Report finds India's anti poverty programs are failing

Updated May 19, 2011 21:45:55

The first ever evaluation of the Indian Government's poverty reduction programs, says they are riddled with corruption and inefficiency.

The World Bank report found despite the billions of dollars spent by the Indian government, the benefits often don't reach the poor. One example found that over two-thirds of food staples such as rice and wheat allocated to the poor, is siphoned away due to bad administration and corruption. The Bank has also weighed in on the controversial issue of food security: arguing a shift towards cash grants to the poor may be a more efficient way to combat poverty in the long term.

Reporter: Alma Mistry
Speakers:John Blomquist, The World Bank Lead Economist for Social Protection in India

MISTRY: The World Bank was commissioned by the Indian Government to look at about ten social welfare programs. India spends about two percent of its GDP on social protection programs -a higher figure than China or Indonesia. But the report says while the economy has undergone massive changes since the 1970s, India's welfare policies are only recently catching up. The mainstay of the Government's social protection system is its largest program - the public distribution system. The PDS is an in-kind subsidy program that's supposed to deliver staple grains, kerosene and other resources to the poor. But as the Bank's lead economist for social protection John Blomquist, explains, the PDS is also a siev for public funds.

BLOMQUIST: About 41 percent of the grains actually reached households in the below poverty line status which means that almost 60% goes somewhere else.

MISTRY: Blomquist says counter to perceptions, corruption isn't the only culprit which is hindering the efficiency of the Public Distribution Scheme, which itself takes up 1% of GDP. He says the diversity of capacity amongst India's state's is a major factor.

BLOMQUIST: So you have the government involved in the procurement of grains on a very large scale. They then are repsonsible for delivering that grain to fair price shops where the grain's distributed ultimately to the beneficiaries. So there's a lot of points where there are inefficiencies in the system. It's possible that there could be some misuse and irregularities. We did not examine those,

MISTRY: The report found that states with higher poverty are allocated more funds from the central budget, but they also have the lowest capacity to spend that money effectively. One of its recommendations is that States are given more flexibility.

BLOMQUIST: One of our suggestions is in the distant future the government may want to consider a sort of a consolidation around a number of centrally sponsored schemes together with a block grant that could be issued to states that they could use to top up some of these benefits or to pursue other programs they think may be better for their particular population

MISTRY: Forty-two percent of Indians, or 455 million people, live on less than US $1.25 a day, according to the World Bank. The Indian Government is working to reform the Public Distribution System and is currently considering a wide range of reforms including whether to keep distributing food and other goods in kind, or to move to a system of 'cash transfers'. The report says strong emphasis on food-based support means the programs are "subject to major governance and implementation problems". Blomquist says cash should be one of several options available to meet the economic diversity of India's population.

BLOMQUIST: The Bank's experience of looking at a variety of these programs internationally does suggest that in the long run it may be preferable to move in the direction of cash assistance because cash works in all market settings to meet needs of households. But I would caution recommending a blanket statement here because I do think that the development conditions in India are variable enough that there needs to b space for both of those.

MISTRY: The report is being considered by India's Planning Commission, which sets the nation's 5 year plans. John Blomquist says there're several steps the government can take now to reduce wastage, including using the nations expertise in information techonology.

BLOMQUIST: Deliniating clear lines of accountability, ensuring adaquate staffing and financing and making better use of India's technological and human capacity to implement and here we're referring to things like informaton communication technology, the use of smart cards the routine use of monitoring and evaluation to reflect on program performance.