Monday, January 22, 2007

The loot in the name of the poor

It is budget time again and most of the focus seems to be on where the tax concessions are going to be or where the tax increases are going to be. News papers the day after the budget, headline with the tax concessions given or the increases. There is focus on new schemes, but there is very little focus on where the money goes & for whom. The Government when it doles out subsidies, often claims that it is for the poor. A short analysis below tries to to figure out some of the amounts involved.

Subsidy from the Central Budget 2006-2007
Food : 24,200 Crores ( From
Fertilizer : 17,252 Crores ( From
Petroleum : 27,863 Crores ( From the previous blog post )

Subsidy from the State Budgets 2006-2007
Education : 93767*(100-1.2)/100 = 92641 Crores ( From RBI & RBI ) . 1.2 = % of cost recovered from users
Electricity : 35,632 Crores ( From RBI
Health : 25775*(100-4.8)/100=24537 Crores ( From RBI & RBI )
Irrigation : 14911*(100-16.9)/100 = 12,391 Crores ( From RBI & RBI )

Just these expenses add up to 2,34,517 Crores. This translates to Rs 31,980 per family per year for the bottom 1/3 of the population [ Assuming population of 110 Crores & family size of 5 ]. This is just a fraction of the money allocated & spent in the name of the poor, none of which seems to have much impact on poverty. A very large loot, in a country which has so many poor people.

And we have not even touched on such heads like Social Security (13,171 Crores) [No, Social Security is not employee pension] , Nutrition (5148 Crores), Transportation & Communications ( 13,957 Crores), Agriculture (23,634 Crores).

Would it not be better if we just scrap these schemes and instead transfer the money to the poor families? With Rs 31,980 a year or an extra Rs 2,500 a month these families will definitely have a greater chance of pulling themselves out of poverty ( If they do not automatically come out of it by just this transfer)

The biggest issue with doing some thing like this would be to correctly identify the beneficiaries. Technology could help us here. I see having a single unique biometric based national identity as the starting point, something like the US social security number. More on this in a later post.

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