(2006c),oradiscussionointernationalevidencethatthereisnonecessarygrowth-equitytrade-o.






o programs like Pradhan Mantri Gramodaya Yojana(PMGY), or through a more ungible realignment o Gross Budgetary Support shares between the states andcentral Ministries which control CSS.317

there are pros and cons of different possible methods

of more flexible central funding for sp programs.

Firstly, there would be natural reluctance rom central

Ministries to simply transerring SP CSS resourcesto Normal or even Additional Central Assistance, asevidenced by the ailure to transer several CSS to statesas per the 1999 Planning Commission list o schemes.More specically, as Normal Central Assistance is basedon population and poverty under the Gadgil ormulaand not on perormance, incentives or states toimprove perormance on specic SP programs wouldbe relatively weak. For Additional Central Assistance,there are examples o linking transers to state reormperormance, such as JNNURM etc. However, theserequirements have not been strongly enorced in

practice. There is also no obvious mechanism or thePlanning Commission to monitor perormance o specicCSS under NCA, and or ACA only where responsibility isgiven to a central Ministry.

overall, an improved transfer system for sp css

would need to balance need, capacity and fiscal and

administrative effort of states. This could involveseveral elements, including:

a rst step towards such a system would be

movingtotowardsamoreoutcomebasedunding

method. Such an approach would, however,require a clearer set o outcome indicators againstwhich state perormance could be measured, anda stronger planning unction at state and districtlevels. This approach is one that is already beingused in India in some donor programs which areresults or outcome-based.

asecondstepinsuchaprocessmaybeallowingor

sanctioningoallocationsorstateswhichstretch

across two to three budget years, which couldlessen current incentives to spend SP allocationsineciently (or simply parking them in accounts),and also assist with programs which are subjectto cyclical demand - such as public works – whichis not presently synchronized with the budgetplanning and release cycle.

a third step could be the block grant or SP

programsoutlinedabove.

an alternative approach which could be

implementedevenintheabsenceomoreserious

nancingreormsisthecreationoanincentive

undorstatesorSPprograms. An SP incentiveund could either be stand-alone or a window o broader proposal or a decentralization incentiveund. Alternatively, a central innovation und orsocial protection could be created which couldallow states to access central unds on a proposal-driven basis or innovations in SP programdelivery, or experimentation with new initiatives.

isttta rs r SP prras

the most fundamental institutional challenges

in sp css continue to be delineating clear lines of accountability in service delivery, and supporting the

authorized actors with adequate staff and finances. This will require rst and oremost greater proactivity onthe part o states to approve policies and put into practicethe PRI/ULB decentralization provided or under the73rd and 74th constitutional amendments. With notableexception o Kerala, and incomplete examples such asRajasthan and Karnataka, most states have yet to denethe ramework or decentralized service delivery in asuciently operational manner.

this would need to be followed by a process-intensive

reconciliation of central guidelines, state-level

stances on service delivery decentralization, and capacities at sub-state levels to perform the required implementation functions in sp programs. This is nota process which will generate a single “right” answeron the assignment o activities to dierent actors atdierent levels o the system. What it could useullyachieve however is a more considered assessment byboth centre and states o what is the chain o activitiesrom top to bottom required to deliver eective SPprograms, and o the realistic potential o dierentactors to deliver on their proposed responsibilities. Thiscould in time improve the alignment o unctions, undsand unctionaries in SP programs. Such eorts wouldneed to ocus in particular on elements o the servicedelivery chain at block level and below. The processcould involve several steps:

317 SeeSaxena(2006)orahistoryocentraltransersorAPPsincethe1960s.




“unbundling”eachcoreSPCSStoitsconstituent

unctions or services and specic activities indierent programs, as has been done or the

MGNREG and RSBYguidelines. While implicit inguidelines o some other schemes, such a simpleexercise would be a useul building block or aprincipled division o unctions across levels.

orallstates,producingaconsolidatedmapping

o the current assignment o sectors and SP program-specic unctions, both de jure and

de acto. This exercise would clearly identiycases where concurrent responsibilities arise orprograms where DRDAs and/or PRIs have specicresponsibilities assigned to them under CSS

guidelines. Where such concurrent responsibilitiesare apparent, urther dialogue between the statesand centre would be needed to agree whetherCSS guidelines need to provide more exibility tostates on institutional arrangements or programs,or whether states need to be encouraged to movemore actively on state-specic assignments whichare consistent with CSS programs (with Keralaproviding a good example o such a proactiverole by states). Such discussions could be guidedby both public nance criteria or assigningresponsibilities, and basic management principlesor enhancing accountability.318 Both o these arediscussed in Box 6.2.

318 SeealsotherecommendationsotheEmpoweredSub-CommitteeotheNationalDevelopmentCouncil(NDC)onFinancialandAdministrativeEmpowermentothePRIsJuly2008.

B 6.2: gd prcps r asst sttta rspsbts

Assigning institutional responsibility or specic services and programs, and within programs or specic activities, naturally involves anumber o trade-os. One diculty in SP CSS to date has been that the principles or assignment, and the policy trade-os involved in

specic assignments o responsibilities, have not always been explicit. In order to move over time to a more principled assignment o institutional roles, both public nance and accountability criteria provide useul guidance.

From a public nance perspective, some guiding criteria or assignment o institutional jurisdiction or service provision are:

economiesoscaleorscope: Economies o scale or scope are likely to apply in SP programs in particular to issues such asrecord keeping, beneciary numbering systems (e.g. unique household identiers are most sensible when consistent acrossprograms and space), and certain aspects o delivery such as management o targeted credit.

scopeo externality rom the serviceor activity: To the extent that a service does involve externalities, the general rule wouldbe to make the jurisdiction large enough to internalize the externality. In the case o SP programs, a number will have ratherlimited externalities beyond the household or village, while others such as public works potentially have a signicant element o externality (e.g. small stretches o road which may i coordinated link villages).

equity: This is clearly a very important welare economics consideration or SP programs.

heterogeneityodemand: To the extent that SP-related needs o dierent states and sub-state areas vary (as they inevitably willin a country such as India), institutional assignments which allow or greater tailoring o priorities to local needs are attractive.

From an accountability perspective, there are ve key eatures o accountability relationships, all o which interact with each other,and are:

delegation: This is simply the explicit assignment o tasks to designated agents. While obvious, it is precisely the lack o clarity insuch assignments within states – due both to their lack o action and in some cases conicts between CSS and state assignments –that is one o the major institutional challenges or SP CSS.

nance: This is aligning nances with the delegated responsibilities, a task which is raught when delegation is unclear orconcurrent to start with. A second constraint in the case o SP CSS is ensuring that those in control o unds have sucientcapacity to do so in a transparent manner.

perormance: This is the doing o the assigned task. Given the many steps involved in delivery o most SP CSS, this requires adisaggregated breakdown o steps in the delivery chain to avoid overly lumpy assignment o many tasks to single levels o thesystem.

inormationaboutperormance: This is an area where many SP programs have been weak, with both weak linkage betweeninormation and actual perormance/outcomes, and requent reliance or monitoring on levels o the system which are tooremoved rom the point o implementation to perorm more than perunctory monitoring.

enorceability: Inormation on perormance only matters i there are consequences or poor or good perormance. How thesystem aligns enorceability with inormation on perormance is this key.

Sources: World Bank (2006d); World Bank (2004).




havingdeterminedanappropriateassignmento

unctions to dierent levels, a ullerassessmentis needed o the personnel and nancialimplications o carrying out required unctions.Where enhanced personnel capacity is needed,this would then need – as is the case withMGNREG – to include the nancing o needsin program costing, and the capacity building

requirements at dierent levels.

graduallyinstitutionalizingrolesorcommunitiesinbothselectedelementsoCSSdelivery,andincommunity oversight o program unctioning.Again, the model o MGNREG provides auseul precedent. This is also likely to involvepartnerships with NGOs to build local capacityor eective social audit, and the more generalobligations o the state or disclosure o programinormation, as has proved eective or examplein Rajasthan. The RSBY scheme also provides

useul precedents on the role o NGOs and othergrassroots organizations in SP service deliveryand demand side mobilization.

taking lessons rom the emerging experience inIndiaand beyond in public-private partnerships

in dierent aspects o SP service delivery.Increasingly, the private sector has beenplaying dierent roles in the Sp service deliverychain. RSBY is the most advanced example,with involvement o private insurers, privatehospitals, private sector smart card providers andoutsourced sotware development, as well asroles or grassroots organizations noted above.However, many other programs – particularlyat state level – have been experimenting withoutsourcing o dierent unctions.In some cases,this involves partnerships on technology, such asthe role o TCS in managing MGNREG databasesin AP, or smart card provision by commercial rmsin a number o pilots. In others, there is a moreinvolved role or the private sector, such as inBihar where rural inormatics service centers orRD programs at block level have been assigned

ollowing a tender process, in which or-protand not-or-prot organizations operate theinormation and database management o RDprograms on behal o the state Government.

in addition to the above needs on institutional roles,specific suggestions include:

at both central and state levels, ormation o

an inter-departmental Task Force or Authorityor Social Protection, which would promotecoordination across programs targeted towardssimilar populations, and promote more coherentstrategy development on the medium term policymix and priorities in social protection. The caseso Mission Convergence in Delhi and the Saety

Nets Authority in UP provide interesting models,which could be adapted by other states.

orprogramplanning,severalinitiativeswouldbeuseul, including: (i) earlier notication to statesand DRDAs o estimated unding envelopes orprograms or the ollowing scal year in orderto acilitate lower level planning and budgetmanagement; and (ii) ensure that states whichhave not already done so appoint District PlanningCommittees, and ensure adequate nancing ortechnical support to DPCs.

associalsecurityexpands,theroleotheprivatesector (as insurers) and a range o member-

based organizations such as MFIs, NGOs and

workers associations is already becoming

increasingly important, and demands new

modes o engagement and partnership orm

the public sector. The biggest constraint onexpanding social security to the unorganizedsector has been developing delivery mechanismswhich can deal with the transactions costs o reaching unorganized workers. This requires

intensive engagement with intermediarypartners between government/insurers andunorganized workers, as well as learning romecient insurance distribution channels o public and private insurers. The RSBY providesan excellent model o partnership, as do morelocalized initiatives such as UTI partnershipswith both state governments and organizationssuch as SEWA, and the roles o trade unions andemployer organizations in some o the welareunds around the country.

or M&E, develop a disaggregated picture o

potential and capacities at dierent levels othe system or monitoring and evaluation, andalign program guidelines in that light. Theproposal to establish a national IndependentEvaluation Oce is a welcome step with respectto M&E.



C HA P T

E R

7Program Administration Issues in Social ProtectionThe “Nuts and Bolts”



CHAPTER-7: Program Administration Issues in Social Protection – The “Nuts and Bolts” 11

the most common mantra in the social protection

field is “india has great laws and policies, but poor

implementation”. This section looks at some o the“nuts and bolts” issues in SP program implementation,

and attempts across programs to understand some o the common administrative problems, several o whichcontribute to the coverage and targeting outcomesobserved in Chapters 3, 4 and 5. The main operationalissues covered in this chapter are:

programawarenessandoutreach

theapplicationsprocessandeligibility

determination

publicexpendituremanagementissues

paymentsystemsorbenets

recordkeeping monitoringandevaluation.

overall, the basic “nuts and bolts” of program

administration and procedures in most states are

far below the standards that could be possible

given india’s technological and human capital

capacity. However, in nearly all areas, there areemerging models o good practice which suggest thatgetting administrative systems in place which increase

accountability and transparency is a realizable goal,given sucient political will and a set o institutionalincentives which reward good practice. One o the keychallenges in this regard is achieving closer alignmento the incentives o the centre, states and sub-statelevels or improved program administration. Thiscannot be separated rom allocation o institutionalresponsibilities, discussed in Chapter 6.

A. PRogRAm AwAReneSS AnD

ouTReAChalthough several of the main pillars of the sp

system in india have been in place for some time, most

programs have been subject to periodic changes in

policies, implementation arrangements, schemes

Program Administration Issues in Social ProtectionThe “Nuts and Bolts”

Chapter–7




names and other features. Some o the changesare quite undamental (e.g., moving to a targetedPDS; guaranteeing the right to 100 days employmentunder MGNREG), while others are either a producto consolidation eorts (e.g., SGSY combining IRDPand several related programs under one roo), or o repackaging or political or administrative purposes(e.g., EAS and JRY being superseded by SGRY).

the frequent shifts in program design imply significant demand for awareness and outreach efforts on the part of government. Despite this need, CSS SP programshave typically relied on a rather top-down approach todissemination o new/revised program inormation. This has been a standard approach o central andstate governments issuing implementing orders andinstructions, oten with detailed program guidelines. These are distributed through line agency and generaladministrative channels, in particular to Collectors andBDOs. This may be complemented by rather traditional

media campaigns announcing the schemes and theirkey elements. Increasingly, some program inormationis available on the web. However, there is rarely a well-developed outreach strategy which ocuses on howdierent audiences receive inormation, and what typeso inormation they most need either to participate inschemes or perorm their unctions in program delivery.In addition, penetration o messages below the block

level is oten lacking, and in any event in ormats mainlysuitable or literate populations.

evidence from four states indicates that there is

considerable variability in awareness of programs,and in some cases across states with respect to

individual programs. This can be seen in Table 7.1and Table 7.2, which presents ndings rom Orissa, MPand Karnataka, and additional survey inormation romJharkhand in the state-specic table. With respect to thecross-program awareness on the three states, the mainndings are:

qarts

1 2 3 4 A

Cash Transer Programs

Targeted

Indira Awaas Yojana 68.0 71.1 68.9 63.6 67.9

National Old Age Pension Scheme 59.6 62.8 57.1 54.7 58.6

Widow/disable pension 60.8 64.0 58.6 54.7 59.5

Universal

Rural Education Scholarship 29.7 29.5 28.1 33.4 30.2

In-Kind Transer Programs

Targeted

Public Distribution System 86.1 90.5 92.9 95.0 91.1

Antyodaya Anna Yojana 34.0 33.3 32.8 31.4 32.9

Universal

Integrated Child Development Services 26.7 33.6 37.0 37.3 33.6

National Mid-Day Meal Scheme 67.7 77.4 78.1 68.9 73.0

Free text-book 60.2 67.6 71.6 68.6 67.0

Free hostel 18.0 31.0 31.1 33.1 28.2

Free uniorm 51.2 59.8 62.7 61.5 58.8

Workare Programs (Sel Targeted)

Sampoorna Grameena Rozgar Yojana 25.0 33.3 30.2 29.6 29.5

Food or work 28.5 29.8 25.7 26.0 27.5

Subsidy Based Livelihood Programs

Targeted

Swarnajayanti Gram Swarojgar Yojana 10.2 17.0 18.9 21.3 16.8

Tab 7.1: Aarss abt prras, orssa, mada Prads ad karataa %

Source: Dev et al. (2007), based on the 2006 three state SP survey. Q1 is poorest and Q4 richest, with ranking based on wealth index.




as would be expected, awareness is highest or

PDS(thoughnotAAY,orwhichawarenessisquite

low). This is not surprising given the program’s

age and widespread coverage o FPS, and theresult holds or all three states.

atleastthreeprogramsaresurprisingintermso

therelativelylowlevelsoawareness–SGRY/FFW,SGSY,andICDS. The low level o ICDS awarenessis particularly striking given its objective o universalism and coverage o anganwadiworkers.

overall,thereisrelativelylimitedvariationacross

quartilesothedistributioninprogramawareness,

but awareness is more progressive or targeted

than untargeted programs (with the notableexception o SGSY). While the top hal o thedistribution has somewhat higher awareness inmost programs, the dierences are not dramatic,and awareness o targeted programs is generallyslightly higher.

betweenstates(notshowninthetable),Orissahas

the highest level o program awareness overall

relativetoMPandKarnataka.

awareness across social categories of major programs

is not dramatically different, but for several key

programs is somewhat higher for st, except in orissa

where it is notably lower for nearly all programs.

Table 7.2 presents results across the three states brokendown by SC, ST and non-SC/ST. For most programs,awareness among SC is not notably dierent, and thedierence is statistically signicant only or IAY. However,or ST, awareness is higher and statistically signicantor several programs, including IAY, ICDS, SGRY/FFWand SGSY. Unortunately, this nding does not hold orOrissa, where ST program awareness is generally lower,in contrast to the overall nding o higher programawareness levels in Orissa.

at the village level, there are several factors

associated with higher awareness, but the relative

Tab 7.2: hsds aar t sat t prras b sca rps, orssa, karataa ad mP cbd %

Source: Dev et al. 2007. ***=signicant a 1% level; **=at 5% level; *=at 10 percent.

Prras ora SC ST n SC&ST

Cash Transer Programs

Targeted

Indira Awaas Yojana 67.92 72.79*** 75.59*** 61.03

National Old Age Pension Scheme 58.55 56.25 62.09 57.25

Widow/disable pension 59.51 56.99 62.56 58.61

Universal

Rural Education Scholarship 30.16 29.41 23.93*** 34.44

In-Kind Transer Programs

Targeted

Public Distribution System 91.08 92.28 86.49*** 93.5

Antyodaya Anna Yojana 32.89 34.56 34.36 31.27

Universal

Integrated Child Development Services 33.63 33.46 37.2** 31.42

National Mid-Day Meal Scheme 73.01 77.21* 73.46 71

Free text-book 66.96 72.06 62.56* 67.67

Free hostel 58.78 63.6 55.21 59.06

Workare Programs (Sel Targeted)

Sampoorna Grameena Rozgar Yojana 29.5 27.21 38.63*** 24.62

Food or work 27.51 21.32 33.89*** 25.98

Subsidy Based Livelihood Programs

Targeted

Swarnajayanti Gram Swarojgar Yojana 16.81 13.6 21.56*** 15.11




importance of different factors varies notably

between karnataka and the other two states. Table 7.3reports results on village level determinants o programawareness, both grouped or the three states, andcomparing the states on key indices o social capital,PRI unctioning, and women’s participation. Some keyresults are:

across the three states, the actors associated

withhigherawarenessincludestatusowomenin

thehousehold,presenceoanNGOinthevillage,

andwomen’sparticipationinpublicaairs. Thiscan be seen in Table 7.3, which reports the actorswhich were statistically signicant as village leveldeterminants o awareness about all saety netprograms. In particular, the emale participationin public lie (though GS meetings, electionsetc) is highly signicant in determining village-level awareness o SP programs. Also, emaleempowerment index (which reects women’sparticipation in household decision making abouta range o key actors, and their autonomy insocial and economic behaviour) has a signicantrelationship with village level awareness o SPprograms.

in contrast, a range o other variables had no

signicantexplanatorypowerasdeterminantso

programawareness,including existing social andeconomic inrastructure, share o small armersand landless, unctioning o the PRI, social

composition o the village, and level o trust inlocal institutions.

awareness o saety net programs is lower inwealthier villages.

it is necessary also to explore in more detail what “awareness” means, and the implications of different

levels of awareness for future outreach strategies.

There is not much good survey-based evidence on thisquestion, but eld studies on awareness o MGNREGare instructive, and point towards the gap betweengeneral knowledge o the existence o programs, andknowledge o the specic elements o entitlements

that would acilitate eective participation in schemesby the poor. This can be seen in Table 7.4. Even in 2006,awareness o the MGNREG in dierent states was highlyvariable, but overall reasonable in light o the youngage o the scheme, and exceptionally good in somecases. While Gujarat and Jharkhand were laggards onawareness, the achievements o AP, Chhattisgarh andBihar were impressive. Subsequently, eld studies thathave revisited sample locations in Chhattisgarh andBihar between 2006 and 2007 indicate that awareness,though still largely low, has increased over time.319

despite the generally positive level of basic program

awareness, awareness of specific important elements

of mgnreg entitlements and functioning is notably

lower in a number of cases, and even general

awareness is generally lower among lower castes.

The results in Table 7.5 provide a more nuanced pictureo program awareness, indicating that while MGNREG“brand awareness” is satisactory or good or such a newscheme, awareness o some key elements o the programremain to lter down as eectively. For example, whileknowledge o the 100 day guarantee is relatively strong(and reective o the emphasis o Inormation andEducation Campaign (IEC)), the understanding o the

Ccts

(Constant) -0.03

Female public participation (e.g. elections, GSmeetings)

0.48***

Female empowerment index 0.23*

Presence o NGO in village 0.40**

Tab 7.3: va dtrats prraaarss, orssa, karataa ad mP, 2006

Source: Dev et al. 2007. See Annex 2 or details o construction o PRI andgender-based indices. ***=signicant a 1% level; **=at 5% level; *=at10 percent.

StatSar aar mgnReg

mgnReg dstrcts %

Andhra Pradesh 97.5

Bihar 62.5

Chhattisgarh 69.3

Jharkhand 28.9

Gujarat 38.8

Madhya Pradesh 45.0

Tab 7.4: ora aarss mgnReg, ars

mgnReg stats, 2006

Sources: CBGA 2006 or Chhattisgarh, MP, AP and Jharkhand; IHD 2006 orBihar; CDA 2006 or Gujarat

319 CBGA(2006,2007)andIHD(2006,2007).




role o GPs and gramsabhas in scheme unctioning isvery low, as could be to some extent expected giventhe innovation involved or such a scheme. The surveyo MGNREG worksites in six northern states by Drèzeand Khera (2009) indicates that ewer than hal o thesurveyed households knew about the entitlement tohundred days o work and minimum wages. Some

studies note that there is little awareness that this is auniversal right or rural households and not limited tospecic groups. In consequence, potential applicantscan be excluded based on certain characteristics(e.g., widowed, single women headed, elderly etc) ordocumentation (e.g., ration card).

both mgnreg and many ngo and donor programs

demonstrate that innovative methods of generating

public awareness of programs are often necessary.

As noted, Government IEC or programs remain typicallytop-down and rather traditional in their communication

methods. In contrast, many NGO schemes (or in somecases, public schemes partnering with NGOs) use avariety o communication methods which are morelikely to be digested by target populations. Theseinclude a wide range o strategies, including relianceon women’s and community groups with grassrootspenetration, and engagement with panchayat orother village level notables including religious leaders, jati panchayat elders, et al. In addition, the modes o communication are much more diverse, and oten bettersuited to the needs o non- or low literate populations. They include tools such as street theatre and puppetry,visual communication o key messages, imaginative useo media (e.g., short human interest spots built aroundthe program and its benets) etc.

another important new factor in awareness raising

is the right to information act. This mandates much

more local posting o program inormation than thepast, and in principle makes inormation on programperormance available to members o the public whopay a small processing ee. This can be a useul tool inawareness raising, and experience in some states (e.g.,Rajasthan) has already demonstrated the potential o the Act in circumstances where eective third parties

such as NGO are able to navigate the system to accessinormation. However, to date the RTI Act has beenmore a vehicle or tracking down program inormationrather than a motivation or program administrators tobe more proactive in sharing basic program indicatorswith the public in easily understandable ormats. Thiswill presumably be part o the agenda o central andstate RTI Commissioners in the uture.

B. The APPliCATion

PRoCeSS AnD eligiBiliTyDeTeRminATion

across most programs, a common complaint of

both current beneficiaries and applicants/potential

beneficiaries is that the administrative complexities

and attitudes of officials are significant barriers to

program participation. This o course is not a problemunique to SP programs, and also an area where evidencebeyond the anecdotal is oten lacking. The sectionbelow presents new analysis or selected programs onthe reported importance o such bureaucratic actorsin accessing programs. While much more research isneeded, it suggests that the widespread anecdotalevidence is borne out by data.

sp programs in india rely heavily on the bpl card

as a principle mechanism providing preliminary

Stat100 das

ptm as

t b pad

R GramSabha/gP

Basc acts atr st wr t 5 km

Andhra Pradesh 93.8 68.8 2.5 48.8 8.8

Chhattisgarh 53.7 35.1 3.9 9.3 13.7

Madhya Pradesh 44.2 35.0 2.5 18.3 5.8

Jharkhand 10.0 8.9 1.1 1.1 2.2

Gujarat 38.8 NA 37.7 23.8 NABihar 77.7 44.0 0.8 4.5 26.5

Tab 7.5: Aarss spcc ts mgnReg ttts b stat, 2006

Sources: CBGA (Chattisgarh, MP, AP and Jharkhand); IHD (Bihar); CDA (Gujarat), all 2006




evidence of eligibility, with both pros and cons for

program administration. A core common determinanto individual or amily eligibility or benet in mostSP programs in India is availability o the BPL card.Such setup helps to control the administrative costo multiple programs by taking the burden o initialeligibility screening away and allows the administeringagencies to ocus on other core tasks. This arrangement

is in contrast to experiences o many other countrieswhere programs oten operate own comprehensiveeligibility determination mechanisms. Given such highdependence on the common external actor o eligibilitydetermination, ensuring ecient operation o thatexternal mechanism becomes crucial to the success o the collective eort o poverty alleviation o various SPprograms. A common limitation o the BPL mechanism,however, is signicant element o inertia in updating thelist o eligible amilies, as it remains part o the censusoperated only once every ve years. The process o card

issue and record-keeping itsel needs urther analysis asit exhibits serious deciencies.

looking at why households do not have ration cards,

the dominant reason nationally is bureaucratic

difficulties. However, there are major cross-statevariations in main reasons or not having cards. Table 7.6 presents results across states. While bureaucraticproblems are the main reason nationally, there aresharp dierences across states in the importance o this reason. For a group o very poor states – including

Bihar, Jharkhand, Orissa, and Chattisgarh, but also WestBengal – bureaucratic diculties in accessing cardsare much more important, though in other poor statessuch as UP, MP and Rajasthan, less specic reasonsdominate. In contrast, or richer and southern states,“other” is the dominant reason or no card. Overall, theimportance o “other” as a reason or no ration card ishigh, and requires more detailed research, particularlyor states such as Maharashtra, TN and Karnataka whereit is easily the dominant reason. Also o interest rom anadministrative viewpoint is that around 18 percent o

household report losing their card or not being able toget a new card ater moving as the main reason or not

Tab 7.6: ma rass r t a rat card b stat, 2004/05 % sds


Stats nt dd Card st Bracratcmd bt cardt trasrrd otr

Andhra Pradesh 12.8 3 29.7 10.4 44.2

Assam 1.3 42.8 31.2 11.6 13.2

Bihar 0.7 9.4 84.4 1.2 4.4

Chattisgarh 8.4 7.2 65.9 5.5 13

Gujarat 16.7 16.7 16.7 16.7 33.3

Haryana 12.6 10.2 9.8 17.3 50.2Himachal Pradesh 25.6 3.2 17 16.7 37.5

Jammu & Kashmir 11.1 4.4 16.8 8.2 59.4

Jharkhand 8.1 7.3 67.6 3.4 13.6

Karnataka 0 8.7 6.4 17.4 67.4

Kerala 4.7 7.9 10.8 21.1 55.5

Madhya Pradesh 20.4 7.6 21.8 21.6 28.6

Maharashtra 4.7 2.8 13.3 5 74.2

Orissa 15.6 7.3 68 3.3 5.7

Punjab 7.8 21.4 28.2 16.7 25.9

Rajasthan 16.3 9.3 18.4 10.2 45.7

Tamil Nadu 11.7 0 0 0 88.3Uttar Pradesh 13 9 30.1 4.8 43.1

Uttaranchal 27.6 4.2 32.4 8.4 27.4

West Bengal 2 7.2 65.5 5.6 19.8

All India 9.5 8.5 40.8 9.6 31.6




having a card. Finally, the share o households reportingthat they did not need a card is under 10 percent, andsurprisingly, this share is higher than average in at leasttwo poor states, MP and Orissa.

looking at reasons for no ration card across the

distribution and social categories, the poorest and

st households appear to have particularly serious

problems with bureaucratic difficulties. Table 7.7presents results by wealth level, rural/urban, and socialcategory. While the dierence across wealth level andcaste in the share o households not needing a card is asexpected, more notable is the sharp dierences betweenlower and upper income groups in the share reportingbureaucratic diculties as the main reason or having noration card. This also applies to rural households relativeto urban, and notably or ST households.

survey results on social pensions from several

states provide further insights into the nature of

difficulties in accessing programs. While these resultsare obviously state and program-specic, they arenonetheless instructive. By way o illustration, Table 7.8below cites the main problems encountered by thosecurrently receiving social pensions in Rajasthan inaccessing benets. Broadly the rst ve rows can beconsidered dierent types o program related diculty,

and indicate that just under hal o applicants acedsome orm o bureaucratic diculty, rising to aroundtwo thirds when secondary reasons are included.

The time and nancial costs o documentation are o particular note, as are the transport costs associatedwith application. The ndings on the demands o eligibility documentation are supported by previousstudies in other states, including AP, Kerala and Orissa,one o which reers to applicants or social pensions “lostin a bureaucratic maze which they nd impenetrable”.320

Tab 7.7: ma rass r rat card b at, cat ad sca catr, 2004/05

Source: Ajwad 2006 based on 2005 IHDS data. Note that the other social group category excludes Brahmins.

nt dd Card as st Bracratc

md bt card

t trasrrd otr

Poorest 4.3 9.5 53.6 7.9 24.7Q2 5.9 8.3 48.6 8.5 28.7

Q3 6.4 8.7 41.9 8.5 34.5

Q4 14.7 7.9 29.2 9.9 38.3

Richest 21.7 6.7 23.0 8.5 40.1

Rural 6.2 9.6 46.7 6.3 31.3

Urban 15.5 6.6 30.4 15.5 32.4

OBC 7.5 8.1 44.1 8.6 31.5

SC 5.9 10.6 43.2 8.6 31.7

ST 9.3 8.4 52.7 6.9 22.6

Other 14.5 8.7 26.6 13.4 36.8

All India 9.5 8.5 40.8 9.6 31.6

Tab 7.8: ma prbs tt sca pssactd, Rajasta, 2006

Source: Dutta 2008, based on Rajasthan social pensions survey, 2006.

Prarprb

Scdarprb

Understanding the eligibilityrules

13.9 5.3

Time or getting documents 16.3 17.9

Cost o getting documents 12.7 21.8

Proving meet criteria 3.0 19.1

Inormal payments 1.3 3.6

Transport costs 13.0 30.2

Other 0.9 2.1

No diculty 38.9 NA

320 See Nayaket al.(2002) or AP,and Centreor ManagementDevelopment2000orKerala,the latternding“non-cooperationbyocials” oncer ticationas asignicantbarriertoaccess.SeealsoInternationalManagementInstitute2001orstudyinOrissa,whichoundthecomplexityodocumentaryevidencebeingabusedbyocialsorrent-seekingpurposes.




On a more encouraging note, just under 40 percent o successul applicants in Rajasthan reported no dicultyin accessing the pension.

insights from those whose applications failed or were

deterred from applying are also of interest. Amongthose in Rajasthan not applying the complexities o theapplication process were the deterrent or one third,

and this was as high as 45 percent in Karnataka.321

Among those who applied and were rejected, aroundone quarter cited lack o personal connections toocials as the reason or rejection in Rajasthan andaround 15 percent in Karnataka. Related to this was aurther 18 percent in Karnataka and a urther 8 percentin Rajasthan citing inability to pay a middleman as themain reason or ailure o their application. A urtheractor o interest is the time taken to sanction benetsor those who are granted them. Once more there isconsiderable anecdotal evidence o signicant delaysin sanctioning, or provision o work in the case o

workare. The MGNREG attempts to address this issuethrough the deault option o an unemploymentallowance in cases where work is not granted within15 days o a request, though in practice studies to datend no evidence o such allowances being paid.322 The Rajasthan and Karnataka social pension surveysalso provide some insights on the question. In thecase o both Karnataka and Rajasthan, the medianwaiting period between application submission andsanctioning o the pension was 6 months, with 10percent o current pensioners in Karnataka reporting

a wait o more than 2 years rom the data o rstapplication.323 In both states, repeat applications byeventual beneciaries are also common.

the above discussion points to the potential importance

of middlemen in accessing benefits. One o the actorsoten mentioned in the literature on SP programs isthat the poor oten take the help o various agents toaccess programs including such things as obtaining aBPL card.324 In addition, there is considerable variationacross programs in the importance o middlemen,with less reliance or programs such as NOAPS and

more or programs such as IAY and public works. It is

important to stress that the term “middleman” includesa range o intermediary relationships. Some – such asintermediation by NGOs or SHGs – may be quite positiveprocesses. At the other extreme, intermediaries whoexploit their relations with ocials or earning “speedmoney” or contractors on public works who get peopleonto worksites or a commission are less desirable. Inbetween lie a range o social network relationships,

or example with local MLAs who may exchangeintermediation or voter commitments.

the prevalence of middlemen in accessing sp programs

is supported by evidence from the three state survey

of orissa, karnataka and mp, which also provides

insights into the relative importance of different types

of middlemen. The results should not be interpretedsimply as maleasance, but more as necessity (andability) to access intermediating ocials and others. Aew observations emerge:

overall, reliance on panchayat ocials is themost common orm o intermediation, and ormost programs is necessary or more than hal o beneciaries.

whiletherearenolargevariationsacrossprograms

inthemainormointermediation,aewprograms

areworthyonote: (i) AAY beneciaries rely armore heavily on elected than administrativeocials; (ii) in child-related programs, the relianceon elected or administrative ocial is relativelylower and conversely, reliance on “other” orms o intermediation higher; and (iii) SGSY exhibits anunusually high reliance on administrative ocialsor accessing.

indistributionalterms, thosein the top quartile

are generally more likely than the poor to rely

ontheintermediationoadministrativeofcials,

while the picture on the relative reliance onelected ocials between rich and poor is moremixed.

using village-level information on the role of

middlemen(or other“contacts”)in accessing programs,

it is possible to look at what factors influence the

321 SeeDutta(2008)andMurgai(2007).

322 SeereportsromvariousstatessummarizedinChapter4.

323 Notethatinbothcases,asignicantsharereportstheneedormorethanoneapplicationbeoresanctioning,e.g.,inRajasthanamongcurrentbeneciaries,justunder30percenthadappliedmorethanonceorbenets.

324 Nayaketal.op.cit.isagainauseulsourceontheroleomiddlemenandhowitdiersbetweenprograms.




dependence of poor households on middlemen to access programs. The results are reported in Table 7.9and Table 7.10. Overall, emale literacy, women’s generalstatus in the household, and households “trust” in publicinstitutions signicantly reduced the dependence onmiddlemen. The dependence on middlemen was alsohigher in the relatively poorer state o Orissa than in theother two states.

a further common claim with respect to sp programs

is bribery in order to access (and in some cases stay

on) programs.325 as with many issues in program

administration, this claim is widely made from field

and anecdotal evidence, but less commonly supported

by data. However, closer studies o the issue haveconrmed the prevalence o direct and indirect bribery,but also strong variations across programs in the scale o the problem. One can identiy several orms o corruptbehavior: (i) individuals ineligible or benet trying togain access to public resources; (ii) otherwise eligible

individuals trying to bribe in order to move up the prioritylist or benets; (iii) eligible individuals trying to overcomebureaucratic obstacles in accessing universal benets.While (i) and (ii) are problems that are intrinsically dicultto address, (iii) is something that should be easier to dealwith by means o public awareness campaign, improvedaccountability, rationalized processes, and possiblyinvestments in IT.

a finding of previous work and supported by research

for this study is that programs which are designed

around larger single or lumpy payments appear

varabs Ccts

PRI unctioning index -0.255(-1.483)

Economic inrastructure 0.124(0.696)

Trust PRI -0.131

(-0.445)

Trust Ocials -0.187(-0.597)

Trust Groups 0.540***(2.796)

Total Female Participation 0.129(0.596)

Empowerment 0.286(1.247)

Control on assets -0.275(-1.524)

Average Index 0.083

(0.295)Ratio o emale and male literacy 0.769**

(2.183)

% emale literacy -1.048**(-2.371)

Migrated -0.139(-0.884)

Presence o NGO in village 0.050(0.274)

Social Composition o village (Herndal) -0.181(-1.077)

Tab 7.9: Dtrats s dda taccss bts, 2006

Source: Dev et al. 2007. Notes: t-statistics in parenthesis. See Annex 2 orvariable denitions.

325 Thisisdistinctromthelargerissueoleakageoprogramundsorgoods,anddiversionodierentormswithinpublicspending.ForPDS,thisisdealtwithinChapter3.

Tab 7.10: Rac trdars t accss bts b prra ad trdar tps, orssa,karataa ad mP, 2006

ocas ectd ladrs otrs

q1 q2 q3 q4 A q1 q2 q3 q4 A q1 q2 q3 q4 A

IAY 23.4 25.0 31.0 41.2 28.2 68.1 63.9 69.0 58.8 66.2 8.5 11.1 0.0 0.0 5.6

NOAPS 18.8 25.0 40.0 33.3 28.1 62.5 68.8 50.0 66.7 63.2 18.8 6.3 10.0 0.0 8.8

Widow/disabledpension

25.0 15.0 22.2 16.7 20.0 65.0 65.0 66.7 50.0 63.6 10.0 20.0 11.1 33.3 16.4

Stipend 28.6 33.3 38.9 33.3 33.3 52.4 38.9 27.8 58.3 43.5 19.1 27.8 33.3 8.3 23.2PDS 16.1 27.6 27.9 24.1 24.0 70.4 63.8 66.7 71.3 68.1 13.5 8.5 5.4 4.6 7.9

AAY 4.0 15.0 13.3 0.00 9.1 88.0 80.0 80.0 83.3 83.3 8.0 5.0 6.7 16.7 7.6

ICDS 8.0 28.6 22.7 30.0 22.5 52.0 42.9 40.9 56.7 49.0 40.0 28.6 36.36 13.3 28.6




B 7.1: Accss iAy – T r t d tr stats

Field research or this report, in addition to nding evidence o bribery in quantitative data, conducted detailed personal histories o theexperience o villagers in accessing schemes. Some ndings with respect to accessing IAY are presented below:

Govind Vishwakarma rom Madhya Pradesh was asked to apply or Indira Awaas Yojana. Govind Vishwakarma contacted theSarpanch who asked him to apply and inorm him, so that he can acilitate the process. He approached some employee in theoce who demanded ` 500 or writing the application and other procedural expenses. He has given ` 400 to get the work done.Later the strenuous ollow up o the application began and this continued or nearly two months. Then the Sarpanch demanded` 5000 and he had to give that amount. Within a week’s time, ` 20,000 was allotted to Govind Vishwakarma. He repaid the debt o ` 5000 rom that and the rest o the money was utilized or the renovation o the house. Thus, he had to give bribes at two pointswhich amounts or more than one ourth o the total grant.

Three years back, Prameshappa rom Karnataka took ` 32,000 as part o Credit cum Subsidy scheme to construct a house. Hethought his savings clubbed with the loan amount would suce the needs or the small house he wanted to make. And in the

villages they say, it is during the bad phase in lie one would embark on making houses. It was proved as an out and out truthor Prameshappa. He exhausted all the sel-earned resources in the very initial phase o house construction and the loans camethrough ater a long point o time. Bribing ocials or getting it sanctioned is a practice and Prameshappa reused to do so. Itdelayed the process and his house is still not nished.

Ghasi Bilputia is a widow, lives along with her daily laborer 18-year old daughter in Similiguda block o Koraput district o Orissa.Her house is in dilapidated condition with walls and cracked asbestos roos. She has tried or IAY and applied or it. The villagemeeting discussed it and approved their application also. But nothing proceeded urther. The neighbors tell her that i she canbribe the Sarpanch and the ward members, she would get a house. For somebody who is struggling or making the two endsmeet, where is the big money that needed or bribing politicians and ocials to get her housing grant cleared?

Shamila Yadav is an unskilled agricultural worker rom Bordai village o Seoni district o Madhya Pradesh However, with theirmeagre incomes they are yet to build a comortable shelter and they nd it dicult to live in the broken down hut they presentlylive. They were told about IAY and Shamila applied or the scheme, being among the most eligible categories. She led theapplication expecting that something would happen positively soon. However nothing has worked out even ater her continuedperusal. Later she met Sarpanch and as suggested by his accomplice, she has given ` 200 to him. He assured that it would be

done positively in a month. However, even ater ten months, Shamila Yadav did not get the benets and the amily continues tolive in the same hut braving summers, winters and monsoons.

Source: Dev et al. 2007, based on qualitative work or the three state SP study.

more subject to demands for bribes by officials and their associates for accessing the program. Morespecically:

previousstudiesandthisindthatIAYistypicallysubject to a bribe running into thousands orupees. The results in Chapter 3 on IAY averagebenets are very consistent with eld reportsrom beneciaries o a bribe o ` 4,000-5,000.

Such ndings are supported in part by GoI’sown evaluation o the program, and by eldresearch rom AP in the early 2000s, whichreported a bribe o around ` 6,000 per ` 20,000IAY benet.326 Box 7.1 presents examples romeld work in three states or this report on thestories o IAY applicants which are illustrative o the situation aced.

ocas ectd ladrs otrs

q1 q2 q3 q4 A q1 q2 q3 q4 A q1 q2 q3 q4 A

Middaymeal

8.0 20.0 14.0 6.3 12.0 62.0 40.0 54.4 72.9 57.5 30.0 40.0 31.58 20.8 30.5

SGRY 18.8 25.7 32.1 40.0 27.8 59.4 60.0 60.7 45.0 57.4 21.9 14.3 7.14 15.0 14.8

FFFW 17.1 13.8 12.0 29.4 17.0 78.1 79.3 76.0 58.8 75.0 4.9 6.9 12.00 11.8 8.0

SGSY 33.3 60.0 70.0 50.0 53.7 66.7 40.0 30.0 25.0 39.0 0.0 0.0 0.00 25.0 7.3

Source: Dev et al. 2007.

326 SeeCAG(2003a)IAYevaluation;Saxena(2006);Nayaketal.(2002)orAPestimate;Devetal.(2007).AlsoNair1999hasauseuldiscussionosomeothepoliticaleconomyaspectsotheprogram.




the other lumpy beneit is under SGSY.

Evidence o inormal payments to ocials o intermediaries is more anecdotal in this respect.Earlier studies by GoI o IRDP pointed to theprevalence o political inuence in accessingthe program, and deduction o oten signicant“commissions” (e.g., in West Bengal, deductiono 10 percent o the loan amount by banks as

“charges”; in TN, “speed money” and “incidentalexpenses” amounting to over 20 percent o loan amounts; in other parts o TN, request orbribes cited as the most common problem orbeneciaries).327 An important element o thisrelates to the weak emphasis on repayment,with an inormal agreement not to pursuerepayment being worth more than the bribeamount to beneciaries.328

incontrast,whilebriberyisconsistentlyreported

inaccessingsocialpensions,thescaleoitrelative

tothecumulativeowobenetsappearstobemuch lower. This can be seen rom Rajasthanand Karnataka data, where the average reportedpayment to ocials was only ` 100-200 in bothstates (variable by type o ocial), and just under` 500 or the small share o beneciaries reportingreliance on a middleman. However, also o interestis the share o rejected applicants who reportedinability to pay a bribe/middleman as the mainreason or not being on the program (16 percento reused applicants in Karnataka, and over 8percent in Rajasthan).

C. oPeRATionAl ASPeCTS oF

PRogRAm ADminiSTRATion

like many areas in service delivery in india, there are

a range of administrative challenges which have

inhibited the efficient and effective implementation

of programs. These go beyond the broader issues o institutional assignment o responsibilities or programimplementation, which are discussed in Chapter 6, and

targeting systems, which are discussed in Chapter 8.Some o the key issues include:

public expenditure and nancial management

issues

paymentsystemsorbeneciaries

programrecordkeeping

monitoring o program perormance and

evaluationoprogramimpacts.

a Faca aat ad SP CSS

prras

an important element of financing of sp css relates to public financial management and accountability (pfma) of programs. As noted, implementation issuescontribute to dierential cross-state perormance on SPCSS, and nancial management is an important aspecto this. The situation in this regard has evolved rapidly inrecent years, with SGSY, SGRY, MGNREG and IAY centraltransers now directly to DRDA/ZP level, bypassingthe state treasuries. This has some benets in terms o avoiding the sometimes signicant delays in approvaland unds release by state treasuries. At the same time,it introduces a new range o nancial management andaccountability challenges. Some o these are due to lack o clarity in FM/accountability procedures as they applyto DRDAs and PRIs, while others relate to limited FMcapacity as one goes down the system.

on the issue of fm and accountability, previous work of goi and others has raised a number of areas for improvement in pem of css, including: 329

states and districts are oten not aware earlyenough o the quantum o unds likely to be

receivedromGoIunderCSS.As a result, budgetplanning at both levels can be disconnected romactual allocations.

ow ounds problemshave otenbeenpresent

inthepast,drivenbyarangeoactorsincluding

GoIandstategovernmentapprovalprocesses, 330

number o intermediaries through whom unds

327 PlanningCommission(2000);WorldBank(1998);TaylorNelsonSoresMODE(2001)regardingTN.

328 SeeNayaketal.opcitregardingAP.

329 SeevariousCAGreports,andWorldBank(2005a).

330 Biharisanexampleostate-levelproceduresbeinganissue,withcumbersomeinternalproceduresdelayingundreleaseby4-6months,withattendantpressuretospendquicklytowardstheendoscal.SeeWorldBank2005.However,thisallswellshortodelaysoupto24monthsinstatereleasesidentiedbyCAGintheSGSYschemeevaluation.




ow, and ailure to keep up with advances in ITCor purposes o unds transer.

asCSSaretreatedas“grant-in-aid”orbudgetary

accounting purposes, release o unds by GoI

(and where relevant by states to lower levels)

are treated as expenditure, which weakens the

emphasis on accounting or und use, nancial

reporting and audit.State-specic analysisindicates issues in some programs with “parking”

o releases in various local accounts, so thatunds have not always been used or programpurposes when already accounted as spent.331 There is no real distinction in such cases betweenexpenditures and advances, an issue which isexacerbated by incentives or states to show“expenditure” to justiy urther und releases. This contributes to diculties in consolidatingyear-on-year expenditures, as most programsin most districts have oten signicant opening

balances. This practice does have benets in theace o sometimes slow releases early in budgetyears, but some cost in terms o transparency andecient planning.

in cases where unds ow directly to districtsoutside the state treasury system, the ramework or accounting, nancial statements and disclosurerequirements remains under-developed.

compliance with internal control procedures is

weak.Internal audit is generally weak in practice,despite nancial rules, and nancial reporting via

utilization certicates tends to be used more orduciary and control purposes than as eectivenancial monitoring o perormance. The RDMinistry has taken a number o positive steps inthis direction, with or example NFFW introducingconditions related to nancial and physicalperormance and monitoring to justiy urtherund releases.

external audit and reporting are weak. In thecase o programs where unds ow through statetreasuries, there is a large backlog on issue o

audit certicates by CAG, driven in large part byailure o departments to provide statements o expenditure. Where programs ow more directlyto the sub-state level, clarity on principles o audit

and lack o local level capacity to prepare nancialstatements are big issues. However, several RDprograms have improved transparency andavailability o program perormance inormationin recent years, or example putting detailedperormance inormation on websites (e.g.,or MGNREG in a number o states or socialpensions in Andhra Pradesh), and some programs

have developed systems which report auditcompliance.

while community level oversight o programexpenditures has become an important eatureo MGNREG through social audits in particular,institutionalizing the social audit process is inmost states only just nding its eet even in thatprogram (though with positive exceptions likeRajasthan), and wider adoption o the practiceunder SP programs has not happened or themost part.

in programs where PRIs play a more signicantrole, such as MGNREG, there is typically very

limited nancial management capacity at thelocallevel. This in turn is oten cited as a reasonor reluctance to transer program unds to PRIs,resulting in a classic “chicken and egg” problem(i.e., limited unds are handled by PRIs becausethey lack capacity, which they are unlikely todevelop so long as they manage limited unds).

there is no provision or reassignment o SP program unds across programs. Given the

program-specic nature o und release andreporting, there is no scope or states to reallocateunds rom programs which are not spending tothose which are. Thus, lower levels are expectedto be accountable or program perormance, buthave little control over either design or programmix at the local level.

While not applicable in all schemes or in all states in thesame measure, the above actors point to signicantissues in accountability o unds use in CSS, includingsocial protection programs. The results o such weak

accountability mechanisms can be seen in CAG’sperormance reports on specic SP CSS:

theevaluationoSGSY(CAG2003b)oundthat53.5

percentoexpenditurestestcheckedin157districts

331 Thevarietyo“parkingaccounts”isalsonotable,andnotconducivetotransparentFM,includingDRDAgeneralaccounts,personalledgeraccounts,civildeposits,currentaccountsanddeposit-at-callreceipts.




were diverted, misutilized, misreported, or

otherwise subject to spending irregularities332.

The largest problems related to parking unds inunauthorized accounts (not necessarily indicativeo maleasance, but at a minimum reecting lack o FM discipline), overstatement o expenditures(typically through ailure to adjust advancesagainst actual expenditure incurred), and

diversion o unds to other purposes. In addition,monitoring o repayments by borrowers was weak in a number o states (e.g., TN and Karnataka), anddeault rates on borrowings ranged rom 28 to62 percent in Chhattisgarh, Gujarat and Kerala.Finally, there was very poor planning in moststates or the program.

the IAY evaluation (CAG 2003a) ound similar

issueswithmisuseandmismanagementounds,

with 31.6 percent o all checked spending beingmisused in some way, including diversion or non-

program purposes, ination o reporting, parkingin unauthorized accounts and other actors.333On

the positive side, only a negligible portion was

consideredtobemisappropriated.

more work is needed to understand across states

the extent to which the above factors contribute to

relative expenditure performance and transparency

of public expenditure management in sp programs.334

Some o the actors noted – such as budget procedures,prevalence o ITC in nancial transactions, andcommitment to social audits - are very state-specic,

while others – such as generally weak FM capacity inpanchayats and accounting parked unds as “spent” –are more generic. To date, no clear pattern emerges toindicate that high income states have signicantlybetter PFM. This is probably due to the common anduniorm ramework ollowed across the country andgiven the act that the PFM reorms are still at a airlynascent stage. Nonetheless, a number o States haveinitiated measures over the last 4-5 years to strengthenthe treasury systems to obtain more timely nancialinormation, initiated accounting reorms in the ULBs,electronic transer o salaries, setting up systems tomonitor audit and other measures which provide goodmodels or other states to ollow.

b Pat ssts r bcars

apart from budgetary financing issues, there has

been some experimentation in recent years with

different modes of cash benefit payments to program

participants. At the same time, the picture in manystates reveals oten outmoded payment systems, andunder-developed reliance on ICT. Modes o benet

payment vary both across space within the country(and oten within states), and between dierent benettypes within states in some cases. They range rom cashpayment by panchayats in the presence o the public(e.g., MGNREG in some districts), to cash payments romblock treasuries, to money order delivery o benets viathe postal system (e.g., social pensions in many states),to direct deposits into bank or postal savings accounts. There are also non-regular orms o payment, includingtranser o MGNREG wages through eld assistants orin some cases contractors. Some important indicationsshould be considered in dening ecient disbursementarrangements: accessibility, cost, transparency o record-keeping and accounting, cash in transit saety,etc. For instance, while using banks could perhaps bethe most ecient and secure method o provision,inadequate banking network penetration may not allowor heavy reliance on that option. No payment methodcan be considered the preerred option in all cases, andeven apparently straightorward and low intermediaryoptions like savings account payment have been seen ineld work to be subject to “deductions” by sta.

india’s ict capacity suggests that governments could

be more proactive in experimenting with new benefit delivery models for sp programs. While some o themodels tried internationally (and now in some partso India) will require connectivity that more remoteareas currently lack, various E-governance initiativeso both central and state governments suggest that itwill increasingly become realistic to experiment withICT-driven payment systems (see Section D).

while not all options will be suitable or possible

in all areas immediately, all these solutions offer

immense opportunities, but also come with limitations

(e.g., mobile phone banking works when money has been deposited in a bank account, etc.). A combination

332 SeeCAGSGSYevaluation,SeeCAG(2003b).

333 SeeCAGIAYevaluation,SeeCAG(2003a).

334 AgoodexampleosuchadetailedanalysisorBiharisWorldBank(2005a).




B 7.2: iats pat ssts

While disbursing cash benets through the organized nancial sector channels is normally associated with strong operational advantage,lack o penetration o many remote and rural areas with nancial services has been posing a binding constraint on this mode o delivery.While Post Oce seems to operate in a greater number o locations in India, adequacy o its accounting mechanisms and capacity toassume new tasks remains to be evaluated. More generally, conventional nancial intermediaries are oten ill prepared to deal with masstransactions o very small amounts in remote, disbursed, and poorly educated communities. The Indian challenge is not unique. Both inIndia and abroad, a number o interesting and relevant innovations have been introduced to acilitate the eort o expansion o coverageo nancial services.

ATM machines, being a conventional means o cash disbursement, remain an expensive proposition or some communities. Research anddevelopment eorts have been ocusing on bringing the advantages o conventional nancial sector inrastructure to those communities.For example, lessons rom Bolivia where low-cost nger print enabled ATMs were introduced to service needs o the emerging MFI sector,indicate that rural, low-income communities are both willing and capable o using high-tech services as long as they serve their needs. The cost o such device in Bolivia is around $18,000 (http://www.digitaldividend.org/case/case_prodem.htm). In India, innovations inthe same eld seem to be ar more promising. With a prototype developed by a team lead by Dr. Ashok Jhunjhunwala o Indian Instituteo Technology in Chennai, a similar device may cost less than $2,000. It can unction as a stand-alone machine or be connected to a

computer terminal, operating on a standard ATM platorm or custom banking IT system. Accessing the account is enabled by a ngerprint recognition system. An ATM card or account number entry would be required to acilitate the matching process. Note that noexpensive smart card is required in this case. Finally this new device is capable o working in the conditions o temporary losses o electricpower supply. All o this is important or ecient service provision in otherwise inrastructurally lagging communities. The new machineshave already been piloted by the ICICI Bank.

Another interesting internationally emerging practice o providing access to nancial services in the remote communities is mobile

banking. In Kosovo, or example, when a new basic old age pension program was being introduced, bank branches were not operatingin some ethnic minority enclaves. A number o mobile banking units were licensed then to service those areas lacking normal bankingcoverage. The mobile units visited these areas on a regular schedule, providing benet disbursement services, until the banking sectordeveloped to suciently cover the whole territory o the province through normal branch operations (Gubbels et al, orthcoming).

Point o Service (POS) devices have been widely utilized, or example, in Brazil as an alternative to the conventional nancial servicesnetwork. Using a regular debit card, individuals can now access their accounts and perorm various nancial transactions, e.g., whileshopping at a local drug store. Local providers have to be licensed by the host commercial bank, have a telephone line, and be equippedwith a card-reading device connecting in a dial-up session to the remote bank’s server.

A nal and more recent innovation is mobile phone-based payment systems. While still in relatively early stages in developing countries,experiences in countries such as South Arica, Kenya and Philippines indicates that there may be signicant potential or exploring mobilephones as vehicles or payments o various kinds. The basic model involves topping up o mobile credits to a phone-holder in the relevantarea, who can then pass on the cash value o the top-up to beneciaries. Obviously such an approach has its limitations and would requirecareul piloting and evaluation, but the act that pilots such as that supported by Vodaone in Kenya appear to be working in challengingenvironments suggests that it is worth considering or experimentation in India.

o various solutions would likely be required. Box 7.2gives some details on existing experiments in India andinternationally, which may provide useul lessons.

an operational complement to conventional public mechanisms that has grown in recent years is reliance on the self-help groups (shgs) and pris in certain aspects of program administration. This has included

client services such as public awareness, beneciaryidentication, basic record-keeping, operation o FPS, and benet disbursement. SHGs can sometimesorganize themselves both at village and mandal levelsand open accounts at commercial banks, which canacilitate cash disbursement. PRI are also involved incertain programs/states in direct benet payment, withcash benets handed over in community meetings/

gram sabhas. While such initiatives have considerablepromise, an issue or uture consideration is the extentto which such unctions are uncompensated, which mayraise questions o their sustainability and replicability.

c Rcrd p

with the notable exception of mgnreg, record keeping

in most programs in most states is often outmoded,

and does not meet the needs and standards of modern

program administration. At the same time, bothMGNREG and the innovations o individual states (e.g.,Karnataka through its computerized treasury systemand Andhra Pradesh with its newly developed systemor the social pension program), suggest that rapid and




separate registers by type o social pension. Thesubstantial variation across districts also pointsto lack o enorcement and standardization o record keeping.

even where registers o beneciaries are

well maintained, there is typically a lack o

coordinationandcross-checkingacrosslevelso

thesystem.Field work or this report ound thatbasic program inormation (including beneciarynumbers) was at times dierent across levels o thesystem, indicating issues with data consolidationand comparability.

updatingandsimplecheckingobeneciarylists

isotenneglected.Beneciarylistsarerequently

notupdatedorlongperiods,despiterequirements

in several programs or annual verication

exercises. Just as signicantly, administrative dataare not in most cases used or “reality checking”

and duplication checks. A positive example o the benets o relatively straightorward (and lowcost) exercise in this respect is ound in Karnataka,where the Finance Department did an initialcheck by taluk o social pensioners against censusdata. This identied a range o obvious issues,including high shares o very old pensioners,taluks where the beneciary population orNOAPS exceeded the total elderly population(and conversely, where it was less than 5 percent),and other anomalies. This allowed or ocusedprogram audit by the Government o Karnataka.

The exercise was supplemented by running asimple algorithm or checking individual recordswhich seemed high risk or duplication. The latterexercise allowed an immediate reduction o 6 percent o duplicate or ghost records across20 taluks. This technique is described in Box 7.4.Such procedure helps to improve and make theinternal audit eort more directed. However itrequires at the minimum some basic electronicdatabase o records o active beneciaries.

lack o records o active members. What oten

is available is only a cumulative register o allbeneciaries who ever applied and/or were paidat least once rom the program. Cases o losseso eligibility or death would remain unaccountedin such program statistics, thereore signicantlylimiting monitoring and planning capacity.

Tab 7.11: Sar gPs ata rstrs sca psrs, Rajasta, 2006

Source: Dutta (2008)

Dstrct

A. A rstr

sca psrs % gPs

B. Sparat rstr

b sca pstp % c. A

Ajmer 16.6 100

Bundi 85.3 100

Dungarpur 4.7 0

Ganganagar 36.0 23.1

Jaiselmer 35.2 71.0

Jalore 44.0 23.1

Jhalawar 0 0

Jhunjhunu 0 0

A sapd

dstrcts

29.2 76.9

quite ar-reaching improvements in record keeping canbe achieved at manageable cost and despite capacityconstraints.

institutional transformation rather than a mere ict

upgrade should be seen as an objective of operational

modernization. An ICT project should be seen as anopportunity to comprehensively assess existing business

processes and based on the accumulated experiencesdene a new process that would help address variouslimitations and loopholes. It is the business process, notthe ICT, that should be a driving orce behind the eorto reorm.

there are a range of common challenges which sp

programs in much of india face. they include:

in some states (or parts thereo) and or some

programs,lackoanyrecordsatlowerlevelso

thesystem. This is or a variety o reasons, but acommon one is the lack o capacity and training,

and lack o clear guidance and enorcementto the lowest levels o the system, in particularGPs. An illustration is provided by the socialpension program in Rajasthan presented in Table 7.11, which shows the share o villagesby district maintaining beneciary registers. Insome districts, there were no GP registers at allo social pensioners in sampled blocks, and inthe 8 districts surveyed, under 30 percent o GPsmaintained a register. O GPs that did maintaina register, a urther quarter did not maintain




ragmentationorecordkeepingacrossprograms,

resultingininefciencies,inabilitytocross-check,

and a weak inormation base where action is

needed on a cross-program basis. The lack o linkages across program record-keeping deprivesthe system o some o the benets o economieso scale that might otherwise be possible. It alsocontributes to the situation where beneciaries

may have multiple identication numbers indierent parts o administrative data systems. Asimple but important example is the commondierence in the identication numbers o BPL households on the PDS ration card systemand in the BPL lists themselves. While a cross-program (and even broader) unique household orindividual identier is a Holy Grail o both Indianand other developing country policymakers, thechallenge is India is not so much technical as oneo departmental coordination and political will.

There are examples where eorts to promote data-sharing across departments are showing promise,e.g., Orissa’s pilots to consolidate reporting acrossdepartments in ood-based programs and link thisto an early warning system on “hunger blocks”.

lackocomputerizationorecordsonaconsistent

basis, particularly at sub-district level. Whererecords exist at lower levels o the system, theyare more oten than not paper-based. This is apractical option in some areas with unreliableelectricity, but nonetheless, many states lack aconsolidated plan or roll-out o computerizationin SP record-keeping. There are good examples o signicant progress, e.g., the MGNREG databasesestablished in several major implementing states.Beyond that, there are emerging examples o more sophisticated ICT applications such as AP’sintroduction o biometric technology in PDSration cards which has resulted in a signicantreduction in duplicate and bogus ration cards. The most notable is the RSBY program, whichrepresents a path-breaking application o smartcard technology to a public program or the

poor. This is discussed in detail in Chapter 5, anddiscussion o the experience o smart cards inpublic programs in India is provided in Box 7.3.

exploring greater reliance on outsourcing and

partnershipsinsotwaredevelopmentandother

aspectsorecordkeeping.While there are good

examples in CSS such as NIC’s development o thebasic MGNREG sotware, states have still to exploitthe ull potential o outsourcing arrangements onimprovements in record keeping, including allstages o ongoing operations like applicationscollection and benet payments, and later stepslike archiving. Deciding what is appropriateto outsource is obviously a policy decision

(including on issues like data ownership andaccess protocols), but India’s private sectorpotential in ICT suggests that there is more scopeor exploring such options. Good computerizedrecords are becoming an increasingly importantelement o program management in the ace o Right to Inormation Act requirements or publiclyavailable program perormance inormation.

capacity development or record keeping,

particular at blockand GP levels. The increasedrole o PRIs in SP program implementation has

created new demand or recordkeeping andother skills at local level. While several states arepursuing capacity building initiatives in this area,much more remains to be done.

there are also a range o program-specic

implementationchallenges. These are discussedin part in Chapters 3, 4 and 5 under individualprograms. Two examples are: (i) absence o available data under SGSY on repayment rateso beneciaries; and (ii) perennial challenges inthe veracity o muster rolls under public works

programs.

d mtr ad aat

Overall, monitoring o sp programs – like many others –remains driven by generation o input/output inormationmore suited to oversight than monitoring in a morepolicy-oriented manner, and rigorous impact evaluationis very under-developed and largely piecemeal.

with respect to evaluation, there is no example of

a major program for which reliable pre-program

baseline information has been collected. The mainevaluations conducted by GoI o major CSS are so-called “concurrent evaluations”, which are useul butmore in the nature o assessments o key perormanceparameters o schemes. At best – or example whendedicated surveys are commissioned – they may give




B 7.3: Sart cards pbc prras: eprc ad sss

The past ew years have seen an unprecedented rise in the use o IT and associated applications in the management and monitoringo Government programs in India. Though most eorts seem to be concentrated towards increasing eciency within Governmentdepartments, there are also eorts to increase outreach to citizens in order to acilitate access to government services. Smart Cards -plastic cards with a chip having the capability to store, maintain and manage data securely over time – are emerging as an importantmedium or enabling ofine transactions with a high degree o security. The ability to enable secure transactions without the needo online connectivity (unlike debit or credit cards) makes smart cards an ideal medium or use in a country which still has large areasvirtually unconnected by reliable means o communication to backend systems. Since smart cards allow only electronic transactions, an

incidental benet o using them is the ease with which authentic electronic data can be collected. The “smartness” o these cards lies not only the manner in which the embedded sotware is implemented, but also in the securitysystems that can be implemented using the encryption and authentication eatures available on smart cards. Deployment o thesecards in association with eatures like biometrics (primarily ngerprints) and context dependent sotware urther enhances their utility.Such a system can easily be used to veriy usage, authenticate a person and validate the transaction without any backend connectivityto servers or external source authentication, providing a completely secure and validated environment or ofine transactions. All thisand more can be done using personal computers, portable computing devices and even certain mobiles, using only a minimum o external or built in smart card reading/writing devices.

There have been numerous recent eorts in India using smart cards or ensuring an authenticated and validated delivery o governmentbenets to the beneciary. Pilots using smart cards include ration cards in Kerala, milk contributions by women in Dairy Federations inGujarat and Rajasthan, and providing subsidized medical aid to Bhopal Gas Victims and HIV/AIDS aected people. These pilots have usedthe cards or enabling ofine transactions, storing the data and empowering the holders. However, not every project involving smartcards has yet realized the true potential o the medium. In act they have even proved detrimental to the argument or use o smart cardsin some cases. Projects like the Fishermen ID card in Gujarat and the much touted driver’s license and registration Certicate have simplyused smart cards as photo identity cards and or storing certain data that is once personalised but never read or used.

Based on the lessons rom other projects, the recently launched Cashless Health Insurance card o the RSBY program o GoI (seechapter 8) has proved to be a success story or smart cards in delivery o Government benets. It has made use o the ull capabilities o the card and combined it with ecient and implementable re-engineered processes to set up a system that is continuously evolving,sel administrating and most importantly has made the process o utilizing ree medical acilities or the Below Poverty Line very easyto use. With the exception o RSBY, India still has a considerable way to go in order to realize the potential o smart cards in publicprograms. In addition using smart cards as a superuous tool to digitize existing processes, it is important to re-engineer processes toempower the beneciary, reduce the administrative eorts and redirect them towards the actual business o delivering benets.

An important aspect or the use o smart cards in India is prevailing standards. Fortunately, the National Inormatics Centre has alreadymade a major eort in this area and Smart Card standards (SCOSTA i.e., Smart Card Operating System or Transport Applications) arealready widely used and have evolved over time to keep pace with the growing demands and availability o new products. Internationalstandards already exist or smart card readers/writers. However, there is still a large gap in standards or other devices and associatedsystems like ngerprints, hence careul evaluation o requirements vis-a-vis available products is needed beore commencing a project

based on these technologies. Using SCOSTA as a distinguisher between kinds o smart cards is a common error. Commonly smart cardsmay be JAVA or Native based on their implementation (the JAVA card should not be conused with the open source operating system orsotware as this is slightly dierent) or they may be contact and contactless to provide a dierent platorm or usage o the card.

Source: Chopra 2009.

insights into the household level benet o programs inrupee or quantity terms. However, such evaluations haveyet to be designed in the public sector to explore thenet impact o schemes, in terms o robust comparisonsboth to the pre-program situation and/or to controlgroups o non-beneciaries with similar characteristics

to those participating. The skills to conduct such impactevaluations are available in India, and some evaluationshave been conducted outside government. Thereis increasing interest in robust impact evaluation in

Government, and MGNREG provides structures in itsgovernance or supporting research on program impactso dierent kinds.

with respect to monitoring, india has a tradition of

detailed reporting of key input/output indicators.

However, such data are used primarily or internalreporting and justication o uture unds rather thananalytically to assess key program weaknesses by issueand state.335 Unlike many developing countries, SP

335 Whiletherearesystemsorconcurrentevaluationoprogramperormancethroughvigilanceandmonitoringcommitteesatvariouslevels,eectivenessvariesacrossstates.Themonitoringmechanismincludes,interalia,aperormancereviewcommittee,periodicprogressreports,auditandutilizationcerticatesandeldmonitoring.




B 7.4: Cas std crss-cc r dpcat bcars karataa

The incidence o duplicates among active (“running”) records o social pensioners in Karnataka was checked by looking at the similarityacross records in the administrative database. To do this, a pattern-matching program was applied to quantiy the similarity between anytwo records in the les.a The program assigned to each record pair a “similarity score” between zero and one, ound the other record mostsimilar to each record in the le, and sorted the le according to this similarity, to put the record pairs most likely to be duplicates on top.

For instance, in one o the taluks (Malur,) the two records appear near the beginning o the sorted le with an assigned similarity o 1.00(they are almost identical, despite their dierent PPO codes,) meaning that they almost certainly reect a double payment. Further belowin the same le, the two records are assigned a similarity o 0.93 (they are alike enough to raise strong suspicion.) Even urther below, thepair with a similarity o 0.86, may or may not be duplicates – a human comptroller would probably suggest an audit.

Across the 20 taluks, 6 percent o the pension records have a likely duplicate in the administrative database. There was wide variationacross taluks: in two (Channarayapatna and Malur), over 10 percent o the records have a close enough active duplicate (similarity scoregreater that 0.80) to warrant an audit. Six other taluks have over 5 percent o records with a close duplicate. The incidence o duplicatesis correlated with the estimated coverage rate (the percent o elderly who benet rom the pension schemes), another indicator o hyperactivity in the application o the pension programs in the taluk.

PPo iD na: Addrss

O980744385 Venkatappa S/O Mutturayappa | Panamakanahalli-Kondashettihalli Post | Malur Tq-X-562116

O980744396 Venkatappa S/O Muthurayappa | Panamakanahalli-Kondashettihalli Post | Malur Tq-X-562116

O870725582 Muniyamma W/O Ramappa | Banuhalli Village-Tekal Hobli | Malur Taluk-X-562116

O870742919 Muniyamma W/O Ramanna | Banahalli Village-Tekal Hobli | Malur Taluk-X-562116

Source: Murgai 2006

Notes: The measure o similarity is based on Ratcli and Obershelp’s “Gestalt” algorithm. The program rst transorms the “Name” and “Address” eldsrom both records into phonetically similar texts, applies the algorithm to each eld pair separately, and nally computes the similarity score as anaverage.

programs in India do not lack or detailed data. However,there remain a range o issues with administrativedata used or monitoring, some related to the datathemselves and others to processes and uses o suchdata or policy purposes:

a rst shortcoming – noted in the FM section

above–isthatexpendituredataisanimperect

reection o actual spending at the grassrootslevel, and conates this with simple unds release(which may remain parked in governmentaccounts).

a second shortcoming in monitoring relates

to consolidation o monitoring data. Giventhe increase reliance on CSS und channelingthrough DRDAs, state budgets will requentlynot reect total spending in the state on specicprograms. Getting a consolidated picture o spending within a state by program is thereorenot straightorward.

a third shortcoming on some schemes is that

importantindicatorsarenotcollectedasamatter

o course, and/or not available in digestible

ormto state or central policymakers. Examples

include: (i) repayment rates on SGSY loans;(ii) the age composition o beneciaries; and(iii) actual days o employment generated underworkare schemes prior to MGNREG. While itis important not to overburden monitoringsystems with needless reporting, some o theseindicators go to the heart o getting a goodsense o program impacts and sustainability. This

points to a bureaucratic rather than strategicculture in deciding which monitoring indicatorsare given priority.

as noted above, the lack o data on activebeneciaries o the program seriously hampers anyeort o analysis o the program perormance.

ontheprocessside,theavailabledataarerarely

used or any purpose other than publication

in annual reports and to some extent audit

and budgeting. Both states and the centre lack

strategic planning oces in Ministries which usethe outputs o monitoring or assessing trends andpatterns in program perormance, and applyingthe insights to policy development. Monitoringdata are thereore under-exploited. Box 7.4 gives




a recent example rom Karnataka o how simpleuse o administrative monitoring data has beenput to good use.

a key development on program monitoring in recent

years has been involving the community itself in

monitoring. With a strong push rom civil society, GoIand states in recent years have begun to recognize

the potential o communities as agents or monitoringprogram implementation. The extent o this practice ishighly variable across states, and in many cases is a toolwhere the rhetoric o possibility has to date outstrippedpractice. Nonetheless, progress is being made. MGNREGpresents the most developed example to date o aprogram which has an explicit community monitoringrole, through the mandate o “social audits”. In theMGNREG guidelines, social audit is viewed as a continuousprocess o community monitoring intended to cover allaspects o program implementation. The method buildson prior experience rom NGO initiatives in India, in

particular the work o Mazdoor Kisan Shakti Sangathan(MKSS), a Rajasthan NGO which pioneered a practice o

junsunwais or public hearings on program perormance.More details o that experience are provided inBox 7.5, as well as insights rom initial experience inAndhra Pradesh on social audits or MGNREG. To date,a requirement o social audit has not been includedunder any other CSS SP program, though AP is lookingto include such a process as a standard element o all RDprograms in coming years.

while the community monitoring process shows

potential - particularly when empowered through

strategic use of the rti act – practice is still evolving

on how to make community monitoring a systematic

process, rather than a “one-off” exercise. To someextent, the reliance on jun sunwais is a reection onthe weakness o community institutions such as thegramsabha. A challenge looking ahead will be trying toincorporate some o the good practices o jun sunwaisinto regular institutional mechanisms at panchayat level.

in addition, the government is increasingly partnering with ngos and research institutes to monitor the

B 7.5: Ct tr sca prras: eprc r Rajasta ad AP

MKSS (Organization or the Power o Workers and Farmers), a Rajasthani NGO, organized a series o junsunwais or public hearings onperormance o public programs targeted to the poor. The meeting is an open orum which aims to include community members, socialactivities, lawyers, media and public ocials. At the meeting, public documents on program perormance are read out, and participantsare encouraged to ask questions and give examples o their own experience in program operation in reaction to the ocial records.Initially, this approach was resisted by many ocials, who objected that ocial documents could only be audited by ocial auditors. Insome cases, court orders were sought to avoid sharing inormation through such an extra-judicial mechanism.

While the junsunwais meeting has no ocial mandate and hence sanction authority, it has proved a useul tool or “naming and shaming”

in order to improve program perormance. Some ocials have returned unds, others have quit or been suspended, and arrests weremade in some cases. On the policy side, the process resulted in amendments to the Rajasthan Panchayati Raj Act to allow public accessto all documents under anti-poverty programs, and the development o social audit guidelines. The process has also now been extendedto some urban areas such as Delhi. The methodology has also been used intensively through “padyatris” on the MGNREG, and MKSS hasconducted two trainings or participants rom other states in the social audit methodology.

Building on the Rajasthan experience and with the mandate o the MGNREG guidelines, the state o AP has taken a proactive role inpromoting social audits in the districts where MGNREG is operational. The Department o RD and Panchayati Raj set up a social audit wing,which trained district resource people, who are training village level organizers. Initial social audits have now been documented in all 13districts in the state where MGNREG is implemented. This has also involved widespread NGO participation. Training has been provided orvillage level workers in social audits processes. For example, in Anantpur district, 1200 workers were organized in team o 10-13 memberscovered 38 mandals in a 10 day period, and then conducted a mandal-level “social audit orum” to discuss main ndings.

The social audit process involves several steps ater training: (i) teams are given a checklist o key implementation issues; (ii) key nancialreports, muster rolls and other documentation are procured rom local ocials under the RTI Act; (iii) a household level survey is done;(iv) visits are carried out at work sites, and a village meeting is held to share inormation and discuss problems ound; and (v) a mandal level

social audit orum is called where ocials and the community attend and ocials are asked to explain discrepancies in implementation.While managing these processes has been challenging, the interaction between communities, PRIs and ocials is generally considereduseul, and has resulted in dismissal o lower level eld sta in a number o cases. At the same time, the social audit has generally beenbetter at dealing with small level grievances than systemic issues, and it remains to be seen how sustained the process and its impactswill be as implementation continues.

Sources: OHCHR/UNDP workshop; Samji and Aiyar.




performance of various programs in the field. Mostnotably, MGNREG has introduced systems or eldmonitoring o the program using national monitors aswell as third party monitoring by independent agencies.A network o institutes has been established orindependent concurrent monitoring o the program andhas generated a body o research on the perormance o MGNREG in the eld across states.336

D. ConCluSionS AnD

ReCommenDATionS

with a myriad of programs and plans to introduce

new schemes, expand coverage and consolidate

existing schemes, it is an important time to assess

relevant experiences and identify both good and bad

administrative practices. While India may not havethe advantage o other countries o running a well-

organized centralized machinery o administrationo public benets, some strategic priorities couldbe dened to achieve better benet delivery andtransparent operation. In particular, policies seekingharmonization, portability, and transparency inbenet provisions, and otherwise ensuring minimumoperational standards, should be designed, endorsed,and promoted. Capacity to regulate and supervisevarious benet providers and their intermediariesshould be gradually built. Furthermore, a rm standcould be taken on the policy o registration andtracking o beneciaries o the public programs.From the discussion above, and rom the insightso many GoI and independent studies on programperormance o CSS SP programs, some more specicrecommendations emerge:

o aarss ad trac

while program awareness and outreach is an

inherently difficult process in a country of india’s

size and diversity, experience from states and for

specific programs such as mgnreg indicates that much

can be done if there is sufficient will. An improvedawareness and outreach strategy would likely involveseveral elements:

developing a better picture o what are the

key inormation sources o the poor on public

programs, including what types o inormation

theygetromwhichchannels. The limited surveyinormation indicates that typical governmentmedia campaigns, web-based inormation, andinormation rom administrative ocials are notthe channels through which the poor nd out

about programs

providing in SP program budgets or sustained

awarenessraisingbythirdpartieswherepossible.

Field work or this report indicates that programawareness dissemination is not a one-timeactivity, but a product o repeat contacts andlocal sources o reliable inormation. This tendsnot to be the approach o most IEC campaigns orSP programs.

developing a more diverse range o IEC

strategies or program awareness raising. Thiswould involve not only a more diverse rangeo actors as tools o inormation dissemination(including NGOs, SHGs, youth groups, socialand religious leaders), but also a more diverseset o inormation tools (including visual mediasuitable or non-literate audiences, televisionand radio campaigns which more creativelyengage audiences rather than simply presentingprogram guidelines, use o community, etc).

deepeningthe useosocialauditsnot only as a

toolorprogrammonitoring,but as a source o program inormation dissemination.

o t appcats prcss review program eligibility criteria on several

key programs with a view to simplication o

eligibilityprooandunderstandingothepublic.

One aspect o this would be exploring avenuesor reliable third party verication o certain actswhere documentary evidence is not available orcostly to gather.

proactive exploration o how SP programscan reduce transactions costs o program

application linking up with the range o ICT

336 ThisProessionalinstitutional Network(PIN) includesIndian Instituteso Management(IIMs), IndianInstituteso Technology(IITs),National Instituteo RuralDevelopment(NIRD),AdministrativeStaCollegeoIndia(ASCI)andothers.




initiatives such as rural business kiosks and

other village-level connectivity initiatives. Theemerging examples in other contexts such asspreading availability o land records throughrural E-kiosks (e.g., Bhoomi in Karnataka) andavailability o market inormation (e.g. ITC’sE-chaupal initiative) suggest that concertedeort between SP departments and their ICT

department colleagues could pave the way or amajor contribution to simplication o programapplications, and signicant cost reductions orapplicant households (not to mention loweropportunities or undesirable middlemen).

encourage–inecessarywithpublicsubsidyona

contracting-outbasis–NGO,SHGandotherCBO

intermediationtoacilitateprogramapplications,

and increase the use o camp approaches to

registration by the administration itsel. Giventhat the culture o reliance on middlemen is

so prevalent, it seems sensible to encouragethe eorts o middlemen (or more likely“middlewomen”) who are more likely to have theinterests o the applicant at stake.

in terms o program oversight, it seems sensibleto target IAY and SGSY or particular scrutiny,including use o social audits.

share the experiences o states which are pilotingbiometric and other ICT advances to reduce raudand human error in the beneciary recordingprocess.

Faca aat337

some o the needed improvements are in the

domain o states, and they will need to ollow

the lead orecent reormers inareaslikepublic

expenditure management rules and expansion

o ICT in release and tracking o unds. Theywill also need to acilitate sustained FMcapacity development in PRIs i the intentionso decentralization o SP programs are to be

realized. This will also require in most states amore elaborated nancial accountabilityramework or PRIs and sub-state implementationagents.

otherreorms– suchas accountingor SP CSS

resourcesas “spent” when they have not been

and application o accrual accounting – will

require coordinated eorts o the centre and

states on reporting processes that require

reliable inormation on physical and other

outcomes o “spending”. The example oMGNREG reporting in some states provides a

good model which should be institutionalized.A rst step in coordinated eort between thecentre and states could be clear agreement onthe necessary skills needed or FM at dierentlevels o the system or SP programs (and morebroadly), and agreement on action plans orensuring adequate skills.

as part o strengthening the accountingand nancial reporting ramework, it will beincreasingly important in SP CSS which routethrough DRDAs to develop standard nancial

reporting rules or societies, which wouldsubsequently be reected in the GFRs or GoI andthe states. This work would most sensibly be ledby CAG and ICAI.

addressthebackloginexternalauditsoSPCSS,

and a more competitive process o selection o

thirdpartyaccountantsresponsibleorauditing

societies. All Ministries implementing SP CSSshould also post the ndings and actions takenon audits on websites.

equally - and more challenging in terms o

bureaucratic culture – there is a strong need todeepen the uses to which nancial inormation

on programs is put, and hence to move awayrom the simple input/output culture o nancialreporting which prevails in most CSS.

nally, the positive development o increased

citizen accountability or SP unds use seen in

MGNREGshouldbeinstitutionalizedovertimein

allSPprograms,with basic initiatives like postingo all program releases and uses, greater relianceon social audits, and posting o beneciary lists

and program rules in plain language. A numbero these are natural corollaries o the Right toInormation Act, but there ull potential remainsto be exploited in most states o India to date.

337 SeeWorldBank(2005a)ormoredetailedrecommendations.




Pat ssts ad rcrd

p

reforms of payment systems can take a range of

forms, both technology-based, and where that is not

possible, with community monitoring of payments.

some of the technological options include:

low cost ATMs developed at a raction o cost o the conventional machines, equipped with ngerprint identication and long-lie batteries, canacilitate cash distribution in remote areas.

point-o-service (POS) devices installed in localshops and gas stations can use regular telephonelines to process on-line cash disbursementtransactions, or – in the case o PDS – acilities ordebiting the monthly ration.

special mobile branches could make conventionalbanking more accessible, enabling regular and

scheduled visits in the remote communities.nally, mobile phone banking is an emergingphenomenon that utilizes comprehensivepenetration o the new communication networks.

more generally, cost recovery mechanisms of different

operational alternatives to the conventional models

of service provision should be further studied.While some models are quite promising, their nancialviability as localized stand-alone solutions remains aconcern. Clever solutions may simply need to be scaledup in order to reach the break-even point o economic

operation. Furthermore, strategies enabling synergiesacross multiple programs should be urther explored.For example, while the smart card technology maybe a costly solution i utilized only by a single benetprogram338, using it as a common platorm or multipleproducts (e.g., various benet and insurance schemes)may well help to make its application a sound economicproposition.

with respect to record keeping, the experiences of more

progressive states such as karnataka offer lessons

for others. Some o the issues or attention include:

training (and subsequent monitoring and

enorcementocompliance)orGPsandblocksin

maintainingappropriateregistersobeneciaries.

As one o the challenges in this work with becapacity constraints at both levels, it could beuseul to explore options or supplementingthis in non-costly ways, such as providing skilledworkers rom MGNREG as temporary assistants tothe gram sewak.

at the state and district level, development o

simple verication exercises which will allow program oversight to ocus on high-risk areas.

Even available monitoring data oten throws upobvious anomalies, but is typically not used orthis purpose.

at central and state levels, improve cross-

departmentalcoordinationonarangeorecord

keeping issues, starting with a strategy or

convergenceobeneciaryidenticationnumbers.

Even where systems remain parallel or the shortto medium term, Collectors and BDOs shouldencourage greater cross-program inormationexchange or programs with common elementssuch as being ood-based or child-ocused.

as a condition o CSS receipts, the centre could

insist that a computerization strategy and roll-

outplanorSPprogramsbedeveloped,including

atrainingplan. This seems a bare minimum ormovement towards a modern system o recordkeeping.

encouragestatestobemoreproactiveinexploring

outsourcing possibilities on development o

program record-keeping sotware. India oersa particularly promising environment or sucheorts, though there would remain an importantrole or the central government in ensuringconsistency in basic design eatures, and thuscomparability o data rom dierent states.

mtr ad eaat ensure that any major SP program has a pre-

programbaselinedone, and that impact evaluationsalso include control areas where easible.

explore replicating the model o MGNREG with

provisionormorerobustresearchandevaluation

nancedromtheprogrambudget.

338 ThemarginalcostoonesmartcardissuedinIndiaisquotedasbeinginthe$2-$3range.



C HA P T

E R

8Targeting MechanismsBPL and Beyond



CHAPTER-8: Targeting Mechanisms – BPL and Beyond 1

targeted programs have naturally to concern

themselves with identifying who are the poor, and

how well interventions reach them. Given scalconstraints, they also oten need to ensure that the non-

poor do not benet unduly rom interventions whichare intended to be targeted. For nearly all its major anti-poverty programs, India seeks to target the poor as theexclusive or major beneciaries o public interventions.

this chapter examines the main ways in which public

programs in india try to target the poor, how effective

they are in achieving their objectives, and options for

improving targeting mechanisms. The structure o thechapter is as ollows: Section A outlines the dierentmeanings o the term poor (in program terms, “belowpoverty line” or BPL or short) in social protection (SP)

policy in India. Section B then has a discussion o thedominant targeting mechanism or SP programs – theBPL census system – and its shortcomings. While povertyincidence is estimated by the Planning Commissionevery ve years based on the “thick” NSS data, the

identication o poor households is done through aseparate process by the Ministry o Rural Developmentor rural areas; the process or urban areas seems tobe more ragmented with various state departments

maintaining dierent beneciary lists. Section C thenlooks at comparative targeting perormance across SPprograms which employ dierent targeting methods.Section D looks at alternatives to the indicator-basedBPL method. The next section assesses the targetingperormance o these dierent methods. The chapterconcludes with a discussion o options or improvingtargeting in SP programs, including a discussion o theproposed 2009 BPL methodology as described in theSaxena Committee drat report. While the chapter ndssignicant shortcomings in the BPL system, targetingo SP programs is an inherently dicult process in a

country where a large share o the population clustersaround the poverty line, and thus the observabledierences between “poor” and “non-poor” householdsare oten not easy to measure and may be small inabsolute terms.

Targeting MechanismsBPL and Beyond

Chapter–8




A. whAT DoeS “PooR” meAn

in TeRmS oF PuBliC

PRogRAmS?

there are four major definitions in the sp system of

the term “poor” or “below poverty line (bpl) people”

in india:

peoplewhoare belowthe state-specic poverty

lines determined by the Planning Commission,

based on the NSS “thick rounds” which areconducted every 5 years or so. These estimatesare primarily or planning and scal allocationpurposes, and are important or allocation o centrally sponsored anti-poverty programs.

peoplewhoareontheso-called“BPLlists”based

onperiodicdedicatedsurveysbytheMinistryo

RuralDevelopment(orruralareas). These use astandard national set o criteria or determininghousehold living standards. These lists distinguishprimarily between APL (Above Poverty Line)and BPL (Below Poverty Line) households, andthe main purpose is ranking o households ordetermining eligibility or various anti-povertyprograms targeted to the poor. This system hasbeen in place since 1992, with changes in themethodology or determining eligibility sincethat time. Though prepared by the Ministryo Rural Development, this BPL list is used ortargeting programs (such as RSBY) administered

by other Ministries as well. There is no comparablecentrally directed process across programs oridentiying urban poor households; instead,various departments identiy poor householdsusing dierent methods and maintain separatebeneciary lists. “A working group at the PlanningCommission is currently debating the design o an urban BPL methodology”.

peoplewhohavea “BPLrationcard”.Thisreers

to ration cards, issued by the state Food and

CivilSuppliesDepartments,whichdeterminethe

amount and price o grains which householdscan access rom the PDS system.339 Since the1997 reorms o PDS, households may havean APL, BPL, Antodaya (AAY) or Annapurnaration card, depending on their poverty level.

The card also has many other unctions, suchas an identity card, and a basis or establishingresidence and even citizenship in some cases. The determination o ration card status is donein dierent ways across states. In several states(e.g., AP and UP), the Food and Civil SuppliesDepartment conducts its own periodic surveyto determine the level o household welare. In

others (e.g., HP and Rajasthan), the Food andCivil Supplies Department relies on the “BPLlists” as a basis or issuing ration cards. In others(e.g., Bihar), this movement rom having separatebases or determining PDS ration card statusand BPL listing or other anti-poverty programpurposes towards integration o the two listshas been airly recent. This has been stronglyencouraged or all states as the 2002 BPL listswere being put in place and more recently in theSaxena Committee drat report on the proposed

methodology or the 2011 BPL Census. people who are considered “destitute” or

otherwise poor or vulnerable. This includesmembers o specic social groups who receiveeither categorically targeted programs dueto their high average poverty rates or socialexclusion. The primary groups in this categoryare ST and SC populations, but in specicprograms may include other poor and/orvulnerable groups such as disabled people,widows and girls.

in terms of policy, there is therefore a divergence in definitions across departments, states and

programs in what the term “poor people” or “below

poverty line people” means. This divergence spills overbeyond social protection programs, as other sectorsuse one or other denition o “below poverty line” orprovision o benets and/or exemptions (e.g., in health,BPL households are eligible or institutional birthallowances, subsidies on participation in some publichealth insurance schemes, and exemptions on serviceees in hospitals and some other health acilities; in

education, many central and state stipends are basedon social category). There is also requently a divergencebetween how policymakers and unctionaries usethe term “BPL” and how dierent segments o thepopulation denes it. Based on research or this report,

339 AnotableexceptionisTamilNadu,whichcontinuestohaveaPDSsystemwhichisnottargetedaccordingtoaBPL/APLdivide(seeChapter3).




the most commonly understood meaning o the termor the general population is either possession o acertain type o ration card, or a more undened senseo destitution.

there has often been a significant mismatch between

aggregate numbers defined as poor for planning

and fiscal allocation purposes and numbers who

are poor according to other methods. The mostnotable example is the dierence in the aggregatenumbers and state-level patterns o poverty in PlanningCommission terms and those or BPL ration cards. Thiscan be seen in Table 8.1, which compares the state-levelestimates o poor households according to the PlanningCommission and the number o BPL householdsidentied by state governments or PDS. Two thingso note are that aggregate numbers o BPL ration cardholders exceed the ocial estimates o the poor (bynearly three quarters), and that the dierentials diersharply across states. Some states such as West Bengal,

Bihar, Chattisgarh, Jharkhand, Rajasthan, Maharashtraand Madhya Pradesh have coverage o ration cardsonly slightly more than the ocial poverty rate. OnlyUttarakhand has under-coverage o BPL ration cardsrelative to ocial poverty rates. In contrast, the majorityo states – most notably Andhra Pradesh, Karnataka,Gujarat and Orissa – have BPL ration card beneciarieswhich ar exceed ocial poverty estimates. Tamil Nadumakes no distinction between BPL and APL rationentitlements. In addition, there are discrepanciesbetween ration card holding using administrative

and survey-based data. Thus, the administrative dataindicates that 40 percent o all households possess aBPL/AAY ration card.340 The corresponding gure rom2004/05 NSS household data is 25 percent.341

at the same time, there have been efforts – as

yet incomplete and variable across states – to

promote greater convergence between the different

administrative mechanisms for identifying the poor.

An example in several states is the eort to developcommon lists o BPL households or PDS and other SPand social programs, at least where the target groups

are similar. However, this initiative has not begun in anumber o large states to date. Another was the attempt

to promote numerical convergence between PlanningCommission aggregate poverty estimates by state andthe estimates o the poor generated rom BPL lists.342 Thiseort was diluted in practice due to political economychallenges so that it is unclear how eective thisconvergence was. This, however, does not necessarily

mean that all programs would need to target the samegroups. Programs such as educational scholarships

Stat

Prsds

ata1

hhs tBPl/AAy

rat cards

ata2

BPl/AAyhhs as

tps

pr hhs


Assam 10.3 18.9 1.84

Bihar 61.1 71.6 1.17

Chhattisgarh 17.9 19.2 1.07

Gujarat 17.3 46.3 2.67

Haryana 5.6 8.1 1.44

HimachalPradesh

1.3 3.0 2.33

Jharkhand 20.7 24.0 1.15

Karnataka 27.3 71.4 2.61

Kerala 10.5 20.2 1.93

Madhya

Pradesh

45.2 52.1 1.15


Orissa 37.5 48.5 1.29

Punjab 3.9 7.1 1.85

Rajasthan 22.3 23.1 1.04

Tamil Nadu 34.2 168.3 4.92


Uttarakhand 6.8 5.0 0.73

West Bengal 41.3 47.3 1.15

Major states 546. 9 955.0 1.74

Tab 8.1: Dscrpacs bt drtstats “BPl” sds rra adrba cbd

Notes: All gures in lakhs. Tamil Nadu makes no distinction between BPLand APL ration entitlements and the number above includes both.

1. Planning Commission poverty estimates based on 2004/05 NSS data. The national poverty rate is 28%. 2. As identied under PDS by stategovernments in 2003/04 (dates dier somewhat across states).

Source: Planning Commission; Ministry o Food, Public Distribution andConsumer Aairs.

340 Calculatedusing2005projectedpopulationandhouseholdsizeestimatesromthe2001Census.

341 Thiscorrespondsto30percentoruralhouseholdsand11percentourbanhouseholds.

342 SeeSaxena(2006).




that target SC/ST children could use the inormation inthe common database to continue targeting on castealiation rather than vulnerability status.

even more worrying is the lack of overlap across

administrative lists, i.e., the same households are

not necessarily identified as bpl even when the

underlying notion of poverty or vulnerability is

the same.For instance, a study in Bangalore revealedthat there were three lists o households identiedas BPL by three dierent departments (including orPDS) in three notied.343 The study ound discrepanciesin aggregate numbers, ranging rom 1841 amilies asper the Food and Civil Supplies Department, 640 bythe Directorate o Municipal Administration and 668amilies according to the Karnataka Slum ClearanceBoard. What was striking was that the number o amilies that were common to all three lists wasonly 6 percent!

B. The 2002 BPl

meThoDology344

The BPL Census is the primary administrativemechanism used or targeting in several governmentprograms, including rural housing support (IAY),subsidized rural credit (SGSY) and, in some states asdiscussed above, also subsidized rations (PDS), aswell as other social programs and services targeted tothe rural poor.345 However, the 2002 BPL list has been

the subject o considerable criticism. This sectiondiscusses the design and perormance o the 2002BPL census methodology. The analysis in this chaptersuggests that this method is a weak mechanism oridentiying the poor. While the BPL score index isgood at distinguishing the bottom 10 percent romthe top 20 percent o the population, it is unable todierentiate between the poor and non-poor in thevicinity o the poverty line. Relaxing these assumptionsand expanding choice o indicators improves dejure targeting outcomes somewhat, but is still not as

eective as a random assignment o BPL status amongthe bottom 40 percent o the population. Fine-tunedindicator-based targeting is an inherently dicultexercise in a context where the characteristics o thenon-poor do not dier signicantly rom those o thepoor.346 Finally, this section evaluates deacto targetingoutcomes or ration card holding in the absence o data on targeting outcomes o BPL lists and because

the most common understanding o “BPL” is linked tothe possession o ration cards.

a dejure tart ds t BPl

css

in 1992, the ministry of rural development, goi,

undertook the task of identifying “below poverty

line” (bpl) households in rural india through periodic

(approximately five-yearly) village censuses. the

first such census used self-reported household

incomes to identify bpl households. Households withannual income below ` 11,000 were classied as poor.However, given the diculties o measuring income,the sel-reported income approach was abandoned inthe 1997 BPL census. In the modied ormat, a set o ve questions were asked o every household in thevillage – whether they: (i) operated size o land wasmore than two hectares; (ii) owned a ‘pucca house’as dened in the Population Census; (iii) had annualhousehold income o more than` 20,000; (iv) ownedany o the ollowing consumer durables: television,

rerigerator, ceiling an, motor cycle/scooter and threewheelers; and (v) owned arm equipment such astractor, power-tiller, or combined thresher/harvesters.I households answered in the armative to any oneo the questions, they were declared to be “visibly non-poor”. This was done to identiy “visibly poor” rom“visibly non-poor” households in the village relativelyquickly and in an inexpensive manner. Visibly non-poorhouseholds were excluded rom the more extensiveBPL survey that collected inormation on consumptionexpenditures using an abridged budget-expenditure

343 Ramanathan(2005).

344 ThissectiondrawsextensivelyonJalanandMurgai(2008),preparedasabackgroundpaperorthisreport.

345 Nocomparablecensusexistsinurbanareasandtheidenticationopoorhouseholdsarecarriedoutseparatelybydierentdepartments,e.g.,theFoodandCivilSuppliesDepartmentorPDS,UrbanDepartmentorSJSRY,etc.

346 AnalysisoNSSdataindicatesthatthereislittledierenceinthestandardolivingbetweenpoorandmiddleclass(median)households,atleastinthetypesoindicatorsthataremeasuredbytheNSS(WorldBank,2011).




across India, the BPL score misclassies nearly

hal (49 percent) o the poor as non-poor, and

conversely,49percentothoseidentiedasBPL

poorareactuallynon-poor.

thereisalsostrongvariationacrossstatesinthe

targetingerrorsimpliedbytheBPLmethodology,

though targeting errors are signicant in all

states.Even in the “best” state (Orissa), 32 percento the poor are misclassied while in the “worst”state (Andhra Pradesh), three out o every ourpoor people are misclassied as non-poor basedon the BPL indicator.

there are also notable variations within

states (based on NSS regions) on the scale o

misclassicationo the poor. This nding – notshown in the table below- is simply an extension

o the above point on cross state variations, butis quite noticeable within several states, includingAssam, Bihar and Orissa.353

Findings rom 2004-05 data imply similar

magnitudes o under-coverage and pattern

o variation across states. The BPL scoremisclassies nearly 46 percent o the poor asnon-poor using 2004/05 data. Under-coverage

higher in most states, with the exception o Assam, Punjab and West Bengal, in 1999/2000relative to 2004/05.

it is also clear that the problem of exclusion of

the poor (and therefore, inclusion of non-poor)

in the bpl method tends to be greater in the richer

states (see gure 8.1). At one level, this is a source o consolation, as SP policy would be expected to be moststrongly concerned with the poorest states. However,this remains a cause o concern, both with respect tothe eciency o public programs which are based on

the BPL mechanism, and o equity, given the still highexclusion o the poor by the BPL criteria even in thepoorest states.

Tab 8.2: Prt rat ad tart rrrs t 2002 BPl casscat, b stat

Notes: Under-coverage is the percentage o the poor population wrongly classied as BPL non-poor. Rural poverty rates are estimated using the ocialPlanning Commission state-specic rural poverty lines or 1999-00 and 2004-05. Note that the poverty rates in the two years are not strictly comparable(see Chapter 1).

Sources: Jalan and Murgai (2008).

Stat

1999-00 2004-05

Rra Prt Rat % udr-cra % Rra Prt Rat % udr-cra %

Andhra Pradesh 10.5 76.9 10.0 74.4

Assam 40.3 41.6 22.0 51.8

Bihar 44.0 40.6 42.5 35.9

Gujarat 12.4 64.9 18.8 51.0

Haryana 7.4 73.8 13.3 60.1

Himachal Pradesh 7.5 74.5 10.5 56.7

Karnataka 16.8 64.2 20.6 56.1

Kerala 9.4 72.6 13.1 67.2

Madhya Pradesh 37.2 43.8 36.9 34.8

Maharashtra 23.2 54.4 29.6 45.0

Orissa 47.8 32.1 46.9 31.2

Punjab 6.0 72.4 9.0 74.4

Rajasthan 13.5 63.8 18.3 59.9

Tamil Nadu 20.0 64.5 22.8 53.5

Uttar Pradesh 31.1 51.9 33.2 47.0

West Bengal 31.7 46.3 28.4 48.2

16 Major States 27.0 49.1 27.3 45.8

353 TheresultsbyNSSregionarepresentedinJalanandMurgai(2008).




on the positive side, targeting errorso the BPLmethoddecreasesharplywithhigherpercapita

incomesabovethepovertyline. This implies thatthe BPL indicator works relatively well in excludingthe more rich amongst those above the povertyline. Inclusion errors are largely concentratedamongst households that are only marginallyabove the poverty line. Targeting errors in thericher expenditure classes are, by comparison,marginal.

however – and more worryingly - the BPL

mechanismisproblematicbelowthepovertyline.

Even though targeting errors tend to decreasewith distance rom the poverty line, errors o exclusion are high even amongst very poorhouseholds. For example, over 20 percent o thepopulation with expenditures which are hal thepoverty line are misclassied as non-poor. In thepoorest decile, a large share o the population(around 37 percent) is incorrectly classied asbeing non-poor.

targetingerrorsarehighestintheneighborhood

othepovertyline. Thus, at the third decile, the

BPL indicator misclassies 62 percent o the pooras BPL non-poor and 33 percent o the non-poorare classied as BPL poor.354

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

0 10 20 30 40 50 60 70 80 90 100

Rural Poverty Rate, by state (%)

U n d e r c o v e r a g e b y s t a t e ( % )

NSS 55th NSS 61st

Figure 8.1: BPL misclassication o the poor and ruralpoverty across states

Source: Jalan and Murgai 2008. NSS 55th round reers to 1999/200 data; NSS61st to 2004/05 data.

looking at the household level,the effectiveness of the

bpl method varies significantly across the distribution

in terms of how well it targets, both in including the poor and excluding the non-poor. Figure 8.2 illustratesthis; Table 8.3 also reports poverty rates (expenditurebased and BPL score based) and under-coverage andleakage rates by per capita expenditure classes. Someimportant observations emerge:

Figure 8.2: Predicted targeting errors in the BPLclassication (1999/00)

Note: The height o the curve captures the extent o targeting errors madeat dierent points in the distribution.

Source: Jalan and Murgai 2008, using 1999/2000 NSS data.

0

.2

.4

.6

.8

% o

f h o u s e h o l d s m i s c l a s s i e d

D e n s i t y o f P e r C a p i t a E x p e n d i t u r e s

-2 -1 0 1 2

Log reported consumption per capita, normalized by poverty line

BPL Expenditure distribution

Tab 8.3: Prt rat ad tart rrrs t BPlcasscat, b pdtr cass 1999/00

Notes: Leakage is the percentage o the BPL poor that is actually(expenditure-based) non-poor.

Source: Jalan and Murgai 2008, using 1999/2000 NSS data.

epdtr

cass

Prt Rat

PaCss

Tart errrs2002 BPl css

epdt-

r basd

BPl scr

Basd

udr-

cra laa

Poorest 10% 100.0 63.2 36.8 –

2nd decile 100.0 47.6 52.4 –

3rd decile 69.7 36.2 62.2 27.3

4th decile 0.0 31.9 – 100.0

3rd quintile 0.0 23.0 – 100.0

4th quintile 0.0 14.3 – 100.0

Richest 20% 0.0 8.0 – 100.0

Total 27.0 27.0 49.1 49.1

354 Thethirddecileothepercapitaexpendituredistributioncorrespondstotherange(-0.1to0.3)on thex-axisinFigure7.2.Theshort rangearisesbecauseothelargemassopeopleconcentratedveryclosetothepovertyline.Bycontrastvaluesbelowandupto-0.26onthex-axiscorrespondtothepoorest10percentothe

population,withthemassothepopulationtowardsthetopendothatrange.




in sum, the targeting errors of the bpl design imply

large welfare losses, both to households, and in

terms of efficiency of public spending which is based

on the bpl mechanism. The BPL method does a relativelygood job at classiying the rich correctly. However itperorms signicantly worse in the lower part o theexpenditure distribution, and the errors are not justconcentrated around the poverty line, indicative o large

welare losses.

c w ds t BPl casprr pr?

Sundaram (2003) highlights two broad sets o concernswith the 2002 BPL methodology.355 First, the sub-indicators used to construct the overall BPL scoremay themselves be a poor description o poverty andsecond, the assumptions underlying the scoring andaggregation method in the BPL indicator may not bevalid. This section explores both reasons empirically.

(i) Choiceoindicators

one reason why the bpl score performs poorly may

be the choice of indicators. The set o indicatorsthat are included in the aggregate score are assumedto reect a household’s “quality o lie”. As a result, aranking o households based on some combinationo these indicators is expected to reect the relativepositioning (presumably in terms o poverty status, orlong-term economic status) o each in household in avillage. As the purpose o the census is identication o poor households, there should be a clear link betweenthe indicators and the underlying concept o poverty.In addition, the indicators should be clearly measurableand veriable. The choice o the 13 indicators have beencriticized on the ollowing grounds:

poor perormance o some indicators inseparating the very poor rom the poor or eventhe poor rom the rich

imposition o the same set o indicators acrossvery dierent local contexts

omission o some socio-economic characteristics(e.g., caste) that are known to be strong correlateso poverty

potentially discourage households rom investingin schooling, housing and sanitation

Assessing the perormance o indicators in identiyingthe poor empirically using 1999/2000 NSS data

conrms the rst o these concerns. Figure 8.3 plotsthe distribution o scores or each indicator acrossexpenditure classes. There are three categories o indicators apparent:

someindicatorsareclearlyineectivein sorting

out rich rom poor. For example, the scores o indicators such as the preerred orm o assistanceand ood security do not vary signicantly acrossexpenditure classes.

some indicators vary between rich and poor,

butinthewrongdirection. For example, whilethe status o children 5-14 years does showsome variance, the gradient is not the expecteddirection. A larger share o the richest 20percent o the population has a score o zeroas compared to the poorest 10 percent o thepopulation.356

other indicatorsshow a shit in the distribution

o scores in the expected direction, but the

dierences in the poorer hal o the population

arenotverystrong. That is, the types o indicatorsthat are included in the overall BPL score do notdo particularly well in sorting out householdsinto poor and less poor categories amongstthe lower hal o the expenditure distribution.For this undamental reason, indexes based onthese scores, regardless o the weighting andaggregation method used are unlikely to beeective targeting instruments.

another factor that weakens the targeting power

of the bpl mechanism include using the same set of

indicators is used in all states. Given India’s diversity,

one question is the variability in the method’s targeting

355 SeealsoHirway(2003),MehrotraandMander(2009)andJain(2004).AlkireandSeth(2008) havealsoarguedthatthecriteriaocusmainlyonresourcesratherthancapabilities.Others(e.g.,MehrotraandMander2009)pointouttheoperationaldicultiesomeasuringcapabilitiesintheeldduringacensusoperation.

356 Thisrelationshiparisesbecausehouseholdswith nochildren5-14 areassigneda scoreozero,as arehouseholdswithchildrenwho areworkingand illiterate. Assigningascoreozerotohouseholdswithnochildreninthe5-14yearagegrouparticiallypushesthesehouseholdsintotheBPLset.




power across states. Table 8.4 presents results onunder-coverage o households in the bottom twodeciles o the distribution in a selection o states. Thisindicates signicant variation in under-coverage o the poorest across states, ranging rom a very high80 percent under-coverage in Andhra Pradesh to around30 percent in Assam or the poorest decile. This conrmsthe limitations o using standard national criteria in the2002 BPL methodology.

finally, the bpl indicators do not include some strong correlates of poverty such as caste. Thisinormation is collected in the BPL survey but is notbuilt into the scoring ormula. There may be sensiblepolitical or other reasons or these decisions, butit remains undeniable that a number o indicatorsincluded in the BPL scoring ormula have much lesspower as predictors o poverty than some o those thatwere omitted.

Figure 8.3: Distribution o individual BPL indicator scores across expenditure classesSize of operational land holding

0

20

40

60

80

100

P o o r e s t 1 0 %

N e x t 1 0 %

N e x t 1 0 %

N e x t 1 0 %

N e x t 2 0 %

N e x t 2 0 %

R i c h e s t 1 0 %

Status of children 5-14 years

0

20

40

60

80

100

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

Status of household labor force

0

20

40

60

80

100

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

Means of livelihood

0

20

40

60

80

100

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

Primary source of energy for cooking

0

20

40

60

80

100

Literacy status of highert literate adult

0

20

40

60

80

100

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

Primary source of energy for lighting

0

20

40

60

80

100

Score=4

Score=3

Score=2

Score=1

Score=0

Food Security

0

20

40

60

80

100

P o o r e s t 1 0 %

N e x t 1 0 %

N e x t 1 0 %

N e x t 1 0 %

N e x t 2 0 %

N e x t 2 0 %

R i c h e s t 1 0 %

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

Preferred form of assistance

0

20

40

60

80

100

Ownership of consumer durables

0

20

40

60

80

100

P o o r e s t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

1 0 %

N e x t

2 0 %

N e x t

2 0 %

R i c h e s t

1 0 %

Availability of normal wear clothing

0

20

40

60

80

100

P o o r e s t 1 0 %

N e x t 1 0 %

N e x t 1 0 %

N e x t 1 0 %

N e x t 2 0 %

N e x t 2 0 %

R i c h e s t 1 0 %

Source: Jalan and Murgai (2008), based on 1999/2000 NSS.




(ii) MethodologyorconstructionotheBPL

score

The BPL methodology entails three key assumptionswith respect to the construction o the BPL score:

the scoring method transorms the data or

each indicator to a uniorm cardinal scale –

scored as 0, 1, 2, 3 or 4, with zero representingextreme deprivation – such that the dierencebetween 0 and 1 (or example, the dierencebetween being illiterate and having someprimary education) is the same as between 3and 4 (or example, the dierence betweenhaving secondary education versus having agraduate degree). Forcing cardinality can resultin problematic rankings, as or the indicator onmeans o livelihood which presumes that an‘artisan’ household is always better o than oneengaged in ‘subsistence cultivation’.

each indicator enters the aggregate score with

an equal weight, implicitly assuming that each

indicatorhasthesameimpactonpovertystatus.Equal weights have the appeal o simplicity andapparent objectivity, but this masks the act thatthe imposition o numeric equality is completelyarbitrary. It results or example in a situationwhere having less than one square meal per day

or much o the year can be treated the same asnon-ownership o any o the consumer durables.

thesameaggregationprocedureisusedinevery

state, implying that the weights assigned to

indicators are the same across all states. Thisimplies, or example, that literacy status o thehighest educated adult in the household has the

same impact in dierentiating poor versus non-poor in Bihar as it does in Kerala, an assumptionthat will clearly not hold or every indicator. Asanother example, a household with an operationalholding o 0.95 hectares o unirrigated land in ahigh rainall state and another household withthe same size o unirrigated land in a desert statewill be assigned the same score.

careful analysis indicates that all these assumptions

implicit in the construction of the bpl score – of

cardinality and equal weights across indicators,

within each category of indicator, and across

states - are rejected by nss data. Overly restrictiveassumptions are evidently to blame, at least in part, orhigh targeting errors and associated welare losses o the BPL indicator. The question is how much? We turn tothe extent to which relaxing these assumptions aectstargeting perormance.

d Atrat spccats t t de

jure tart ds t 2002

BPl css

In this section, two alternative models or a proxymeans test to identiy the poor are presented to explorehow dierent types o adjustment in the 2002 BPLmethodology may improve targeting power. They are:

an alternative index using the same indicators

astheBPLmethodologybutwhichrelaxthetwo

assumptions o cardinality and equal weights.

The rst is a regression-weights based indexthat uses the estimated coecients o the mostexible specication - modied to allow dierent

coecients across states - to predict a household’sper capita expenditure.

the second approach is to use an expanded list

o indicators in a regression-based index that

captures other household characteristics that

mayaddexplanatorypowertowardsidentiying

Tab 8.4: udr-cra rats BPl td rt pr, sctd stats

Sources: Jalan and Murgai (2008).

Stat/dc

epdtrbasd pr

% hh

BPl-basdpr

% hh

udr-

cra BPl td

%

Poorest decile

Andhra Pradesh 100 20.0 80.0

Assam 100 69.9 30.1

Maharashtra 100 50.8 49.2

Rajasthan 100 52.7 47.3

Uttar Pradesh 100 63.6 36.4

Second decile

Andhra Pradesh 100 22.6 77.4

Assam 100 55.5 44.5

Maharashtra 100 46.8 53.2

Rajasthan 100 33.1 65.9

Uttar Pradesh 100 43.8 56.2




the poor. To retain maximum exibility in theindex and consistent with the evidence thatequal weights or indicators across states are notvalidated by the data, coecients o all regressorsare allowed to vary across states.357

Poverty and under-coverage rates or each o theabove methods are reported in Table 8.5, and several

conclusions emerge: therstisthatrelaxingtheassumptionsimplicit

intheBPLmechanismimprovestargeting,butthegains are not substantial. The regression-basedweighted index which discards the assumptionso cardinality and equal weights across indicatorsreduces under-coverage only marginally, rom49 percent to 45 percent.

the big gains in improved targeting come rom

relaxingtheassumptionsandrevisingthelistoindicatorsto discard somethatare problematic

(e.g.,statusochildren5-14years)andaddothers

thatarestrongcorrelatesopoverty(e.g.,sexo

household head and caste). This index resultsin a 32 percent reduction in under-coveragecompared to the BPL model. The main reason orthe reduction in exclusion error stems rom theact that the model identies 80 percent o thepoor in the poorest 10 percent o the distribution,

compared to only 63 percent by the BPL index.Clearly, this is a signicant improvement i thepoorest are the group about whom policy ismost concerned. Inclusion errors are also lower,although this is mainly because again theaugmented regression model perorms better atcorrectly assigning people in the top 40 percentas non-poor.

why does even the most flexible regression model,

with a long list of indicators, not perform better?

An examination o the poverty rates in Table 8.5 shedssome light. The augmented regression model works wellin identiying the poorest among the poor. However,targeting errors are much higher in the vicinity o thepoverty line (in the third and ourth expenditure deciles),and this is a problem evident in the regression-basedmodel as well. With the high density o population withincome close to the poverty line (see the discussion inChapter 1), arriving at an eective proxy means test is aninherently problematic and dicult exercise.

as with the 2002 bpl method, there are notable

differences across states in how well alternative

proxy means test (pmt) specifications perform

relative to the bpl method. Table 8.6 presents thepercentage improvement o the two specications ora selection o states (i.e., only the gures in parenthesisin the above table), ocusing once more on the bottomtwo deciles. A ew points emerge which have relevanceto any BPL reorm:

or all states except Rajasthan, the improvementsin targeting perormance are signicantly higheror the poorest than the second decile or allspecications.

or the poorest decile, the variations are verystrong between states where all alternativespecications produce signicant improvements

epdtr

Cass

Rrss basd

ts

Atd

rrss d

I. Poverty Rates by Expenditure Class

Poorest 10% 66.0(4.4)

80.3(27.1)

2nd decile 51.4(7.9)

62.1(30.4)

3rd decile 41. 6(14.7)

45.6(25.8)

4th decile 32.2(0.9)

30.1(-5.4)

3rd quintile 22.7(-1.2)

16.7(-27.2)

4th quintile 12.2(-14.5)

7.1(-50.6)

Richest 20% 4.3(-46.7)

1.8(-77.1)

Overall 26.7

II. Classication errors

Under-coverage 45.4(-11.3)

34.5(-32.5)

Tab 8.5: Prt ad dr-cra rats acrssdrt tart tds

Notes: 1. Numbers in parentheses are percentage change rom the BPL scoreindex. 2. Assumptions underlying the alternative models are givenin Annex 5.

Source: Jalan and Murgai 2008 using 1999/2000 NSS.

357 Theexpandedlistoindicatorsincludesdemographic,occupationalandeducationalvariablesinadditiontoselectedBPLindicatorsthatwereoundtobestronglycorrelatedwithpercapitaexpenditures.




in coverage, and Rajasthan and UP, where theywould actually worsen coverage.

the augmented regression model dominates allother methods (and strongly dominates the BPLmethod) in nearly all states.

deacto tart – h ds

t 2002 BPl td prr practc?

The above analysis examines the BPL methodologyin terms o its design – i.e., assesses how well it wouldperorm assuming that it was implemented precisely asintended. In this section, we turn to the problems in theimplementation o the household census and evidenceon BPL outcomes in practice.

(i) ImplementationotheBPLcensus

there are substantial capacity and logistic limitations as well as local institutional pressures

associated with the implementation of the bpl census that negatively impact data quality and eventually

targeting efficiency. International evidence suggeststhat a large raction o the observed dierences intargeting eectiveness across systems and programscan be attributed to actors related to implementationand monitoring.358 This implies that investments aimedat correcting some or all o these limitations could go

a long way in improving targeting outcomes in theregion. The ollowing concerns have been highlightedby studies and surveys in various states:

Problemsindesignothequestionnaireordata

collection: There are concerns about the precisephrasing and coding o questions in the BPLcensus questionnaire. Some indicators, as askedin the questionnaire, are not clearly measurableor veriable (e.g., availability o clothing, orm o assistance preerred). Codes or some indicatorsare unclear or not necessarily mutually exclusive

with unclear guidelines or implementation,implying subjectivity in assigning scores (e.g.,status o household labor, means o livelihood; it isalso unclear how to assign scores or householdswith no children).359

Poor quality data collection processes: Eectiveimplementation o the BPL Census requires aclear denition o institutional responsibilitiesand sucient administrative capacity. While thedesign is the responsibility o the Center, datacollection in order to calculate household-level

welare scores is done at the local level. A commoncomplaint rom block-level government ocials iso inadequate stang, training and time allowedor the enumeration. In addition, since the task is perormed by teachers, health workers andother village-level government employees, thisresponsibility comes in addition to their regularwork load.360 There is little standardization o processes with little or no quality control romhigher levels o administration. These problemsare exacerbated given the signicant expansiono the required coverage o the detailed survey in

2002 ater dropping o the exclusion criteria usedin the 1997 method.361

Tab 8.6: iprt r BPl td crarats r st t dcs b stat acrssdrt tart tds %

Source: Jalan and Murgai (2008) using 1999/2000 NSS data.

Stat/dcRrss

tsAtdrrss

Poorest decile


Assam 10.0 17.5Maharashtra 15.0 30.5

Orissa 5.9 15.5

Rajasthan -12.2 -3.0

Uttar Pradesh -2.7 11.3

Second decile


Assam 5.7 10.5

Maharashtra -1.3 5.5

Orissa 6.3 13.0

Rajasthan 0.3 21.5

Uttar Pradesh 6.5 16.4

358 Coadyetal.(2004).

359 SaxenaCommitteeReport(2009).

360 Basedonanecdotalevidenceromlocalizedsurveys.

361 Sundaram(2003).




Importance o local institutions and elite

capture:Available evidence conrms widespreadanecdotal inormation that participation inprograms according to BPL criteria is aectedby operation o local institutions. However, it isinconclusive in terms o systematic patterns acrossstates in how the BPL list system is implementedin practice. For instance, in three villages in UP, the

survey was substituted by a list o BPL householdsdrawn up by the Village Development Ocer inconsultation with the Pradhan, and orwarded todistrict level. At the same time, it was expectedsome names rom the list would be deleted athigher levels o administration due to ceilingon total number o poor. Similarly, studies o AP, Karnataka, Kerala and TN ound that: (i) theinclusion o landless and illiterate households inBPL lists was more intensive in villages that hadheld gramsabhas, with the probability o inclusion

8-10 percent higher;

362

and (ii) the intensity o BPLcoverage o SC/ST households was increased byaround 7 percentage points where the GP wasreserved, indicating the importance o casteand other connections with the Sarpanch orpurposes o being determined as BPL at thevillage level.363 Further evidence rom West Bengalon participation in BPL-targeted programs ound:(i) targeting within villages appeared to be airlyeective and not overly captured by local elites;(ii) targeting within villages did not vary greatlyaccording to village characteristics, though the

employment-intensity o public works and SC/STshare o targeted credit worsened as inequalitiesin land ownership increased; but (iii) allocationo resources across villages exhibited signicantdiculties, with a 25 percent reduction on publicworks resources and a 70 percent reduction inall grants associated with a 5 percent increase inthe share o poor SC/ST households in a village.364 Another localized study rom West Bengal oundsignicant manipulation by local elites o BPLlists, with severe under-coverage o the poorest

and signicant inclusion o the non-poor.365 SinceBPL status is the rst step to access a range o benets, there is considerable incentive or non-poor households to pressure local authorities orinclusion in the BPL list or or getting a BPL card.

Grievance redressal and recer tication o

households: Another important shortcoming isthe lack o attention to grievance redressal as wellas recertication (as the eligibility o householdsmay change over time) in the period betweentwo censuses.366 Some states have introduced

an appeals process against the BPL list, a large

number o appeals remain unresolved. Thereis no systematic process to update householdinormation or status ollowing changes inhousehold circumstances in the ve year periodbetween censuses, e.g., due to deaths, migration,ormation o new households, changes in socio-economic status, and so on. This lack o processes

or dynamic updating are compounded by poormanagement o the BPL database in most states.Validation checks o the BPL administrativedatabase or selected states revealed two criticalproblems in the BPL database:367 (i) internalinconsistencies and inaccuracies in the databaseand (ii) lack o clarity on a master BPL list at thestate-level given dynamic updating at local levels,with no corresponding mirror changes at thestate-level. Consequently, dierences betweenthe state and local-level registers are not onlysignicant but bound to grow over time as moreappeals and grievances are being processed,severely undermining the system’s integrity,transparency and credibility. The accuracy andreliability o BPL lists varies widely across thecountry and even within states.

(ii) BPLtargetingoutcomesinpractice

it is useful to supplement these insights on design and

data collection process with evidence on bpl outcomes

in practice. Surprisingly, there is less empirical evidence

362 Besley,PandeandRao(2005).

363 Besley,Pande,RahmanandRao(2005).

364 BardhanandMookerjee(2006).

365 Mukherjee(2005).

366 Sundaram(2003),AlkireandSeth(2008).

367 InthecontextodevelopingaconsistentbeneciarydatabaseortheRashtriyaSwasthyaBimaYojana.




than might be hoped on this question, and the existingevidence is not always clear on the distinction betweenBPL ration cards, and being on BPL lists or otherpurposes. The 2002 BPL list was operationalized onlypost-2006 due to a stay order passed by the SupremeCourt on a writ petition led by the People’s Union orCivil Liberties which alleged that the new methodologywould reduce the number o persons identied as

BPL and a large number o the poor would lose theirentitlements. The analysis below relies on 2004/05NSS data when the 1997 BPL list was operational andthe 2002 BPL list had not yet become operational.368 Even in the case o two states, Himachal Pradesh andRajasthan, where ration cards are issued on the basis o the BPL list, the estimates o dejure and deacto under-coverage are not strictly comparable. This is because theestimate o dejure under-coverage is based on the 2002BPL methodology while the BPL ration card holding

is based on the 1997 list. As a result, it is not possibleto conclusively assess whether eld level experiencesare dierent rom the predictions discussed above.However, it is possible to analyze targeting outcomesat the household level as given by the distribution o ration card holding.

analysis of household expenditure and ration card

holding using the 2004-05 nss data indicates that targeting outcomes are even worse in practice

(see Table 8.7).Several observations emerge:

At the national level, the percent o BPLcardholders and the ocial poverty rate is thesame. This is unsurprising given the stipulation bythe central government that the number o BPLpoor be the same (or not more than 10 percent)as the number o poor persons as estimated bythe Planning Commission or 1999-2000.

Tab 8.7: deacto tart rs ta dejure

Notes: 1. BPL cardholders are identied in the data as those that possess a BPL or AAY card. 2. Under-coverage is the percentage o the poor populationwrongly classied as BPL non-poor (dejure – as per 2002 BPL methodology) or not possessing a BPL card ( deacto). 3. Leakage is the percentage o the BPL

card holder who are actually (expenditure-based) non-poor. 4. Rural poverty rates are estimated using the ocial Planning Commission state-specic ruralpoverty lines or 2004-05.

Source: Jalan and Murgai (2008) based on NSS data or 2004/05.

StatRra Prt Rat

%Rra BPl

carddrs %

udr-cra % laa %deactodejure deacto

Adhra Pradesh 10.0 60.6 74.4 19.0 86.7

Assam 22.0 11.5 51.8 76.6 55.2

Bihar 42.5 17.1 35.9 78.2 45.8

Gujarat 18.8 38.3 51.0 43.9 72.4

Haryana 13.3 18.6 60.1 66.8 76.3

Himachal Pradesh 10.5 18.0 56.7 55.4 73.9

Karnataka 20.6 52.0 56.1 28.7 71.7

Kerala 13.1 30.0 67.2 50.3 78.3

Madhya Pradesh 36.9 35.4 34.8 47.5 56.1

Maharashtra 29.6 34.1 45.0 53.3 49.5

Orissa 46.9 45.5 31.2 40.8 39.0

Punjab 9.0 11.7 74.4 79.3 84.1

Rajasthan 18.3 17.9 59.9 66.7 65.9

Tamil Nadu 22.8 21.1 53.5 68.7 66.1

Uttar Pradesh 33.2 15.9 47.0 75.5 48.8

West Bengal 28.4 30.2 48.2 58.3 60.8

16 Major States 27.3 28.7 45.8 61.2 63.2

368 JalanandMurgai(2008).ThisNSSroundincludesadirectquestiononwhetherhouseholdspossessarationcard,andiso,whethertherationcardisaBPLcard.BPLcardholdersareidentiedinthedataasthosethatpossessanAntodayaorBPLcard.Householdswiththe“other”typeorationcardsareclassiedasAPL(above-poverty-line).




However, this is not true across the dierentstates. In states like Andhra Pradesh, Gujarat,Karnataka and Kerala, the percent o BPLcardholders are three times more than the ocialpoverty rate. In these states, de acto under-coverage rates are lower than de jure, but theleakage rates are also very high.369

At the national level, there is approximately a15 percent dierence in under-coverage ratesbetween de jure and de acto targeting. At thenational level and or the majority o statesdeacto targeting is even worse than de jure.Nearly two thirds o the poor are under-coveredby BPL cards; leakage is just as high – 63 percento BPL/AAY ration cards are held by the non-poor.

findings for all-india indicate that bpl and

particularly aay ration card holding is progressive,

though with worrying exclusion among the poorest

and substantial inclusion errors.Results on theincidence o ration card holdings are presented in

Table 8.8, by monthly per capita expenditure quintilesand by social category or rural and urban households.On average, about 3 percent o rural householdspossess AAY ration cards, a quarter possess BPL rationcards and 52 percent possess APL ration cards, while19 percent report no ration card holding. In urbanareas, ration card holding is much lower, only about11 percent reporting BPL ration cards, less than one

percent reporting AAY cards, and about a third o urban households reporting no ration card holding.370 Several observations emerge, including:

possession o BPL ration cards is progressive,

though there remain signicant inclusion and

exclusion errors, and the dierences in the BPLrates o the bottom 40 percent are not as great asmight be expected (at least in rural areas).

despite the general progressivity o BPL cards,

there remain signicant inclusion errors in BPL

cardholding, with around 35 percent o rural BPLcards held by households in the top 40 percent o

Tab 8.8: Pssss rat cards, b tp ad sc-cc stats % sds

Notes: 1. Households possessing “other” type o ration cards are classied as APL. 2. The expenditure quintiles are calculated or rural and urban householdsseparately on the basis o real monthly per capita expenditure (i.e., corrected or cost o living dierentials across states) expressed in 2004/05 rural and urbanprices respectively.

Source: Sta estimates using 2004/05 NSS data.

qt/Sca rp

Rra urba

AAy card BPl card APl card n card AAy card BPl card APl card n card

I. Expenditure quintiles

Poorest 5.8 35.3 37.9 20.9 2.8 26.2 43.0 27.8

Q2 3.6 31.4 47.6 17.2 1.2 17.0 54.8 27.0

Q3 3.0 28.5 52.0 16.2 0.5 9.7 59.1 30.7

Q4 2.1 23.8 56.9 17.1 0.3 5.7 58.9 35.1

Richest 1.2 17.7 59.9 21.2 0.1 1.7 58.3 39.7

II. Social group

ST 5.0 39.6 30.8 24.3 1.3 13.6 37.6 47.4

SC 4.4 34.9 43.7 16.9 1.6 17.3 49.8 31.2

OBC 2.3 24.5 54.5 18.5 0.9 14.4 51.5 33.1

General 1.9 17.3 63.0 17.6 0.4 5.1 61.8 32.5

All-India 2.9 26.5 51.8 18.6 0.8 10.5 55.6 33

369 TherelativelylowpercentageoBPLcardholdersinTamilNaduisaconsequenceotheactthatthestateprovidesuniversalaccesstosubsidizedgrainevenatertheintroductionoPDSsothatthedistinctionbetweenBPLandAPLcardholdersismeaninglessorhouseholds.SeeChapter3oradiscussion.

370 Thesendingsaresomewhatsimilar(especiallyinruralareas)tothosereportedbyRametal.(2009)using2005/06NFHSIIIdataandbyAjwad(2006)usingthe2004/05IHDSdata.Theormerreportsthatabout27percentoallhouseholdspossessBPLrationcards.AccordingtotheIHDSsurvey,nationally,34percentoallhouseholdspossessBPLcards,3percenthaveAAYcardsand47percenthaveAPLcardswhile15percenthavenorationcards.Thedistributionorationcardholdingacrossassetquintilesusingthesealternativedatasetsalsodelineatesasimilarstory–i.e.,mildlyprogressiveBPLcardholding,butwithhighexclusionandinclusionerrors.However,BPL cardholdingo therichestquintiledropsmoresharplywhencomparingacrossassetquintilesthan acrossexpenditurequintilesasintheNSSdata.




the distribution in rural areas. The correspondinggure or urban areas is much lower at 16 percento urban BPL cards.

AAY ration card holding is notably more

progressive, including in the lower ends o the

distribution, with almost 33 percent o all ruralAAY cards held by households in the bottomquintile, and almost 55 percent by householdsin the bottom two quintiles. In urban areas, thepoorest households hold up to 54 percent o allurban AAY cards.

amongthosewithnorationcardatall,thereare

no sharp dierences between the poor and the

richandacross social categories, though tribalsare somewhat less likely to have a card.

probit regression models examining the role of

household and village characteristics in determining

bpl and aay ration card holding support this finding

(see table 8.9).371

Thus, households in the bottom quintilehave the highest probability o possessing AAY or BPLcards, ollowed by those in the second quintile and so on.However, dierences between the bottom two quintilesare small.372 With respect to inclusion errors, householdsin higher quintiles also have a airly high probability o possessing cards. Caste is a signicant determinant o ration card holding. Other household characteristicshave also the expected eects.373 In addition, Ram etal. (2009) nd that a signicant percentage o BPL cardholders appear to be airly well-o in terms o assetsowned. For instance, about 18 percent o BPL card

holders own more than ve acres o agricultural land,11 percent live in pucca houses with three or morerooms, 10 percent own a motorized vehicle and so on.Also, anecdotal evidence, eld experiences relayed byNGOs, and eld survey based studies suggest instanceso both severe under-coverage o the most needy andcoverage o the economically better-o population.374 An important additional nding rom the three state SPstudy is that the reasons underlying dierential access

may vary across states. For example, the poor and tribalsin Orissa are more reliant on their (oten weak) socialnetworks to access ration cards, while in Karnataka, PRIsplay a more active role in acilitating access.375

C. AlTeRnATive TARgeTingmeThoDS

The BPL method examined above (and the BPL rationcards) is the most commonly used targeting toolor several anti-poverty programs, especially thoseadministered by the Ministry o Rural Development.However, a number o dierent targeting methods areavailable or directing resources to particular groups

varabsBPl carddrs

AAy carddrs

Quintile 1 0.3536*** 0.0481***

Quintile 2 0.3455*** 0.0472***

Quintile 3 0.2730*** 0.0298***

Quintile 4 0.1714*** 0.0211***

Other caste 0.0130 0.0032OBC 0.0501** 0.0045

SC 0.1404*** 0.0154**

ST 0.1734*** 0.0129*

Rural 0.1748** 0.0069*

HH size 0.0007 - 0.0002

Female HH head 0.0081 0.0063*

Age o HH head 0.0005* 0.0001*

HH head literate 0.0113 - 0.0048**

HH head completed primary - 0.0181* 0.0005

HH owns agric. land - 0.0001* - 0.0001

HH owns animals - 0.0071 - 0.0043

Tab 8.9: Dtrats rat card d

Notes: ***=signicant a 1% level; **=at 5% level; *=at 10 percent. Quintile 5and other caste are the (omitted) reerence group. State and other controlsalso included.


371Forconsistencywithpreviousmodelso participationin variousgovernment programs(seeChapter 3or PDSandothersocial assistanceprograms),these

regressionmodelsarebasedonIHDSdata.Thesedataalsoallowsoraricherspecicationohouseholdandvillagecharacteristics.SeeAjwad(2006)orresults.372However,thestrongimpactsobeinginlowerquintilesarehighlydilutedwhenonelooksatactualusageotheBPLrationcardsintheprevious6months(seeChapter3).

373In addition,theeecto locationis verypronouncedorBPL rationcardholding(notreportedinthetable).Broadly,householdsinmostnorthernstatesaresubstantiallylesslikelytoholdBPLcards(over20percentlessinmost,andapproaching30percentinRajasthanandPunjab).Conversely,householdsineasternandcentralstatesaresubstantiallymorelikelytoholdaBPLcard,andsouthernandwesternstatesbroadlyexhibithigherpositiveparticipationeects.

374 See,orexample,Mukherjee(2005).





(see Box 8.1 or a brie description). All these methods,with the exception o the rst (means testing), are inuse in India.

thus, sp programs in india direct resources to

particular groups using a range of different

targeting methods. These include the BPL method(proxy means test), sel-targeting (in public works), and

mixed methods (e.g., social pensions). See Table 8.10 ora mapping o programs and targeting tools. The 2002BPL method examined above is a orm o a proxy meanstest, i.e., a targeting tool that relies on readily observableand veriable socio-economic proxies as substitutesor more expensive and dicult to collect income orexpenditure inormation. All programs combine theirspecic targeting methodology with a geographicelement in terms o scal allocations. In addition, severaldonor and NGO initiatives rely on community-basedtargeting methods. In some states, notably Andhra

B 8.1: ma tps tart tds

a. mas tsts

A means test seeks to collect (nearly) complete inormation on households’ income and/or wealth. Sometimes this inormation is ully/partially veried against independent sources, other times verication is not possible and program intake workers simply record whatthe applicant says. Veried means tests are considered to be the gold standard o targeting but are usually dicult to implement indeveloping countries.

b. Pr as tsts

Proxy means tests generate a score or each applicant household based on airly easy-to-observe household characteristics believed tobe correlated with the household welare status. The inormation provided by program applicants is usually partially veried either byprogram ocials or by communities. Eligibility is determined by comparing the household score against a predetermined cuto. India’s2002 BPL Census method alls in this category.

c. Ct-basd tart

Community-based targeting uses a group o community members or leaders whose principal unctions in the community are not relatedto the program to decide who in the community should benet.

d. grapc tart

With geographic targeting, location determines eligibility or benets: people who live in the designated areas are eligible and thosewho live elsewhere are not. Few programs target only on the basis o geography, but many programs combined this criterion with othertargeting methods.

. Drapc/catrca tart

The usual and simple orms o demographic targeting are based on age (e.g., elderly), or on some other individual characteristiccommonly perceived to be associated with a higher likelihood o being poor, vulnerable or socially excluded (e.g., widows, disabled,certain caste groups).

. S-tart

Sel-targeted programs are technically open to everyone, but are designed in such a way that the take-up is expected to be much higheramong the poor than the non-poor or the level o benets is to be higher among the poor. A common example is the use o low wagesin public work programs to induce participation primarily among the poor.

Source: Grosh et al. (2008) Chapter 4.

Tab 8.10: Tp tart b SP prras

Sources: Program guidelines. Note that NOAPS was earlier targeted usingstate-specic denitions o “destitution” in IGNOAPS; these have now beensubstituted by BPL status.

Prra Tp tart

PDS grain Ration card

Annapurna grain Ration card

Rural credit (SGSY) BPL list

Rural public works(MGNREG, SGRY, FFW)

Sel-targeting

Rural housing support (IAY) BPL listIGNOAPS Categorical (age) + BPL list

Disability pension Categorical (disability)

Widow pension Categorical (widowhood)

Subsidized healthinsurance (RSBY)

BPL list

Scholarship Categorical (social group,gender)




Pradesh and Kerala (to a more limited extent), thisapproach has been adopted or the government’s anti-poverty programs as well. We turn to three methodsthat are currently in use in India, but could potentiallyoccupy a larger place in the targeting system.

a Ct-basd tart

a very different approach from the bpl targeting

methodology is village-based wealth ranking of

households conducted by communities themselves.

This is done in a growing number o states underdonor and NGO initiatives. The obvious advantageo the wealth ranking approach is its reliance on localknowledge o actors at the household level whichincrease or decrease poverty and vulnerability, butwhich cannot be well measured or taken into account bymore aggregated administrative systems. The potentialdisadvantages include: (i) localized assessments need to

match with program allocation systems and nancing i they are to be useul or allocating unds across space;(ii) there may be economic and other costs (e.g., potentialostracization) incurred by the participating communitymembers; and (iii) such methods may also be subject tolocal capture, just as administrative systems may be.

international and regional evidence provides some

guidance on the benefits and limitations of community-

based targeting.376 The basic trade-o which suchprograms ace is between the “inormational advantage”that communities possess in targeting, against the

accountability risks o capture by local elites and losso spatial comparability across communities. Evidencerom the Food-or-Work program in Bangladesh, orexample, ound substantial variation across village in thetargeting perormance o community-based methods,with no systematically better perormance in poorervillages. However, a clear result was that village withgreater within-village inequality had worse targetingoutcomes.377 The empirical nding is supported bytheoretical literature that points to the importanceo actors such as local asset inequality and socialnetworks.378 The risk o local elite capture o community-

based targeting is real. At the same time, empiricalevidence on the BPL system suggests that it is alsosubject to capture and manipulation in such instances.While both methods thereore have the risk, a mediatedcommunity process such as described in Box 8.2 wouldappear to have greater channels or making such captureboth explicit and subject to community account thanthe BPL system.

currently, andhra pradesh presents an interesting

case of how community based targeting methods have

been rolled out, and have now been absorbed into the

mainstream system for identifying bpl households.

Through project-nanced activities, community wealthranking has been conducted in nearly all o AP in recentyears. Most interesting rom a systemic viewpoint is thatthe credibility o the exercise has been sucient thatPRIs and public administration have agreed that thelists o poor households identied through this processshould be the basis or ocial identication o BPL. The experience and method o the ranking exercise isoutlined in Box 8.2. Interestingly, even in cases where thecommunity-based process results in households beingremoved rom the ocial BPL lists, there has to datebeen airly limited resistance, due to the village-widebuy-in on the process underlying the new identicationmethod. A similar process is now being debated in TamilNadu, and there is interest rom PRIs in particular orexploring the Andhra Pradesh convergence experience.Kerala ollows a more hybrid model where communitiesare heavily involved in the validation and nalization o

the list o poor households. This targeting method wasdeveloped in the context o Kudumbashree, but appliesto other government anti-poverty programs that haveconverged with Kudumbashree (See Box 8.3). HimachalPradesh is also experimenting with community selectiono households or Rural Development programs andPDS rom within the ocial BPL lists, with annual reviewo BPL status by the gram sabha. Bihar is a urtherinteresting case o a review and appeals process withrespect to the 2002 BPL list which involved severalrounds o gramsabha meetings to revise the initial listgenerated rom the BPL census.

376 Ravallion(2003)providesasummary.SeealsoormoredetaileddiscussionConningandKevane(2002).

377 GalassoandRavallion(2002).

378BardhanandMookerjee(2000)andBenabou(2000)on assetsandSpagnolo(1999)onsocialnetworks.SeealsoAlderman(2002),onAlbaniaanditsuseocommunity-basedtargeting,andCoudoueletal.(1998)ontheUzbekistanmahallas’scheme,whichusesacombinationocentralguidelinesandcommunity-basedtargetingorsocialassistance.




B 8.2: Partcpatr idtcat t Pr PiP Adra Prads

Under its Velugu program (now IKP), AP has conducted a widescale PIP process in 840 mandals in 22 districts o the state. This is basedon methods developed over time in a number o NGO, donor and in some cases public programs. A key benet is that the PIP process isable to take account o more dimensions o poverty and social exclusion than administrative systems are typically capable o. Based onthis exercise, 14.2 million rural households were surveyed, o which 7.9 million. (55 percent) households were categorized as BPL, and o these 2.6 million. were rated as “the poorest o the poor”. The key steps in this process are:

1. There is an intensive identication and training process or workers who act as acilitators o the PIP process. This is accompanied by aworkshop with various government and civil society stakeholders to seek support or the process.

2. There is then a three day process in villages which has several elements:developing rapport with key village unctionaries and service providers, including gathering inormation on key village andcommunity characteristics

community meeting on purpose o the exercise, including probing more on the operation and awareness o current schemes. There should be agreement on the timing and place or development o a social map o the village (see below)

“transact walk” in the village as preparation or social mapping

development with villagers o a social map, including social and inrastructural acilities, local institutions, use o services, socialprole o the village, social clustering within the village by caste or other indicators, and other actors

eedback rom villagers on the social map to veriy its ndings, and preparing a report on these ndings

a “wellbeing analysis”. In consultation with villagers, this looks into what are the key correlates and determinants o poverty inthe village, and what are the key issues that the poor ace. This should allow or a general categorization (and quantication) o households into our groups: the rich, the middle class, the poor, and the poorest o the poor

identiying specic households within wellbeing categories, and listing them

the household list should then be discussed in the gramsabha, and any changes incorporated. The ratication o the GramSabha is a key step in terms o community acceptance o the PIP ndings.

preparing a report which consolidates the ndings, together with supporting documentation. This reports are tabulated atmandal and district levels, ratied by Collectors and printed.

An important outcome o this process throughout AP has been agreement that the poor household identied through the PIP processshould replace the administrative BPL list, subject to the aggregate “cap” on total number o BPL households allowed in any one village.Looking ahead, a key challenge will be convergence between the “macro” numbers on BPL and the micro PIP process in cases where thePIP identies signicantly greater (or lesser) number o poor households than administrative BPL numbers allow or.

B 8.3: Cb dcatr-basd tart t ct adat ad aat t pr kraa

Kudumbashree was launched in 1998 by Government o Kerala as a participatory, women-oriented approach to poverty reduction. Thisprogram is implemented entirely through local sel governments in both rural and urban areas. The program consists o a three-tier

structure, with neighborhood groups (o women) at the bottom, ederations into area development societies at the ward level and acommunity development society at the panchayat level.

Kudumbashree presents an interesting case where indicator-based targeting is combined with a heavy reliance on community-basedvalidation o the “BPL list” in a government program. The initial targeting tool used nine slightly dierent indicators or identiying the poorin rural and urban areas. Broadly, these included indicators or asset ownership, social exclusion, lack o employment or earning capability,and disability. A amily was considered poor i our or more o these risk actors applied and most vulnerable i all nine risk actors applied. These indicators were chosen so as to be easily understandable by communities who had to identiy poor households, to enable a rankingbased on severity o poverty and yet be veriable and easy to monitor. However, several shortcomings remained as some indicators werenot directly correlated with poverty, others were amenable to manipulation, and equal weights were applied across indicators.

These deliberations on the deciencies o the previous method led to the evolution o a new set o indicators and targeting methodology. The same set o indicators are now applied in urban and rural areas. These include indicators related to capabilities (e.g., social groups,occupational groups, etc.) and entitlements (e.g., land, dwelling characteristics, basic amenities). Weights have also been assigned tothese indicators but it is not clear i these have been assigned by committee or developed through a rigorous regression model. Aranking system has also been devised (along with prioritization o indicators in the case o similar scores). Certain exclusion criteria

are also applied, e.g., regular employment, international migration o household members, and ownership o land, concrete house andother assets. This list o poor households – the equivalent o a “BPL” list – is prepared in our stages: a survey by ocials, validation bythe neighborhood groups o Kudumbashree, discussion in the gramsabha and nal adoption by the panchayat. There is also an appealsprocess at the district level.

While developed in the context o a specic program, Kudumbashree, this system o identication o the poor is used in several governmentprograms in the state, including SJSRY (promoting wage and sel-employment), VAMBAY (urban housing) and NSDP (slum development)in urban areas and or SGSY in rural areas.




B 8.4: Ct tart Baads – h ds t dt t pr?

Given the scale o NGO poverty programs in Bangladesh, their experience with community wealth ranking is o interest. BRAC has since2002 operated a program called “Challenging the Frontiers o Poverty Reduction: Targeting the Ultra-Poor”. This relies on a several stepprocess in identiying program beneciaries: (i) development o program eligibility criteria based on a literature review to determine thecommon correlates o ultra-poverty; (ii) a community wealth ranking exercise which sought to distinguish the ultra-poor rom the poorand non-poor; and (iii) based on the ranking exercise, a household survey o those identied by the community as ultra-poor, as a naltool or beneciary selection.

A study o outcomes o this process was produced in 2004 which ound as ollows (see table or results o survey-based analysis):

the community did a good job in its ranking o distinguishing the poor and ultra-poor when cross-mapped to the “objective”

indicators o poverty pre-identied rom national data and studies.among the ultra-poor, the household survey was a urther useul tool or distinguishing those eligible or the program andothers.

statistical analysis ound that the dierences between both the ultra-poor and others identied in the community ranking exercise,and among the ultra-poor between those eligible and not or the program were highly signicant.

idcatr utra-pr % hh tcaractrstc

n-tra pr% hh

Bcars atr raps sr % hh

Widow 20 6 30

Divorced/abandoned 8 1 15

With no adult male 21 3 36

Physically able husband 64 88 43

Children working 12 7 18

No cultivable land 90 76 98

Average land holding 25.7 units 42.9 units NA

Not own land o house 44 24 62

No non-housing assets 46 29 56

Borrowing rom MFI 19 34 NA

very little information exists which compares

community-based wealth ranking outcomes with

targeting outcomes from administrative systems.

The limited empirical inormation suggests that thereis overlap but also signicant divergence betweencommunity-based identication and administrativeBPL identication. It also suggests that ranking bythe community may produce somewhat dierent

ranking outcomes among households than one basedpurely on per capita expenditures. Two examples arereported below or India, as well as one or Bangladeshin Box 8.4.

Table 8.11 compares outcomes o a community-basedwealth ranking across a range o Indian states with thestatus o households on BPL lists, based on a sample o over 3,000 households. The results indicate that: (i) BPL listsexclude signicant numbers o households consideredto be poor and even very poor by communities; (ii) theBPL lists seem to include signicant shares o householdsnot considered to be poor by communities; and

(iii) community ranking in this case is able to sort a smallgroup o the very poor, and also to avoid large sectionso the community being rated as poor. The act that suchan exercise in the aggregate produces a share o “poor”households which is not too ar away rom povertyestimates based on NSS is also o interest.

A second cut on community ranking is comparing to

expenditure based measures o welare, and Table 8.12below reports ndings rom a smaller sample in the

Tab 8.11: Cpar ct-basd ad BPltart

Sources: Sinha (2003).

Ctat ra

% ttasds

% catr BPl st

Very poor 5 71

Poor 27 57

Borderline 36 61

Non-Poor 32 40




state o Orissa. While caution is necessary due to smallsample size and state-specicity, a ew interestingresults emerge: (i) signicant shares o the very poor inexpenditure terms are not ranked among the poorestby the community; (ii) conversely, around one thirdo household above the poverty line in consumptionterms are rated among the poorest groups by the

community; and (iii) as one approaches the poverty line,distinguishing among the poor becomes less eective.

the only firm conclusion that one can draw from

the above studies is that community rankings differ to both bpl and expenditure-based measures. Whatthis implies depends on whether community rankingis accepted a priori as more “correct” in identiying thepoor. In the case o the BPL comparison, the analysis o this chapter suggests that that is a valid assumption.However, or the expenditure-based comparison, theconclusion is less clear. To some extent, this imperect

overlap with consumption expenditure is not entirelysurprising. This is because local denitions o povertyand/or vulnerability typically encompass indicators thatmay or may be tightly correlated with consumption-based poverty.379

b S-tart

an important method of household-level targeting

which appears to have value both internationally and

in india is self-targeting. The approaches examined

previously assume an active process o identication o poor households, whether through the BPL method orcommunity wealth ranking. Sel-targeting in contrast

operates in India mainly through public works programs,primarily MGNREG (and implicitly to some extent inPDS through grain quality), and relies on some screento allow beneciaries to sel-select into the program.In the case o public works, the assumption is that thewage rate and nature o the work will lead those withsuciently high opportunity cost or reluctance to

undertake work to avoid the program. The targetingoutcomes presented in the next section indicate thatsel-targeted public works have oten done better thanBPL-based targeting.

while self-targeting can be an important element

of targeting strategies, it is also important to

look closely at which situations to which it is

best suited. Sel-targeting will be more suitable inconditions where administrative capacity is weak (andhence more intensive targeting methods unsuitable),in crisis situations where the time lag in conducting

more demanding orms o targeting are not desirable,and where incomes are irregular. In addition, thereneeds to be a suitable screen or the sel-targeting. Themost common ones worldwide are the nature o work and/or a low wage rate in public works, and subsidieson certain ood items which are not consumed bybetter-o people. On the other hand, it is importantto acknowledge the limitations o sel-targeting. Aclassic example is the exclusion o certain groups likeelderly and disabled (and in some countries, women)rom sel-targeted public works due to the nature o

the work demanded. Another is that – by the natureo the targeting tool – it would typically be dicultto provide high benets even to the poorest, as this

Ct ra

epdtr pr capta cass

lss ta 50%

prt

25 t 50% b

prt

25% b prt

t prt Ab prt

Extremely poor 34.7 27.5 25.0 11.7

Highly poor 26.5 26.1 8.3 23.5

Average poor 30.6 23.2 29.1 35.2

Low poor 8.2 18.8 33.3 23.5

Non-Poor 0 4.3 4.2 5.8

Sources: Shah et al. (2005). Results based on a small sample (159 households in our villages) in Orissa.

Tab 8.12: Cpar ct-basd ad pdtr-basd dtcat pr r orssa

379Communitiesotendenepovertyintermso(i)economicindicatorsassociatedwithlivelihoods,assetsandincome,(ii)abilitytomeetbasicneedsoood,shelter,andclothing,(iii)healthandeducation,and(iv)indicatorsoinsecurity,exclusion,andlackoparticipation.See,orexample,WorldBank(2008b)andKrishna(2004,2006).




would blunt the targeting mechanism.380 Sel-targetingprograms by their nature impose participation costs onbeneciaries. While these are higher or the non-poor,they are oten also signicant or the poor, e.g., evidenceon various workare programs nd opportunity costso participation ranging rom around one quarter(Maharashtra EGS) to around one hal the gross earningsin Argentina’s Trabajar workare program.381

c grapc tart

most anti-poverty programs in india include, in

combination with the methods described above, an

element of geographic targeting in terms of fiscal

allocations for programs. In addition, some programsexplicitly rely on geographic targeting at least in initialphases. For instance, the Mahatma Gandhi NationalRural Employment Guarantee Scheme was introduced ina phased manner, starting with the 200 most backward

districts, then rolling out to the next 330 districts andnally to the most advanced districts.382 The indicatorsused to select these “backward” districts includedindicators such as value o output per agriculturalworker, agricultural wage rate and percentage o SC/ST population as well as some consideration specialcategory status and extremism.

With geographic targeting, location determineseligibility or benets: people who live in the designatedareas are eligible and those who live elsewhere are not.Few programs target only on the basis o geography,

but many programs combined this criterion with othertargeting methods. The advantage o this approachis that it is administratively simple, requiring none o the machinery or individual assessment. However,geographic targeting will perorm poorly when povertyis not spatially concentrated. It also depends on theaccuracy and level o disaggregation o the povertyestimates. Finally, political compromises may be required,

as politicians rom each jurisdiction will lobby to havetheir districts included and this could mean that a ewdistricts in each area, rather than the poorest districts,will benet. Indeed, the list o the 200 backward districtsincludes at least one district in each state.

D. how Do TARgeTing

meThoDS STACk uP?

while robust comparisons of all targeting methods

are not available, it is possible from national data to compare targeting outcomes from selected css sp

programs which rely on different methods. Targetingoutcomes by program are presented in Table 8.13 and Table 8.14, looking rst at coverage rates across thedistribution, and then benet incidence, the latter alsousing the “targeting dierential” method. Looking acrossprograms, some observations on coverage rates acrossthe distribution are:

theuseosel-targeting(inSGRY)andcombined

categorical“destitutiontargeting”throughsocial

380 SeeCoadyetal.(2004)oramoredetaileddiscussion.

381 Ravallionetal.(1993).

382The Backward Regions Grant Fund (BRGF), introduced in 2006/07, an untied transerto panchayats in order to strengthen local governance and villageinrastructure,isalsotargetedtobackwarddistrictsoIndia.


Tab 8.13: Cat sar bcars ajr prras b at t, 2004/05 %

Prst q2 q3 q4 Rcst

PDS grain 27.0 47.8 72.3 89.8 100

Annapurna grain 51.9 74.8 85.5 98.1 100

Rural housing support (IAY) 28.6 48.4 73.7 91.9 100

IGNOAPS 32.8 49.1 66.8 82.1 100

Disability pension 30.7 49.7 73.4 86.3 100

Widow pension 43.2 60.8 77.9 91.7 100

Rural credit (SGSY) 32.9 53.6 74.2 86.3 100

Rural public works (SGRY) 43.4 65.6 85.3 96.1 100

Scholarship 22.6 52.2 73.0 88.4 100




pensionsandAnnapurnaarethemostpowerulintermsopromotingcoverageamongthepoorest

quintile.SGRY, Annapurna and widows pensionsstand out or sharply higher inclusion o thepoorest as a share o all beneciaries.383

BPL-basedtargetingunderPDS,andruralhousing

programs perorms less well among targeted

programs,although they are mildly progressive.

benefit incidence for the bottom quintile is worse

across all programs except pds than simple coverage

rates would indicate. At the same time, the relativeperormance o programs in terms o targetingperormance does not change, with the notableexception o SGSY and school scholarships, which

perorm particularly poorly in benet incidence terms. The more useul insight in policy terms, however, is howrobust the ranking o targeting perormance remains,with sel-targeting and specic categorical targetingcontinuing to outperorm other methods.

The targeting dierential provides an alternative singlemeasure which takes account o the share o programbenets captured by the poor (or this purpose, thebottom two quintiles o the distribution) and thenon-poor (the top two quintiles), which takes accounto both inclusion and exclusion errors.384 As such, it

provides useul shorthand or targeting perormance inboth dimensions. A negative number denotes regressivebenet incidence, and vice versa, with higher numbers

indicating better aggregate targeting perormance.While rankings are broadly similar, the very regressiveperormance o SGSY shows up as even more o aconcern (see Table 8.14).

however, targeting effectiveness is a function

not just of the design and implementation of the

targeting tool, but also the design, implementation

and monitoring of the targeted program. As a result,programs targeted using the same tool can exhibitradically dierent targeting outcomes. For instance,both PDS and old age pensions (NOAPS) are targetedusing the BPL indicator (combined with categoricaltargeting in the case o NOAPS). However, the programspresent varying degrees o targeting eectiveness which

can be attributed to dierences in program design andimplementation.

A ew common lessons or the link between programdesign and targeting outcomes emerge rom theanalysis o program perormance in previous chapters.Clear program design with well-dened programrules and institutional roles and responsibilities isa critical prerequisite. The nature and requency o benets also has implications or minimizing raud andleakage – (i) cash transers appear to be preerable thanin-kind transers; and (ii) regular (smaller) payments

appear to be preerable than one-time large payments.While the PDS deals in providing monthly rations o oodgrains and other items, the NOAPS oers regular small

Notes: Targeting dierential o benets between lower and u pper quintiles. Higher numbers indicate better targeting perormance.


Tab 8.14: Cat sar tta bts captrd b t b prra, 2004/05 %

Prst q2 q3 q4 RcstTart

drta1

PDS grain 29.7 54.8 77.4 93.6 100 4.8

Annapurna grain 37.9 64.8 76.0 98.6 100 20.4

Rural housing support (IAY) 24.6 43.1 68.0 90.7 100 5.6

IGNOAPS 31.1 50.6 66.0 81.6 100 8.0

Disability pension 27.6 44.1 64.0 75.2 100 4.1Widow pension 32.8 51.0 70.4 87.6 100 14.5

Rural credit (SGSY) 7.7 23.1 33.5 50.2 100 -21.7

Rural public works (SGRY) 34.2 51.7 67.9 83.2 100 16.4

Scholarship 11.7 33.3 45.8 65.9 100 -10.4

383 ThoughinormationontargetinginMGNREGis yettobe rigorouslyconrmedromhouseholdsurveys,administrativedatasuggest largelypositiveasthereisover-representationoSC/SThouseholdsinemploymentprovided(seeChapter4).

384 SeeRavallion(1999)andRavallionandGalasso(2005)oranexplanationotheestimationmethod.




and regular cash benets. The regularity o payments,relatively small amount o each pension payment andmonetization o benets under NOAPS make it a moreeectively delivered and better targeted program ascompared to the PDS.

With respect to program implementation, the ollowingcontribute to maximize access and minimize de acto

exclusion errors, as well as to reduce program leakage:(i) adequate outreach and inormation campaigns;(ii) streamlined enrolment process to as to minimizetransaction costs; (iii) creative use o IT or paymentdelivery; and (iv) lean administrative structures (i.e.,minimum number o program intermediaries). Ingeneral, greater awareness among the poor, both o programs and eligibility criteria, are a critical rst stepin their ability to access benets.385 In recent years,awareness o the BPL process is airly high in rural areas,partly due to re-verication drives undertaken in severalstates ater the large number o appeals against the

2002 BPL list. With respect to administrative structuresor delivery, there appears to be a weak link betweenlean structures with shorter delivery chains and bettertargeting outcomes. For instance, the PDS system isoperated by heavy bureaucratic machinery involvingmany stages and levels o intermediaries, includinga network o air price shops. Some other relativelypoorly targeted programs also rely on intermediaries,e.g., SGSY relies on banks, SHGs and supporting NGOsor other mobilizers. In contrast, NOAPS is airly simplein design, making direct payments to pensioners. This

distinction – and its mapping to targeting outcomes – isnot airtight (e.g., why does Annapurna perorm so muchbetter than PDS itsel? SGRY saves on the targetingtransactions and intermediaries through sel-targeting,but needs coordination on organization o works andpayment determination), but is worth keeping in mindin reecting on relative targeting outcomes.

e. oPTionS FoR imPRoving

TARgeTing in SP PRogRAmS

the above analysis suggests there is major scope to

improve targeting systems for public programs in india. At the same time, there are several generic issues

which must be taken into account in reorming targetingin SP programs:

the distribution o households exhibitsconsiderable clustering around the poverty linenationally, making ne-tuned targeting designinherently challenging

there is considerable diversity across states in

the actors that are correlated with poverty, sothat reliance on standard national indicators intargeting systems has inherent weaknesses.

community level beneciary identication hasattractions in such an environment. However,its strength is within-community targeting at avery localized level in relative terms rather thanthe kind o absolute measure o poor peoplenecessary or comparisons across space.

a key challenge therefore is how might the system

marry the “top down” targeting necessary for spatial

distribution of social protection resources, with the “bottom-up” information on the characteristics

of the poor which might do a better job of ranking

households at the grassroots level. There appear tobe several elements o a potential strategy. These arediscussed below, rst presenting more modest reormproposals, and then presenting an option which wouldimply more substantial reorm.

international evidence on targeting outcomes

provides useful insights in thinking about an

appropriate targeting mix. Three observations emergerom a review o targeting methods and outcomes in122 targeted programs in 47 developing and transitioncountries:

some methods have better targeting outcomesthan others when taken across a wide range o countries. This can be seen in Box 8.5.

combining targeting methods generally results inimproved outcomes. For example, a combinationo three methods improves targeting outcomes byaround 30 percent. This potential improvementsneeds to be traded o however with additionaladministrative costs and demands, and the riskso too much complexity introducing possibilitiesor manipulation.

385 Forinstance,asurveyaterthelaunchoRSBYinaparticularstaterevealedthat,alargeproportion(82percent)ohouseholdswhowereawareotheschemehadenrolledortheprogram.Researchorthisreportalsopointstothelackoawarenessabouteligibilitycriteria(e.g.,orsocialpensions)andentitlementsunderMGNREG.




B 8.5: itrata ds tart tds

It is useul to look at targeting methods in light o their targeting perormance in other developing countries. This can be seen in the tablebelow.

Source: Coady et al. (2004). Higher scores indicate better targeting perormance.

Tart ctss drt tart tds

Tart td mda tart prrac

All methods 1.25

Any orm o individual assessment 1.50Means testing 1.55

Proxy means testing 1.50

Community assessment 1.40

Any categorical method 1.32

Geographic 1.33

Age: elderly 1.16

Age: young 1.53

Other categorical 1.35

Other selection methods 1.10

Work 1.89

Consumption 1.00Community bidding 1.10

An important additional issue is the reliance on multiple targeting criteria. This raises the question o the benets o using multipletargeting methods, which implies a relatively high degree o administrative eort to implement. International evidence gives somesupport or the use o multiple targeting methods. In an econometric analysis o 122 targeted programs rom 45 developing countries, ithas been ound that each additional targeting method used improved targeting outcomes by around 15 percent, controlling or actorssuch as country income level, governance, inequality and other actors. O course, such improvements in targeting perormance come atthe cost o additional costs o administration and additional costs or households in compliance. However, it is unusually dicult to makea reliable estimate o the costs o administering UDB or several reasons, so that it is not possible to have an inormed discussion o thetrade-o between improved targeting outcomes and increased targeting costs.

Source: Coady et al. (2004).

at the same time, there is also strong variationacross countries in targeting outcomes withineach method, pointing to the importance o country specicities and implementation capacityin considering options. Across the sample o programs, around 80 percent o the variation intargeting outcomes is accounted or by withinmethod variation, and around 20 percent bybetween method variations. One importantdimension o this is community “voice” in the

society, which internationally improves targetingoutcomes by around 23 percent.

international evidence therefore clearly suggests

that no single targeting method will ever be sufficient,

and that the policy question is whether a more

effective mix of methods can be employed for sp (and

other programs).386 This would include improvementsin methods or each type o targeting, and potentially adierent mix o methods. The discussion below ocusesinitially on improvements in geographic targeting andthe “backbone” BPL method, beore a discussion o moresubstantial reorm options.

a ipr rapc tartwith respect to geographic targeting of central sp

allocations, it would be useful to generate sub-state

estimates of poverty using poverty mapping techniques,

386 SeeCoadyetal.(2004)orauseuldiscussionodierenttargetingmethodsandcombinationsindevelopingcountries.




and use these as the basis for future spatial resource allocation.387 Poverty mapping allows or reliablesmall area estimates o poverty below the state level bycombining inormation rom the NSS household surveydata with unit record data rom the Census. Since thelate 1990s, detailed “poverty maps” have been preparedor a growing number o developing countries. Thesemaps provide estimates o poverty and inequality at the

local level – such as the district, sub-district, and evenvillage level. Such inormation is not commonly availablebecause household surveys are typically too small insample size to permit suciently ne disaggregation. Yet,with ongoing eorts to apply detailed spatial targetingo public interventions, or to realize the gains romdecentralization and community-centered development,there is a pressing need or inormation on distributionaloutcomes at the local level.

in india, this could reliably generate poverty estimates

at block level. While progress on this ront would not

address the issue o household level targeting, it wouldsignicantly reduce issues o targeting across spacewithin states. In India, a pilot eort to produce povertymaps in three states - West Bengal, Orissa and AndhraPradesh – is ongoing. Once that is complete, it would bea more precise basis or allocations o CSS SP resourcesacross space. In particular, these poverty maps canpotentially be an important part o a strategy to marry“top down” targeting (essential or scal allocations o resources across space) with “bottom-up” targeting o households or individuals (e.g., through community-based methods that rely on local knowledge but are notcomparable across space).

b ipr sd-

tart

In addition, there is a major need to improve India’shousehold level targeting systems, though the rangeo options varies between urban and rural areas, andby program type. This section looks at three possiblereorms in the BPL methodology as well as the potential

role o other methods, including community-based andsel-targeting methods. None o them provide a “magicbullet” or all programs, but are suggestive o options or

improvement which may contribute to a more eectivemix o targeting methods.

c Rr t BPl td: tprpsd 2011 BPl td

given the concerns over widespread exclusion and

inclusion errors in the 2002 bpl method, an expert committee has suggested significant changes in

design of the proposed 2011 bpl census (as described

in the saxena committee report).388 One, the methodproposes the automatic exclusion o visibly non-poorhouseholds and the automatic inclusion o the mostvulnerable households, with a survey and scoring onlyo the remaining households. Two, the new methodoverlays geographic targeting criteria by speciyingdistrict, block and GP-level quotas with respect to theproportion o BPL households. In districts that have a veryhigh proportion o BPL households (over 80 percent),

all households (except the visibly non-poor) would beconsidered to be poor and automatically included in theBPL list. This design reduces administrative demands andcost to some extent by reducing the scope o the survey. The underlying principle o the proposed methodologyis to minimize errors o exclusion, without worryingover-much about errors o inclusion. The elements o the proposed method are described below.

setting quotas for the distribution of bpl households

across space: district-level thresholds for the

proportion of bpl households could be set using

the ratio of sc/st population in the district to that in the state, the inverse of agricultural production

per rural person and agricultural wage rate of

the district.389 These could then be used to estimateblock-level proportions o the poor using any oneor a combination o indicators on soil and irrigationquality, road connectivity, emale literacy and shareo non-agricultural workers. Finally, these block-levelestimates would be used to generate GP-level quotasor BPL households on the basis o population estimates.Estimating these disaggregated sub-district thresholds

as well as choosing alternative rules to generate GP-level quotas could be let to the discretion o the stategovernment or district authorities.

387 SeeElbersetal.(2003)ordiscussionothepovertymappingmethodologyandWorldBank(2011)oradiscussiononthepilotsinIndia.

388 SaxenaCommitteereport(2009).

389 ThisisthestandardormulausedorscalallocationsorRuralDevelopmentprograms.




identifying poor households: The basic principlebehind the methodology being proposed is to ensurethe inclusion o groups that are regarded as particularlyvulnerable (e.g., workers in low income or highlyvulnerable occupational categories, households whereearning capacity is severely curtailed by externalconstraints, etc.) and/or groups that are historicallysubjected to social exclusion. The proposed method

o identiying households has the ollowing threeelements:

Automatic exclusion o visibly non-poor house-holds

Automatic inclusion o the poorest and mostvulnerable households

Scoring o the remaining households (exceptin districts with poverty above the speciedthreshold – 80 percent - where all households,except those automatically excluded, are

identied as poor without a survey).(i) automatic exclusion of households that are meet

certain criteria and are identified as non-poor: Theintention is to exclude households that are visiblynon-poor, but whose position o economic, social orpolitical privilege makes it possible or them to get(wrongly) included in BPL lists. The exclusion criteriainclude the ollowing: (a) households with doublethe land o the district average o the agriculturalland per agricultural household i partially or whollyirrigated (three times i completely unirrigated);

(b) households who have two-wheeled (or more thantwo wheeled) motorized vehicles; (c) householdswho have at least one mechanized arm equipment;(d) households who have any person who isdrawing a salary o over ` 10,000 per month in non-government/private organizations or is employedin government (including parastatals) on a regularbasis with pension or equivalent benets; (e) incometax payers.390 These criteria are an improvement overthose used in the 1997 BPL method as (i) they allowor some local variation to a limited extent (e.g.,land holding is assessed relative to the local average

instead o the all-India threshold o two hectarespreviously) and (ii) ocus only on high-value assetsthat may be more successul in separating the richrom the poor.

i.

ii.

iii.

(ii) automatic inclusion of certain categories of households that are considered to be among the

poorest and most vulnerable: These include theollowing categories: (a) designated Primitive TribalGroups; (b) designated most discriminated againstSC groups (called Maha Dalit Groups), i so identiedby the state; (c) single women headed households;(d) households with disabled person as bread-earner;

(e) households headed by a minor; () destitutehouseholds that are dependent predominantly onalms or survival; (g) homeless households; and (h)households where any member is a bonded laborer.However, there is some conusion in the treatmento households and individuals while operationalizingthese criteria. While the report ocuses or the mostpart on households (i.e., a joint amily that residesunder a common roo and eat rom a commonkitchen) and nuclear amilies, some o the speciccategories noted above relate to individuals. In this

case, the report suggests treating these groupsas separate households (e.g., single women withno major son, elderly couples or individuals, etc.).However, it is not clear how to score the remaininghousehold members. Also, not all o these criteriaare easily measurable or veriable in the eld – e.g.,a unctional assessment o disability requires severaldetailed questions and highly trained investigators.

(iii) grading of the remaining households (identified as poor) in order to prioritize programs and

services to the poorest among these households:

The proposed scoring system ranks households ona scale rom one to ten using the ollowing criteria:(a) caste and religious aliation – SC/ST (3 points),denotied tribes and designated ‘Most BackwardCastes’ (2 points), Muslim/OBC (1 point); (b) anyone household member engaged in the ollowingoccupations – landless agricultural worker (4 points),agricultural laborer with some land (3 points), casualworkers (2 points), sel-employed artisans or sherolk (2 points); (c) no adult above the age o 30 withschooling up to grade ve (1 point); (d) any householdmember with TB, leprosy, mental illness or HIV/AIDS

or disability (1 point); and (e) households headed byan old person o age 60 and above (1 point). Since thebunching o a large number o households is possibleat certain scores, the method proposes a ranking o

390 Thesecriteriaapply totheentire jointamily– i.e.,therstcriteria ohigherthan averagelandownershipwould applyevento thesono alargearmer eventhoughhemaynotactuallyhavelandregisteredinhisname.




households with the same score, with those in thespecial category group such as SC/ST at the top,ollowed by landless agricultural laborers and so on.

this proposal is a modest approach to reform in that it proposes continuing with the bpl system with some improvements. The proposed methodology is animprovement over the 2002 BPL method in some ways:

(i) The indicators chosen are likely to be highly correlatedwith poverty or the most part (though not necessarilyor the elderly).391 Some o these indicators (gender o household head, education, occupation) were among awider set o indicators used by Jalan and Murgai (2008)in their augmented regression model that perormedmuch better than the 2002 BPL method. However, whilethe reduction in the number o indicators increasessimplicity in eld processes, it may make it more dicultto separate the rich rom the poor and the poor romthe poorest; (ii) Weights have been assigned to theindicators as noted above. However, weights have

not been applied across states; and (iii) The use o thegeographic, automatic inclusion and exclusion criteriareduce the scope o the survey and hence administrativedemands and costs. Subjecting this methodology to the

test using NSS data as done with the 2002 BPL methodwould yield interesting insights into how well the newde jure targeting design would perorm.

however, several drawbacks of the previous bpl

method remain, particularly with respect to the

imposition of central criteria across diverse local

contexts, cardinality of indicators, and the same

process of aggregation. In addition, there are likelyto be reporting issues with some o the indicators (e.g.,chronic health problems, disability). The adoption o thismethodology will also have signicant scal implications. The inclusion criteria are dened on the basis o nuclearamilies and individuals who are considered as separatehouseholds or the purpose o this exercise. This wouldlead to the number o BPL households increasingsignicantly, implying possible rationing within thesehouseholds i program budgets do not rise adequately.

as a result, there is still scope to move to a more

developed form of proxy means-test, using methods which are good practice in developing countries, for

both rural and urban areas. Box 8.6 provides someinsights rom international experience with PMT.

391 SeePalandPalacios(2008)oracomparisonopovertyratesamongtheelderly.

B 8.6: itrata prcs t pr as tst

Targeting on the basis o proxy means test like the BPL is becoming more common in developing countries. Generally such methods areused or large benets and/or or multiple programs. Current examples include use o PMT or cash transers (Armenia, Colombia, Mexico),targeting ood subsidies and rations (Indonesia, Turkey), rationing entry or subsidized health insurance schemes (Colombia) etc. PMTs arealso currently being designed and piloted in Bangladesh and Pakistan. In general, PMTs are relatively insensitive to quick changes in welareand require time to design, pilot and set up systems or implementation, monitoring and redressal. As a result, PMTs are best suited ortargeting the chronic poor in stable situations and not as a response to crises. From reviews o international experience with PMT, several

common eatures emerge which can be considered good practice. India in its BPL system relies on some o these but not others: Design: Typically a PMT is designed using regression models o total household income or consumption on the selected variables,

oten separately or dierent regions o the country. This process, usually iterative, should yield:

Indicators that are the best possible proxies to predict poverty in rural and/or urban settings.Indicators that are easily observable and not easily manipulated by households.

A weighting across the indicators, with the weights derived rom the regression model.Not too many indicators to be used in the PMT. Around two dozen variables are used typically when one looks at programsinternationally.Piloting beore nalizing the PMT allows validation o the tool against other indicators o household welare using current data.

Implementation: The use o PMT requires institutional capacity or collection o household-level inormation and or subsequentdatabase management.

Governments or project teams may decide to collect inormation through a door-to-door census type exercise or throughtargeting centers (combined with outreach and communication strategies to minimize exclusion).Some countries combine the use o PMT with home visits or other methods or ensuring both that those identied through

the PMT are actually poor, and to check on others. While desirable, this needs to be trade o with additional administrativecosts and capacities.

In some countries, the scoring system is made public.There is oten an appeals process to mitigate the negative impacts on some poor households o the mechanical nature o thePMT ormula.

l

l

l

l

l

l

l

l

l




there are several possible elements in such as

reform:

evenistandardnationalBPLcriteriaareretained,

these should be determined using rigorous

regression models or greater targeting power.

While the proposed 2011 BPL methodology doesinclude criteria such as caste aliation that have

been ound to be strong correlates o poverty,the preerred method or such an exercise is touse the NSS or other representative nationaldata to generate a set o indicators that providemore targeting power, and which could be easilyveriable at reasonable cost. The Ministry o RuralDevelopment is currently analysing data rom asample survey to inorm the debate on the 2011BPL design.

whatever indicators are used, they should have

some weighting – preerably on a state-specic

basis. The basis or such weights and a moresensible ranking between levels o each indicatorshould be the NSS data, or other representativenational data where relevant. In contrast,the proposed BPL methodology and Kerala’sKudumbashree use a set o weighted indicatorsor the identication o poor households, but theweights do not appear to be based on regressionanalysis. These are likely to be assigned bycommittee or, in the case o Kudumbashree,developed by communities in a participatorymanner.

a preerred approach beyond the above wouldbe tolet the indicators inthe BPL methodology

vary by state, or perhaps groups o states. Asthe purpose o BPL is increasingly ranking o households rather than determining aggregatenumbers o poor people (which remain controlledthrough the linkage to Planning Commissionaggregates or states), there seems no inherentneed to insist on standard national indicators. Aspart o a process to generate indicators, it wouldbe worthwhile to simulate state or region-specic

indicator sets and test their power in ranking o households.

piloting the proposed method would allow an

assessmentohowwelltheseindicatorscapture

householdwelare,measuredusingotheraccepted

measuressuchaspercapitaconsumptionand/or

assetindices.

BPLlistsshouldbesubjecttolocalizedverication

by communities, using gram sabhas or other

mechanisms. In principle, this should happen,and does in some states (e.g., HP) and/or orspecic programs. However, the process is notsystematic and made more complicated by theact that gramsabhas are held inrequently andparticipation is oten low in most states.392 I itwere to become more standard, it may be useulin some areas to have the verication processacilitated by NGOs or other third parties wherethere are concerns o elite capture. Vericationand nalization o the BPL list by the gramsabha is one o the suggestions made by the SaxenaCommittee report.

build in systems or dynamic updating o BPL

listsinbetweencensuses. The Saxena Committeereport suggests holding a census once everyten years, combined with a system or updatingthe lists every two years by registering changesin household circumstances. However, thereport does not speciy the implementationarrangements or doing this.

requirestatestohavecommonBPLlistsandBPL

rationcardaggregates,preerablyconsistentalso

atthehouseholdlevel.Several states already dothis, and it has the benet o saving administrative

demands and avoiding multiple targetingcriteria. The Saxena Committee report makes thisrecommendation. However, in states where thetwo do not presently coincide, political economymay make convergence challenging, particularlywhere BPL ration cards signicantly exceed thenumbers on BPL lists.

no comparable central guidelines for a census of

poor households exists for urban areas. Typically,the identication o poor households is carried outseparately by dierent departments, such as the

Food and Civil Supplies Department or PDS rationcards. However, methods dier across states anddepartments and there is little systematic inormationon this process. Recently, a working group was

392 Evenintheoursouthernstates,only20percentohouseholdsreportedattendedagramsabha(Besleyetal.2005).




ormed in the Planning Commission to deliberate onthe design o an urban BPL. Notable exceptions areDelhi and Kerala (see Box 8.3 above). More recently,Delhi has dened a common process o identicationo the poor across programs. This denes a set o thematic indicators capturing residential location,social deprivation and occupational vulnerabilityto identiy vulnerable households. The underlying

principle o promoting inclusion and several o thespecic indicators are similar to those proposed in therural 2011 BPL methodology (see Box 8.7 or details).A survey is currently underway to collect inormationon households in poor localities, with the intention o covering other areas over time. The list o vulnerablehouseholds so generated would be used by the ninestate departments that are engaged in deliveringprograms or services to the urban poor. This is a verypositive step towards generating a common beneciary

database or multiple programs, thereby reducingadministrative costs and increasing transparency. This,however, does not necessarily mean that all programswould need to target the same groups. Programs suchas educational scholarships that target SC/ST childrencould use the inormation in the common databaseto continue targeting on caste aliation rather thanvulnerability status.

while the above reforms could significantly improve

the bpl system, international and indian evidence

suggests that indicator-based targeting – even

where generated robustly from reliable survey

data – will struggle to explain a significant portion

of variations in living standards across households.

This is true in a static sense, where such methods rarelyexplain more than hal the variance in householdconsumption.393

B 8.7: Tart dr ss crc r rba D

The emphasis o Mission Convergence (MC), initiated in March 2008, has been on improving targeting and outreach o social protectionprogrammes in the National Capital Territory o Delhi. The Mission targets through a revised methodology, premised on the enumerationand identication o prospective beneciaries employing a survey o localities and sites which house ‘vulnerable’ populations in Delhi. Three thematic indicators – type o residential locality, social deprivation and occupation are used to dene ‘vulnerability’ and classiytarget vulnerable households as distinct rom other households canvassed or survey data.

vrab sds ar dd as pr t paratrs:

Residence – those living in notied and non-notied slums, resettlement colonies (F,G and H), and are shelterless and precariouslyhoused;

Socialdeprivation – households with elderly either living alone or as dependents or others, households with persons withdisabilities, households with any member suering rom a specied chronic illness, single women living in households asdependents or alone as heads o households, single unprotected children and households headed by children;

Occupationalcategory – Households that are primarily dependent on earnings rom occupations and orms o employment or sel employment which are casual, irregular and hazardous with insecure wages and poor working conditions. An indicative list o such occupations include rag picking, unskilled construction labor, casual daily wage labor, street hawking, casual domestic work,cycle rickshaw, unskilled workers in household enterprises.

In addition, a sub-category o the most vulnerable households includes those that are (a) homeless or precariously housed households;(b) households residing in notied slums, non-notied slums and resettlement colonies (F,G,H) and who report at least one amily memberas being socially vulnerable as per the criteria noted above.

MC relies on the institutional capacity and expertise o Gender Resource Centres (GRCs) – managed and staed by non-governmentalorganisations, civil society groups and community-based organisations or the data collection process. Such an institutional ramework,whilst providing unique opportunities in relation to the delivery o benets and services, has also been accompanied by problems in thepursuit o the planned targeting method. As noted in the Saxena Committee drat report, the actualization o such a non-income basedassessment require clear, measurable and standardized denitions o concepts and terms used, which can acilitate strict instructions ordata collection. Thus, a concern with the revised vulnerability targeting criterion set by MC is the diculty in translating the specied

criteria into practicable inputs or implementation by agencies with limited survey experience and capacity. In addition, some o thegroups noted above are broadly dened (e.g., a large number o households would have at least one member engaged in some ormo casual work). This combined with no weighting across criteria, indicated the need or rules or prioritization or ranking within theseindicators i aced with budget constraints or programs.

393 Forexample,Egypt’sPMToritsoodrationingsystemcapturesonly43percentothevariationinconsumptionsacrosshouseholds,andArmenia’sonlyaroundonequarterothevariation.




(ii) Otherreormoptions

while reform of the bpl system is highly desirable,

there may be additional options in rural areas of

some states for community-based targeting to play

a stronger role in sp programs. As the centre enorcesconvergence on aggregate numbers o poor peoplebetween Planning Commission estimates and the BPL

system, possibilities or more signicant reorms o targeting systems could be considered in rural areas(though perhaps not in urban, where an enhanced PMTwould seem more easible).

once a poverty map is available at block level,

reliance on community-level wealth ranking becomes

a feasible option as a tool within the formal system

for identifying sp beneficiaries. While not an idealmatch, the availability o aggregate numbers to block level and community ranking at GP/village level comesclose to the “top-down” and the “bottom-up” meeting.

To the extent there remains a gap, solutions such asassuming even poverty rates within the block, or somesimple indicators such as population share (as is beingproposed in the Saxena Committee drat report) or SC/STshare or landless share in dierent villages might be usedto allocate SP resources within a block. The precedento Andhra Pradesh is instructive, where a list o poorhousehold generated entirely by community wealthranking has replaced the administratively generated BPLlist across the state or the main anti-poverty programsadministered by the Rural Development Department. This may not be easible in all states (e.g., where caste

ragmentation is high and risks o local elite capture more

pronounced), and would need acilitation by competentNGOs. However, an evaluation o the AP experience, andwell-evaluated pilots in other states seem warranted tosee whether some o the shortcomings o even a well-designed PMT can be mitigated through a strongercommunity role in identiying beneciaries. See Box 8.8or a discussion o the operational challenges in scalingup community-based targeting methods.

as happens presently with community wealth ranking,

the process would benefit from being framed within

general criteria for ranking households. From animplementation viewpoint, there is a tension betweenmore localized guidelines and minimizing intensityo process and costs in developing the guidelines.However, experience rom India (e.g., Kerala’sKudumbshree) and rom other countries which haveormalized community identication into their ormalSP systems (e.g., Uzbekistan), suggests that this is asurmountable challenge.

whether the modest or more fundamental reform

options are pursued, self-targeting (as happens in

public works) would continue to be a useful tool for

programs where it is suitable. This approach is mosteective when used to target goods or services that aremore heavily consumed by the poor than the non-poor,and or programs where monitoring costs associatedwith verication o eligibility are high. Programs such aspublic works are amenable to sel-targeting approachesthrough the wage rate and types o work oered. Otherssuch as subsidized credit lend themselves less readily

to sel-targeting. For cash benets, the possible role

B 8.8: oprata csdrats sca p ct-basd tart tds

Several operational challenges need to be addressed with respect to scaling up community-based methods i they are to be used ingovernment programs:

Deningcommunity in a manner that balances the sociological necessity o cohesion among households with the operationalcompulsions o scale. The unit o the exercise should be small and socially cohesive, but this adds to the cost o the exercise andleads to an additional problem o aggregation o these locally collected lists to an operational/administrative unit level.

Mobilizingparticipation is typically earlier in a project context where there is expectation o immediate benets but may requiremore outreach when part o a targeting exercise that is delinked rom a specic project and with more diuse expectations o uture benets.

Monitoringthequalityoparticipation with respect to standardized and high quality acilitation to minimize dominance.Deningpovertyandcategorizingthepoor requires balancing the maxim o allowing communities to dene characteristics o thepoor with the operational need to ensure an acceptable degree o comparability across communities (even in a project-context). Typically ‘guidelines’ are adopted or the characterization o various poverty strata.

Institutionalizingtheprocess by setting up systems or verication o poverty lists and or regular updating o poverty status.

Source: Conning and Kevane (2002).




o sel-targeting will depend on benet levels, ease o accessing programs and other actors. Despite theseobvious limitations, the empirical results in Chapter 4highlighting the superior targeting perormance o public works suggests that “cutting out the middleman”in targeting o SP programs remains an important toolor programs where the nature o the sel-targeting

requirement or o benets oered permits. This suggeststhat sel-targeting should continue to play a role inprograms where it is suitable. An important additionalactor supporting this conclusion is that sel-targetingmay minimize the political costs o clear designationo target groups, by allowing policymakers to describesuch programs as “open to all”.



C HA P T

E R

9Getting More from India’s Social Protection SystemDirections for the Future



CHAPTER-9: Getting More from India’s Social Protection System – Directions for the Future 221

india will undoubtedly continue its strong commitment to a social protection system which seeks to serve the poor. The question is how best to do thatmore eectively in the short and medium term. Thereare likely to be three broad elements necessary or aneective SP reorm strategy or India:

Reorientingthepolicymixandspeciicprogram policies across SP programs in order to meetthe diverse needs o India’s poor – diversitywhich has several dimensions: spatial acrossand within states; across socio-economiccategories; and between households tryingto manage dierent types o risks and shocks. This would include exploring new SP tools orleveraging improved human capital outcomesand household productivity, and innovatingwith policies and programs to support the

urban poor; Gettingbetterpovertyreduction outcomesrom

existing programs through improvements innancing, targeting, institutional arrangementsandadministrationoexistingschemes;and

Building consensus around the reorms to be

undertaken. It will be necessary or politicalconstituents, including a signicant share o thosewho may lose rom reorm, to support the stageso policy and implementation evolution i theyare to be successul.

if such a reform agenda can be delivered, the benefits

for the poor of india could be substantial, and make

growth significantly more inclusive. In addition, thereare likely to be positive impacts on growth itsel rom anSP system which more eectively addresses a range o market ailures which result in poor and unproductivecitizens. The traditional view o social protectionsystems and the redistributional objectives underlyingthem was that there was a clear growth versus equitytrade-o. However, empirical evidence increasingly

highlights that a well-designed and implementedSP system provides dynamic eciency gains to theeconomy through positive impacts on productivity, andas an important tool or governments in managing theimpacts o reorms in the wider economy.394

Getting More from India’s Social Protection System

Directions for the Future

Chapter–9

394 SeeWorldBank(2004).




A. PoliCy ReFoRm in SoCiAl

PRoTeCTion

there is a need to deepen the ongoing policy reorientation of the indian social protection system

to meet the changing and increasingly diverse needs of its population. Marginal changes alone will not

deliver the kind o saety net which a changing Indianeeds or its poor and or its economy. This wouldinvolve several elements: (i) a rebalancing o thepolicy mix across dierent types o public SP priorities;(ii) consolidation o the large number o central andstate schemes to a core set o agship programs;(iii) in the context o consolidation, introducing anelement o choice and exibility or states in the specicprogram mix o centrally-supported schemes that theyoperate; and (iv) in some areas and or some programs,actively exploring the possibilities or leveraging therole o private players (both non-governmental and or-

prot) in delivery o interventions.

in terms of reorienting the policy mix, the report

suggests several directions:

increasingtheemphasisonpreventiveprograms

which help the poor and those vulnerable topoverty to manage risks and shocks better. Thisimplies a signicant expansion in coverage o dierent social insurance instruments, thoughin a phased manner consistent with institutionaland scal capacity. Experience to date suggeststhat phasing would benet rom: (i) starting withsimpler-to-administer insurance products such aslie and permanent disability, while continuing topilot and evaluate experience with more complexproducts such as health insurance; and (ii) orreasons o ease o worker mobilization and tocontrol transactions costs, ocusing initially on the“low hanging ruit” o unorganized workers whoare members o groups (e.g., MFIs, cooperatives,trade union and worker associations, SHGederations) that could play an intermediaryunction between workers and the state/insurers.

rethinking programs which seek to promotemovement out o poverty in two ways: rstly,moving rom administratively driven subsidizedcredit to public nancing o a more diverse rangeo livelihood promotion approaches better suitedto the labor market conditions o individual states

as is currently being proposed under NRLM;and secondly considering the options or use o saety net transers (see next bullet) to leverageparticipation in core education, health andpossibly nutrition services, in order to promotelong term movement out o poverty.

moving to more consolidated and more cash-

based social assistance programs or the

chronicallypoor. The “big elephant in the room”in this respect is undamental reorm o PDS. The very poor and long run perormance o the program in many states suggests that themedium term vision o a reormed PDS or mostgroups should be cash-based, though this wouldace substantial resistance in light o the ongoingdebate around the Right to Food legislation. Areormed PDS could still provide ood-basedsupport or specially vulnerable groups (in linewith Supreme Court orders), and in specic areas

acing chronic or acute ood shortages, but ormost areas and most people, a cash-based socialassistance system seems a more ecient andtransparent means o providing an income oor.An intermediate solution currently being mootedin the 2010 Economic Survey is to transer thesubsidy directly to households (rather than thePDS store owner) through ood coupons with alumpsum entitlement that can be exchanged atany PDS store.

in the ace o demographic change and slower

rates o poverty reduction in urban areas, startingtoaddresstheneglectourbansocialprotection

policy. While some o the needs o the urbanpoor are common to their rural counterparts,the possibilities (and constraints) o the urbanenvironment suggest that simple mimicking o rural models o SP programs and service deliverymechanisms is unlikely to be an adequateresponse. For example, the options or “voiceaccountability” o service providers which canbe mobilized in rural areas through collectivecommunity action are likely to be less possible

in urban areas, while the possibilities or “choiceaccountability” (through income enhancementand oering options in service providers wherepossible) are likely to be greater. The JNNURMprogram had appeared to oer a solid base orsuch an urban SP reorm, but has largely ailed to




deliver in this regard and closer consideration isneeded o how to aect urban SP policy change.

the specific proposal of this report is that central

sp programs over time aim for a “3+block ” strategy.

This would involve 3 core CSS SP programs or “pillars”,combined with an SP block grant rom which statescould nance other SP programs - or supplement

benets under the core pillar programs - more tailoredto the poverty and vulnerability prole o the individualstate. This would also involve signicant expansion inurban areas. This could promote both a more coherentand less duplicative SP system, but also give states moreleeway to adapt the SP policy mix to the needs o thepoor in individual states in light o available economicopportunities. The three core pillars proposed are:

amajor socialassistanceprogram. The obviouscandidate or this is a signicantly reormed PDS,merged or specic groups with existing social

pension programs.

395

Chapter 3 give more detailson the options or reorm o PDS proposed bythis report, with a preerence or a predominantlycash transer approach.

a public works program, or which MGNREGwould be the building block, as well as pilotingexpansion in urban areas. There are severalbenets o a reliable public works program at thisstage o India’s development: (i) by its demand-driven nature, it can be responsive to shocks in away that longer run programs typically cannot.In this way, it unctions as a “quasi-insurance”

program or the extended period during whichmore structured insurance is expanded to theunorganized sector; (ii) the positive targetingoutcomes o sel-targeted works; and (iii) thepotential or multiplier eects rom asset creationand community mobilization distinguish publicworks rom other SP programs. See Chapter 4 ora discussion.

abasicsocialsecuritypackageorthose outside

the ormal sector which could be expandedin terms o coverage and scope o benets

as institutional capacity and scal space isdeveloped. The core types o insurance which

GoI aims to expand include lie, disability, old agepension, and health, and the RSBY program isalready an important step orward in this regard.Chapter 5 gives suggestions on institutional,nancing, sequencing and other aspects o anexpansion strategy.

beyond the three “pillars,” states could receive an

additional transfer and implement state-specific sp interventions. How this is programmed couldvary according to state-level priorities, and includeinterventions such as livelihood support o dierentorms, targeted housing, interventions to incentivize useo basic social services, nutrition and/or early childhoodcare (e.g., through conditional cash transers as beingpiloted in some states), specic urban SP programs,or other options as proposed by states. A secondarybenet o such an approach would be strengtheningo complementaries between CSS and state-sponsoredschemes in order to control unnecessary duplication.A common core national SP system under the threepillars could promote portability o basic entitlements,and be increasingly useul as mobility o workers andhouseholds increases.

in terms of promoting both more effective spending

on sp, the “3+block ” proposal would allow more

cross-program flexibility to states – or possibly

districts - in deciding their sp expenditure priorities,

while still maintaining a common national core sp

system. It would also allow or greater adjustment inlight o poverty levels, key vulnerabilities, etc. This couldbe done in a variety o ways, possibly using a menuapproach to SP programs, and a exible orm o socialprotection block or matching grant which consolidatesresources rom existing SP CSS.396 This is an approachwhich has received increased attention in India in recentyears as policymakers seek to get greater impacts romSP spending. Given current nancing channels romthe centre to states in India, a more exible grantingmechanism or SP programs to states could takedierent orms – as a more “bundled” anti-poverty CSS,as Additional Central Assistance (ACA) along the lines

o programs like Pradhan Mantri Gramodaya Yojana(PMGY), or through a more ungible realignment o






targeted credit and livelihood interventions or the poor,and low-income urban housing.

B. imPRoving

imPlemenTATion oF SoCiAl

PRoTeCTion PRogRAmSeven if the necessary reorientation of the sp policy

and program mix can be achieved, it will not improve

outcomes for the poor unless accompanied by a

thorough overhaul of sp program administration,

including institutional arrangements. Whateverthe evolving mix o SP policies, there will be severalkey elements o administration and institutionalarrangements which will need to be conronted i Indiais to achieve the poverty reduction outcomes that itssignicant spending on SP warrants, including:

delineating clear lines o accountabilityaccompanied by adequate sta and nances.

Delineating appropriate institutionalresponsibilities or all links o the SP servicedelivery chain, and aligning the divisiono unctions with assignment o personneland allocation o resources or programimplementation will be critically important orimproved implementation o SP programs. Thiswill require rst and oremost greater proactivityon the part o states to approve policies and

put into practice the PRI/ULB decentralizationprovided or under the 73rd and 74th constitutionalamendments. This would need to be ollowedby a process-intensive reconciliation o centralguidelines, state-level stances on service deliverydecentralization, and capacities at sub-statelevels to perorm the required implementationunctions in SP programs. Achieving this goal willrequire coordination and gradual convergenceacross the many departments o governmentresponsible presently or dierent programs, andcommitment to strengthening implementation

capacities at the lower levels o the system, inparticular at the block and GP levels. It will alsomean building on innovations in institutionalroles to promote greater accountability among SPservice providers, as exemplied by social auditsin MGNREG.

rapidandsubstantialimprovementsinthebasic

“nuts and bolts” o program administration

and procedures. The detailed suggestions inthis regard are outlined in Chapter 7. Broadly,they would involve overhauling a range o bureaucratic procedures which impede undsow, strengthening processes or administrativeand social accountability o service providers,

a through modernization o program recordkeeping and reporting arrangements (includingcomputerizing systems and taking advantage o India’s ICT prowess to look or “technology leap-rogging” opportunities such as introduction o smart cards and other innovations), building onimproved rural banking inrastructure to overhaulpayment systems, and building a strong culture o M&E. Recent reorms in RSBY and to a lesser extentMGNREG, together with a number o state-specicprogram pilots, provide many lessons in this area,

and it is hoped that they can be systematicallyincorporated in other SP programs over time.

overhauling existing targeting mechanisms,

bothatthehouseholdlevelandgeographically.

Any social protection system needs to be ableto identiy who are the poor with a reasonabledegree o accuracy. Innovations already operatingin India and good practice rom other developingcountries oer a range o options or signicantimprovements in targeting mechanisms. Theseinclude: (i) development o “poverty maps” at

a sub-state (probably block) level which wouldallow more precise geographical allocation o SPunds to poor areas; (ii) overhaul o the BPL 2002methodology in line with good practice in designo proxy means-tests (PMT) in other developingcountries, including allowing or cross-stateand urban/rural variations in the PMT ormula;and (iii) in rural areas, continued piloting andstrengthened evaluation o community-basedbeneciary identication or SP programs with aneye to convergence with a reormed BPL system,and possibly – as has already happened in AP – its

replacement in appropriate settings. While thenew BPL methodology proposed by the SaxenaCommittee improves upon the 2002 system inseveral ways, several drawbacks o the previousmethod remain. Piloting the proposed methodsand subjecting this methodology to the test




using NSS data as done with the 2002 BPL methodwould yield interesting insights into how well thenew de jure targeting design would perorm.

in the area o social security or unorganized

workers, past experience suggests that direct

public provision, nancing and administration

is neither easible nor desirable. It seems more

easible to partner with existing non-governmentalentities (or-prot, NGOs, and membership -based organizations) and restrict the role o government to: (i) providing targeted subsidies;and (ii) regulating these entities and setting basicstandards. This model already exists in India inseveral orms, such as the JBY scheme operated byLIC or lie insurance, and more importantly the RSBYprogram. In addition, many other schemes allinginto the community based or micro-insurancecategory could be incorporated under an umbrellaprogram that provided matching contributions or

premia but set certain standards in terms o benettargets, eligibility conditions, investment policyand recordkeeping, among others.

sp programs can be classified into three main pillars.

“Protective” measures or programs, which providerelie against deprivation and shocks once they haveoccurred. “Promotional” measures attempt to improveincomes in the short and longer term through livelihoodand human capital interventions. “Preventive” measuresseek to avert deprivation by supporting the ability o households to manage dierent risks and shocks they

may ace ex ante. The main sets o programs alling intoeach o these categories are discussed below, togetherwith a number o cross-cutting areas critical or programsuccess, including nancing and institutions, programadministration, and targeting.

a Prtct prras

The programs intended primarily to protect individualsand amilies once risks have been realized, include PDS,social pensions and targeted housing programs. The

section reviews the perormance o each and identiessome program reorm options.

(i) PublicDistributionSystem(PDS)

clearly, the dominant program as far as safety

net reform in india is concerned is tpds. This is or a

range o reasons which are presented in this and otherreports. Firstly, it remains easily the largest saety netprogram. Secondly, it has poor targeting outcomes,and in many o the poorest states appalling levels o leakage which have persisted over many years. Thirdly,the procurement system on which it relies is becomingincreasingly strained in the ace o gradual liberalizationo agricultural markets in India, both domestically and in

terms o openness to trade.

looking at results from the poor states in particular,

it is hard to argue that pds comes anywhere near

achieving its food security and poverty alleviation

objectives. However, reorm options or PDS haveto be assessed with a clear acknowledgement o thecontext: technical, political economy, and possiblylegal. This context is o course strongly aected by alsothe commitment o GoI to the Food Security Bill whichwould convert PDS rom a scheme to a legislated right. These include:

reormoPDSisinextricablylinkedtothepublic

procurementsystem.While the benets o PDSto households are spread across India, the mainbeneciaries o public procurement o grains toeed the PDS are concentrated among armersin a ew states: Punjab, Haryana, some parts o Uttar Pradesh, and Andhra Pradesh to a lesserextent. Without some reorm o the publicprocurement system – in terms o pricing policywith respect to the Minimum Support Price andthe control o government in grain procurement

more broadly – there will continue to be largegrain stocks purchased each year which need tobe drawn down.

there is a large internal bureaucracy running

PDSwhichislikelytoresistundamentalreorm

options which would undermine their role. TheFCI alone employs around 450,000 people inIndia, and SFCs a urther number. This in itsel is astrong lobby which is likely to resist any changesin the PDS which would imply either a potentialrole or the private sector in grain provision, or

more undamentally a shit in use o the PDSsubsidy rom ood purchase and distribution tocash or poor households.

despitetheshitattheaggregatelevelromood

decittooodsurplus,thereare–andwillcontinue

tobe–areasothecountrywhichareperiodically




oodinsecure. This reality will continue to supportarguments or a direct ood security role or thestate. At the same time, penetration o private oodmarkets has increased sharply in recent years, sothat the actual availability o ood is there with theexceptions o some tribal and dry land areas, andmarket inrastructure o well-developed and sub-markets are increasingly well-integrated. Thus,

even with the ood crisis o recent years, in mostareas the challenge is not so much availability perse as price and aordability.

the maturity o the PDS has naturally created

socialexpectationsthatitispartotheabrico

socialpolicy. The results on awareness o PDS (seeChapter 7) are instructive in this respect, and thesocial constraints o any enorced undamentalchange in PDS should not be under-estimated.

theremayalsobelegalconstraintsontheability

othestatetowithdrawromdirectprovisiono

grainsthroughPDS. The Supreme Court o India,in response to Public Interest Litigation take upby the People’s Union or Civil Liberties in 2001with Union o India, FCI and eventually all stategovernments as respondents, has claried thatArticle 21 o the Constitution on the Right toLie also implies a right to live with dignity. TheSC agreed that one aspect o this was a right toood, with the PDS a central plank o the right. The Court has made various orders subsequentlyin eorts to improve the unctioning o ood-

based schemes.398

A point o note is that the initialorder rom 2001 indicated that “what is o utmostimportance is to see that ood is provided to theaged, inrm, disabled, destitute women, destitutemen who are in danger o starvation, pregnantand lactating women and destitute children,especially in cases where they or members o theiramily do not have sucient unds to provide oodor them”.399 The implications are taken up below.

in light of this context, three reform options are

presented for pds, which could themselves have

variants borrowing from the approaches discussed.Each approach is outlined below. It is stressed that noneo the options assumes any necessary decrease in the

aggregate level o public spending devoted to socialassistance or the poor:

anincrementalapproachtoreormwhichwould

retainthecurrentPDSmodelbutwithahostoimprovementsinthepolicyandimplementation

systemstoincreaseefciencyromitsotenvery

poorstate.

anintermediatereormoption,whichwouldretainaood-basedentitlementprogrambutintroduce

privatesectorparticipationingrainprocurement

and delivery and a moreundamentaloverhaulothe PDS administrationthroughuse osmart

cards.

undamental reorm which allows or cashtransers instead o ood-based transers,either

whenthestateprovesitselunabletoulllitsood

transerobligationsorbyoeringhouseholdsthechoiceograinorthecashequivalentothegrain

subsidy.400

the overall position of this report is that fundamental reform options for pds should be considered and

that offering households the option of a cash transfer - while retaining the core food security

and buffer stock functions of fci, and ensuring pds grains in areas where access is a genuine issue – is an

attractive option. While there is certainly potential toimprove PDS perormance (as is currently being donethrough the Ministry’s nine point action plan), thereremain a host o structural issues with a SP program sodependent on many intermediaries operating withinsuch weak governance systems. In that light, theincremental approach represents a triumph o hopeover experience which cannot be expected to resolvethe situation o PDS in much o the country. The longterm problems o PDS cannot be solved quickly or witha single prescription or all states and all time. However,oering options which allow households choices in howthey benet rom the massive public subsidy o PDS couldallow or exibility, greater eciency, and accountabilityor the system. While the proposed Food Security Billwill potentially have a major impact on the legally

possible range o options, it is hoped that it is not tooprescriptive, but leaves open approaches which wouldappear to have the possibility to improve the welare o

398 Auseulsummaryandbackgroundmaterialscanbeoundatwww.righttooodindia.org.

399 SeeSupremeCourtOrder,o23rd July,2001.

400 ThisoptionhasbeentakenbyarangeoIndiancommentatorsovertheyears,includingmostrecentlyKapuretal.(2008)andPanagariya(2008).




poor households. In this light, the deault provided orin the consultation drat o the Bill or provision o cashwhere the PDS system is unable to provide adequate anddecent quality grains seems sensible. The system has soclearly demonstrated its inability to do so or so long inso many places that ruling out such an option seemslikely to leave many poor households with a strongerlegal right but no better a real world situation.

introducing a range o measures to make

honestlyoperatedFPSnanciallyviable,sothat

leakageisnotanancialinevitabilityothePDS

atthatlevel. The measures proposed – many o which are in practice in some states - include:(i) doorstep delivery o grains to FPS at the cost o the state (currently being done in 17 states/UTs);(ii) provision o rent-ree premises by panchayatsor FPS operations; (iii) allowing FPS to sell non-PDS commodities which will both increase theirviability and increase the likelihood o being open

more days in a month. States such as HimachalPradesh and Gujarat are already moving in thisdirection, which is supported by the PlanningCommission in its PDS report; (iv) ensuringthat FPS have a minimum catchment area andturnover o grain which allows or sucient scaleto ensure viability. The Planning Commissionestimates that substantial share o FPS ail to meetthis benchmark. There is an obvious challengeto enorce such a requirement in remote andinaccessible areas, which are likely to be thosemost reliant on FPS. One option or “squaringthe circle” in this respect could be the use o mobile FPS vans such as Himachal Pradesh isalready using in a number o remote districts; and(v) in line with Planning Commission suggestions,increase the margin on grains or FPS to 2 percento the economic cost.

deepening ongoing reorms in management o

FPS.States – both rich and poor - are increasinglymoving rom FPS operated by private operatorsto operation by community-based institutions,including PRIs, SHGs, and cooperatives (e.g., in

Tamil Nadu in 2009, almost 90 percent o FPSare run by cooperatives). This seems eminentlysensible in terms o having operators who aremore accountable to their communities and more

likely to operate the FPS on a regular basis. Resultsrom the SPS surveys on saety nets are instructivein this respect. Despite kerosene distribution inPDS being notorious or being high leakage, theincidence o kerosene rom PDS in Orissa is armore progressive than that o grains. A simpleexplanation appears to be that kerosene has beenthe rst commodity transerred to operation by

women’s SHGs in the state.401 By early 2009, about83,000 FPS (out o the 4.98 lakhs shops acrossthe country) had been allotted to cooperatives,women’s and other SHGs, PRIs, etc.

decentralization o grain purchases. This wouldhave several possible advantages, and a numbero states are increasingly exploring this option intheir grain purchasing. Firstly, locally purchasedgrains are more likely to accord with local dietarypreerences, and hence be in greater demand.Secondly, local procurement could spread the

economic benets o the procurement subsidyrom the current concentration in a ew states(two o which are very well-o) to armers inall states. Thirdly, the costs o transportationand storage o grains are likely to be reducedconsiderably. A number o states have started tomove in this direction, including lagging statessuch as Chhattisgarh and Orissa, though how arthis can advance beore hitting resistance on thesupply side in traditional supply states such asPunjab and Haryana remains to be seen.

makingoptionsorhousehold-levelotakeromFPS more exible. The most obvious reorm inthis respect is obviously allowing, as a numbero states already do, or weekly drawing o thehousehold’s allocation. The only constraint onthis is the FPS being open on a more regularbasis, but that should be addressed through themanagement reorms outlined above. A secondmeasure which may be more challenging rom abureaucratic perspective – but seems desirable –would be allowing BPL and/or AAY households tocarry over their monthly ration rom one month

to another in months when they had less needor their ull ration. Given seasonal uctuationsin PDS to market prices, this could imply somelumpiness. A third option would be allowing





households a more exible mix o grains andother basic commodities up to the value o theirration subsidy, an approach which GoI plans topilot in the coming year (see below).

strengthening monitoring o PDS operations. Anumber o measures to increase transparencyin the operations o PDS are easible withinthe current ramework and are indeed beingimplementing in several states. For instance, oneelement o management reorm may be moredirect community oversight in PDS operations, e.g.,through community verication o PDS deliveryquantities where they are not already operatingthe FPS and/or through the involvement o PRIs invigilance committees to monitor FPS. Some stateshave made some progress in implementing asystem o monthly certication by PRIs/vigilancecommittees or delivery o ood grains to FPSand allocation to ration card holders on time. In

addition, public display o BPL lists and o districtand FPS-wise allocations o ood grains or publicscrutiny as proposed under the nine point actionplan would improve transparency. The review o BPL/AAY lists in 14 states as part o this process hasalready led to the elimination o 100.51 lakh bogus/ineligible ration cards. Concurrent evaluations o PDS perormance by NCAER and IIPA have beencommissioned in recent years by the Departmento Food and Consumer Aairs.

strengthening the use o Inormation and

Communication Technology (ICT) in the PDS atthe beneciary end in order to promote more

robust identication and in reducing leakage.

This can take a variety o orms, some – such asin Andhra Pradesh already – simple biometricidentication but not ully integrated into a “smart”system, others involving bar coding and otherapplications. The range o options or greater ICTuse in the PDS system have been exhaustivelyreviewed in a report or the GoI Ministry o Financenanced by the World Bank, which also conducteddetailed easibility assessments in Anand district

in Gujarat and Thane district o Maharashtra in2007.402 In addition, the use o new technologiessuch as GPS or tracking movement o vehicles

transporting PDS commodities. Funds or pilotingthis technology in Chhattisgarh, Delhi and TamilNadu were sanctioned in 2007-08. In addition,computerization o TPDS operations have beeninitiated in several states.

conductinganindependentreviewoFCI’spricing

structure,withaneyetoreducingtheeconomic

costs o grain procurement and handling. Itappears that FCI is inecient in its handling o grains, and the costs o this are naturally borne bythe budget and the end beneciary. Despite this,previous reviews have not been very probing intheir eorts to look at possibilities or improvedeciency in FCI. A truly independent review o their cost structure with a prior commitment by GoIto implement its ndings would seem desirable(though the technical demands o “ecient” costestimation in the ace o such a dominant marketposition should not be under-estimated).

anotheroptionisintroductionooodstampsorcoupons,anapproachthatisprevalentinAndhra

Pradesh and Rajasthan, and was introduced in

Biharin2007. The current ood coupon approachinvolves coupons which are redeemable only inthe FPS network, though there is no reason not toallow or a coupon which would be redeemablealso in approved private ood retailers (see below).Coupons may have attractions as a tracking andleakage-reduction tool i FPS owners are able toreplenish their grain stock based strictly on the

basis o redeemed coupons. In Andhra Pradesh, itis estimated that the introduction o coupons hasreduced leakage in the PDS by up to 25 percent. The system has some obvious risks, includingorgery o coupons. Another issue may be thedevelopment o a secondary market or coupons(though how much o a concern this is i poorhouseholds place more value on the cash thangrains is a question). The Bihar experience withood coupons has been closely assessed througha two round survey-based assessment.403 Whileonly around 60 percent o eligible households

had been provided with ood coupons in therst year o implementation, access among themdramatically increased as a result o the reorm,

402 SeeCal2Cal(2007)oraPDSsmartcardeasibilitystudyproducedatrequestoMinistryoFinance.

403 SeeVashishtetal.(2009)whichanalyzesurveysromapre-reormbaselineandaollow-upsurveyjustoverayearatertheintroductionooodcoupons.




rising rom only 2 percent to around hal o BPLhouseholds. Bar coded coupons/ration cards havebeen introduced under TPDS in six states.

the above options can be considered a minimalist

approach to pds reform. the option of allowing grain

purchases with coupons from approved private food

retailers would represent a more bold form of pds

reform which feasibility studies indicate is viable.Some o the potential attractions o such an approachinclude competition between PDS and private traders(which could act as an accountability check and perhapsincentivize eciency improvements in FCI and SFCs),greater requency o availability in areas where FPSopen irregularly, and possibly reduction in the transportand holding costs o PDS or the portion o grainspurchases rom private traders. The United ProgressiveAlliance (UPA) Government in 2007 announced plans topilot such a reorm in 20-50 districts, using coupons orbeneciaries which can be redeemed in neighborhood

stores other than FPS (“kirana” stores), though thereappears to have been limited progress. In addition,beneciaries would be allowed to have a more exibleorm o ration, allowing or purchase o any mix o grains, pulses or other household basics up to the valueo the coupon. This reorm option was also mentionedin the 2010 Economic Survey. While details remain tobe worked out, the initiative seems worth pursuing andevaluating.404

a more technically advanced form of food coupons

could be introduction of “smart cards” in the pds,

which could be redeemable also at approved private traders and/or fps.405 A smart card system canacilitate two key unctions: individual identicationand remote transaction processing/storage. Smartcards have the ability to store and record a large amounto program and authorized biometric inormation(signature or ngerprint image) that can be matched tothe actual ngerprint or signature o individual involvedin a transaction. In the context o the ood ration system,the card can store inormation on the identity o theindividual, eligibility or rations, quantity, price and time

intervals at which he/she could be supplied rations, etc.Point o Service (POS) terminals are simple machines thatread the cards and have the capability o authorizing thetransactions via phone lines or the internet or recordingthe transactions on the smart card itsel.

smart card systems are not new to india or to south

asia. Several experiments are already in operation,

and the Rashtriya Swastya Bima Yojana (RSBY) healthinsurance program introduced by GoI in 2008 clearlydemonstrates that smart card applications are veryeasible or wide scale use even in poor and lowcapacity settings, provided the right mix o institutionalplayers is involved and there is rigor in standard settingand implementation (see Chapter 5). Indeed, there isdiscussion presently o “piggy-backing” other programson the RSBY cards, and this is technically possible. Therehas already been progress with respect to MGNREG inthis regard. Another notable small scale private initiativeis that o Swayam Krishi Sangam (SKS) in operation in

one o the poorest districts o Andhra Pradesh (inMedak). The card is being used essentially as electronicpassbook to record all the transactions or micro-nanceloans. Recently, GoI has provided in the 2008 and 2009budgets unds or piloting o a smart card-based reormin Haryana and Chandigarh which would also allowaccess to authorized private dealers.

the worrying condition of pds as reported by goi,

national researchers and this report, suggests

however that a more fundamental reform of pds is

warranted which would introduce the option of

cash transfers.406 The ollowing paragraphs outlinetwo variants o a undamental reorm option or PDS:(i) switching to a cash transer or the poor, or oeringoptions or poor households between ood and cash;and (ii) switching to a conditional cash transer, in orderto leverage improved human capital outcomes romthe huge spending on PDS.407 Neither option wouldeliminate the need or ood buer stocks, nor or thecontinued use o ood-based transers or specicsituations (e.g., where relie aid is needed due to climacticor other disasters) or specic areas (e.g., remote or dry

404 TimesoIndia,July3,2007,“FoodcouponstoendPDSmess?”,seehttp://timesondia.indiatimes.com/news/india/Food-coupons-to-end-PDS-mess/articleshow/2165884.cms,lastaccessedonSeptember22,2009.

405 GoIhaslauncheditspilotothisapproachinHaryanaandChandigarh.AndhraPradeshhasalreadygonesomewayinthisdirectionbyrecordingbiometric(iris)identicationoallBPLrationcardholdersinacentraldatabase.Thisallowedorsignicantreductionsinduplicateandghostrationcardholders.SeeCal2Cal(2007)oradetaileddiscussionothetechnologicaloptionsandeasibilityosmartcardsinPDS.

406 See,orexample,RadhakrishanandSubbarao(1997).

407 Inessence,this isthestrategythatMexicoollowedinitstransitionromtheso- called“tortillasubsidy ”totheCCTprogramProgresa(nowcalledOpportunidades).




land areas), and possibly specic population groups(e.g., those noted in the Supreme Court order above,which largely conorm to the AAY category presently).Despite the ongoing debate around the Food Securitybill, Indian policymakers appear to be willing to exploresuch options, as evidenced by the recent announcementby the Government o Delhi o a “cash or ration” pilot inone district which would provide ` 1,100 per month to

women in poor households (an amount which wouldpurchase around 30 kg o rice at market price as o mid-2009).408 The 2010/11 Economic Survey suggests thatthe GoI is considering the introduction o ood couponsor households with a lumpsum entitlement (rather thanspecic amounts or rice, wheat, sugar, etc.) that can beencashed at a PDS store o their choice.409

the elements of a transition from a food to cash

based pds could be the following:

reorm would have to start at the procurement

endothesystemiitistobeeasible,andinvolve

areorientationoFCI’sunctions. This essentiallyinvolves a reduction in government controlsover grain markets and procurement operations.Even in such a reormed system, FCI could stillbe expected to play important roles. Firstly, itcould compete with private players in the market,relying on the economies o scale in operations,existing inrastructure, distribution networks andother advantages to be competitive. Secondly,and very importantly, FCI could retain a role asmanager o India’s buer stocks o grain and

perhaps their distribution in situations or areaswhere they were needed. Finally, to the extentthat specic groups or areas continued to receivePDS grains, FCI could continue to perorm thatdistribution unction in coordination with SFCs.

i procurement reorm could be achieved,

substantialresourceswouldbereeduporusein

acashtranserprogramorthepoor.In essence,public unds that are now spent on the large oodsubsidy bill o GoI would be reed up to be used ordirect cash grants to the poor. The analysis o this

report shows that regular cash grants are subjectto less leakage than ood in nearly all cases, are areasier to administer, and are highly valued by the

poor. There is also no solid or systematic evidencerom eld work o the concern that cash grantsare drunk or smoked by the men in recipienthouseholds, though o course that cannot bediscounted as a possibility.

there are several obvious challenges and issues in such a proposal. they include:

likely strong resistance rom the stakeholdersoutlined above in the discussion o political

economy constraints. This is natural. The mainway o managing this risk is to have a strategy or“reinvention” o the FCI along the lines outlined,so that it becomes an active player in the newsystem, with important residual unctions likebuer stock management, rather than simply a“loser” in the reorm process.

resistance rom FPS owner groups. Given theexistence o over 400,000 FPS owners, thought

would need to be given to how to manage thisrisk. The rst element o a strategy would becontinuing transer o FPS unctions to PRI/CBOswho are not “sole purpose” organizations in theway that FPS owners would be, and hence are lesslikely to resist changes that may be supportedby their communities. Secondly, a sub-set o FPSwould continue to be needed or the continuedPDS unctions which would continue even in areormed system. Thirdly, the government couldas necessary support transitional livelihoodssupport or FPS owners who lost their businesses

as a result o reorm (though this has not provennecessary to date in states which have transerredFPS ownership rom private individuals tocommunity groups).

legalimplicationswithrespecttoexistingSupremeCourtdecisionsandtheproposedFoodSecurity

Bill. This is an important issue, as any reorm mustbe consistent with the law o the land, more sowhen it ows rom constitutional provisions. Onereading o the SC order is that Government maynot be constrained i it provided sucient cash

transers to the identied groups to allow themto purchase ood. A more demanding readingsuggests that a legal obligation directly to provide

408 See HindustanTimes, August27, 2009: Pro-poorschemes getthe thumbs-uprom planpanel, see http://www.hindustantimes.com/Pro-poor-schemes-get-a-thumbs-up-rom-plan-panel/H1-Article1-447365.aspx,lastaccessedonSeptember22,2009.

409 GoI(2010).




ood may apply to the groups noted. At thesame time, the expansion o midday meals andIntegrated Child Development Scheme (ICDS),together with the existence o other programsor the destitute such as Annapurna (and o course social pensions) goes some way towardsmeeting such an obligation i supplemented bya cash transer. Clearly, however, this would need

close consideration o the legal issues and theirimplications or a reorm strategy. Another way o approaching this may be to oer households theoption o grains or cash and letting them decide. This would presumably meet the state’s legalobligations while oering choice to householdsin exercising their rights.

the existence o areas where ood insecurity is

chronic. Despite the aggregate move to oodsurplus, there is a natural concern about ensuringood security in these areas. It may be that

PDS continues in those areas until there is anassessment o the impact o transition to cash inother areas.

aggregate evidence indicates that caloric intakes

are falling in india, even among the very poor.410 Inlight o this, moving to cash or PDS may seem counter-intuitive. However, the counter-balances to that in theabove proposal would include: (i) buer stocks remainan important part o the system, possibly with a “buerstock plus” to allow a more generous provision orgrains or emergency and special situations; (ii) the

recent expansion o midday meals may or childrenprovide a caloric oor (see below); and (iii) it is proposedthat AAY continue to provide ood or the poorest, aswould Annapurna or a share o the elderly destitute;and (iv) ongoing eorts to improve the perormanceo the nutritional program under ICDS could – i eective – provide improved coverage o poor inantsand pregnant/lactating women. Cumulatively, these byno means suggest a wholesale withdrawal rom directprovision o ood or the poor.

the second variant of a cash-based reform of pds

would be introducing a conditional cash transfer (cct) rather than a simple cash grant as outlined

above. The basic arguments or such an approach – andthe political economy and legal constraints – are similar

to those or a simple cash grant, though conditionalizingtransers may ace more legal complexities. The typeso conditions that could be considered would varyaccording to household characteristics, but couldinclude registration o girl births and school attendanceor households with children. For other householdtypes, conditionality may not be appropriate, especiallythose in the categories outlined above. The obvious

attraction o a CCT approach relative to a simple cashgrant would be that PDS spending could be used toleverage improved human capital outcomes, or othersocially desirable goals such as better treatment o girlchildren. The additional challenges would include theadministrative demands o operating a CCT, but theJanani Suraksha Yojana (JSY) institutional birth grantand other state-specic experience in India suggeststhat such demands can be dealt with.

in light of various constraints and given the

fundamental nature of such a reform, it would be

advisable to experiment with a cash-based pds, perhaps focusing on more food secure states/districts first. Itwould also be sensible to ensure that the groups coveredunder the Supreme Court order continue to receivegrains, possibly in addition to a cash transer. Such apilot would need careul monitoring and evaluation toassess impacts and ensure that ood security was notcompromised, but or poorer states in particular seemsa more promising way o ensuring (albeit in an indirectmanner) the right to ood.

(ii) Socialpensionsthe evidence suggests that social pensions are a

reasonably effective part of the indian sp system, and

their enhancement in coverage and central financing

in recent years is well directed. In light o this, the reormoptions or social pensions are more o an incrementalnature, both in terms o relative spending/coveragepriority, and in terms o improvements in current policiesand implementation. The main recommendations are:

there is a need in a number o states or better

educationoofcialsandotherinvolvedinsocial

pension administration on eligibility policies.Field work in several states nds either partialknowledge or problematic interpretationso previous eligibility criteria on “destitution”

410 SeeDeatonandDrèze(2009).




(now modied to BPL) and even the reorms underNSAP are likely to ace some continuing problemso identiying the poor. Following a review o policy, a more thorough awareness raisingand perhaps development o implementationguidelines could help improve the situation.

morebroadly,asprogressismadeonexpansion

o social security to the unorganized sector, itwillbecriticalorthosemanagingsocialpension

policy development to be involved in thinking

throughoptionsorpensionexpansion,andthe

complementarities with social pensions as a

possible“zeropillar”oanycontributorysystem

ortheunorganizedsector.

centralmonitoringoNSAPperormanceshouldbe

urtherstrengthened,despitetherelianceonACA

ratherthanCSSnancingmode.Social pensionsare one o the ew major national programs orwhich simple consolidated reporting on variousperormance indicators is not available in annualreports o the Ministry o Rural Development. Ata minimum, this would be desirable. A welcomerecent initiative is the computerization o NSAP beneciaries that signicantly increasestransparency and enables the central Ministryto monitor outcomes. States are currently in theprocess o moving to a ull-edged MIS or NSAP.As importantly, the central Ministry could act as amore eective conduit or sharing o good state-level experience in dierent aspects o policy and

implementation. experience suggeststhatthe previousundow

modelosendingsocialpensiontransersdirectly

to DRDA level is preerable to routing through

state treasuries, and that its reintroduction

should be considered. The strongest argumentor this is evidence o even rich states such asGujarat diverting social pension transers orother purposes, something that is less likely withDRDA routing. In addition, delays in on-paymentby state treasuries could be avoided with such

a model. However, this potentially entails apolicy decision to make the program a centrallysponsored scheme.

theveriicationprocessorcurrentbeneiciaries

bystatesneedstobemaderegular,andaprocess

orremedialactiondeveloped.Presently, simple

checks such as comparison o census andbeneciary inormation by district is typicallynot done, and has proven very inormative wherehas been done in identiying outliers on the upand downsides (e.g., in Karnataka). This wouldallow a more targeted process o perormanceaudit. In addition to state departments, theremay be a potential role in such an enhanced

process or PRIs.

areviewopaymentsystems or social pensions

wouldbedesirableinanumberostates,aswould

athrougheorttoreconcilesometimesdivergent

locallevelandstatelevelreportingonbeneciary

numbersandotherinormation.

(iii) Targetedhousingprograms

while there are clearly some significant challenges

in making the targeting and performance of targeted

housing programs more equitable and efficient,

specific recommendations on improvement are more

difficult to suggest. Nonetheless, some suggestionsinclude:

attemptto developand implement mechanisms

in states or minimizing the signicant rent-

seeking that appears to be happening in IAY.

This is inherently challenging so long as benetsinvolve large lump sums. However, the nature o rural housing needs and behavior among the poorsuggest that the program can be better adaptedto needs.

ensure that saeguards in current guidelines

are actually enorced. The recent introductiono “permanent waiting lists” based on the BPLlist and the requirement o displaying thesewaiting lists in a public area (e.g., the wall o thepanchayat building) is the rst step in increasingtransparency in the program. In this respect,options such as social audits seen in the MahatmaGandhi National Rural Employment GuaranteeScheme may oer an additional mechanism.A second obvious improvement would be to

provide or direct transers to households via thebanking system or post oces. Such a reorm inIAY in Bihar has been introduced recently, and eldvisits indicate signicant reductions in leakage o unds due to the reduction in intermediation byocials in the benet payment process.




conductadetailedstudyonpracticesamongthe

rural poor in housing improvement, to explore

optionsorbettermatchingschemedesignwith

needsandpractice.

a longer term option for targeted housing reform

may be exploring possibilities for more market-led

provision of housing, particularly in urban areas.

Experience in some metros may provide guidance here,and exploring the role o the private sector as nancierand constructor but with subsidies to householdsseems warranted. There are a range o challenges inmarket-based solutions which are particularly acuteor the inormal and sel-employed sectors o theworkorce due to diculties in credit assessment, theneed to mitigate risks or lenders, and transactions costs.Nonetheless, small scale experiences o Micro FinanceInstitutions (MFIs) such as Swadhaar, Ujjivan and BASIX,and interest rom small and medium housing nancecompanies indicate both interest in non-traditional

market players in serving the urban poor or housingupgradation needs. Initial assessments indicate thatmarket-based solutions may be possible or householdswith monthly incomes in the range o ` 4,500-8,000.411 In addition, there is a need to integrate housing deliveryunder IAY into a larger process o acilitating access tosae, sustainable and adequate housing. This couldinclude access to credit in order to meet the unding gapbetween the IAY subsidy and the cost o housing as wellas access to environmentally sustainable technologiesand building materials and services to assist people in

construction.the more fundamental question on housing programs

for the poor is the extent to which they should

remain as standalone css, or might more usefully be

allowed for within an sp (or generalized) block grant

system.412 The JNNURM approach o having an optionwithin a larger program but requiring more pro-activeproposal development and management on the parto local authorities in order to use central unds or low-income housing seems worth exploring in the contexto IAY also. This would be more consistent with giving

states/cities greater local determination in use o CSSresources. Whatever the approach, it would certainlyseem that innovation is needed in the area o publicsubsidies or housing or the poor. It is also important to

view these programs in the context o the larger housingand habitat policy or the country.

b Pbc rs ad prta

sca prtct prras

both public works and promotional social protection

programs have received increased political and budgetary priority in recent years. This seems a sensibleeort to get greater leverage on poverty reduction andhuman capital ormation rom the saety net. Given thatsignicant spending on these programs, particularlyMGNREG and mid-day meals, can be expected tocontinue, it will be increasingly important to ensure thatthe desired equity and public expenditure eciencyobjectives are achieved. The ollowing sections providesome recommendations in this respect.

(i) Publicworks

many of the appropriate reforms of public works policy

are already reflected in the guidelines of mgnreg,

which in several ways represents the most serious

effort to date to address many of the institutional

and implementation problems encountered in previous

works (and indeed several other) programs. In manystates there has been greater political and institutionalcommitment to trying to “make the program work”.Examining the implementation experience o MGNREGin the last our years suggests some lessons or improvingthe delivery o the program in states that are not doing aswell as others. It also identies some areas that warrantincreasing attention as the program matures.

the variable implementation experience across states

offers several valuable cross-state learning. Oneo the biggest challenges in implementing MGNREG isto match the expression o demand with the supply o worksites and employment opportunities. It is vital toaddress the constraints – ormal and inormal – on thisprocess. At the broadest level, this goes to the heart o what a rights-based, demand-driven approach means in

practice. Some states have done better at establishingsystems to improve the responsiveness o supply to thedemand or work. This has typically involved attentionto or innovations in the ollowing areas:

411 SeeMonitorGroup(2007)orauseulmarketassessmentobothdemandandsupplysidesolowcosturbanhousingoptions.

412 AproposalalongtheselineshasbeenmadebyKapuretal.(2008)usingIAYandSGSYundsaspartoanenhancedPRIblockgrant.




Establishing the implementation structure

early in the game and ensuring adequate sta

withthe appropriateorientation and skills. Thisincludes serious and sustained eorts at buildingcapacity at all levels o the delivery process,oten in partnership with the State Institute orRural Development. Under the Act, a portion o unds are available or capacity building o those

involved in MGNREG implementation, includingPRIs. Using these unds eectively will be a criticalelement o program success over time.

Generating awareness o the rights and

entitlements under MGNREG as the rst step

towardsestablishingarighttowork. Over time,there has been some evolution o IEC campaigns interms o moving rom the dissemination o rightsto an emphasis o the need to and the means bywhich individuals can demand that right. It is alsonecessary to make communities aware o the

unemployment allowance provision in the Act orthe guarantee unction to be credible. It is vitalto deepen awareness raising eorts on MGNREGentitlements, in close collaboration with civilsociety and using strategies that are tailored to alargely illiterate audience.

Leaprogging technical manpower constraints

(e.g.,theshortageoengineersattheblocklevel)

by developing detailed technical specicationso MGNREG works or dierent geo-climatic

conditionsasapreparatorystage. This minimizes

the technical input required at the block and GPlevel at the planning stage and while startinga worksite. This can be done without the aid o technology (e.g., as in Madhya Pradesh) or withtechnology as an integral part o a transactions-based Management Inormation System (e.g., asin Andhra Pradesh).

Streamliningtheowoundsinvariouswaysso

astopreventundingdelaystoconstrainopeningo worksitesor payment o wages. For instance,some states (e.g., MP) make available advanceunds (linked to the volume o MGNREG work)

with GPs that makes it easier to open worksitesin response to demand. In addition, some stateshave reduced delays in payment o wages romthe GP to worker post oce accounts (e.g., byplacing a “oat” with post oces to make wagepayments while waiting or unds transer; and

by mandating that the GP MGNREG account andaccounts o MGNREG households to be in thesame branch).

Revisingtheruralscheduleorates(SoRs)through

detailed time and motion studies or dierent

localesandgroupstoenablea“normal”workerto

earntheminimumwageatMGNREGworksites.

Partneringwithcivilsocietyorganizationstoworkassupportagencieson a variety o areas, includingorientation and capacity building o MGNREG sta,awareness generation and mobilization amongworkers, promoting participatory planning o works, and enhancing accountability.

Emphasizing the commitment to transparency

and accountability. While the design o MGNREG contains many saeguards in termso transparency and accountability, actualimplementation on this ront has been highly

variable. This includes institutionalizing socialaccountability mechanisms, making the MIS up-to-date, and a continued emphasis on monitoringand community mobilization.

in addition, increased attention by policy-makers

and implementing agencies on improving the quality

and relevance of assets created under mgnreg is

warranted as the program matures. This is critical i MGNREG is to have any long-term impact on the ruraleconomy and uture livelihoods. In addition, the creationo appropriate, durable and productive assets could

potentially help garner the support o non-MGNREGparticipants or the program and a stake in improvingprogram outcomes. There are many elements to thisincreased ocus on the second objective o the Act:

Explore options or a wider range o worksauthorized under MGNREG to reect variable

needsandtodovetailwithotherprogramssoasto

contributetowardsacoherentvillagedevelopment

plan. The list o eligible works needs to be exibleenough to incorporate seasonality, dierences ingeo-climatic conditions and the needs o specicgroups, particularly those not capable o hard

manual labor. As experience grows, this would beworth looking at rom several perspectives, someo which are currently under discussion. The rstis the range o works that could be implementedin ood-prone, water-logged, heavily orestedor mountainous areas. The second is the range




o possible works which could be oered to allMGNREG workers, and whether some “soter”work options – e.g., related to provision o socialwelare or community services or vulnerablepopulations – could be introduced which havepositive social externalities. The third is looking atthe specic needs o sub-groups or whom specialeorts may be needed to provide appropriate

work, e.g., disabled people who may not beable to carry out hard physical labor. The ourthis exploring options or MGNREG to nance thelabor component while the community (or otherline departments) co-nancing works that maynot be on the approved list o MGNREG works butare part o the larger village development plan.

Revitalize Gram Sabhas and institutionalize the

directinvolvementocommunitiesinidentication

oworksundertakenunderMGNREGinawaythat

isintegratedwiththelargervillagedevelopment

plan. This has to date been the weakest element inthe chain, largely because gramsabhas are otennot held. I the Act’s objective o empoweringcommunities and strengthening grassrootsdemocracy is to be achieved, it will be importantto ensure that the role o gramsabhasanticipatedunder the Act is made a reality. This includesensuring gramsabhas are held regularly, buildingthe capacity o gram sabhas in participatoryplanning, community oversight and otherrelevant areas and the mobilization o groupssuch as SHGs and CBOs to have their prioritiesreected through the gramsabha process.

Establishsystemsorproviding in-timetechnical

inputsorassetplanningandevaluation,beyond

the currently mandated technical supervision

during asset creation. This includes providingtechnical inputs (e.g., through village-level resourcemapping to ascertain the technical easibilityo dierent types o works) to the gram sabha during the planning process and developmento shel o works. Similarly, monitoring o thequality and durability o assets created will

increasingly become important. In this respect,MGNREG could draw on international experience(e.g., Bangladesh’s Food For Work program) ondeveloping cost eective methods or estimating

rates o return on assets. In addition, the use o technology such as GIS in both planning andmonitoring would be.

an additional issue for consideration is whether

any element of direct human capital formation can

be factored into mgnreg as it matures. Presentlythere is no provision under MGNREG or skill ormation

among workers. This may be something that could beconsidered in due course with the view o enhancingnot just current but also uture livelihoods. One optionto consider is the South Arican public works programwhich provides or two days training per month o work or those undertaking public works. While suchan approach obviously requires a supply side agency –probably on a contracted-out basis – which can provideuseul training, it seems a useul option to consider inuture development o MGNREG.

a final issue is that public works for the poor remain

restricted to rural areas. Recently, policy-makershave started to discuss the possibility o designing asel-targeted public works programs or the urban poor.Such programs already exist in the works schemes o a number o developing countries such as Ethiopia,Liberia, Colombia, and some other Arican and LatinAmerican countries. Drawing on the experienceo these countries, or example the role o urbancommunities in identication o beneciaries, planningand execution o works, and oversight, would be useulin designing an urban public works program or Indiancities and towns. In act, one o the north eastern statesis planning to introduce an employment guarantee orurban areas as a state-unded scheme. Combining sucha program with vocational or technical training wouldenable young participants to upgrade their skills andalso compete in the labor market. An example o suchan approach is being developed in Kenya or youthsliving in urban slums.413

(ii) Programstopromotemovementouto

povertyintheshortandlongrun

(a) Targeted rural credit

the government has recently undertaken a significant

overhaul of the sgsy in the form of the national

rural livelihood mission. The main reasons or SGSY’s

413 SeedelNinnoetal.(2009).




and predecessor programs’ weak perormance stronglysuggested the need or a undamental reorm that wentbeyond marginal improvements. In many ways, therestructuring o the existing program into NRLM goes along way in doing this.

the nrlm moves away from the precisely defined credit

program for the poor as exemplified by sgsy and irdp

and instead includes a range of livelihood support options for the poor. This is consistent with the optionsin the SP block grant proposed within the “3+ block”outlined in the Executive Summary. The rationale behindsuch a restructuring and reorientation is necessary or avariety o reasons: (i) the nature o labor markets acrossand within states varies suciently that a “one size tsall” credit program seems increasingly inappropriate;(ii) the livelihood support needs o individual groupsand poor households that go beyond credit are alsodiverse, and uniorm CSS have ailed to respond to this;(iii) the growing penetration o both commercial banks

and other non-bank players such as MFIs make thechallenge or the poor making them “bankable” ratherthan being the sole source o ormal credit.

such an approach would require greater effort by

states to develop state specific poverty reduction

strategies for the effective use of central subsidies

for livelihoods promotion. The NRLM design givesstates a air degree o exibility in trying dierentapproaches to livelihood support; some urther optionscould be explored in this regard:

using reputable MFIs as a channel or creditdelivery where theyhave a presence.MFIs havea strong interest in developing a sustainedrelationship with BPL clientele, and more diverseand community-based sources o inormationon borrowers, allowing or a more inormedassessment o risk in the lending transaction. Theyare also more likely to enorce repayment, reducingrent-seeking opportunities seen presently, andprovide appropriate support services to theirmembers. MFIs oten have savings as an integralelement o their relationship with clients, so that

credit provision is reinorced by savings that canact as cushions against household shocks. At thesame time, a signicant issue would be the relativeterms o SGSY lending and those o most MFIs totheir existing clientele, and such an option woulddemand some degree o harmonization between

MFI nancial, reporting and other procedures andthose o government.

where local labor markets are stagnant and/or

migrationisalreadysignicant,nancingsupport

services or poor migrant workers which would

reducesomeotheeconomicandsocialcostso

migration, and increase its benets. There are

already interesting small-scale examples o suchinitiatives, e.g., in southern Rajasthan with workersmigrating to Gujarat. Some o the services thatcould be provided include: (i) reliable remittancemechanisms; (ii) support or children o migratingworkers either in situ or in destination sites toensure that they do not drop out o school; and(iii) provision o reliable inormation on labormarket conditions in destination areas, probablythrough a contracted-out service providercontract.

(b) School stipends

while the evidence on school stipends suggests that they

are not as well targeted as many safety net schemes,

their objective is distinguishable. The position o thisreport is that they will continue to be an interventionworth expanding, though with serious thought aboutsome design elements. The more pertinent concernswith school stipends seem to be two-old: (i) in theircurrent orm, where stipends are based on enrollmentand not attendance and thus with no assurance that theintended outcome is being promoted, stipends are less

likely to achieve the goal o improved human capitalacquisition among the poor; and (ii) stipend schemesdo not provide choice or households in schooling,being linked to enrollment only in government andaided schools. This may reduce their potential welareimpacts not only or the household, but also or theeducation system, by increasing the marginal costs o private schooling and reducing the accountability o thepublic system that might otherwise be encouraged byhouseholds “voting with their eet”.

there seem solid arguments for exploring ways in which

to make stipend receipt conditional on a specified level of actual attendance rather than simply enrollment,

which in itself may not contribute to human capital

investments. The obvious challenge that such a transitionwould present is operating an eective system to recordand veriy school attendance. However, evidence rom




a growing number o countries which have introducedconditional cash transers based on a specied level o school attendance indicates a range o positive eectson attendance, and other household welare indicators. Though several central and state-specic CCT programsexist in India, these operate more as cash transersrather than conditional cash transers. Key challengesin the eective implementation o these programs as

CCTs include the monitoring and enorcement o theconditionality and a weak institutional ramework orsuch cross-sectoral programs. In addition, supply-sideconstraints in the provision o services, particularly inrural areas, could also play a role.

the arguments on introducing a demand side element to

stipends through either expansion to private unaided

schools or use of education vouchers redeemable in

private schools are more complex. It is probably notpossible to think about any wholesale shit to systemslike vouchers which would be relatively new in the Indiancontext, and one where international experience –particularly in developing countries – is ar more limited.However, this should not preclude piloting in stateswhere the conditions are appropriate, or perhaps inareas in selected states where the participation in privateschooling by poor households is more pronounced (e.g.,in urban areas where the experience o a pilot in urbanDelhi was airly positive).414

(c) Midday meals

like mgnrega, the mid-day meals program is also

conceived as a universal right rather than a targeted program. Mid-day meals are a universal entitlement orall children enrolled in government or government aidedschools. With the recent expansion, midday meals havebecome an increasingly important part o the Indiansaety net. While the national level impacts o middaymeals in educational, nutritional and other dimensionsremains to be understood in depth, the evidenceavailable suggests that MDM have had positive eects

at least on enrolments. As a result, the MDM programprovides an interesting example o a major demandside SP intervention which has great potential. In thiscontext, a stronger ocus on monitoring and evaluationis warranted. This requires establish systems to monitorthe perormance in the eld with respect to inputs(such as already being done or example or schoolinrastructure or providing meals), outputs (besides

administrative data on children availing o MDM) andoutcomes. The latter requires conducting more widelyrepresentative studies on the various impacts o middaymeals, in particular nutritional impacts. In addition,while several concerns on coverage and implementationhave been addressed through the recent expansion andrevised guidelines, more can be done to reduce thevariability in perormance across states.

c Prtat asrs: Cs

t cra ap sca scrtin addition to social assistance programs aimed at alleviating existing poverty, many social protection

systems insure against a range of shocks that can often lead to poverty.415 These social security schemesgenerally include provisions or old age, disability anddeath o the breadwinner under the umbrella term,pensions.416 Many countries have also tied healthinsurance coverage to membership in social securityschemes which require contributions or premia whileothers have opted or general revenue nancing.417 This

section is about the schemes that operate in India todayor both organized and unorganised sector workers. Inaddition, based on recent experience, it outlines thinkingabout how to expand pension and health insurancecoverage to the vast majority o India’s unorganized labororce. Closing the “coverage gap” is an important policyobjective in India and many developing countries.418

india’s unorganized labor force is vast and

heterogeneous and this reality must be taken into

414 CMSSocial(2009).SeealsoShahandBraun-Munzinger(2006)oracriticalreviewotheexperienceoelevencountrieswitheducationvouchers,withadiscussionolessonsorIndia.

415 Otherimportantsourcesoincomeprotectionsuchascropandlivestockinsurancearenottypicallycoveredbysocialinsuranceprograms,butarecriticalintermsoprotectionagainstcovariateshocksintheruralsectorincountrieslikeIndia.ItisalsoworthnotingthatlumpyexpendituresorweddingsarealsoimportantintheIndiancontext.

416 Unemploymentandcashbenetsormaternity(asopposedtomedicalinsurance)areotencoveredbygovernmentsponsoredsocialinsuranceschemes.Therearemoralhazardproblemsinbothcases,especiallywithregardtounemployment.Moreover,thedenitionandmonitoringounemploymentorunorganisedsectorworkersisdiculttoadminister.ESISoersanunemploymentbenet.

417 SeeWagsta(2007)orasummaryotheongoingdebatebetweenthesemodels.

418 Foradetaileddiscussionoextensionosocialinsurancecoverageinthecontextopensions,seeHolzmann,RobalinoandTakayama(2009).




account in any attempt to extend coverage of

social security programs. One important distinctionis between households that are either too poor tocontribute or have already experienced the shocksthat could otherwise be insured through contributoryschemes. In these cases, social assistance i.e., cashtransers on a means-tested basis are the appropriateintervention. These programs are dealt with in Chapter 3.

At the same time, a large proportion o households wouldbenet rom ex ante interventions that allowed orrisk pooling and were made more aordable throughdirect subsidies. Among these households, a subsetis already participating in a number o uncoordinatedattempts – mostly through group arrangements – toprovide protection against a range o lie-cycle risks.Some are sponsored by government, such as welareunds while others are NGO-based initiatives that oteninvolve microinsurance.

the lessons from some of the schemes that already exist

in india should be distilled and applied in the process of adopting a new national policy for extending

social protection coverage. These experiences couldprovide policymakers with inormation ranging romthe actors aecting voluntary participation to datathat could help with actuarial calculations o cost.419 Implementation lessons might include estimates o thecosts o specic transactions, such as processing a claimor issuing a statement and the potential savings romthe scale economies usually ound in administrationand recordkeeping operations. Comparing notes across

existing schemes might yield useul inormation abouthow to eciently use technology or how to set upprocesses to certiy eligibility and veriy claims. In somecases, there may be evidence that supports governmentaction through better regulation or direct provision o public goods. The case o unique identiers, alreadymentioned, is likely to be one such case.

many of the existing schemes use a form of the

partner-agent model and this approach has several

advantages over the alternative, the creation of a new

layer of government bureaucracy with potentially

lakhs of employees. In particular, the PA model hasbecome increasingly relevant in India in recent yearsas nancial sector reorms have resulted in competitivemarkets or insurance and asset management and haveled to the creation o specialized regulatory institutions. This avorable situation should be exploited in order to

reduce costs and preempt the problems observed withmonopoly, quasi-state entities that cover ormal sectorworkers. The key question is whether this ‘bottom up’approach can be successully scaled up with governmentsupport. Answering this question could begin with aseries o meetings that could bring together potentialgroup participants (SHGs, MFIs, coops etc.), insurancecompanies, asset managers, regulators, governmentministries and researchers.

initially targeting existing groups such as shgs and

mfis is recommended for several reasons including

for reducing transaction costs, achieving effective risk pooling420 and ensuring a minimum critical mass

of voluntary take-up in the early stages of the

program. However, there are tradeos involved insuch a strategy. First, while the number o such groupshas been increasing rapidly in recent years, coverageis still relatively low and regionally concentrated(predominantly in the Southern states).421 Second, anysubsidies involved in such a scheme should not beexpected to mainly reach the very poorest households.Various studies have shown that membership in

groups tends to be concentrated in the second andthird quintiles rather than the bottom quintile.422 Asmentioned above, or many o these households,the condition that would have been insured alreadyexists (e.g., lie insurance or widows). In these cases,ex-post transers in the orm o social pensions seemthe appropriate policy response.

at least three measures are required if these initiatives

are to be successfully scaled up.

419Unorganisedsectorworkersand subsetstherein will exhibitmortalityand morbiditypatternsthatmay dier greatlyromthe typicalclienteleo insurance

companies.Forexample,thelietablesusedbyLICarebasedonannuitantsmostowhomarehigherincomeindividualswithmuchlowermortalityratesthanthegeneralpopulation.Adatabasethatsystematicallycollectedthisinormationcouldbeusedtoproduceactuarialtablesthatwouldserveasabenchmarkorassessingcostswhendesigningtheschemeaswellassupervisingprovidersoncetheschemewasoperational.

420 Thesegroupsare,orexample, inamuchbetter positiontoensurethatallmembersparticipateinahealthinsurancescheme,reducingadverseselectionproblems.

421 AsGhate(2006)reportshowever,thegrowthinthenumberoSHGslinkedwithbankshasincreaseddramaticallyandregionaldisparitiesareshrinkingsomewhat.

422 Seeorexample,BasuandSrivastava(2005)ortherelationshipbetweenincomelevelandmembershipinSHGsinAndhraPradesh.Inthesamevein,Ghate(2006)concludesthat“Micronanceisbestsuitedtoreachtheeconomicallyactivepoor,whichmayexcludesomeinthelowestdecileortwoothepopulationthatsuerromoldage,illhealthordisability.”




rst, in order to take advantage o economies

o scale, to ensure portability and to acilitate

supervision, some common standards would

have to be developed, particularly in the area

orecordkeeping. A good example is a universalstandard or identication o covered workersthat, in itsel, would be a public good with manyother uses. Another is a ratings system or SHGs

and other groups based on objective criteria.

second, appropriate contribution and insurance

premia would be calculated based on rigorous

actuarial calculations that were adjusted over

timetoreectexperience. This would help ensurethat ununded liabilities (or example, those thatarise when guarantees are oered) did not ariseand compromise nancial sustainability. It wouldalso make any subsidy involved explicit andtransparent.

direct government subsidy is the third element

o successul coverage expansion. In order toencourage voluntary take up among low incomesegments o the unorganised labor orce, therequired premia and contributions would have tobe subsidized. This subsidy would have to be setat a realistic level given budget constraints.423

fiscal constraints, along with the need to keep

transaction costs low and to establish the credibility

of the new program, all suggest that the new

programs be phased in carefully and gradually. Thiskind o sequencing will inevitably imply tradeos. For

example, as experience in India already shows, it is easierto implement cash-based benets covering risks such asdeath and old age than it is to provide health insurancedue to supply side constraints and the complexitieso monitoring providers. Add to this the problems o adverse selection and moral hazard and it becomesclear that health insurance is much more dicult todesign and implement than pensions. Yet, medical careis likely to be a greater priority or most unorganisedsector workers and the members o the households that

depend on them or income.424 Nevertheless, extendingcoverage or other risks in a shorter time rame couldprevent millions o households rom alling into povertyin the meantime.

achieving widespread coverage in an effective manner

is not possible without the development of information

systems that allow the goi to track members of these

programs and the financial flows (contributions,premia and benefits) efficiently. Innovative use o technology may be part o the answer, but in order tokeep costs down, existing inrastructure such as postoces and banks will have to be harnessed. In addition,and especially during the rst phase o implementation,the recordkeeping that already exists or groups such asSHGs and MFIs should be utilized and, where necessary,upgraded so that it is possible to ‘plug in’ large numberso participants in a cost eective manner. Bothgovernmental and external assistance could be madeavailable to groups willing to participate and meeting

recordkeeping standards (including compliance withthe unique ID system) should be a condition or receipto subsidies. A centrally managed recordkeepingsystem is one option, but common standards thatallow supervision entities to monitor eectively area minimum prerequisite. The time and resourcesrequired to design and construct a national system o this kind should not be underestimated but getting theimplementation machinery right at the beginning willavoid bigger problems down the line. At the same time,India is a world leader in MIS applications so that state o

the art solutions are possible i policymakers accord theissue the importance it merits.

finally, although not mentioned above, there are many

disparate and disconnected initiatives in progress by

central and state governments in india that should

be brought under a consolidated national policy

framework . The passage o the Social Security Act atthe end o 2008 is a positive step towards establishingsuch a ramework. It now requires implementation. TheSocial Security Board envisioned under this act can serve

423 TheGOIalready subsidizesmemberso theEPFOwith anannualcontributiono 1.16percento thecoveredwagebill.In addition,avorabletaxtreatmentosuperannuationproductsandthePersonalProvidentFund(PPF),amediumtermsavingsinstrument,resultsintaxexpendituresoanunknownamountthatmostlyaccruetohigherincomeworkerswhopayincometax.Itcouldbearguedthatamatchingsubsidyothekinddescribedherewouldbebothmoreprogressivethanandhaveamorepositiveimpactromapublicpolicyperspectivethanexistingsubsidies.

424Interestingly,somesurveys,(e.g.,Madheswaranetal.2005ashowthatunorganisedsectorworkersrateold agepensionshigherthaninsurance orsicknessorhealth.However,thedataonactualshocksexperiencedsuggestthathealthshocksaremoreimportanttomosthouseholds,atleastonashorttermbasis.Furthermore,thereis evidencethatmanyworkersdonotvaluethebenetohealthinsurance itheydonotmakea claimand considerthepremium‘lost’.Pensions,ontheotherhand,aredeerredincomethat,atleastinprinciple,willeventuallybereceived(atleastbyasurvivorincaseodeath).




as a coordinating body bringing various eorts underone umbrella, spell out a national policy complete withtarget benet levels, costing, subsidy and strategy orphased implementation. In light o the importance o implementation issues and, especially recordkeeping,a special advisory group to make recommendationson these aspects with the best available technicalsupport rom public - private sector partners in India

could be ormed.

d Fac ad sttts r

sca prtct

like other public interventions, effective social

protection systems rely on a mutually supportive

web of appropriate policies, capable and empowered

institutions for implementation, and transparent

and adequate financing. This section provides anoverview o nancing and institutional aspects o SPprograms, key determinants o SP system eectivenessin India. It rst explores nancing sources, mechanisms,and patterns in recent years or the major centrallysponsored schemes o social protection, beoreexamining the rapidly evolving institutional ramework or SP program delivery.

it is clear that social protection is in an exciting

phase in terms of policy evolution, financing levels,

and institutional arrangements. At the same time,the situation presents an unnished agenda which insome ways lacks a coherent vision or the system whichis inormed by the socio-economic developmentsoutlined in Chapter 1, and institutional capacities.Looking at the nancial and institutional aspects o SPprograms covered in this chapter, some conclusions andrecommendations are as ollows:

(i) FinancingoSPprograms

broadly speaking, india’s share of public spending

on safety nets is reasonable, and indeed quite high

as a share of gdp by international standards of low

and middle income countries. Its main challenges arethereore ourold:

sustaining roughly the current share o publicspending as overall spending rises.

adjusting the composition to spending to greateremphasis over time on ex ante risk mitigation (i.e.,social insurance programs or the unorganizedsector) and promotional programs (includingthose linked to human capital ormation,discussed in Chapter 4).

increasing the exibility o unding rom thecentre to states in terms o how it can be used ordierent SP interventions, while strengtheningthe emphasis on spending outcomes.

deepening a range o administrative andinstitutional reorms in SP service delivery whichcan contribute to greater expenditure eciency.Many o the operational reorms are discussed inChapter 7.

the notable exception is the area of social insurance,

where the share of public spending can be expected

to increase notably as india enters middle income

status, and where the imbalance between social security spending on the organized and unorganized

sectors would be expected to shift in favour

of the latter. In the medium term, internationalexperience and social expectations in India wouldsuggest signicantly increased spending on socialinsurance or the large uncovered share o workers.It will be important that this increased expenditurepriority not be at the expense o social saety netspending, but rather is nanced rom a combinationo reallocation rom non-merit spending, growth inaggregate scal resources, and contributions rom

workers themselves. In practice, expanding socialsecurity to the unorganized sector is likely to requirenot-insignicant public subsidies to incentivizeparticipation, as one sees or example with RSBY andcertain pension schemes.425 In addition, eective socialinsurance programs can in part be expected to besel-nancing in two ways: (i) they should help controladditional demands on the saety net that mightotherwise arise due to actors such as populationageing; and (ii) international evidence suggests thateective social security systems can actually contribute

to growth in a variety o ways, rom enabling higherrisk/higher return productive activities to cushioningthe impacts o growth-enhancing reorms or thosewho lose out rom them in the short run.426

425 Forinternationalexperienceonmatchingsubsidiestoincentivizeparticipationinpensionprogramsorinormalsectorworkers,seeHolzmannetal.(2009).

426 SeeWDR,(2006),oradiscussionointernationalevidencethatthereisnonecessarygrowth-equitytrade-o.




there are pros and cons of different possible methods of more flexible central funding for sp programs.

Firstly, there would be natural reluctance rom centralMinistries to simply transerring SP CSS resourcesto Normal or even Additional Central Assistance, asevidenced by the ailure to transer several CSS tostates as per the 1999 Planning Commission listo schemes. More specically, as Normal Central

Assistance is based on population and povertyunder the Gadgil ormula and not on perormance,incentives or states to improve perormance onspecic SP programs would be relatively weak. ForAdditional Central Assistance, there are examples o linking transers to state reorm perormance, suchas JNNURM. However, these requirements have notbeen strongly enorced in practice. There is also noobvious mechanism or the Planning Commission tomonitor perormance o specic CSS under NCA, andor ACA only where responsibility is given to a central

Ministry.overall, an improved transfer system for sp css would need to balance need, capacity and fiscal and

administrative effort of states. This could involveseveral elements, including:

a rst step towards such a system would be

movingtotowardsamoreoutcomebasedunding

method. Such an approach would, however,require a clearer set o outcome indicators againstwhich state perormance could be measured, anda stronger planning unction at state and district

levels. This approach is one that is already beingused in India in some donor programs which areresults or outcome-based.

asecondstepinsuchaprocessmaybeallowing

or sanctioning o allocations or states which

stretchacrosstwotothreebudgetyears,whichcould lessen current incentives to spend SPallocations ineciently (or simply parking themin accounts), and also assist with programs whichare subject to cyclical demand – such as publicworks – which is not presently synchronized with

the budget planning and release cycle. a third step could be the block grant or SP

programsoutlinedabove.

an alternative approach which could be

implementedevenintheabsenceomoreserious

nancingreormsisthecreationoanincentive

undorstatesorSPprograms. An SP incentiveund could either be stand-alone or a window o broader proposal or a decentralization incentiveund. Alternatively, a central innovation und orsocial protection could be created which couldallow states to access central unds on a proposal-driven basis or innovations in SP programdelivery, or experimentation with new initiatives.

(ii) InstitutionalrolesorSPprograms

the most fundamental institutional challenges

in sp css continue to be delineating clear lines of

accountability in service delivery, and supporting the

authorized actors with adequate staff and finances.

This will require rst and oremost greater proactivity onthe part o states to approve policies and put into practicethe PRI/ULB decentralization provided or under the73rd and 74th constitutional amendments. With notableexception o Kerala, and incomplete examples such as

Rajasthan and Karnataka, most states have yet to denethe ramework or decentralized service delivery in asuciently operational manner.

this would need to be followed by a process-intensive

reconciliation of central guidelines, state-level

stances on service delivery decentralization, and

capacities at sub-state levels to perform the required

implementation functions in sp programs. This is nota process which will generate a single “right” answeron the assignment o activities to dierent actors atdierent levels o the system. What it could useully

achieve however is a more considered assessment byboth centre and states o what is the chain o activitiesrom top to bottom required to deliver eective SPprograms, and o the realistic potential o dierentactors to deliver on their proposed responsibilities. Thiscould in time improve the alignment o unctions, undsand unctionaries in SP programs. Such eorts wouldneed to ocus in particular on elements o the servicedelivery chain at block level and below. The processcould involve several steps:

“unbundling”eachcoreSPCSStoitsconstituent

unctions or services and specic activities indierent programs, as has been done or the

MGNREG and RSBY guidelines.While implicit inguidelines o some other schemes, such a simpleexercise would be a useul building block or aprincipled division o unctions across levels.




orallstates,producingaconsolidatedmapping

o the current assignment o sectors and SP

program-specic unctions, both de jure and

de acto. This exercise would clearly identiycases where concurrent responsibilities arise orprograms where DRDAs and/or PRIs have specicresponsibilities assigned to them under CSSguidelines. Where such concurrent responsibilities

are apparent, urther dialogue between the statesand centre would be needed to agree whetherCSS guidelines need to provide more exibility tostates on institutional arrangements or programs,or whether states need to be encouraged to movemore actively on state-specic assignments whichare consistent with CSS programs (with Keralaproviding a good example o such a proactiverole by states). Such discussions could be guidedby both public nance criteria or assigningresponsibilities, and basic management principles

or enhancing accountability.427

Both o these arediscussed in Chapters 6 and 7.

havingdeterminedanappropriateassignmento

unctions to dierent levels, a ullerassessment

is needed o the personnel and nancial

implications o carrying out required unctions.

Where enhanced personnel capacity is needed,this would then need – as is the case withMGNREG – to include the nancing o needsin program costing, and the capacity buildingrequirements at dierent levels.

graduallyinstitutionalizingrolesorcommunitiesinbothselectedelementsoCSSdelivery,andin

community oversight o program unctioning.

Again, the model o MGNREG provides auseul precedent. This is also likely to involvepartnerships with NGOs to build local capacityor eective social audit, and the more generalobligations o the state or disclosure o programinormation, as has proved eective or examplein Rajasthan. The RSBY scheme also providesuseul precedents on the role o NGOs and othergrassroots organizations in SP service delivery

and demand side mobilization.

taking lessons rom the emerging experience in

Indiaand beyond in public-private partnerships

in dierent aspects o SP service delivery.

Increasingly, the private sector has beenplaying dierent roles in the Sp service deliverychain. RSBY is the most advanced example,with involvement o private insurers, privatehospitals, private sector smart card providers andoutsourced sotware development, as well asroles or grassroots organizations noted above.

However, many other programs – particularlyat state level – have been experimenting withoutsourcing o dierent unctions. In some cases,this involves partnerships on technology, such asthe role o TCS in managing MGNREG databasesin AP, or smart card provision by commercial rmsin a number o pilots. In others, there is a moreinvolved role or the private sector, such as inBihar where rural inormatics service centres orRD programs at block level have been assignedollowing a tender process, in which or-prot

and not-or-prot organizations operate theinormation and database management o RDprograms on behal o the state Government.

in addition to the above needs on institutional roles,

specific suggestions include:

at both central and state levels, ormation o

an inter-departmental Task Force or Authority

or Social Protection, which would promotecoordination across programs targeted towardssimilar populations, and promote more coherentstrategy development on the medium term

policy mix and priorities in social protection. The cases o Mission Convergence in Delhiand the Saety Nets Authority in UP provideinteresting models, which could be adapted byother states.

orprogramplanning,severalinitiativeswould

be useul, including: (i) earlier noticationto states and DRDAs o estimated undingenvelopes or programs or the ollowing scalyear in order to acilitate lower level planningand budget management; and (ii) ensure that

states which have not already done so appointDistrict Planning Committees, and ensureadequate nancing or technical supportto DPCs.

427 SeealsotherecommendationsotheEmpoweredSub-CommitteeotheNationalDevelopmentCouncil(NDC)onFinancialandAdministrativeEmpowermentothePRIsJuly2008.




associalsecurityexpands,theroleotheprivate

sector (as insurers) and a range o member-

based organizations such as MFIs, NGOs and

workers associations is already becoming

increasingly important, and demands new

modes o engagement and partnership orm

the public sector. The biggest constraint onexpanding social security to the unorganizedsector has been developing delivery mechanismswhich can deal with the transactions costs o reaching unorganized workers. This requiresintensive engagement with intermediarypartners between government/insurers andunorganized workers, as well as learning romecient insurance distribution channels o public and private insurers. The RSBY providesan excellent model o partnership, as do morelocalized initiatives such as UTI partnershipswith both state governments and organizations

such as SEWA, and the roles o trade unions andemployer organizations in some o the welareunds around the country.

or M&E, develop a disaggregated picture o

potentialandcapacitiesatdierentlevelsothe

systemormonitoringandevaluation,and alignprogram guidelines in that light. The proposalto establish a national Independent EvaluationOce is a welcome step with respect to M&E.

Prra adstrat scaprtct

with a myriad of programs and plans to introduce

new schemes, expand coverage and consolidate

existing schemes, it is an important time to assess

relevant experiences and identify both good and bad

administrative practices. While India may not havethe advantage o other countries o running a well-organized centralized machinery o administrationo public benets, some strategic priorities couldbe dened to achieve better benet delivery and

transparent operation. In particular, policies seekingharmonization, portability, and transparency inbenet provisions, and otherwise ensuring minimumoperational standards, should be designed, endorsed,and promoted. Capacity to regulate and supervisevarious benet providers and their intermediaries

should be gradually built. Furthermore, a rm standcould be taken on the policy o registration andtracking o beneciaries o the public programs.From the discussion above, and rom the insightso many GoI and independent studies on programperormance o CSS SP programs, some more specicrecommendations emerge:

(i) Onawarenessandoutreach

while program awareness and outreach is an

inherently difficult process in a country of india’s

size and diversity, experience from states and for

specific programs such as mgnreg indicates that much

can be done if there is sufficient will. An improvedawareness and outreach strategy would likely involveseveral elements:

developing a better picture o what are the

key inormation sources o the poor on public

programs, including what types o inormation

theygetromwhichchannels. The limited surveyinormation indicates that typical governmentmedia campaigns, web-based inormation, andinormation rom administrative ocials are notthe channels through which the poor nd outabout programs.

providing in SP program budgets or sustained

awarenessraisingbythirdpartieswherepossible.

Field work or this report indicates that programawareness dissemination is not a one-timeactivity, but a product o repeat contacts and

local sources o reliable inormation. This tendsnot to be the approach o most IEC campaigns orSP programs.

developingamorediverserangeoIECstrategies

orprogramawarenessraising. This would involvenot only a more diverse range o actors as toolso inormation dissemination (including NGOs,SHGs, youth groups, social and religious leaders),but also a more diverse set o inormation tools(including visual media suitable or non-literateaudiences, television and radio campaigns which

more creatively engage audiences rather thansimply presenting program guidelines, use o community, etc.).

deepeningthe useosocialauditsnot only as a

tool or program monitoring,but asa source o

programinormationdissemination.




(ii) Ontheapplicationsprocess

review program eligibility criteria on several

key programs with a view to simplication o

eligibilityprooandunderstandingothepublic.One aspect o this would be exploring avenuesor reliable third party verication o certain actswhere documentary evidence is not available or

costly to gather. proactive exploration o how SP programs can

reducetransactionscostsoprogramapplication

throughlinkingtotherangeoICTinitiativessuch

as rural business kiosks and other village-level

connectivity initiatives. The emerging examplesin other contexts such as spreading availability o land records through rural E-kiosks (e.g., Bhoomi inKarnataka) and availability o market inormation(e.g., ITC’s E-chaupal initiative) suggest thatconcerted eort between SP departments andtheir ICT department colleagues could pave the

way or a major contribution to simplicationo program applications, and signicant costreductions or applicant households (not tomention lower opportunities or undesirablemiddlemen).

encourage–inecessarywithpublicsubsidyonacontracting-outbasis–NGO,SHGandotherCBO

intermediationtoacilitateprogramapplications,

and increase the use o camp approaches to

registration by the administration itsel. Giventhat the culture o reliance on middlemen is

so prevalent, it seems sensible to encouragethe eorts o middlemen (or more likely“middlewomen”) who are more likely to have theinterests o the applicant at stake.

interms oprogramoversight, itseems sensible

to target IAY and SGSY or particular scrutiny,

includinguseosocialaudits.

sharetheexperiencesostateswhicharepiloting

biometricandotherICTadvancestoreduceraud

and human error in the beneciary recording

process.

(iii) Financialmanagement

some o the needed improvements are in the

domain o states, and they will need to ollowthe lead orecent reormers inareaslikepublicexpenditure management rules and expansion

oICTinreleaseandtrackingounds. They willalso need to acilitate sustained FM capacitydevelopment in PRIs i the intentions o decentralization o SP programs are to be realized. This will also require in most states a moreelaborated nancial accountability ramework orPRIs and sub-state implementation agents.

otherreorms– suchas accountingor SP CSS

resourcesas “spent” when they have not been

and application o accrual accounting – will

require coordinated eorts o the centre and

states on reporting processes that require

reliable inormation on physical and other

outcomes o “spending”. The example oMGNREG reporting in some states provides agood model which should be institutionalized.A rst step in coordinated eort between thecentre and states could be clear agreement onthe necessary skills needed or FM at dierent

levels o the system or SP programs (and morebroadly), and agreement on action plans orensuring adequate skills.

as part o strengthening the accounting

and nancial reporting ramework, it will be

increasingly important in SP CSS which route

through DRDAs to develop standard nancial

reporting rules or societies, which would

subsequentlybereectedintheGFRsorGoIand

thestates. This work would most sensibly be ledby CAG and ICAI.

addressthebackloginexternalauditsoSPCSS,and a more competitive process o selection o

thirdpartyaccountantsresponsibleorauditing

societies. All Ministries implementing SP CSSshould also post the ndings and actions takenon audits on websites.

equally – and more challenging in terms o

bureaucratic culture – there is a strong need to

deepen the uses to which nancial inormation

on programs is put, and hence to move awayrom the simple input/output culture o nancial

reporting which prevails in most CSS. nally, the positive development o increased

citizen accountability or SP unds use seen in

MGNREG should be institutionalized over time

in all SP programs, with basic initiatives likeposting o all program releases and uses, greater




reliance on social audits, and posting o beneciarylists and program rules in plain language. Anumber o these are natural corollaries o theRight to Inormation Act, but their ull potentialremains to be exploited in most states o India todate.

(iv) Paymentsystemsandrecordkeeping

reforms of payment systems can take a range of

forms, both technology-based, and where that is not

possible, with community monitoring of payments.

Some o technological the options include:

low cost ATMs developed at a raction o costo the conventional machines, equippedwith nger print identication and long-liebatteries, can acilitate cash distribution in remoteareas.

point-o-service (POS) devices installed in local

shops and gas stations can use regular telephonelines to process on-line cash disbursementtransactions, or – in the case o PDS – acilities ordebiting the monthly ration.

special mobile branches could make conventionalbanking more accessible, enabling regular andschedules visits in the remote communities.

nally, mobile phone banking is an emergingphenomenon that utilizes comprehensivepenetration o the new communicationnetworks.

more generally, cost recovery mechanisms of different

operational alternatives to the conventional models

of service provision should be further studied.

While some models are quite promising, their nancialviability as localized stand-alone solutions remains aconcern. Clever solutions may simply need to be scaledup in order to reach the break-even point o economicoperation. Furthermore, strategies enabling synergiesacross multiple programs should be urther explored.For example, while the smart card technology maybe a costly solution i utilized only by a single benetprogram428, using it as a common platorm or multipleproducts (e.g., various benet and insurance schemes)may well help to make its application a sound economicproposition.

with respect to record keeping, the experiences of more

progressive states such as karnataka offer lessons

for others. Some o the issues or attention include:

training (and subsequent monitoring andenorcement o compliance) or GPs and blocks inmaintaining appropriate registers o beneciaries.As one o the challenges in this work with be

capacity constraints at both levels, it could beuseul to explore options or supplementingthis in non-costly ways, such as providing skilledworkers rom MGNREG as temporary assistants tothe gram sewak.

at the state and district level, development o simple verication exercises which will allowprogram oversight to ocus on high-risk areas.Even available monitoring data oten throws upobvious anomalies, but is typically not used orthis purpose.

at central and state levels, improve cross-departmental coordination on a range o recordkeeping issues, starting with a strategy orconvergence o beneciary identication numbers.Even where systems remain parallel or the shortto medium term, Collectors and BDOs shouldencourage greater cross-program inormationexchange or programs with common elementssuch as being ood-based or child-ocused.

as a condition o CSS receipts, the centre couldinsist that a computerization strategy and roll-outplan or SP programs be developed, including atraining plan. This seems a bare minimum ormovement towards a modern system o recordkeeping.

encourage states to be more proactive in exploringoutsourcing possibilities on development o program record-keeping sotware. India oersa particularly promising environment or sucheorts, though there would remain an importantrole or the central government in ensuringconsistency in basic design eatures, and thuscomparability o data rom dierent states.

(v) Monitoringandevaluation

ensure that any major SP program has a pre-program baseline done, and that impact

428 ThemarginalcostoonesmartcardissuedinIndiaisquotedasbeinginthe$2-$3range.




evaluations also include control areas whereeasible.

explore replicating the model o MGNREG withprovision or more robust research and evaluationnanced rom the program budget.

on monitoring: (i) review the current set o monitoring indicators or major programs to assess

their utility and gaps in key program indicators;(ii) i necessary on a contracted-out basis orunder special units (e.g., as Orissa has developedunder its Poverty Monitoring Agency), conductregular basic analysis o consolidated programmonitoring inormation at state and central levels;and (iii) explores institutional mechanisms instates and at the centre to use the analysis o suchunits or annual review o program perormanceand policy implications.

building on the social audit experience in some

states, mainstream social audits as a standardpractice in all SP programs. While the experienceis relatively new on any scale, social audits seem auseul tool or increasing community knowledgeo programs and providing a vehicle or redresswhere needed. However, in the absence o anauthorizing environment in program guidelines(such as under MGNREG), the potential o socialaudits will remain limited.

Tart cass

the analysis in the report suggests there is major scope

to improve targeting systems for public programs in

india. At the same time, there are several generic issueswhich must be taken into account in reorming targetingin SP programs:

the distribution o households exhibitsconsiderable clustering around the poverty linenationally, making ne-tuned targeting designinherently challenging.

there is considerable diversity across states in

the actors that are correlated with poverty, sothat reliance on standard national indicators intargeting systems has inherent weaknesses.

community level beneciary identication hasattractions in such an environment. However,its strength is within-community targeting at a

very localized level in relative terms rather thanthe kind o absolute measure o poor peoplenecessary or comparisons across space.

a key challenge therefore is how might the system

marry the “top down” targeting necessary for spatial

distribution of social protection resources, with the

“bottom-up” information on the characteristics

of the poor which might do a better job of ranking households at the grassroots level. There appear tobe several elements o a potential strategy. These arediscussed below, rst presenting more modest reormproposals, and then presenting an option which wouldimply more substantial reorm.

international evidence on targeting outcomes

provides useful insights in thinking about an

appropriate targeting mix. Three observations emergerom a review o targeting methods and outcomes in122 targeted programs in 47 developing and transition

countries:some methods have better targeting outcomesthan others when taken across a wide range o countries.

combining targeting methods generally results inimproved outcomes. For example, a combinationo three methods improves targeting outcomes byaround 30 percent. This potential improvementsneeds to be traded o however with additionaladministrative costs and demands, and the riskso too much complexity introducing possibilities

or manipulation.at the same time, there is also strong variationacross countries in targeting outcomes withineach method, pointing to the importance o country specicities and implementation capacityin considering options. Across the sample o programs, around 80 percent o the variation intargeting outcomes is accounted or by withinmethod variation, and around 20 percent bybetween method variations. One importantdimension o this is community “voice” in the

society, which internationally improves targetingoutcomes by around 23 percent.

international evidence therefore clearly suggests

that no single targeting method will ever be sufficient,

and that the policy question is whether a more

effective mix of methods can be employed for sp (and




other programs).429 This would include improvementsin methods or each type o targeting, and potentially adierent mix o methods. The discussion below ocusesinitially on improvements in geographic targeting andthe “backbone” BPL method, beore a discussion o moresubstantial reorm options.

(i) Improvinggeographictargeting

with respect to geographic targeting of central sp

allocations, it would be useful to generate sub-state

estimates of poverty using poverty mapping techniques,

and use these as the basis for future spatial resource

allocation.430 Poverty mapping allows or reliablesmall area estimates o poverty below the state level bycombining inormation rom the NSS household surveydata with unit record data rom the Census. Since thelate 1990s, detailed “poverty maps” have been preparedor a growing number o developing countries. Thesemaps provide estimates o poverty and inequality at the

local level – such as the district, sub-district, and evenvillage level. Such inormation is not commonly availablebecause household surveys are typically too small insample size to permit suciently ne disaggregation.Yet, with ongoing eorts to apply detailed spatialtargeting o public interventions, or to realize thegains rom decentralization and community-centereddevelopment, there is a pressing need or inormationon distributional outcomes at the local level.

in india, this could reliably generate poverty estimates

at block level. While progress on this ront would not

address the issue o household level targeting, it wouldsignicantly reduce issues o targeting across spacewithin states. In India, a pilot eort to produce povertymaps in three states - West Bengal, Orissa and AndhraPradesh – is ongoing. Once that is complete, it would bea more precise basis or allocations o CSS SP resourcesacross space. In particular, these poverty maps canpotentially be an important part o a strategy to marry“top down” targeting (essential or scal allocations o resources across space) with “bottom-up” targeting o households or individuals (e.g., through community-

based methods that rely on local knowledge but arenot comparable across space).

(ii) Improvinghousehold-leveltargeting

in addition, there is a major need to improve india’s

household level targeting systems, though the range

of options varies between urban and rural areas, and

by program type. This section looks at three possiblereorms in the BPL methodology as well as the potentialrole o other methods, including community-based and

sel-targeting methods. None o them provide a “magicbullet” or all programs, but are suggestive o options orimprovement which may contribute to a more eectivemix o targeting methods.

reforming the bpl method. given the concerns over

widespread exclusion and inclusion errors in the

2002 bpl method, an expert committee has suggested

significant changes in design of the proposed 2009

bpl census (as described in the Saxena Committeereport).431 One, the method proposes the automaticexclusion o visibly non-poor households and the

automatic inclusion o the most vulnerable households,with a survey and scoring only o the remaininghouseholds. Two, the new method overlays geographictargeting criteria by speciying district, block and GP-level quotas with respect to the proportion o BPLhouseholds. In districts that have a very high proportiono BPL households (over 80 percent), all households(except the visibly non-poor) would be considered tobe poor and automatically included in the BPL list. Thisdesign reduces administrative demands and cost tosome extent by reducing the scope o the survey. The

underlying principle o the proposed methodology isto minimize errors o exclusion, without worrying over-much about errors o inclusion. The elements o theproposed method are described below.

setting quotas for the distribution of bpl households

across space: District-level thresholds or the proportiono BPL households could be set using the ratio o SC/ST population in the district to that in the state, theinverse o agricultural production per rural person andagricultural wage rate o the district.432 These could thenbe used to estimate block-level proportions o the poor

using any one or a combination o indicators on soil andirrigation quality, road connectivity, emale literacy and

429 SeeCoadyetal.(2004)orauseuldiscussionodierenttargetingmethodsandcombinationsindevelopingcountries.

430 SeeElbersetal.(2003)ordiscussionothepovertymappingmethodologyandWorldBank(orthcoming-a)oradiscussiononthepilotsinIndia.

431 SaxenaCommitteereport(2009).

432 ThisisthestandardormulausedorscalallocationsorRuralDevelopmentprograms.




share o non-agricultural workers. Finally, these block-level estimates would be used to generate GP-levelquotas or BPL households on the basis o populationestimates. Estimating these disaggregated sub-districtthresholds as well as choosing alternative rules togenerate GP-level quotas could be let to the discretiono the state government or district authorities.

identifying poor households: The basic principle behindthe methodology being proposed is to ensure the inclusiono groups that are regarded as particularly vulnerable (e.g., workers in low income or highly vulnerable occupationalcategories, households where earning capacity isseverely curtailed by external constraints, etc.) and/orgroups that are historically subjected to social exclusion. The proposed method o identiying households has theollowing three elements:

Automatic exclusion o visibly non-poor house-holds

Automatic inclusion o the poorest and mostvulnerable households

Scoring o the remaining households (exceptin districts with poverty above the speciedthreshold – 80 percent - where all households,except those automatically excluded, areidentied as poor without a survey).

Automatic exclusion o households that aremeet certain criteria and are identied as non-poor: The intention is to exclude householdsthat are visibly non-poor, but whose position o

economic, social or political privilege makes itpossible or them to get (wrongly) included in BPLlists. The exclusion criteria include the ollowing:(a) households with double the land o the districtaverage o the agricultural land per agriculturalhousehold i partially or wholly irrigated (threetimes i completely unirrigated); (b) householdswho have two-wheeled (or more than twowheeled) motorized vehicles; (c) households whohave at least one mechanized arm equipment;(d) households who have any person who isdrawing a salary o over ` 10,000 per month in

non-government/private organizations or isemployed in government (including parastatals)on a regular basis with pension or equivalent

benets; (e) income tax payers.433 These criteriaare an improvement over those used in the1997 BPL method as (i) they allow or some localvariation to a limited extent (e.g., land holding isassessed relative to the local average instead o the all-India threshold o two hectares previously)and (ii) ocus only on high-value assets thatmay be more successul in separating the rich

rom the poor.

Automatic inclusion o certain categories o households that are considered to be amongthe poorest and most vulnerable: These includethe ollowing categories: (a) designated Primitive Tribal Groups; (b) designated most discriminatedagainst SC groups (called Maha Dalit Groups),i so identied by the state; (c) single womenheaded households; (d) households with disabledperson as bread-earner; (e) households headedby a minor; () destitute households that are

dependent predominantly on alms or survival; (g)homeless households; and (h) households whereany member is a bonded laborer. However, thereis some conusion in the treatment o householdsand individuals while operationalizing thesecriteria. While the report ocuses or the mostpart on households (i.e., a joint amily that residesunder a common roo and eat rom a commonkitchen) and nuclear amilies, some o the speciccategories noted above relate to individuals. In thiscase, the report suggests treating these groupsas separate households (e.g., single women withno major son, elderly couples or individuals, etc.).However, it is not clear how to score the remaininghousehold members. Also, not all o these criteriaare easily measurable or veriable in the eld –e.g., a unctional assessment o disability requiresseveral detailed questions and highly trainedinvestigators.

Grading o the remaining households (identiedas poor) in order to prioritize programs andservices to the poorest among these households: The proposed scoring system ranks households

on a scale rom one to ten using the ollowingcriteria: (a) caste and religious aliation – SC/ST(3 points), denotied tribes and designated ‘Most

433 Thesecriteriaapply totheentire jointamily– i.e.,therstcriteria ohigherthan averagelandownershipwould applyevento thesono alargearmer eventhoughhemaynotactuallyhavelandregisteredinhisname.




Backward Castes’ (2 points), Muslim/OBC (1 point);(b) any one household member engaged in theollowing occupations – landless agriculturalworker (4 points), agricultural laborer with someland (3 points), casual workers (2 points), sel-employed artisans or sher olk (2 points); (c) noadult above the age o 30 with schooling up tograde ve (1 point); (d) any household member

with TB, leprosy, mental illness or HIV/AIDS ordisability (1 point); and (e) households headed byan old person o age 60 and above (1 point). Sincethe bunching o a large number o households ispossible at certain scores, the method proposes aranking o households with the same score, withthose in the special category group such as SC/ST at the top, ollowed by landless agriculturallaborers and so on.

this proposal is a modest approach to reform in

that it proposes continuing with the bpl system with

some improvements. The proposed methodology is animprovement over the 2002 BPL method in some ways:(i) The indicators chosen are likely to be highly correlatedwith poverty or the most part (though not necessarilyor the elderly).434 Some o these indicators (gender o household head, education, occupation) were among awider set o indicators used by Jalan and Murgai (2007)in their augmented regression model that perormedmuch better than the 2002 BPL method. However, whilethe reduction in the number o indicators increasessimplicity in eld processes, it may make it more dicult

to separate the rich rom the poor and the poor romthe poorest; (ii) Weights have been assigned to theindicators as noted above. However, weights havenot been applied across states; and (iii) The use o thegeographic, automatic inclusion and exclusion criteriareduce the scope o the survey and hence administrativedemands and costs. Subjecting this methodology to thetest using NSS data as done with the 2002 BPL methodwould yield interesting insights into how well the newde jure targeting design would perorm.

however, several drawbacks of the previous bpl

method remain, particularly with respect to the imposition of central criteria across diverse local

contexts, cardinality of indicators, and the same

process of aggregation. In addition, there are likely

to be reporting issues with some o the indicators (e.g.,chronic health problems, disability). The adoption o thismethodology will also have signicant scal implications. The inclusion criteria are dened on the basis o nuclearamilies and individuals who are considered as separatehouseholds or the purpose o this exercise. This wouldlead to the number o BPL households increasingsignicantly, implying possible rationing within these

households i program budgets do not rise adequately.

as a result, there is still scope to move to a more

developed form of proxy means-test, using methods

which are good practice in developing countries, for

both rural and urban areas. There are several possibleelements in such as reorm:

evenistandardnationalBPLcriteriaareretained,

these should be determined using rigorous

regression models or greater targeting power.

While the proposed 2009 BPL methodology does

include criteria such as caste aliation that havebeen ound to be strong correlates o poverty,the preerred method or such an exercise is touse the NSS or other representative nationaldata to generate a set o indicators that providemore targeting power, and which could be easilyveriable at reasonable cost.

whatever indicatorsare used, they shouldhave

some weighting – preerably on a state-specic

basis. The basis or such weights and a moresensible ranking between levels o each indicatorshould be the NSS data, or other representative

national data where relevant. In contrast,the proposed BPL methodology and Kerala’sKudumbashree use a set o weighted indicatorsor the identication o poor households, but theweights do not appear to be based on regressionanalysis. These are likely to be assigned bycommittee or, in the case o Kudumbashree,developed by communities in a participatorymanner.

a preerred approach beyond the above would

beto let the indicators in the BPL methodology

vary by state, or perhaps groups o states. Asthe purpose o BPL is increasingly ranking o households rather than determining aggregatenumbers o poor people (which remain controlled

434 SeePalandPalacios(2008)oracomparisonopovertyratesamongtheelderly.




through the linkage to Planning Commissionaggregates or states), there seems no inherentneed to insist on standard national indicators. Aspart o a process to generate indicators, it wouldbe worthwhile to simulate state or region-specicindicator sets and test their power in ranking o households.

piloting the proposed method would allowan assessment o how well these indicators

capture household welare, measured using

other accepted measures such as per capita

consumptionand/orassetindices.

BPLlistsshouldbesubjecttolocalizedverication

by communities, using gram sabhas or other

mechanisms. In principle, this should happen,and does in some states (e.g., HP) and/or orspecic programs. However, the process is notsystematic and made more complicated by the

act that gramsabhas are held inrequently andparticipation is oten low in most states.435 I itwere to become more standard, it may be useulin some areas to have the verication processacilitated by NGOs or other third parties wherethere are concerns o elite capture. Vericationand nalization o the BPL list by the gramsabha is one o the suggestions made by the SaxenaCommittee drat report.

build in systems or dynamic updating o BPL

listsinbetweencensuses. The Saxena Committee

drat report suggests holding a census onceevery ten years, combined with a system orupdating the lists every two years by registeringchanges in household circumstances. However,the report does not speciy the implementationarrangements or doing this.

requirestatestohavecommonBPLlistsandBPL

ration card aggregates, preerably consistent

also at the household level. Several statesalready do this, and it has the benet o savingadministrative demands and avoiding multiple

targeting criteria. The Saxena Committee dratreport makes this recommendation. However, instates where the two do not presently coincide,

political economy may make convergencechallenging, particularly where BPL ration cardssignicantly exceed the numbers on BPL lists.

no comparable central guidelines for a census

of poor households exists for urban areas.

Typically, the identication o poor households iscarried out separately by dierent departments, such

as the Food and Civil Supplies Department or PDSration cards. However, methods dier across statesand departments and there is little systematicinormation on this process. Notable exceptions areDelhi and Kerala. More recently, Delhi has dened acommon process o identication o the poor acrossprograms. This denes a set o thematic indicatorscapturing residential location, social deprivationand occupational vulnerability to identiy vulnerablehouseholds. The underlying principle o promotinginclusion and several o the specic indicators aresimilar to those proposed in the rural 2009 BPL

methodology (see Chapter 8 or details). A surveyis currently underway to collect inormation onhouseholds in poor localities, with the intention o covering other areas over time. The list o vulnerablehouseholds so generated would be used by the ninestate departments that are engaged in deliveringprograms or services to the urban poor. This is a verypositive step towards generating a common beneciarydatabase or multiple programs, thereby reducingadministrative costs and increasing transparency. This,however, does not necessarily mean that all programs

would need to target the same groups. Programs suchas educational scholarships that target SC/ST childrencould use the inormation in the common databaseto continue targeting on caste aliation rather thanvulnerability status.

while the above reforms could significantly improve

the bpl system, international and indian evidence

suggests that indicator-based targeting – even

where generated robustly from reliable survey

data – will struggle to explain a significant portion

of variations in living standards across households.

This is true in a static sense, where such methods rarelyexplain more than hal the variance in householdconsumption.436

435 Evenintheoursouthernstates,only20percentohouseholdsreportedattendedagramsabha(Besleyetal.2005).

436 Forexample,Egypt’sPMToritsoodrationingsystemcapturesonly43percentothevariationinconsumptionsacrosshouseholds,andArmenia’sonlyaroundonequarterothevariation.




(iii) Otherreormoptions

while reform of the bpl system is highly desirable,

there may be additional options in rural areas of

some states for community-based targeting to play

a stronger role in sp programs. As the centre enorcesconvergence on aggregate numbers o poor peoplebetween Planning Commission estimates and the BPL

system, possibilities or more signicant reorms o targeting systems could be considered in rural areas(though perhaps not in urban, where an enhanced PMTwould seem more easible).

once a poverty map is available at block level,

reliance on community-level wealth ranking becomes

a feasible option as a tool within the formal system

for identifying sp beneficiaries. While not an idealmatch, the availability o aggregate numbers to block level and community ranking at GP/village level comesclose to the “top-down” and the “bottom-up” meeting.

To the extent there remains a gap, solutions such asassuming even poverty rates within the block, or somesimple indicators such as population share (as is beingproposed in the Saxena Committee drat report) or SC/ST share or landless share in dierent villages mightbe used to allocate SP resources within a block. Theprecedent o Andhra Pradesh is instructive, where a listo poor household generated entirely by communitywealth ranking has replaced the administrativelygenerated BPL list across the state or the mainanti-poverty programs administered by the Rural

Development Department. This may not be easiblein all states (e.g., where caste ragmentation is highand risks o local elite capture more pronounced), andwould need acilitation by competent NGOs. However,an evaluation o the AP experience, and well-evaluatedpilots in other states seem warranted to see whethersome o the shortcomings o even a well-designed PMTcan be mitigated through a stronger community role inidentiying beneciaries.

as happens presently with community wealth ranking,

the process would benefit from being framed within

general criteria for ranking households. From animplementation viewpoint, there is a tension betweenmore localized guidelines and minimizing intensity o process and costs in developing the guidelines. However,experience rom India (e.g., Kerala’s Kudumbshree)and rom other countries which have ormalized

community identication into their ormal SP systems(e.g., Uzbekistan), suggests that this is a surmountablechallenge.

whether the modest or more fundamental reform

options are pursued, self-targeting (as happens in

public works) would continue to be a useful tool

for programs where it is suitable. This approach is

most eective when used to target goods or servicesthat are more heavily consumed by the poor than thenon-poor, and or programs where monitoring costsassociated with verication o eligibility are high.Programs such as public works are amenable to sel-targeting approaches through the wage rate andtypes o work oered. Others such as subsidized creditlend themselves less readily to sel-targeting. For cashbenets, the possible role o sel-targeting will dependon benet levels, ease o accessing programs and otheractors. Despite these obvious limitations, the empirical

results in Chapter 4 highlighting the superior targetingperormance o public works suggests that “cuttingout the middleman” in targeting o SP programsremains an important tool or programs where thenature o the sel-targeting requirement or o benetsoered permits. This suggests that sel-targetingshould continue to play a role in programs where it issuitable. An important additional actor supportingthis conclusion is that sel-targeting may minimize thepolitical costs o clear designation o target groups, byallowing policymakers to describe such programs as“open to all”.

C. PoliTiCAl eConomy oF

SoCiAl PRoTeCTion ReFoRm

the political economy of sp policy reorientation is

complex, and will require intensive efforts to build

consensus on reforms. In particular, it will be importantto ensure that the interests o perceived “losers” o SPand broader economic reorms are taken into account.While reorms that involve expanded coverage or new

types o interventions are unlikely to be controversial,there are strong interests in preserving the status quoin SP programs among a range o actors, includingadministrators, politicians, contractors and others.Simply cutting programs or excluding certain groups o beneciaries or institutional players is thereore unlikely




to be successul unless incentives or institutions andhouseholds which will be aected by reorms can bepart o the reorm package. The political economy o SPreorm is challenging in all countries, and governmentsin India would benet rom more innovation in theireorts to create a broader societal understanding o theneed or and benets o reorms.

some of the political economy challenges that the sp system confronts if it is to become more coherent




consolidationandreormotheSPsystemwithin

a coherent strategy will run counter to the past

experience o scheme-driven initiatives by a

plethoraoMinistries,andtheobservedtendency

o each new government at both central and

state levels to want new SP programs clearly

distinguishableromtheirpredecessors.Reducingthese natural bureaucratic and political tendencieswill be very challenging. A rst step is obviouslyhaving an integrated SP strategy which is driven bythe top politicians and bureaucrats at central andstate levels, with strong inputs rom civil societyin its development, including opposition parties.However, even i such a strategy process can bedeveloped, it will be important or it not to becomea “one shot” exercise, but to have institutionalcoordination mechanisms in place which exploreprogram duplication and exploit synergies.

givingstatesamoreexiblehandinuseocentralSPresourceswillbeachallengingtransormation

both or central administrators (whose pasttendency has been to dene the parameters oruse o central unds quite tightly) and politicians(who not unexpectedly seek political attributionor centrally-nanced schemes implemented bystates). The rst o these challenges in perhapseasier to address through development o moreoutcome-based monitoring systems. The secondis more dicult in a democracy.

in a number o programs, there are presentlysignicantrent-seekingopportunitiesorarange

oactors.Such opportunities are acilitated by thecurrent complexity o the SP program mix, butalso by the number o intermediaries who otenare involved in the interactions o poor people

with the SP system. The generic identity o suchocial intermediaries and unocial middlemenis generally well-understood, but minimizing thepotential avenues or their continued roles has onlyrecently become a more explicit goal o SP policydesign. While it is too early to say, even apparentlynaïve blanket bans on certain actors in legislationand/or guidelines (such as the ban on contractors

under MGNREGA) do appear to help. However, amore comprehensive approach will require a morethorough modernization o SP business processes.Examples where such approaches already appearto be making headway include greater reliance ondirect transers to beneciaries through bankingand postal systems, and innovations in use o ICTin SP program delivery.

amorerecentanduiddevelopmentinthepolitical

economyoSP(andmuchother)servicedeliveryis

howincreaseddecentralizationoresponsibilities

to panchayats – in particular GPs – generatesdierent patterns o contention, cooperationand collusion between newly elected panchayatocials and traditional loci o inuence amongadministrators and higher level politicians such asMLAs and MPs. An essential rst step in promotingdecentralization o SP service delivery as a tool orcontestability and hence accountability will begetting a better empirical understanding o thediversity and evolution o experience. This wouldinclude how the gradual increase in the role o panchayats is proceeding (and what actors –such as limited control o resources and very lowcapacity), and the extent to which panchayatseectively promote accountability in SP servicedelivery or are captured by local social, politicaland administrative elites.

a more nascent, but powerul, element in the

politicaleconomyoSPreormisthepolicyshit

towardsa rights basedapproach. Governmento India is increasingly operationalizing such anapproach in a number o areas through legislationand specic policies and programs. For instance,

the Right to Inormation Act was passed in 2005and mandates the government to release timelyinormation demanded by citizens. It has beenwidely hailed as one o the most importantdrivers o governance reorm and transparencyin India. The Right to Food and Right to




Livelihood movements are led by civil society,but have managed to inuence government sothat the National Rural Employment GuaranteeAct, (now renamed the Mahatma Gandhi RuralEmployment Guarantee Act) was passed in2005. Other similar Acts include the Right toEducation Act (2009), the Scheduled Tribes andOther Traditional Forest Dwellers (Recognition o Forest Rights) Act (oten called simply the “TribalRights Act”, 2006) while legislations such as orood security are on the anvil.

a consequence o the above is the increasingly

prominentroleocommunitiesandcivilsociety

in promoting more eective poverty reduction

outcomes rom spending. In this respect, thestrengthening o the “authorizing environment”

or communities in SP service delivery in recentyears is encouraging. This is both cross-cutting,through reorms such as the Right to InormationAct, and program specic, such as the anticipatedrole o social audits in MGNREGA, and new rolesor community groups such as SHGs in delivery o some SP services (e.g., running Fair Price Shops).However, there is no guarantee o “trickle down”

to citizens in terms o awareness o their emergingentitlements. The role o NGOs, media and otheractors in this respect cannot be under-stated,as various political and administrative actorsat local level may not have strong incentivesto promote such citizen-based accountabilitymechanisms. Notable examples such as MKSS inRajasthan demonstrate the potential impacts o such partnerships.



Annexes



Annexes 2

The India Human Development Survey (IHDS) – II(2004-05) is a household survey collected by the NationalCouncil o Applied Economic Research (NCAER), as acollaborative exercise with the University o Maryland,USA. The data canvassed around 216,000 individualsliving in 41,500 households in India. Questions on saetynet programs were included in the survey with nancialsupport rom the World Bank, and analysis o the datacarried out by Bank sta ater entry and cleaning byNCAER. The data are representative at the state levelor 33 states and Union Territories and or urban andrural areas separately. Table A1.1. presents the samplesize (number o households) canvassed in the survey orurban and rural areas separately and by state.

welFARe meASuRe

Income and consumption data were not available rom

the IHDS at the time o the analysis, but the asset indexallows or analysis across the wealth distribution. We cancompute a measure o wealth based on the ownershipo durable goods and housing characteristics. The wealthindex is generated using a principle components model(see Filmer and Pritchett, 1998). Separate wealth indicesare created or urban areas and or rural areas, withdata rom all the states pooled together. Householdwealth quintiles too are computed or urban and ruralareas separately. Filmer and Pritchett demonstrate thatmeasuring long-run wealth (asset index) using a principle

India Human Development Survey (IHDS) – II (2005)

annex 1

Stats urba Rra Tta

Andhra Pradesh 900 1,535 2,435

Arunachal Pradesh 45 119 164

Assam 315 701 1,016

Bihar 464 966 1,430

Chandigarh (UT) 80 80

Chattisgarh 269 905 1,174

Dadra & Nagar Haveli (UT) 60 60

Daman & Diu (UT) 60 60

Delhi (UT) 840 120 960

Goa 44 121 165Gujarat 900 1,178 2,078

Haryana 268 1,351 1,619

Himachal Pradesh 315 1,058 1,373

Jammu & Kashmir 315 400 715

Jharkhand 405 519 924

Tab A1.1: nbr sds srd r rba ad rra aras sparat ad b stat




components model can perorm as well as other measureso welare, such as household per capita consumption.

The asset index employed in this note is computedusing 24 durable goods. The durable goods used are:bicycles, sewing machines, generator sets, mixer/grinder, motor cycle, black and while television, colortelevision, air cooler, clock or watch, electric an, chairor table, cot, telephone, cell phone, ridge, and pressure

cooker. Among households that had at least 6 o theabove durable goods, households are asked about theollowing: car, AC, washing machine, computer, creditcard437. I a household has less than 4 items rom the mainlist o assets, then they are also asked about owning: twopairs o clothes, shoes or chappals or all the memberso the household438. These last two categories o assetsare particularly good at separating out the poor romthe very poor. Note that we only have inormation on

Source: Ajwad 2006.

437 Sinceanswersareonlyrecordedorhouseholdswithatleast6durablegoods,weassumethathouseholdswithewerthan6durablegoodsdonotpossessanyothese5items.Sincethese6itemsarelikelytobeownedbyverywellohouseholds,theassumptionislikelytobemet.

438 Sinceanswersarerecordedonlyorhouseholdswithmorethan4durablegoods,weassumethathouseholdswithmorethan4durablegoodsalsohavetwopairsoclothesoreachothehouseholdmembersandthateveryoneinthehouseholdalsohasshoesorchappals.

439 Notincludedinthedataaresomearmassetslike:tubewells,electricpumps,dieselpumps,bullockcarts,tractors,threshers,biogasplant.Thesevariablesmaybeuseultocreateawelareaggregate,buttheactthatnon-armhouseholds(whetherrichorpoor)arenotlikelytohaveanyotheassetsmakesinclusionlesscompelling. Alsonotincludedare housingcharacteristicssuchas:themainsourceodrinkingwater(tapinsidetheresidence,sharedorpublictap,hand-pump,etc.),typeohousingmaterial(kachcha,semi-pucca,pucca),typeotoiletacility(ownfushtoilet,ownpittoilet,sharedtoilet,etc.),mainsourceolightingorthehouse(electricity,kerosene,other),andmainsourceouelorcooking(LPG/electricity,kerosene,wood,other).ThesedataarenotavailableintheIHDS.Itshouldalsobenotedthatabouthaltheassetsinthemodelrequireanelectricityconnectionintothehouseholdoragenerator.Inourmodel,onlyhaltheassetsareelectricitybased.

Stats urba Rra Tta

Karnataka 1,168 2,852 4,020

Kerala 627 1,104 1,731

Madhya Pradesh 645 2,168 2,813

Maharashtra 1,125 2,078 3,203

Manipur 45 60 105

Meghalaya 45 116 161

Mizoram 45 60 105

Nagaland 30 100 130

Orissa 600 1,466 2,066

Pondicherry (UT) 45 60 105

Punjab 540 1,052 1,592

Rajasthan 892 1,595 2,487

Sikkim 45 60 105

Tamil Nadu 1,108 991 2,099

Tripura 45 184 229

Uttar Pradesh 1,125 2,387 3,512

Uttaranchal 135 323 458

West Bengal 1,124 1,256 2,380

All India 14,549 27,005 41,554

whether or not a household owns/uses each o theseitems and not the quantity or quality o the items439.

The asset index satises internal coherence (Table A1.2).Sharp dierences are seen in ownership across householdsin the poorer versus richer households. For example, 1.3,0.1, 0.2 percent o households in the poorest quintileown a sewing machine, motor bike or scooter or colortelevision, while in the richest quintile 59, 59, and 65

percent respectively own the same assets. As expected,all households in the richest quintile own at least twopairs o clothes and two pairs o shoes or all members o the amily, while only 85 and 64 percent o householdsin the poorest quintile own those assets respectively.

Asset deprivation is broadly consistent with staterankings using other sources o inormation such as percapita gross state domestic product or the HDI. Consider



Annexes 2

Tab A1.2: Asst rsp

Source: Ajwad 2006.

orsp r a

sdsorsp r sds

t 1orsp r sds

t 5

Own (1); rent home (2); neither (3) 1.11 1.11 1.07

Bicycle 58.1% 39.5% 71.1%

Sewing machine 20.2% 1.3% 58.5%

Generator 1.1% 0.0% 5.4%

Mixer 22.5% 0.4% 54.7%Motor bike/Scooter 16.0% 0.1% 58.7%

TV – Black & White 24.7% 12.3% 32.9%

TV - Color 24.1% 0.2% 65.4%

Air cooler 9.8% 0.2% 34.2%

Clock or watch 83.2% 38.1% 99.3%

Fan 58.5% 14.2% 96.3%

Chair or table 64.9% 14.0% 97.7%

Cot 85.1% 64.9% 97.9%

Phone 13.7% 0.0% 48.6%

Cell phone 7.0% 0.0% 26.0%

Fridge 13.4% 0.0% 44.4%Pressure cooker 38.2% 4.3% 83.1%

Car 1.6% 0.0% 8.0%

AC 0.5% 0.0% 2.2%

Washing machine 3.2% 0.0% 14.4%

Computer 1.0% 0.0% 4.2%

Credit card 1.4% 0.0% 7.7%

Clothes 97.1% 84.5% 100.0%

Shoes 93.0% 64.3% 100.0%

a measure such as the proportion o households in thestate alling into the all-India bottom 40 percent o thewelare distribution. With that measure, Maharashtra(around 67 percent o its residents all into thebottom 40 percent o the all-India welare ranking),

Bihar (60 percent), Madhya Pradesh (55 percent), andWest Bengal (53 percent) respectively rank amongstates with the largest number o poor people. By thismeasure, the smallest contributors to overall povertyare Mizoram, Goa, and Sikkim.

Tab A1.3: Prprt stat’s ppat b t t a-ida ar ts

Stats Prst q2 q3 q4 Rcst

Andhra Pradesh 12.80% 14.10% 32.00% 27.30% 13.80%

Arunachal Pradesh 0.20% 4.00% 12.70% 40.50% 42.60%

Assam 6.50% 30.80% 34.30% 17.20% 11.10%

Bihar 33.00% 27.30% 21.20% 11.20% 7.10%Chandigarh (UT) 4.80% 8.60% 19.50% 14.70% 52.40%

Chattisgarh 25.40% 21.20% 25.00% 15.50% 12.90%

Dadra & Nagar Haveli (UT) 10.40% 18.60% 12.70% 10.40% 47.90%

Daman & Diu (UT) 0.70% 0.40% 4.30% 29.20% 65.50%

Delhi (UT) 5.20% 11.70% 17.30% 25.60% 40.10%




Stats Prst q2 q3 q4 Rcst

Goa 1.10% 1.00% 3.30% 21.20% 73.40%

Gujarat 5.10% 14.50% 24.20% 26.90% 29.30%

Haryana 3.60% 5.10% 11.40% 21.90% 58.00%

Himachal Pradesh 2.00% 5.60% 15.50% 25.30% 51.50%

Jammu & Kashmir 9.90% 15.10% 20.20% 22.70% 32.10%

Jharkhand 20.20% 22.50% 25.50% 16.50% 15.30%

Karnataka 28.00% 17.50% 18.00% 16.60% 19.90%Kerala 1.70% 11.20% 15.40% 18.70% 53.00%

Madhya Pradesh 32.60% 22.70% 16.80% 13.00% 14.90%

Maharashtra 37.90% 28.90% 21.60% 10.90% 0.60%

Manipur 6.20% 2.00% 15.80% 23.20% 52.80%

Meghalaya 29.60% 18.60% 21.10% 17.20% 13.50%

Mizoram 0.00% 0.90% 24.60% 26.40% 48.10%

Nagaland 2.50% 3.10% 17.10% 58.90% 18.40%

Orissa 38.80% 12.50% 22.60% 13.30% 12.70%

Pondicherry (UT) 11.40% 9.80% 20.90% 17.50% 40.30%

Punjab 1.30% 4.50% 9.40% 20.60% 64.20%

Rajasthan 14.90% 24.70% 19.00% 18.40% 23.00%Sikkim 0.00% 2.60% 11.90% 31.80% 53.60%

Tamil Nadu 18.30% 15.60% 21.20% 21.70% 23.30%

Tripura 12.90% 12.60% 26.60% 31.20% 16.70%

Uttar Pradesh 19.10% 29.50% 17.60% 17.30% 18.70%

Uttaranchal 9.20% 12.30% 18.30% 31.30% 28.80%

West Bengal 25.70% 27.40% 19.50% 18.00% 9.50%

All India 20.30% 21.10% 20.60% 18.30% 20.00%

Source: Ajwad 2006.



Annexes 21

This study nanced a special household surveyconducted in three Indian states, Orissa, Madhya Pradeshand Karnataka. A multi-stage stratied sample scheme(see Table A2.1) was ollowed or selecting the samplehouseholds, as described below.

SAmPle SeleCTion

In each state, three districts were selected. While samplingthe districts within each state, it was ensured that theyare located in dierent agro-climatic zones with dieringsocio-economic characteristics. For this purpose eachstate was divided into dierent socio-cultural regions(SCRs)440 based on the agro-climatic zones and socio-

economic characteristics (urban, remote, tribal, etc). Fromeach state three SCRs were selected with probabilityproportional to size (PPS). Further one district wasselected randomly using PPS method rom each sampleSCR. The list o selected districts is given in Table A2.2.

From each sample district, two blocks were selected.While making the selection, it was ensured that one block

represented the most developed area o the district andthe other the least developed area. For this purpose, acomprehensive development index was constructed orall the blocks in the sample district on the basis o Censusdata like sex ratio, literate population and literacy rate,worker and non-worker population, etc.

A total o 5 villages were selected rom each district(two blocks). From the most developed block, 2 villageswere selected randomly using PPS method. In the leastdeveloped block three villages were selected withPPS, one rom the list o all villages having more than60 percent SC and ST population and two rom the rest.

In each village a sample rame o households wasprepared by listing all the households using a separate

listing schedule. The listing schedule also containedsome ancillary inormation like the caste, landpossessed, education, participation in our major saetynet programs, etc. From the listing o households, asample o 30 households was selected or administeringthe main household questionnaire and the women’squestionnaire. In order to gain insight into the benets

Social Protection Survey in Three States

annex 2

440 Khan(1992).

Tab A2.1: Sap cra SPS sr

l Dtas Sap t Std

States Madhya Pradesh, Orissa & Karnataka 3

Districts 3 per State 9

Blocks 2 per District 18

Villages 5 per District 45

Households Survey 30 per Village 1356




availed rom government-unded saety net programs,it was decided to over-sample households which haveavailed benets under Food or Work, Indira AwaasYojana, SGRY, SGSY.441 For this purpose all the listedhouseholds were divided into ve strata. The participantsin the programs Food or Work, Indira Awaas Yojana,SGRY, SGSY were treated as our separate strata442. The

rest o the households were treated as the th stratum.Finally, we selected 3 households rom each o the rstour strata. The balance o 18 sample households wereselected randomly rom th stratum443. The survey wasconducted in 45 villages covering 1356 households.

The main questionnaire was administered to the heado the household. In case the head o the household was

absent, it was administered to any knowledgeable adultmember o the household. The section or the emales wasadministered to the spouse o the head o the household.In case she was not available, it was administered to anyadult married emale available in the household. Thecoverage or the study is summarized in the tables.

meThoDology AnD ToolS

a mix of quantitative and qualitative approaches was adopted in the survey. The instruments used to collectthe data are shown in Table A2.3.

The survey also used a wealth index to rank householdsor purposes o incidence analysis. This was constructed

Tab A2.2: Dstrcts sctd r t sr

Stat SCR Dstrct

Madhya Pradesh Bhagelkhand Rewa

Bundelkhand Datia

Chhatisgarh & Gondwana Seoni

Karnataka Kannada (Bombay) Bagalkot

Karnatak (Deccan) Bidar

Old Mysore & Maland ShimogaOrissa Chhatish Garh & Gondwana Sundargarh

Coastal Orissa (Kalinga) Jajapur

Dandekaranya Koraput

istrt Rspdt Sap irat

Household questionnaire Household member 1,350

(450 perState)

Inormation about the households –

– Socio-economic characteristics,– Programme participation,– Prole o benets, shocks/risk prole etc.

Village schedule Local key inormants -Sarpanch, Patwari

45 Inormation about the village –

– Demographic characteristics and Inrastructure acilities,– Program coverage, Utilization o unds,– Functioning o Panchayat, NGOs etc.,– Social mapping,– Political economy and institutional incentives.

Focus Group Discussions inthe village

Stakeholders (separatelyor men and women)

90

Case studies 30 – Households who successully used and beneted romprograms and those who did not,

– Major shocks aced and coping mechanisms,– Seasonal migration and household/community impacts,– Detailed situation o specic vulnerable groups,

– Dynamics o poverty and poverty traps.Interview with BDOs 18 Seek inormation on implementation o the SSN schemes, its

success/ailure and reasons.Interview with NGOs 9

Tab A2.3: istrts sd

441 Suitablemultiplierswereused;themultiplierswereconstructedbasedonthepopulationsizesusedordrawingsamplesateachstage.

442 Incaseohouseholdsaccessingmorethanoneprogram,thehouseholdisselectedbasedonitsparticipationinoneprogram.

443 Incaseoanyshort-allosamplesundertheprogramstrata,theremainingsamplesweredrawnromthegeneralstrata.



Annexes 2

Tab A2.4: wat d: cstrctd r sd star

S n idcatr Scr

I Durables

Cycle 1, i household possess, 0 otherwise

Radio/Transistor -do-

Fan -do-

Cot/Charpai -do-

Almirah -do-

TV -do-

Rerigerator -do-

Car -do-

Scooter/motorcycle -do-

Watch/Clock -do-

Furniture (Chair, stool, Table etc.) -do-

Telephone (Landline or Mobile) -do-

Durable Index Weighted average o above*

II Utensils used or cooking

Earthen pots 0

Aluminum 0.50

Stainless steel 1.00

Index or Utensils Average

III Clothing

One set 0 Two sets 0.33

Three sets 0.67

More than three 1.00

Index or Clothing Average

Welath Index Average (I,II,III)

rom the household questionnaire and is outlined inthe Table A2.4

For constructing the durable index, weights are assignedto each durable. The normalized weights are derivedrom the reciprocals o the requency o possession. Thus the most commonly owned durable gets a lowerweight while one with less requently owned gets

higher weight. The analysis also relied upon indices o several socialand institutional actors, including household socialcapital, women’s trust in institutions, women’s civicparticipation, women’s autonomy and decision makingpower (all rom the household survey). An inrastructure index was also created or the samplevillages rom the village schedule. The nine household-level indices were constructed by aggregatingthe score on each o the component variables(1 i the condition is met, 0 otherwise). The component

variable and condition or each index are describedbelow.

A. Index o household structural social capital

(score 1 to 16, i anyone in the household is a

member):

Village Development Committee

NGO- SHG

Vana Samrakshana Samithi –SHG

Finance, credit group (Other than DWCRA/NGO SHG)

Religious group

Political parties

Caste Association

Mahila Mandal

Development o Women and Children in RuralAreas (DWACRA/NGO SHG)




Vana Samrakshana Samithi Managementcommittee

Rythu Mitra/Farmers’ association

Mothers’ Committee

Watershed Committee

Village Education Committee

Village Tribal Development Agency

Water Users Association

B. Women’s Trust in PRIs (score 1 to 4; i women

trust):

Ward-members

Village vice-sarpanch

Sarpanch

Village Assistant (Patwari)

C. Women’s Trust in ofcials (score 1 to 8; i

women trust):

TeachersExtension ocers

ANM

Banks

Post oce

Aaganwadi teacher

Aaganwadi helper

Police

D. Women’s Trust in community groups (score 1

to 5; i women trust):

Mother CommitteeVillage Education Committee

Parents Teachers Committee

Any Other important village committee

E. Women’s participation in meetings (score 1 to

6; score o 1 i women participated in the rst

three meetings; 2 i women participated and

spoke or raised any issue):

Gram Panchayat

Water users association

Village Education Committee

F. Women’s participation in elections (score 1 to

5; 1 i women participated):

Gram Panchayat

Block elections

Zila Parishad

State Legislature (MLA)

Lok Sabha (MP)

G. Women’s role in household decision making

(score 1 to 14; 1 i women involved in the nal

decision):

Daughter’s Marriage

Son’s Marriage

Food related

Debt related

Children’s education – Boy

Children’s education – Girl

Care o elderly people

Health Care

No. o children

Family Planning

Spacing between births

Application or ration card

Participation o HH members in public works

Participation in SHG

H. Women’s control over assets (score 1 to 4; 1 i

women owns):

Agricultural Land

House/plots

Gold & Silver

Durables

I. Women’s autonomy (score 1 to 9; 1 i womencan go to the rst 8 events/places without

permission; 1 i allowed to set money aside

or sel use; 1 i purchased the last variable):

Can go alone without permission

Marketing

Visiting riends

Visiting relatives

Cinema, local entertainment, etc.

Local health center/Doctor

Outside village or Work Community Center/Park in the village

Community unctions

Allowed set aside some money or sel use

Did you purchase clothes or yoursel on your ownduring the last 12 months?



Annexes 2

it is useful to look at the cumulative coverage at

household level of major sp programs by examining

evidence on households accessing more than one

program. This section looks briey at access to majorSP programs in a cumulative sense.444 The results arepresented by wealth, location and social category in

Figure A3.1.the proportion of households benefiting from

more than one significant sp program is fairly low

nationally, though significant in some states. Around23 percent o all households accessed no program atall, while the large majority o households (around58 percent) accessed only one program. Above that,only Orissa, UP and AP o the major states had morethan 20 percent o households accessing more thanone program. Over all states, the share o householdsaccessing more than two programs (generally PDS plus

one other) is insignicant.

looking at the distributional incidence of multi-program coverage, over one fifth of the poorest (and st) households access no sp program at all. at the same time, the situation is for the most part remarkable mainly for its uniformity across wealth levels and social category, though as would be expected rural households are significantly more likely to access more than one program. This can be seen in Figure A3.1. The most notable eature is how high up the distributionsimilar patterns o coverage persist, and how the poorestare not specially better o in coverage terms than thosein the middle and even upper reaches o the distribution.On a social category basis, the story is somewhat morepositive, with SC and ST having notably higher coverage inmore than one program. However, particularly when oneconsiders some o the results on average benet levelsamong SC/ST, the overall picture is one o considerablepublic spending spread rather thinly across a large share

o the population.

Cumulative Coverage Across Major Programs

annex 3

Figure A3.1: Number o SP programs per household, by wealth and caste

Source: Ajwad 2006 based on 2005 IHDS data.

Number of SP programs per HH by wealth

0

10

20

30

40

50

60

70

progs

0 1 2 3 4

progs

% o

f H H i n q u i n t i l e

Poorest

Q2

Q3

Q4

Richest

Number of SP programs per HH by caste

0

10

20

30

40

50

60

70

0

progs

1 2 3 4

progs

% o

f H H i n q u i n t i l e

OBC

SC

ST

Other

444 TheprogramsincludedinthisanalysisarebenetsromPDS,scholarships,SGSY,NOAPSandothersocialpensions,maternitybenets,Annapurna,andhousingprograms.




Chapter 7 pointed to the requent bundling o SPservice delivery activities at specic – and at timeinappropriate – levels o the system, and recommendedthat all programs undertake an “unbundling exercise”which could allow or more considered assignment o activities in the service delivery chain. The ollowing is an

example o an unbundling or SGRY. It presents the “deliverychain” or SGRY, and then seeks to map both the de jureand de acto assignment o activity responsibilities acrosslevels o the system. Just such an unbundling exercisewas done or MGNREG in its operational guidelines,which oer a good model o both process and outcome.

annex 4

Unbundling SP Service Delivery Activities445

Tab A4.1: D-jr Fcts ad Actts matr

Fct Actt Rspsbt

va

C e n t r a

S t a t e

D s t r c t

B c k

g r a m

P a n c h a y a t

g r a m

S a b h a

Policy Design/Standards Rules o implementation

TargetingBudgeting

Standards

Planning Activity Prioritization/action plan

Activity selection

Asset Creation Human Capital

Skill development

Social Capital

Inormation dissemination

Physical Capital

Public Works

Operation Beneciary Selection

Identication o beneciariesAwareness Raising

Recurring

Provision o wages/ood grains

Supervision & quality control

445 ThisannexisdrawnentirelyromAiyarandSamji(2006).



Annexes 2

Fct Actt Rspsbt

va

C e n t r a

S t a t e

D s t r c t

B c k

g r a m

P a n c h a y a t

g r a m

S a b h a

Personnel

Hiring/ring

Maintenance

Accounting & nancial management

Repairs

Monitoring And Evaluation Assets

Record o assets

Physical verication o assets created

Audits

Financial audit

Social audit

De-acto Functions and Activities Matrix

Policy Design/Standards Rules o implementation

Targeting

Budgeting

Standards

Planning Activity Prioritization/action plan

Activity selection

Asset Creation Human Capital

Skill development

Social Capital

Inormation dissemination

Physical Capital

Public Works

Operation Beneciary Selection

Identication o beneciaries

Awareness Raising

Recurring

Provision o wages/ood grains

Supervision & quality control

Personnel

Hiring/ring

Maintenance

Accounting & nancial management

Repairs

Monitoring and Evaluation Assets

Record o assets

Physical verication o assets created

Audits

Financial audit

Social audit




Brad ct Spcc actt C e n t r a t .

S t a t e t .

D P C s

Pacaat Raj

isttts

u l B s

g S / g P S t .

C m .

C B o s , e t c .

D s t r c t

i n e r m e d a t e

v a e

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

A Fcts

Framing scheme Objective, design, standards, etc.

Planning Building database

Preparation o macro plans

Preparation o micro plans

Approval o micro plans

Consolidation o plans

Asset creation and

operation

Identication o project/land/site

Construction

Operation & maintenance

User charges

Identication o beneciaries

Procurement/distribution o asses

Monitoring And

evaluation

Reporting

Display o inormation

Social audit

Independent evaluation

IEC

B Fctars

Oversight over

each category o

unctionaries

Selection/appointment

Training/capacity building

Payment o salary etc

Disciplinary control

Attendance monitoring

Perormance evaluation

C Fds

Financial approval,

accounting & audig

Untied/exible unds

Financial approval

Authorization to release

Reporting on expenditure

Expenditure review

Maintenance o accounts

Quick audit

Tab A4.2: idcat rat r actt app mstr Pacaat Raj

Source: Ministry o Panchayati Raj (Advisory to states delineating the role and responsibilities o PRIs in CSSs/ACAs, Annexure III, 19th January, 2009).



Annexes 2

This technical annex describes the methodologyadopted by Jalan and Murgai (2008) or the analysisdescribed in Chapter 8. Based on the distribution o BPL scores within each state, we dened a state-specicBPL score cut-o such that the number o BPL poor (i.e.,people with BPL scores below the cut-o) is exactlyequivalent to the number o persons living below thepoverty line in that state as estimated by the PlanningCommission or the year 1999-2000 and 2004-2005.Undercoverage – or misclassication - was dened asthe percentage o the actual or expenditure-based poorwho are incorrectly classied as BPL non-poor. In thiscontext, at the state-level, the extent o under-coverage

is identical to leakage – the percentage o BPL poor whoare actually (expenditure-based) non-poor – becauseo the restriction that the total number o BPL poor isthe same as the number o expenditure-based poor in astate. Thereore, whenever we reer to state-level under-coverage estimates as a measure o targeting accuracy,it is useul to keep in mind that it implies the same extento aggregate state-level leakage, by assumption.

A shortcoming o undercoverage and leakage measuresis that they do not dierentiate between exclusion(inclusion) o households who are just below (above)

the poverty line and households that are ar below(above) the poverty line. I most o the targeting errors(exclusion and inclusion) were concentrated aroundthe poverty line, the welare losses suggested by thesemeasures would be considerably lower.

In order to examine the nature o the targeting errors,i.e., where in the consumption distribution theseerrors maniest themselves, we ollow the approachdeveloped by Skouas and Coady (2002) to display thetargeting errors graphically. We construct a variablethat takes a value one when households that areclassied as “poor” and “nonpoor” according toconsumption are classied incorrectly as “nonpoor”and “poor”, respectively, according to the BPL indicator.Otherwise this variable take the value zero. Usingnon-parametric methods described by Skouas andCoady, we plot the mean o this variable against thelog o reported per capita expenditures normalized

by the poverty line. The value on the y-axis is the“predicted error probability” (PEP). The height o thecurve captures the extent o targeting errors made atdierent points in the distribution. The shape captureswhere in the distribution these errors are being made.For example, a bell-shaped curved concentratedaround 0 (where expenditures equal the povertyline) indicates that most o the misclassicationsinvolve households that are just below and above thepoverty line.

The impact o targeting losses can be summarized

in a welare index that places a greater “welareweight” on income transers to households thatare lower income households (Skouas andCoady, 2002). Equation (1) derived rom standardwelare theory denes an index λ

por program p.

annex 5

Methodology for Comparing BPL “Poor” and NSS“Poor” at the Household Level




h reers to households who receive transers and dy h is the level o transers or household h, so that thedenominator is the total budget to be allocated across

λ

ω

θ ω p

h h

h

h

h

h

h

h

dy

dy ≡ =

∑

∑∑

where

ω ε

h z h y y = ( ) ,

θ h

h

h

h

dy

dy =

∑

(1)

households.446 θh is each household’s share in the totalbudget. ωh is the weight assigned to household h and isthe social valuation o income transer to household h. y z is the state-specic poverty line, y h reers to consumptiono household h, and ε is the inequality aversion parameter.For example, ε= 0 implies no aversion to inequality andall welare weights take a value o unity, i.e., transers to allhouseholds are viewed equally. When ε= 1, i household

h has hal (twice) the consumption o the poverty line,then its welare weight is 2.0 (0.25), and so on.

446 Strictlyspeaking,λ p

isabenet-costratiobutitisequivalenttoawelareindexsinceweassumethatthebudgetisxedacrosssimulations.

Source: Jalan and Murgai (2008).



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