The overarching design of policies must start with the bottom of the pyramid.


New Delhi: For far too long, and particularly after the liberalisation of 1991, policymakers in India have relied on a trickledown approach to handle the harsh realities of Third World poverty. The primary goal, and measure, of development has been ramping up the pace of GDP growth and per capita income, while leaving it largely to market forces to decide both the allocation of resources and the flow of benefits.

Under such a “residual model”—one drawn from the experiences of the industrialisation of Western nations based on the application of capital and modern technology—the deprived masses are expected to see improvements in their standard of living due to accelerated growth rather than specific policy measures aimed at them. Proponents of this belief argue government intervention should remain minimal, and that rising aggregate incomes would allow poor families to satisfy unmet needs.

With adoption of such a top-down approach to development, the results in India have clearly been sub-optimum. The proportion of people below the poverty line (BPL) may have declined, but in absolute terms it has increased to a staggering 200 mn. Of equal concern is the unequivocal widening of inequalities of income and wealth. This has caused greater concentration of factors of production, especially capital. Over time, access to basic healthcare, meaningful primary education and even a modicum of social security has worsened.

Yet, despite the ground reality, there is reluctance to make material changes including effecting reductions in subsidies that benefit the better-off, increasing taxation on the rich, introduction of additional wealth and inheritance levies, realignment of capital gains and real-estate taxation.

Instead of ad infinitum pursuing the current strategy, and passively awaiting GDP growth to move to double digits, benign democratic structures call for a pressing shift in direction. The benefits flowing upwards to the well-off can still be significant (as witnessed by the even more extreme welfare approach of the Scandinavian nations), but the overarching design of policies must start with the bottom of the pyramid. After all, enlightened public policy, by definition, has to be for the larger good of the society and not to unduly benefit a few. Otherwise, the edifice of democracy itself would remain unsure and unsustainable.

A people-centric public policy framework starts with the Benthamite principle of state doing things for the good of the greatest number of people. Government revenue, even if largely coming from a few, is spent on those who need it the most. Before critics grossly simplify this approach, it is clarified that this does not inherently mean being “anti-rich” or a prejudice against the well-off; it merely changes the focus of state policy.

The Covid-19 pandemic has brought out the extreme vulnerabilities of almost half a billion of our countrymen. With 130 mn workers deprived of wages for weeks together, and with no worthwhile savings to fall back on, the Union and state authorities have had to rush to prevent an all-out-disaster. While one-off measures of providing food grains and cash transfers have helped, need for such relief measures would have been far less had prior policies been designed with such a populace in mind.

The very existence of 80 mn migrant workers had somehow alluded the attention of authorities who imposed one of the strictest lockdowns in the world. A people-centric policy approach would have meant the enforcement of the 1979 law on inter-state migrant workers, granting such workers ID cards and acknowledging their status, both as voters and more importantly, as human beings. Formalising informal workers, who account for 94% of the total workforce, would not have remained merely an aspiration.

A bottom-up approach would also have permitted the long existing PDS to be negligent in making the food-grains’ entitlements portable and depriving 500 mn citizens of their statutory right to food. There is also no credible explanation for a countrywide health database not being created, despite being approved and provisioned for under the National Digital Health Mission, 2018.

With two-thirds of Indians in villages, rural-development must become a core priority; one manifested in significantly higher budgetary allocations and a drastic attitudinal change. Rather than rush to already bursting metros, living in rural areas must be made more attractive to retain residents—this requires creating local, adequate means of livelihood and vastly improved access to essential amenities.

While agriculture would continue to be the mainstay of village-life, human pressure on land has to be checked to prevent further sub-division of already unviable farm-holdings. Besides, initiatives enhancing agricultural productivity, the devising of ways of significantly expanding dairying, animal husbandry, food processing, all-weather roads, pucca housing and health facilities become imperative. The option of a universal basic income for the rural poor must remain on the table. A guaranteed job assurance scheme, which enables enough income for those who cannot be otherwise employed, would also be its essential ingredient.

Greater attention to rural concerns would, in many ways, more effectively address urban issues too. With our metropolises burgeoning, further human ingress has to be slowed, and we can begin by incentivising private capital, technology and ingenuity being applied beyond cities to existing and new towns across the country.

A more direct role of the state is called for in health. Public spending of 1.6% of GDP on healthcare is abysmally low, with the poor bearing the brunt of the burden. Preventive care must be entirely funded by the states and their local bodies, while curative care for the disadvantaged continues to be provided by private agencies, but is financed by the Union government. The destitute cannot be expected to continue with the Hobsonian choice of slipping into significant debt or altogether neglecting their health.

Similar involvement is needed in providing basic education—it is time for the states to assume and discharge their responsibility of providing basic education by improving access and quality of government schools.

For such objectives to materialise, states need the requisite decision-making authority. Given the highly skewed scheme of public revenue flows in favour of the Union, the autonomy of the state governments (especially in fields squarely their responsibility) has to be enhanced. We must move away from the incremental approaches of the successive Finance Commissions to making structural changes. The essence of a bottoms up approach is states, municipalities, and panchayats being heavily involved in policy-formulation as well as implementation.

None of this will be easy. It will require a change in mindset and how we define economic success as a nation. Merely because the task at hand is immense does not justify our continuing with the existing strategies; rather, it underscores that we be more willing to explore a change in direction with urgency.

Dr Ajay Dua, a development economist, is a former Secretary to Government of India.