Wednesday, 15 June 2016 | Uttam Gupta | in Oped
The Modi Government has sought to plug the leakages in the welfare delivery mechanism. It must now sustain the momentum to achieve double-digit growth rates
Three decades ago, Prime Minister Rajiv Gandhi estimated that only 15 paise out of every rupee meant for the poor actually reached them because of leakages in the delivery system. This was a tacit admission that brazen loot of public money was happening but nothing was being done to curb it. Successive political establishments happily recalled the statement but never introspected on its seriousness.
In his two years in office, Prime Minister Narendra Modi not only analysed the modus operandi of how the resources meant for the poor was being misappropriated, but also galvanised the entire Government machinery to stem the rot. The outcome of team Modi's efforts, especially in key areas of subsidy on LPG, food under the public distribution system (PDS), kerosene, pension and payments under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) are there for all to see. All of these point towards immense opportunities for garnering huge savings, badly needed to fulfil the bare minimum needs of the poor.
Using the Aadhaar-based system for direct benefit transfer ( wherein subsidy is directly credited to the beneficiary's bank account, duly authenticated with Aadhaar number), the Government has identified ‘bogus’ beneficiaries and excluded them from the ambit of welfare schemes. In LPG, a whopping 35 million bogus beneficiaries have been weeded out, leading to a saving of Rs21,672 crore (Rs14,672 crore during 2014-2015 and Rs7,000 crore during 2015-2016).
In food, 16 million bogus ration cards were identified in Andhra Pradesh, Telengana, Puducherry and Delhi alone. By stopping the release of subsidised food on these cards, the Government saved about Rs10,000 crore. Likewise, weeding out duplicates under MGNREGA resulted in a saving of Rs3,000 crore during 2014-2015. Leakages in scholarships and pension schemes in Uttar Pradesh, Haryana, Kerala and Madhya Pradesh also plugged savings to the tune of Rs2,000 crore.
All put together, the Government saved Rs36,500 crore. This is just the tip of an iceberg. When wholesome coverage all-over India is achieved, savings will be mammoth. According to officials, putting PDS and MGNREGA payments under Aadhaar-based system alone will save about Rs100,000 crore. And these savings will accrue every year.
These savings are 0.8 per cent of India's gross domestic product (about two trillion dollars). Thus, by eliminating bogus beneficiaries, during the current year, the Government can achieve fiscal deficit of 2.7 per cent against a target of 3.5 per cent. For 2017-2018, it can touch 2.2 per cent as against the three per cent target — as per its fiscal consolidation roadmap. This will have unprecedented beneficial effect on the economy by way of low inflation, lower interest rates, higher sovereign rating and more of foreign direct investment.
Second, savings can be used to increase coverage for the poor under welfare schemes. Modi has amply demonstrated this in the case of LPG. By leveraging exclusion of 35 million bogus connections and another over 10 million households surrendering under ‘Give It Up’ campaign, the Government provided connections to 30 million poor households. Another 50 million will be covered in the next three years.
The same approach is being adopted for kerosene wherein in Haryana alone, 600,000 bogus connections were stopped and more will follow as direct benefit transfer has begun (in select districts). This will be good for the environment as well as for kerosene which is being diverted for mixing with diesel adding to pollutants in the air.
A third positive spin-off will be increased availability of resources for investment in infrastructure viz, roads (including rural roads), highways, ports, railways etc. For building infrastructure to the required level, the country needs an investment of one trillion dollar (equivalent to half of India's GDP) of which 50 per cent has to be contributed by the Government. Savings by plugging leakages in subsidy pipes will come very handy to achieve this goal.
Finally, once the corruption money is released, the economic system is laundered producing all sorts of ill-effects. For instance, this money is used for hoarding food items and creating artificial scarcity. It goes for hoarding real estate/property leading to skyrocketting prices. In short, it can inflict serious damage in every sector. Most of it will stop once the leakages from welfare schemes are plugged.
Hopefully, the momentum will be sustained in the years to come; thus, laying a solid foundation for India to traverse on a double digit growth trajectory and ensure a decent living for the citizens.
