'Outlays have had no relationship with outcomes'

As an Indian, and one who has held high ministerial office, it is only right that I begin by portraying the reality of my own country before drawing comparisons with my South Asian neighbours. The World Food Programme tells us that half the world’s hungry live in India.

Which is the more significant reality: Our being the second-fastest growing economy in the world, or that, notwithstanding that extraordinarily high growth rate, we remain a low-income, food-deficit country in which 35 per cent of the population consumes less than 80 per cent of its minimum human energy requirements, where 9 out of 10 pregnant women suffer malnutrition and anaemia, and, in consequence, 47 per cent of children under the age of 5 are moderately to severely undernourished?

Tragically — and this is the running theme of my argument — outlays have had no relationship with outcomes, outcomes having been nowhere near commensurate with dramatically increased outlays. Indeed, through the most accelerated phase of growth in India’s economic history, which is the first decade of this century, we have actually slipped in our ranking on the UN HDI (United Nations - Human Development Index).

Our relative position on the HDI has deteriorated in conjunction with our rise in GDP growth, as illustrated by our sinking from 126 to 128 to 132 to 134 over precisely the period of accelerating growth (2004-2007), even as, curiously, our worst performance in GDP growth since economic reforms (1997-2002) coincided with our rising on the UN HDI from 132 to 127!

Why are higher outlays impacting so relatively little on all that makes life more bearable for the poor? And why is political attention to the issues of poverty so muted in comparison to the hurrahs we hear over GDP growth rates? The gravamen of my lecture to you this morning is that the problem lies in the answer to the second question — the muted attention given to issues of poverty alleviation relative to the race to economic super-power status, even as the solution lies in the answer to the first question — why outcomes are non-commensurate with outlays? In short, what, over and above increased spending, is required for accelerated growth to translate into inclusive growth?

The answer, I fervently believe, lies in ‘inclusive governance’. In the absence of inclusive governance, the people at the grassroots, that is, the intended beneficiaries of poverty alleviation schemes, are left abjectly dependent on a bureaucratic delivery mechanism over which they have no effective control. The alternative system would be participatory development, where the people themselves are enabled to build their own future through elected representatives responsible to the local community and, therefore, responsive to their needs.

Not only is responsive bureaucratic administration almost a contradiction in terms, the Indian and South Asian experience of the last six decades confirms bureaucratic delivery mechanisms absorb a disproportionately high share of the earmarked expenditure — up to 85 paise in a rupee, said Rajiv Gandhi; perhaps 83 paise says the Planning Commission in a recent evaluation; not quite so high, says the prime minister.

We can leave it to experts to argue how many angels can dance on the head of a pin. For our purposes, it is enough to note that 75-85 per cent of expenditure on poverty alleviation schemes is absorbed by the delivery mechanism itself. No wonder outcomes are so derisory. Thus, depriving beneficiaries of the multiplier effect that would operate if the beneficiaries themselves, through their locally elected leaders.

Unfortunately, even in India, while the institutions of local self-governance are in place, their contribution to grassroots development has been negligible on account of a virtual failure of political will and an absence of recognition in finance ministries and planning commissions of the nuances of devolution, reflected in inadequate and unscientific Activity Mapping.

Painfully slow and grossly uneven progress on the devolution of the three Fs has made the three Rs virtually non-functional. In consequence, the journey to the three Es has barely begun even 16 years after the required Constitutional amendments were enacted.

(Excerpts from a lecture by former minister for Panchayati Raj Mani Shankar Aiyar at the Institute of South Asia Studies, National University of Singapore, on November 4, 2009)