The welfare debate must diversify
Focussing primarily on corruption is not the only way out of India’s broken welfare system
The twin announcements of the launch of the PM-KISAN programme in the 2019 budget and the Congress Party’s promise of a minimum income guarantee if elected to power have reignited an important debate on the feasibility of a basic income transfer in India. India’s corrupt, inefficient and broken welfare state lies at the heart of this debate. Part of the appeal of a basic income, universal or otherwise, lies in its perceived potential of bypassing and possibly fixing this broken welfare state. In making the case for a Universal Basic Income (UBI), the 2017 economic survey argued that by moving resources directly to beneficiary accounts, income transfers have the potential of cutting down bureaucratic layers. This could curb discretion, simplify monitoring and, therefore, reduce corruption.
The merits of this argument aside, the contours of the debate on income transfers and state capacity raise a fundamental concern about how the challenge of India’s broken welfare state is being understood and addressed. The core question this debate provokes is: Has the focus on corruption and inefficiency set limits on our understanding of how the welfare state functions? Consequently, do current prescriptions like income transfers run the risk of reinforcing rather than resolving the problem?
Perhaps the best illustration of this concern is in the experience of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), a programme that is emblematic of the very failures that the income transfers, in principal, seek to resolve. But experience with addressing corruption in MGNREGS holds important lessons both for the potential of income transfers and the larger concern of fixing India’s broken welfare state. The concern with corruption was paramount when MGNRERGS was designed and in response a number of transparency requirements were built into it. Over the years, innovations were introduced, particularly through the use of technology, to streamline administration and curb corruption. Evidence on the effects of these measures highlight important, unexpected effects that, ironically, served to undermine the very objective of curbing corruption — ensuring that beneficiaries received work and appropriate wages.
An experimental study in Bihar, by economist Abhijit Banerjee and others, focused on the corruption effects of a technology-based reform to streamline the administration of fund transfers by reducing administrative layers. The study found definitive evidence of reduced corruption but there was little increase in employment or wages. This resonates with an ethnographic study on the effects of transparency requirements in MGNERGS in Uttrakhand by Nayanika Mathur. Increased transparency curbed corruption by preventing bureaucrats from striking deals with contractors, as was the norm. But paradoxically, implementation suffered. While the old system broke down, Mathur argues that transparency placed laborious paperwork demands on officers leaving them with little time to build capacities for the new model of implementation. Economist Martin Ravallion offers a more provocative explanation for implementation failure — tighter scrutiny significantly increased the costs of corruption because siphoning funds now required the cooperation of a larger network of officers along the delivery chain. When money couldn’t be made and workloads increased, the incentives to implement the scheme to the letter reduced resulting in slow/ no implementation.
This is not to suggest that transparency and administrative simplification is not necessary, rather to point out that transparency without deeper reforms — enhancing human resources, technical skills and crucially building citizen awareness—the positive effects of transparency goals are undermined. Ironically, the focus on corruption detracted from efforts to strengthen capacities of local administrators and Panchayats to deliver the scheme well. Employment suffered but absent strong Panchayats, the quality of infrastructure built has been patchy thus undermining the scheme’s welfare impact.
It can be argued that by cutting out the work requirement, the income transfer model could potentially reap the anti-corruption benefits of transparency and administrative simplification in ways that MGNREGS could not. But the reality of implementing income transfers complicates this argument. As a recent Niti Aayog study by economist Karthik Muralidharan and co-authors on the transition from PDS to cash highlights, getting the cash architecture requires significant administrative intervention. From raising beneficiary awareness, to building databases, facilitating bank transactions and most crucially tackling citizen disputes, local officials are critical to the success of income transfers. Importantly, the current model of targeted transfers that are being proposed, place a significant burden of beneficiary identification on the local administration. Absent efforts to strengthen the local welfare state, the increased workload, could well create implementation failure similar to MGNREGS.
But perhaps the most damaging consequence of the focus on corruption is that it has legitimised the view that the only way to fix India’s broken welfare state is by curbing discretion and tightening scrutiny. This has served to deeply centralise the welfare bureaucracy at the cost of building a local government system that is genuinely responsive to citizen needs. The debate on fixing India’s corrupt welfare bureaucracy with or without income transfers misses this crucial reality.