Thursday, 19 May 2011

POVERTY: India: Not getting "bang for rupee" from poverty schemes

May 18, 2011: Henry Foy
(Editing by Matthias Williams and Alex Richardson)

A homeless woman prepares food on a roadside in  Ahmedabad December 20, 2010.  REUTERS/Amit Dave/Files
A homeless woman prepares food on a roadside in Ahmedabad : Credit: Reuters/Amit Dave/Files

NEW DELHI (Reuters) - India's key social development programmes, which have formed the core election promises of the ruling Congress party at a cost of over 2 percent of its GDP, are failing to effectively tackle widespread poverty, a World Bank report said on Wednesday.
The government's schemes to distribute food and guarantee work in rural areas suffer from poor implementation, red tape and corruption, the report said, common ailments that worry investors in Asia's third-largest economy.
Congress has trumpeted costly welfare schemes to lift hundreds of millions of Indians out of poverty and share the spoils of years of economic boom, propelling it to two successive victories in federal elections.
Though home to 69 billionaires, the country has more people living in poverty than the whole of sub-Saharan Africa.
While the Bank commended specific innovations and the impact of schemes in some states, it warned that welfare schemes were yet to make significant progress in helping up to 500 million people living below the poverty line in India.
"While India devotes over 2 percent of GDP to her social protection programmes... the poor are not able to reap the full benefits of such large investments," the report stated.
"India is not getting the 'bang for the rupee' that its significant expenditure would seem to warrant."
Costly social sector spending will likely make it difficult for the government to meet its fiscal deficit target of 4.6 percent of GDP in the fiscal year ending March 2012.
A decade of booming economic growth has pulled millions out of poverty, but its failure to provide for its 1.2 billion population means it lags other developing nations, such as China, in key development indicators.
The programmes assessed by the report have been praised for driving growth in rural areas, which rely heavily on agriculture and were largely bypassed by the mostly urban-centric economic boom that has swollen the middle class.
The impact of the Public Distribution System, which spends up to 1 percent of GDP on providing food to the poor, is limited, with leakage and diversion of stocks through corruption resulting in only 41 percent of grains reaching poor households.
The Congress party-led coalition's Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREG), to provide poor households with work, is undermined by payment delays and administration errors, and fails to promote social mobility.
"Studies suggest the ability of MGNREG to be promotional has started but has not reached its potential," said John Blomquist, the report's author.
"For the most part, it has been much more of a reactionary programme for existing poverty, and has a way to go."

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