Throwing money at the problem might work

by February 17, 2011

An overview of India's welfare programs (Illustration credit: Vaibhav Raghunandan)

Whether you lean to the left or to the right, careful planning of the delivery of social services is essential to a country’s development. These programs, large and small, require a strong administrative support system to ensure that services reach their intended targets. The bureaucratic red tape that is the byproduct of this administration is arguably a necessary evil to ensure that services are properly delivered and monitored. But is there a line? At what point does the cost of administration or subsidies compromise or eclipse the service itself?

For fast-growing India, the line, or rather the ratio, appears to be about 4:1. In a recent issue of Down to Earth, an Indian environmental publication, senior editor Richard Mahapatra describes how the Indian government is leaning toward making payments in cold hard cash to bypass the massive cost of welfare administration, and to ensure that social service programs and subsidies benefit those for whom they are intended. According to the article, “To reach one rupee of development, India spends Rs 3.65…India needs to triple its development budget to ensure each rupee currently allotted reaches the intended beneficiary”. The Indian government believes that the transfer of money directly into the hands of the people can reduce administrative burdens and ultimately improve the lot of many of the country’s poorest citizens. From the article:

The mathematics of development goes awry on the ground. Take the extremely poor Daretha village in Madhya Pradesh’s Tikamgarh district. In many ways Daretha illustrates the dilemma: why are villages still poor despite the impressive budget figures? Officially, more than 150 development schemes are under implementation in Daretha. The schemes cover a person’s welfare from mother’s womb till his/her death. With an annual development investment of more than Rs 2 crore, each of its 500 families should have got Rs 40,000. This is double the household poverty line for rural India.

Read the rest here.

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