Compared to most other states in India, Tamil Nadu is noted for widespread provision of education, primary health care, nutrition support, rural roads, electricity, water and other public services. These services are typically well planned and tend to work well. I examine what determines Tamil Nadu’s performance. I argue that widespread and decentralized collective action for public services plays a critical role in it but such collective action is a new phenomenon, dating back to the seventies. I also argue that normative challenges by major social movements, changing influences of various social groups and raising individual capabilities among common people played an instrumental role in enabling such collective action that ultimately had an impact on public services.

Download, read, annotate, share

You can download the commentable version of the dissertation here.  Apart from reading the PDF document, you can easily insert comments using your PDF reader, and if you choose to, you can share them with me or with others to enable a social reading experience. We can thus gain from collective knowledge, understanding and critique.

All you need for this is Adobe Reader 9, or later, to review this document. Open the document in Acrobat or Adobe Reader and make your comments using the Comment & Markup tools. When you are finished, click Publish Comments to automatically return your comments to the author and all other reviewers. Your comments will be private unless you click on the publish button.

I hope you will share your comments, and enjoy the social reading experience.

Click here to download the dissertation.

Another strong argument for coupons or cash is that the recipients will have the choice to spend it on what matters most to them.  Proponents of reform have argued that the Indian policymakers tend to be paternalistic, and often argue that if the government gives cash instead of grains, poor people may misuse it, including by drinking it away.  They have argued that it’s important to trust poor people to make choices that matter most to them.  I fully subscribe to that argument.  Even if there is a condition that beneficiaries should only buy food using the cash transfer, having the option of buying cheaper grains instead of rice or wheat offered in the PDS could be attractive to many a poor family.   Ashok Gulati argued that such choice could also bring about diversity in diet, which is a desirable goal.

If choice is something that we really care about, it is possible to introduce it in a limited extent in the ration shop itself.  Beneficiaries often have the choice of getting rice or wheat, choosing kerosene over other alternatives, et cetera.  The range of goods that are sold through the PDS could be increased, and a limited set of choice could be easily introduced within that system.  PDS reformers of a different brand have argued for a long time that the range of goods available through the PDS should be expanded, some of which should be sold commercially, in order to make the ration shop the more viable.  Such a system exists in Kerala.  While the range of choices may be increased at the ration shop, cash transfers are clearly superior alternative from the perspective of choice.

Poor people will use the cash transfer for the intended purpose

In response to the argument that men in poor families may use the cash for alcohol instead of food some have pointed out that 92% of the people who received cash to buy bicycles bought them in Bihar.  This was given as an incentive to send girl children to higher secondary school.  The assessment that money was used to buy-cycles as intended seems to be correct.  That said, it is a poor analogy to how cash transfers for food will be used.  In the example, girl children were expected to buy bicycles and provide proof of the purchase to the school teachers.  Such a mechanism would be totally infeasible in the case of monthly quota of food grains.

Kaushik Basu among others have argued that cash transfers should be made to adult women in the household, and this has proved around the world to result in higher spending by the families on food, education, health and other desirable ends.  I feel that this is a much more serious basis of arguing for cash transfers than the bicycle example.  Similarly, I am sympathetic to the argument that we have to trust the beneficiaries to use it for what they consider are the best reasons, even though it will result in some cases of what the society can judge reasonably to be a misuse of such benefits.

Coupons give a choice of shops

Another choice argument made by the proponents of reform is that cash transfers and coupons make it possible for the beneficiaries to go to an alternative shop in case the one that they’re dealing with is corrupt.  Today people are tied to a particular ration shop, and if the shop does not deliver they cannot do much about it.  The idea that people should be allowed to take their entitlements to a different place is powerful, and that can actually put a lot of pressure on corruption.  While that idea is powerful, it has strong limitations in a lot of rural areas that are serviced by very few shops.

The coupon system in particular will be vulnerable because of the fact that a private shopkeeper will have to recover her money from the government by providing the coupons, which could involve delays, corruption, et cetera.  This may prevent most shopkeepers from taking coupons, while the rest can merrily charge what they want without any accountability to the holders of the coupons.  Shopkeepers can cite this as an excuse and charge what they want from the coupon holders.  Since there will be no obligation for the shopkeepers to sell the goods at a particular price, they can hold the coupon holders to ransom without any legal accountability .  In other words, they can do exactly what a ration shop dealer would do in terms of charging excess price but the act will be totally legal.  It would be a case of eliminating a crime by eliminating the law.

The coupon system makes corruption a very attractive proposition since legal accountability is considerably reduced in public-private partnerships.  The argument of choice of shops hinges on the idea that there will be unrestrained competition between shops.  In most areas the choice of shops will be limited and the possibility of collusion is large.  Further, officials can easily ensure that honest shopkeepers do not get reimbursed on time and thus keep them away from the system.  If the profit motive of a shopkeeper will drive competition, it can also drive collusion and corruption to the last penny that can be extracted.  The removal of legal accountability, accounting norms and other features that now govern ration shops will only increase the attractiveness of corruption with the coupon arrangement.

Such a risk will be lower in the case of cash transfers, though it is possible that beneficiaries will be tied to either a bank or some intermediary from where they will have to collect the benefits; instead of paying a bribe at the ration shop, they will pay this at a different place.

The idea of giving a choice of shops could be done in a limited fashion within the PDS without compromising on accountability mechanisms.  In urban areas, users can be given the choice of going to any ration shop, and this can be made possible easily with the use of smart cards.  An official in Tamil Nadu told me that they consider such a proposal within the current PDS with respect to Kerosene, where the subsidy is high.  They proposed to open kerosene bunks that can provide an alternative to ration shops, and under measurement could be controlled more easily in mechanised kerosene bunks.  Running ration shop involves overheads, and the possibility that people may go to some other ration shop to collect their entitlements will threaten excessively corrupt ration dealers, and create a similar kind of pressure that coupons and cash transfers will accomplish.

Some scholars have pointed out that the motivation to dissolve the PDS comes from the ideological belief that the government should not be engaged in providing public services, and of course the material appeal this has for the rich.  The quest for PDS reform started in the context of India’s liberalization and globalization.  Pushed by multilateral agencies, the PDS was converted into a targeted system in 1997.  The motivation of these reforms was not one of protecting people from hunger – but the zeal to eliminate most public services.  Some of the loudest support for PDS reform today has come from people who have generally shown little concern otherwise for policies to protect people from hunger.  The sudden zeal shown by these enthusiasts for cash transfers and other alternatives to PDS is only bound to give the politically conscious observer the belief that such calls to reform are mainly to undermine the PDS, and not to create a system that works for the poor.

The offer of an alternative can thus be a smokescreen to dismantle what is well established.  I do believe that there are well meaning people who are proposing such reforms.  I guess that they would be well advised to think of creating a strong framework of rights within which coupons or cash transfers can be but one alternative that could be introduced slowly.

Similarly, a lot of push for so-called public-private partnerships comes from large consultancies, and associations of large corporations.  Dismantling the PDS and creating alternate forms of delivery can be a source of profits for many organisations.  One cannot ignore the fact that a lot of political support for reforms is ultimately garnered by such groups whose main motivation is not one of making the system work for the poor.

Courtesy: The Hindu

He also argued that the number of people below poverty line has gone down over the last five years, and attacked those who criticise this assessment. Specifically, he said that these people are not contributing to an intelligent debate on poverty and are instead just bent on making the political point that poverty has increased with Economic Reforms. I agree with him that there are such people. I also agree that income levels of the poor have gone up, and even though it has gone up only by a small measure, it makes an important difference to people’s lives. My agreement with him stops there.

The level of comparison

In arguing that the level of the line does not matter for comparing over time, he implicitly makes an argument that the trend of income change is the same for all income groups. This is problematic. A low poverty line helps us understand the net change in the number of people who slipped above or below the line – nothing else. It gives us no information about people who are poor by any reasonable standard but are above the poverty line, which is problematic given the number of people about whom this gives us no information. To take an extreme hypothetical example, if the line is fixed at zero, we will estimate that there is zero poverty, and this will be the case every year making the estimates uninteresting and meaningless. While the current level does give us some information, much is missed by keeping the level so absurdly low.

Why revise the benchmark?

His defence of the estimate is all the more problematic if we consider the fact that the criticism is to the revisedestimate of the level of poverty made by the Tendulkar Committee. Montek argued that the poverty line is analytically useful only if it is held constant because it enables comparison. If that were the case, why appoint the Tendulkar commission, spend all that money and effort into revising the poverty line? The point of that exercise was to arrive at a more reasonable measure of poverty.

Not any expert’s business

He also argued that the estimate should not be criticised because the measure is not arbitrary and it was arrived at by experts. If the mandate of the ‘experts’ was only to estimate the number of people who are poor based on a level of poverty that was given to them, I would agree with such an exercise. While economists are trained to do that, they have no expertise to arrive at what is a level about which one could deem a person to be not poor. For that matter, no ‘expert’ is qualified to make that judgement. It is an exercise in human values and the only correct way to arrive at the level would be through a public debate by which we can arrive at a broad agreement. The commission and its experts can assist in this process and participate in it, but to say that a group of experts can do it in isolation, and that it should not be criticised is bogus.

The acceptable amount argument

On a related note, after arguing that Rs. 29 figure is not useful as a measure of poverty per se, he goes on to argue that it is a reasonable amount if we see it not as a daily level per individual and instead look at it as a monthly income per family; a cleaver way of arguing that it is an acceptable level. Similarly while arguing that the poverty line is not useful as a level, he emphasised again and again that “poverty” has declined over the last five years. A more accurate statement would be that the number of people making less than Rs. 29 per day in urban areas has gone down over the last five years. It is not surprising given that he states that POVERTY has reduced, after all that way of putting it can help in getting political support for Reforms that he has been a champion of over the years.

Do we need a level?

He has also argued that the poverty line will not be used in order to identify people who are poor for government programs, and that he is happy to use an arbitrary figure for the purpose. In my view, this is nothing but an attempt to distract attention on the level, since public attention to the level will force the commission to revise the poverty line upwards, which will in turn increase the number of people who we estimate to be poor. This will raise demands for greater state engagement in combating poverty, which goes against his politics.

Intelligent apolitical debate

He has argued that we have to have an intelligent debate on the poverty line and we should not compromise intellectually in order to score political points. There are at least two key issues under debate here: what a reasonable level of poverty is, and how poverty has changed over time by this estimation. In my opinion, he has played a useful role in arguing that things have changed for the better over the years. I believe in this and the NSS data backs this claim.

The criticism on the revised estimate poverty by the Tendulkar commission is another part of the debate, where his role has been to confuse the public and attack those who criticise without taking a stand on what this level should be. I believe that his reason for doing so is very political, and has to do with his vision for the role of government in public welfare. Thanks to his politics, while arguing for an intelligent apolitical debate on the issue, he has acted as a master obfuscator himself.

In April 2001 People’s Union for Civil Liberties (PUCL) approached the Supreme Court of India arguing that the government has a duty to provide greater relief in the context of mass hunger. The litigation has now become the best known precedent on the right to food internationally. This paper reviews the litigation with a view to understand various strategies used by the litigants to create and enforce far-reaching entitlements in a near legal vacuum on the right to food. This is followed by a discussion on the lessons from this case for rights based approach to development at large.

Citation:  S. Vivek and Basudeb Guha-Khasnobis, “Rights Based Approach To Development: Lessons From The Right To Food Movement,” in Food Insecurity, Vulnerability and Human Rights Failure, Studies in Development Economics and Policy (Basingstoke: UK: Palgrave-Macmillan, 2007).

Click here to download the article.

In evaluating alternatives including cash transfers, it is first important to identify both contributions and failures of the system.  Proponents of reforms today have focused exclusively on the problems, without dwelling on the things that it has done.  There is a reason why the PDS is so popular in Tamil Nadu, Kerala, Andhra and increasingly in other states including Chhattisgarh.  In all these cases the PDS has worked and means a lot to the life of poor people.  It has failed in other parts of India, and sometimes miserably.  Given that the basic structure of PDS is the same across India, one should ask whether the failure of the PDS is due to the design of the system, or whether it is due to larger problems in how these states function.  If it is the former, it makes immense sense to reform or even replace the system.  If it is the latter, we may spend a lot of resources and energy into replacing the system only to find that the alternative will suffer the same fate in the states where it does not deliver.  One problem with the arguments to replace the PDS lock, stock and barrel is that they do not ask serious questions as to why the PDS has failed in some parts of India; and instead they assumes that the PDS has been a failure overall.

Apart from the fact that the PDS has functioned well in some states, we should also take into account some of the inherent advantages in its design compared to cash transfers.  For example, it is more versatile at critical times such as galloping food inflation in its ability to get the government to absorb some costs, compared to cash transfer programs or anything else.  While it is possible in theory to adjust the amount of the cash transferred by taking into account inflation, such a process is politically unlikely to respond to massive food inflation unlike the PDS, where there is a prefixed commitment to provide the entitlements at a certain price.  Further, such as system will automatically respond to differing levels of inflation across regions of India, whereas the cash transfer system will have to have a massive input of information about differing levels of prices in every region, and it has to be accompanied by very complex arrangements to provide different amount of support to people in different regions.

The PDS also provides some means of social intervention when there is coalition among traders to artificially increase the price of grains.  It has served as an outlet of grains bought by the government to insure farmers with a minimum price for their produce.  The PDS also serves to transport grains from many of the grain surplus states into places where it is required.  I will not claim that these functions cannot be done by alternate arrangements; but, if we have to evaluate the system, we have to take into account what it has done along with what it has not; and we have to take into account what the costs of doing it through an alternate system would be.  The calls for replacing the PDS have generally been accompanied by a dismissal of the PDS system as an unqualified failure that accomplishes nothing.  The reality of the PDS is far more nuanced.

Many have argued that half the PDS entitlements reach the “non poor”.  I believe that resources are scarce, and the government should spend the money on people who need it most.  We should thus be concerned if resources are being spent on those who do not need it.  In considering whether resources reach the right people, we should remember that we have a rather poor system of identifying the poor.  The poverty-line based on which we classify a person as poor is woefully out of date and so people who would be identified by the society as living in abject poverty could be officially classified as ‘non-poor’.  As a result, the argument that PDS entitlements reach people who do not need is grossly exaggerated.

In addition to the definition problem, even those who could be officially classified as poor often get excluded given the problems with identification.  Proponents of reform are correct in identifying identification to be a problem; but then, they focus mainly on the non-poor being identified (which is an exaggerated problem), whereas my concern is that the poor are often left out in targeted systems.

Further, proponents of reform have made no argument on why the shift to coupons or cash transfers will improve the identification situation.  There is absolutely no reason either in theory and practice for the shift from the PDS to lead to an improvement in this dimension.  In fact, shifting to cash transfers will only worsen the identification problem:  The quality of PDS grains, the need to wait in line to get the grains, and other reasons make the PDS inherently unattractive to most middle-class and rich people.  As a result a lot of people who are well-off select themselves out of the PDS, which would not work with a cash transfer program.  Further, there are rich possibilities of providing different sets of grains (e.g. coarse grains) that may find a larger set of takers among the poor than those who have the means.  Cash offers no such means of self-selection.

UID will solve the identification problem

On a related note some have argued that the introduction of Unique Identity Cards will solve the identification problems for cash transfers.  The idea that the use of unique identity cards would solve the identification problem is perhaps the most ill thought solution for the problem of identifying who all need food support.  The use of biometric identification will have a limited but significant impact in reducing the number of ghost cardholders, and perhaps in ensuring that the same person does not get multiple entitlements.  UID offers no way of identifying whether a person is poor are not.  In addition, if the UID is able to offer any help in identification, it can do so equally well for PDS as for cash transfers.

Please read other articles in this topic before getting here…

The cost of administering the PDS is high

Some economists have pointed out that the cost of administering the PDS is very high, and it is now possible to transfer cash to people at a cheaper rate.  This is one of the strongest arguments for a shift from PDS to cash transfers, in my opinion.  The amount of money that could be transferred just by eliminating PDS is substantial, and can go a long way in assisting poor families with it.

While making that argument, it is important to realise that an important proportion of the cost goes to transporting grains from surplus states to where it is needed, for warehousing, and other purposes that will not go away just by eliminating the PDS.  Perhaps the market will do this more efficiently, but we have not seen that happen with fruits, vegetables and other grains in which the government does not play a major role.  I should add that I am not ideologically presupposed to believe that the private sector does everything more cheaply than the government.  I would instead like a careful exercise to be made in understanding how the cost of private trade would change if the cost of transferring grains is absorbed by them instead, and if they are more efficient than the government.  The capacity that the government has to move around grains also has an impact on collusive speculation, something that we should be wary about in a country where food is a dominant part of the budget for such a large population.

The current system of procurements actually increases the price of grains for poor people who do not have access to PDS

Kaushik Basu made the argument that the government is a major hoarder of food grains, and in the process of procuring food grains and creating major stocks, we end up increasing the prices of food grains in the market.  Many poor people do not have an access to the PDS, and have to rely on the market for their food grains, and such procurement and hoarding increases the prices at which they buy.  Prof. Basu carefully distinguishes between the need to hold some buffer stocks, and excessive hoarding that would lead to a major increase in the food prices.

This is an important argument, but if we focus on excessive hoarding by the government, it is important to realise that it is not inherent to the PDS. The massive stocks that have been televised widely are mainly a recent phenomenon following the ill-advised move to target the PDS to a narrow section of the population in 1997.  Such targeting removed a large number of users from the system, and simultaneously the price of grains even for officially poor was increased over the market price, making it unattractive for anybody to buy through the system.  On top of this, there was also an increased procurement in the following years from the farmers, which altogether led to a massive accumulation of stocks well over the official buffer stock levels.  One cannot blame the PDS for it.

[Kaushi Basu’s article talks about the entire food grains system, and not just the PDS.  He is thus not arguing that the increase in stock is due to the PDS.  I am not arguing against his position, but would like to clarify that his concern cannot be added as an argument against the PDS].

We should give some new ideas a shot

The unceasing restrain of those proposing these reforms is that we should “experiment” with new ideas when we are confronted with a poor system.  There can be no argument against trying new ideas, and being creative.  Unfortunately cash transfer is not a new idea, and it is not terribly creative.  As I have argued elsewhere in this series, India already has many different forms of cash transfers.  The idea of coupons has been experiment with.  We not heard about the performance of these alternatives, and we perhaps never will, at least from the proponents of reform.

Cash transfers should be conditional

Ashok Gulati wrote about making cash transfers conditional upon families sending their children to school.  While this may be a suitable arrangement as an added support for families to send children to school, it is a very poor basis to determine food support for families per se.  A conditional transfer of that sort is better done through scholarships, school feeding and other school-based programmes.  Basic services such as food and health should not be offered with strong conditionalities attached to them.