Friday, October 16, 2015

Modi govt's cash transfer policy is "experiment on the poor", is "hardly an encouraging sign": Deaton

By Our Representative
Nobel Prize winner in economics Angus Deaton has suggested that the Government of India’s cash transfer policy, which would require transfer of money to individual bank account holders receiving government subsidy, hasn’t been properly thought out, terming it as an “experiment on the poor”.
Deaton is said to be close to the school of thought in economics represented by another Nobel laureate Amartya Sen, who believes affirmative policies for poor are key to sustainable growth, something the present NDA government is refusing to agree with. Sen is a known critic of Prime Minister Narendra Modi.
Giving his insight into India for the first time after the announcement of Nobel prize in economics, Deaton, who is professor economics at Princeton University, has termed cash transfer as one of the “experiments … done on the poor, and not by the poor”, underlining that it is “hardly an encouraging signal”.
Deaton says, the Government of India’s cash transfer policy replacing public distribution system (PDS) with cash transfer only seeks to provide “technical solutions to political problems.” Modi’s year-old Jan Dhan project, to make every individual have a bank account holder is known to be the means to ensure that cash transfer is successful.
According to Deaton, “If we want to think about using cash transfers instead of the PDS, we have to consider all of the subsequent changes, what would happen to procurement and storage, and what would happen to the free market prices of grains.”
He underlines, “An experiment can be useful for part of this, but only a part, and without all the parts we cannot judge what to do. I worry too that experiments are technical solutions to political problems, that really ought to be decided by democratic discussion; that experiments are often done on the poor and not by the poor is hardly an encouraging sign.”
Thanking Nobel committee for highlighting the work that he and his collaborators have done on India while declaring his name for Nobel Prize, Deaton argues in favour of “high quality, open, transparent, and uncensored data are needed to support democracy”.
This he says, is particularly important because there is a big “threat” to India’s “famous National Sample Surveys (NSS) to measure poverty”, which provides the much-needed check on government data. Saying that NSS has its pitfalls, the economist believes, there is also a need to “an enormous discrepancy between the National Accounts Statistics (NAS) and the (NSS) surveys.”
According to Deaton, what is distressing is, “over the years that critics of the (NSS) surveys have got a lot more attention than critics of the growth measures.” Arguing for the need to change focus from growth statistics to consumption statistics, which is what NSS does, he wonders, “Perhaps no one wants to risk a change that will diminish India’s spectacular (at least as measured) rate of growth?”
Pointing out that “poverty is more than lack of money”, which is what his work with Jean Drèze, a well-known Amartya Sent protagonist, has documented, Deaton says, there is a need to look deeper into “the improving, but still dreadful, state of nutrition in India.”
Approvingly quoting former Prime Minister Manmohan Singh calling stunting among Indian children a “national shame”, Deaton says, “Our work highlighted that malnutrition is not just about a lack of calories, and certainly not about a lack of cereal calories, but is more about the lack of variety in the diet – the absence of things like leafy vegetables, eggs, and fruit.”
“It is also crucially linked to inadequate sanitation, to the fact that women often do not get enough to eat when they are pregnant, and to (in many areas) poor maternal and infant health services”, he adds.
Coming to the issues of inequality, Deaton says, there is also a need to look into “the threat that extreme inequality poses to democracy”, insisting on the need to look beyond how consumption patterns of some “look like those of Americans or Western Europeans”, with not a few have becoming “fabulously rich”.
Pointing out that while poor people can think that, given new opportunities, education and luck, their sons and daughters can prosper, too, Deaton warns: “But there are also terrible dangers of inequality, if those who have escaped from destitution use their wealth to block those who are still imprisoned by it.”

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