Three years in to its five-year term and the Modi government’s approach to social policy remains unclear. This certainly is, in part, a reflection of the multiple and often contradictory pulls and pressures of building a welfare state in India. However, it is also a reflection of the government’s lack of political imagination and capability to build a consensus around critical issues like health and education.
Entitlements vs empowerment
In 2014, when the National Democratic Alliance (NDA) government rode to power, many had expected (with anticipation or trepidation depending on which side of the ideological fence you sit on) that the government would radically alter the architecture for welfare. Indeed, early into its term, the government set about the task of distinguishing (and distancing) itself from the United Progressive Alliance’s (UPA) rights-based welfare approach by positioning its approach to social policy as “empowerment” in opposition to the UPA’s “entitlement” approach. Replacing the leaky and inefficient welfare delivery system with the deceptively elegant cash transfer model was a critical component of the empowerment narrative. To do this, the government’s first task was to scale up the direct benefit transfer (DBT) pilots with the JAM (Jan Dhan, Aadhaar, Mobile) trinity as its foundation.
Progress, however, has been slow. The target in 2014 was for DBT to cover 536 schemes across 65 ministries and departments. By December 2016, only 84 schemes across 17 departments and ministries were using DBT. Moreover, the pace of money transfers through DBT has slowed down. By December 2016, only 45% of the 2016-17 Government of India (GoI) allocation for LPG subsidies and 62% for the National Social Assistance Program were transferred through DBT. And while the government is struggling to roll out the DBT, the PM has turned to the UPAs “entitlement” programs to respond to post-demonetisation shocks to the rural economy. In his December 31 speech, the PM committed his government to implementing the maternity benefits program, a key provision of the National Food Security Act. Add to this, the MGNREGA, which was given a new lease of life earlier this year on account of drought conditions in many parts of India, has recently received a supplementary grant on account of the increased demand in December. By early January 2017, the Centre had released Rs. 55,076 crore for MGREGA – the highest allocation so far since the program was launched.
One reason for the NDA’s continued reliance on the “entitlement approach”, despite the rhetoric of “empowerment” through cash, is the lack of consensus even within the BJP on what a credible alternative to the current welfare framework could be. Even as candidate Modi campaigned from a centre-right, less state intervention position with slogans like “maximum governance, minimum government”, the BJP’s position on welfare, as political scientist Milan Vaishnav has argued, was very much a continuation of the UPA’s entitlement approach. Not unlike the UPA, the BJP manifesto promised to implement the right to food, a national health assurance program and increase expenditure on education. Moreover, BJP-ruled states have done a better job of implementing the UPA’s entitlement schemes than many Congress states. The best illustration of this is Chhattisgarh, which under the BJP’s Raman Singh government has become the poster child of PDS reform. With these successes, replacing entitlements like the PDS with cash transfers just doesn’t make political sense.
The lack of political consensus also exposes the limitations of the cash argument. The push to cash transfers stems from the belief that cash transfers are a solution to the state’s continued failure to deliver services. Yet, as the DBT experience is beginning to reveal, cash is not a substitute for a failed state system. Getting the cash architecture right requires negotiating complex governance tasks like getting targeting right, adapting to market fluctuations, dealing with supply constraints and building a functioning banking system. Rather than being a substitute, effective cash transfers require a sophisticated and capable state machinery to support it. The failure to recognise this, especially as calls for a Universal Basic Income grow louder, and invest in building state capacity is this government’s greatest error. The UPA left most of its entitlement schemes, including the MGNREGA, in urgent need of improved implementation. Rather than focus on getting implementation right, the contradictory messages from the government have further weakened these programs.
Wage payments under MGNREGA are a good example of this. In 2016-17, at a time when the government needed MGNREGA to perform, 53% of payments were delayed by between 15-90 days.
Health and education
Despite the emphasis on “empowerment”, health and education remain invisible in the Modi government’s social policy agenda. In an op-ed published in The Hindu to mark the second anniversary of this government, Niti Aayog chairperson Arvind Panagriya presented a shopping list of schemes launched by the government to realise “empowerment”. But this long list of schemes offers no hint of a cogent vision and policy on health and education.
Health is the bigger causality. The National Health Policy has disappeared without a trace. In the 2016 budget, a new health insurance scheme was announced. A year later, this is still to be implemented. And while government rhetoric suggests a shift in priority toward insurance, there is no debate on how to tackle complex issues of regulation and quality. On the other hand, the National Health Mission (NHM), the current flagship program for strengthening primary health systems, which still accounts for 50% of the centre’s health budget, is floundering. And despite growing evidence of a serious crisis in the quality of primary care, from doctor absenteeism to low effort, lack of use of treatment protocols, over-medication and maltreatment of patients, the government is showing no urgency to reform the NHM. To be fair, the current crisis in health care is not the making of this government. However, the lack of a coherent vision and strategy on how to tackle this crisis, especially in the context of the rhetoric of empowerment, is a serious failure.
Elementary education has had a relatively better run. The need to urgently tackle the low learning levels in India’s elementary schools is now widely recognised and even though the National Education Policy has been deferred to yet another committee, the commitment to improve learning outcomes has been clearly stated. At the moment, the effort is focused on measuring learning. The Niti Aayog is in the process of launching a school quality index while the education ministry is preparing to undertake a learning census. Measurement is necessary but its usefulness hinges on the system’s ability to use measurement as a diagnostic tool to reform the teaching-learning process. For the moment, there is little clarity from the government on how it intends to use these assessments.
The problem is complicated by the fact that the current planning and budgeting process is not designed to prioritise learning. Planning continues to be based on school infrastructure goals and learning focused programs receive very little financing. In 2014-15 (latest available figures) 78% of the Sarva Shiksha Abhiyan (the government flagship scheme for elementary education) budget was allocated to infrastructure and teacher salaries. The two line items that focus specifically on fuelling learning-focused innovation – (innovation and learning enhancement program) received less than 1% of the SSA budget. And this is the one area that has seen the most cuts – in 2014-15 only 13% of funds requested for these activities were approved. This increased to 25% in 2015-16. Many state governments are now beginning to experiment with different ways of changing classroom practices to improve learning. These ought to be supported, studied and scaled. But the absence of resources and the continued focus on school infrastructure in plans and budgets is a serious impediment.
Swachh Bharat and co-operative federalism
Finally, no discussion on the Modi government’s social policy approach is complete without mention of two issues on which the PM has staked significant political capital – Swachh Bharat and co-operative federalism.
On Swachh Bharat, the high-level political commitment has made sanitation top priority across the country. But the basic design and approach of the Swachh Bharat Mission (SBM) is flawed. As is widely acknowledged, total sanitation is only achieved when communities recognise the need for sanitation and demand sanitation services. Building awareness for sanitation and creating demand through sustained community engagement is thus critical and local governments are the appropriate institutional mechanism to achieve this. Rather than strengthen local governments, the SBM is designed as a top down program implemented by bureaucrats.
Consequently, even as money is being spent on toilet construction – 98% of the 2016-17 Swachh Bharat Mission-Gramin (SBM-G) expenditure has been on toilet construction (IHHL) – the real challenge of behaviour change remains. It should be noted that there are separate figures for SBM- U (urban), which are even worse off in terms of spending and implementation.
One illustration of this is the low levels of expenditure on awareness raising. In 2016-17, till January 10th only Rs. 56 crore, which is 1% of the total expenditure on the scheme, had been spent for awareness raising activities. And in the face of pressure to meet targets toilets are being constructed mostly by coaxing citizens through orders threatening to withhold ration and electricity supplies if toilets aren’t constructed, imposing fines and withholding payments.
One casualty in this rush to meet targets is data quality. Two years in to the SBM and rigorous third-party evaluations on outcomes is scant. The annual latrine usage survey has only just begun. The one data point that is tracked is toilet construction and ODF status. However, data quality is a serious issue. In 2015, Accountability Initiative studied the government data on toilet construction to find several inconsistencies including duplication of names and misreporting. Our field survey revealed that as many as 1/3rd households reported to have toilet in the government database, didn’t actually have them. In the absence of data, we cannot set targets and make policy. The primary reason for this data mess is the sheer lack of capacity at the block and district level where this data is compiled. Most districts complained of a lack of staff including data operators. Consequently, those officials who are in-position are now overburdened as districts are under pressure to meet targets, leading to obvious errors. Without accurate data we cannot set targets and track progress. This is the minimum condition for SBM’s success.
For social policy, the cooperative federalism agenda began to unfold in 2015 with the implementation of the Fourteenth Finance Commission (FFC) recommendation to enhance tax devolution to states from 32% to 42%. In the 2015 budget, this increased tax devolution was accompanied by the rationalisation of centrally sponsored schemes (CSS), the primary mechanism for central government financing for social sectors. It was now for states, the government argued, to enhance social sector spending as they saw fit. Moreover, states were required to contribute 40% of the total share of CSS funds. But, even as the burden of financing shifted to states, on the larger question of the role that the central government ought to play in this new financing architecture, the government has been silent.
In August 2016, the Government of India accepted the recommendations of the Niti Aayog’s chief ministers’ sub -group on centrally sponsored schemes (CSS). This led to an effort to restructure CSS into 28 umbrella schemes. But a closer look at this restructuring reveals that little has changed. Most old schemes continue to function with budgetary allocations but have been grouped under a common name. Moreover, CSS continue to function in a top-down, one-size fit all model where state budgets for CSS continue to reflect central government priorities. To illustrate, in the National Health Mission, in 2016, 76% of state proposals for communicable diseases were approved for funding while 90% of state proposals for immunisation and infrastructure were approved. Add to this, expenditure, even at the grassroots, is linked to orders from Delhi and state capitals. We discovered this while studying health financing in Uttar Pradesh, were we found that districts don’t begin spending till orders are received. Similarly in education, there are significant differences between budgets proposed by states and finally approved by the center. In FY 2016-17, for instance, 52% of SSA budgets proposed by Bihar and 53% by Punjab were approved. Of this, only 35% of Bihar’s quality proposal was approved. This is kind of centralisation is precisely what the FFC sought to move away from.
The good news is that the government has a unique opportunity for change. Arguably, the one fundamental and potentially transformational shift that this government is well positioned to institutionalise in social sector funding is a shift to outcomes-based financing. By all accounts, the Niti Aayog has initiated a process of creating an outcomes focused measurement index to rank states on key social sector indicators. If designed right, this outcomes index could be used to design a performance based inter-governmental transfer system. In this model, central funding could be given to states in two windows. The first window would be an untied block grant – so states are not dependent on the whims and fancies of central government budget line-time approvals. The second would be a performance-based financing window linked to progress on the outcomes index measured by NITI Aayog. The primary role for the center in this model would be to support states in designing and implementing their plans while at the same time encouraging competition and incentivising states to innovate for improved outcomes.
Despite a reluctant and confused start, the government has an important opportunity to strengthen social policy and institutionalise a new framework for delivery, which could serve India well in the long term. By all accounts the 2017 budget is likely to respond to demonetisation with a greater focus on the poor. Apart from mere sops, the PM has the opportunity to really make a difference to the lives of India’s poor by changing the architecture of inter-governmental finances. Will 2017 be the year of change?