Poverty alleviation and growth

Can large cash transfers, an effective right to work, an accountable public healthcare system, and a sovereign fund that makes all citizens co-owners of the nation’s financial wealth, together create a new development paradigm for India? The present volume could be read in this manner.

The collection contains a wide variety of essays on topics ranging from poverty reduction policies, role of property rights and financial inclusion, to caste in India and autocrats in Muslim-majority countries.

The common theme is the economist Pranab Bardhan whose contributions, described by the editors as “co-terminus with the emergence of modern development economics,” inspire the essays.

The book is targeted mainly towards specialists and students at the advanced undergraduate and graduate level, but the depth of treatment as well as level of technical difficulty vary quite a bit.

Generally accessible essays on the role of property rights (private and communal) in resource allocation (Maitreesh Ghatak) and the impact of colonial censuses on perception of caste hierarchies in India (Rohini Somanathan) are found alongside long technical pieces on automation and employer power in the labour market (Nancy Chau and Ravi Kanbur). A review of this kind cannot really do justice to all the 12 chapters. My aim is thus not to offer an evaluation of each essay, but rather to draw attention to a few things I found interesting and relevant.

Cash-or-kind transfers

Dilip Mookherjee’s essay introduces readers to the variety of anti-poverty interventions, as well as problems of corruption and elite capture that have plagued efforts over the years. The piece elaborates pros and cons of type of entitlement (cash or kind), delivery mechanisms, and the issues that arise when one speaks of substituting one type of programme for another (say cash instead of food). This essay sets the stage for subsequent essays on particular policies.

The MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) has emerged as a vital social safety net during the COVID-19 pandemic and there have been demands for its extension to urban areas. Even aside from the pandemic, as the world’s largest right to work programme, its economics is of special interest. Martin Ravaillon, a long-time observer of employment guarantee in India, raises the question, might MGNREGA fail to provide work to all who want it despite being adequately funded by the government? The essay presents a microeconomic model where work rationing emerges out of cost-benefit calculations by local officials implementing the programme. It is worth noting that the solutions briefly alluded to in the essay, viz. more robust social audits and grievance redressal mechanisms, are precisely the ones activists have been working hard to achieve on the ground.

Cash transfers have also emerged in recent years, in India and elsewhere, as popular instruments for improving the social safety net. Indeed, it is hard to avoid the “UBI versus PDS/MGNREGA” question with respect to the future of social protection in India. The essay by Bruce Wydick examines international evidence for impact of conditional as well as unconditional transfers on poverty reduction. But the more interesting question raised in the essay is, can cash transfers be transformative, i.e. can they move households into self-sufficiency where they no longer need such transfers? The simple and intuitive answer is that, for this to occur, transfers need to be large enough to finance not just consumption but also savings, and they do not work well unless accompanied by complementary policies such as employment generation.

The pandemic has also brought the failures of the Indian healthcare system into high relief. Based on several years of surveys and RCTs (randomised controlled trial) in Udaipur with the NGO Seva Mandir, Banerjee and Duflo’s essay offers rich insights into the quality of private and public health infrastructure as well as into how poor households decide whether to visit public health centres, private allopaths, or traditional healers. Their findings amply illustrate why healthcare is a particularly difficult commodity for private markets to handle and point to the importance of regulating private providers, training informal practitioners, and improving incentives in the public sector.

Wealth inequality

A relatively under-researched policy idea, at least in the Indian context, is developed by Parikshit Ghosh and Debraj Ray who argue for a sovereign India Fund, “to be invested in portfolios of equity, bonds, and other financial assets, and managed professionally”. Created via the issuance of a fraction of new shares to the government by every publicly traded Indian company, free of cost, the India Fund transfers a fraction of private capital into social ownership. The returns are paid out as dividends universally or via means-testing. The idea is motivated by two profound consequences of capitalism — increasing pace of automation that creates growth without jobs (also the theme of the essay by Kanbur and Chau), and increasing inequality of wealth (particularly financial wealth). Various other essays on China’s Belt and Road Initiative, autocracy and development, constructing measures for economic growth that take distribution into account etc. are to be found in this volume. Though this makes for a somewhat diffuse focus — no one theme really can be said to dominate the volume — it nevertheless constitutes a valuable resource for public policy debates as well as teaching. And taken together, it is gratifying to see a strong progressive and transformative agenda emerging from the essays.

Development, Distribution, and Markets; Edited by Kaushik Basu, Oxford University Press, ₹1,495.

The reviewer is Associate Professor of Economics at Azim Premji University.

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Printable version | Sep 26, 2021 12:20:38 PM |

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