Source: Ideas and Institutions Issue #7
Analysis
Making Sense of the BJP Government’s Welfare Strategy
Given the BJP’s successes in many important elections, the party’s strategy for winning support is worth understanding. In this essay, we focus on one aspect of the strategy—the BJP-led union government’s use of welfare expenditure to reach potential voters. We highlight three aspects that have changed. Which benefits have been given and to whom? How have the benefits been given and publicized? And finally, how have the resources been leveraged?
First, the BJP government has prioritized giving cash and certain basic amenities while continuing many of the older schemes and sometimes expanding them. Among basic amenities, it has emphasized building houses, constructing toilets, and providing LPG, electricity, and more recently, piped water connections. The expenditure on housing accelerated in 2016-17. Between 2016-17 and 2020-21, its share in the total union government expenditure was more than double of what it had been in the preceding five years. The subsidy in the housing schemes is quite large, but relatively few people can get it. The scheme reached about 20 million rural households and 9 million urban households in five years.
Other schemes allow for a wider reach. For instance, under the rural component of Swachh Bharat Mission, about 109 million toilets had been built by February 2022. A more interesting example is PM Kisan Samman Nidhi (PM-KISAN), which gives cash transfers of Rs. 6000 per farmer household per year. The scheme started in 2018-19. In 2021-22, 110 million households received the cash transfer. The cash amount is non-trivial, especially in states where farmers’ incomes are low. About a quarter of the beneficiaries of this scheme were in Uttar Pradesh, where the average annual income of farmer households in 2018-19 was less than Rs. 100,000. The income at, say, the 25th percentile would be even lower.
How does providing cash and private goods are make political sense?
The political scientist Bruce Bueno de Mesquite has argued that since, in democracies, a large number of supporters are required to win elections, leaders tend to offer public goods—that benefit a large number of people—rather than private goods, which the government can only afford to give to a fraction of potential voters. However, in India, a private goods strategy could also help. Due to fragmentation of electoral contest, a relatively small vote share is now required to get a parliamentary majority. In 1967, the Congress party got 41 percent votes, which won it 283 seats. In 2014—owing to fragmentation in the contest—a 31 percent vote share translated to 282 seats for the BJP.
The BJP seems to have segmented strategies for cobbling together this vote share, with the provision of cash and private goods being a key tactic in the electoral strategy for lower income households. This strategy costs less than a strategy that relies on private goods for creating the entire support base. It is worth noting that, according to CSDS-Lokniti survey, the BJP’s vote share among the poor increased from 24 percent in 2014 to 36 percent in 2019. While the critics focus on the shortfalls and imperfections of the schemes, the BJP does not need perfect implementation.
Provision of cash and private goods can also potentially overcome the problem of attribution. We should distinguish between what is directly attributed and what is potentially and contestably attributed to government. Private goods provision can be directly attributed to government. On the other hand, attribution for jobs, incomes, inflation, agrarian distress, etc. is quite contestable. The pandemic has provided even more alibis. Attribution for public goods is also contestable. So, taking credit or shunning accountability for such outcomes is a matter of political persuasion.
Second, the BJP government has made direct benefit transfers (DBT) the default mode of delivery. While the building blocks for this—Aadhaar, zero balance bank accounts and mobile phones—were substantially in place when the government changed in 2014, the system has grown a lot. In 2013-14, Rs. 73.7 billion in cash was transferred to about 108 million beneficiaries. In 2019-20, Rs. 2.4 trillion in cash was transferred to 706 million beneficiaries, and Rs. 1.4 trillion worth of in-kind benefits were given to 741 million beneficiaries using the DBT platforms. In the pandemic, these transfers were scaled up. In 2020-21, Rs. 2.97 trillion in cash transfers were made to 980 million beneficiaries and Rs. 2.56 trillion of in-kind benefits were given to 735 million beneficiaries. In 2021-22, Rs. 2.59 trillion in cash were transferred to 735 million people and Rs. 3.58 trillion worth of in-kind benefits were given to 950 million beneficiaries. The huge increase of in-kind benefits was mainly for food subsidy.
For the ruling party, there are certain politically consequential features of DBT system.
It puts the beneficiary directly in contact with the government, giving it better control over the messaging around the benefits. It converts something complex and intermediated into something simple and direct by either removing the layers of intermediation, or by decoupling them from the experience of getting the benefit. So, it feels as though the benefits come directly from the union government. When the experience is direct, it is easier to give credit. Compared to 2014, in 2019, the union government got much more credit for the schemes than the state governments.
Depending on the quality of implementation, DBT can help reduce leakages from the system, thereby helping the government reach more of the intended beneficiaries. Critics have argued that this comes at the cost of false exclusions. However, when it comes to such systems, governments tend to focus on maximizing overall performance. Political benefits would accrue to the government as long as the exclusions are only a small fraction of the reduction in leakages.
The DBT system also improves the government’s ability to respond to a situation like the pandemic. Earlier, crisis response was often followed by allegations of graft and leakages. As long as the direct transfer infrastructure works at the last mile (and it doesn’t always work well), the government can send benefits to those who need it without worrying much about leakage. In response to the pandemic, the government could quickly scale-up food distribution and send cash transfers.
Third, the government has tried to leverage the resources of others to fund the expenditure for which it gets much of the credit. It increased the states’ financial contribution in the co-financed centrally sponsored schemes. For a majority of schemes, the states’ share (except for North Eastern and Himalayan states) was increased from 25 percent to 40 percent. The government also got public sector enterprises to help with expenditure in some of the schemes. In 2019, a Comptroller and Auditor General report noted that, under the Swachh Bharat Mission, seven public sector enterprises had constructed 1,30,703 toilets in schools, at a cost of Rs. 21.6 billion. While the government also used these enterprises for incurring off-budget expenditure for the schemes, this was eventually brought on the budget. The government has also nudged corporates to use their CSR funds for funding welfare activities that are branded by the union government, and to directly contribute to scheme funds such as the Swachh Bharat Kosh.
To an extent, leveraging others’ resources has helped the government expand its envelope. In the last few years, union government’s resources have been constrained because of weak revenue collection and greater sharing of resources with the states based on the Finance Commission’s recommendations. The union government’s non-debt receipts averaged 8.9 percent of GDP between 2015-16 and 2019-20, while they had averaged 9.5 percent of GDP in the preceding five years. Also, in states where the BJP is not ruling, leveraging the state governments’ resources for funding the schemes for which the union government gets more credit is politically beneficial for the party.
Prima facie, it seems that the schemes are reaching many of the intended beneficiaries. The last two National Family Health Surveys, conducted in 2015-16 and 2019-20, show improvements in the basic amenities that the government has focused on. The percentage of population living in households that use an improve sanitation facility increased from 48.5 to 70.2. The percentage of households using clean fuel for cooking increased from 43.8 percent to 58.6 percent. Percentage of population living in households with electricity increased from 88 to 96.8.
While the overall impact of the BJP government’s economic policies is debatable, many voters, especially in the low-income households, are likely to have perceived a significant improvement in what they get from the government directly. It is plausible that this has yielded some electoral benefits for the BJP. However, since politics potentially concerns everything in the polis, it is difficult to determine how much of the BJP’s electoral success can be attributed to this aspect of its strategy.
Looking forward, there are two challenges to sustaining this strategy.
First, there is a tension between the private goods-led strategy and broader developmental goals. To the extent that this expenditure is crowding out the supply of public goods and certain merits goods like education and healthcare, it could negatively affect long-term prospects for growth and development. As a dominant party, the BJP has to worry about the long-term outcomes.
Second, since the overall fiscal space is expected to be constrained in the next few years, and the recent budget has emphasized capital expenditure on infrastructure, the fiscal space available for private goods may be reduced. It would be challenging for the government to sustain such transfers, let alone increase their flow to give a sense of improvement over the past. The flip side of direct attribution for benefits is the potential for being blamed for their drying up.
—By Suyash Rai
Review
How Can Cities Survive Covid-19?
With high COVID-19 transmissibility being a concern in dense urban areas, experts have been debating the reordering of urban spaces in the wake of the pandemic. While it is too soon to estimate the long-term impact Covid-19 has had on urban life, economists Edward Glaeser and David Cutler take a stab at it in their sprawling account of public health challenges and urban existence in the context of COVID-19. Their book Survival of the City: Living and Thriving in an Age of Isolation combines an account of the public health challenges faced by the U.S. with an assessment of the ability of cities in the U.S. to hold up against the pandemic.
The book begins by recounting the disastrous effects pandemics have often had on cities. “In the aftermath of Justinian’s plague, trade collapsed. Cities shrank to small towns. The population of Rome, perhaps 1,000,000 at the time of the Caesars, fell to 30,000 a millennium later.” In response to such effects, humans implemented the system of quarantining, with the city of Ragusa in Italy appointing “officials against travellers from places of plague” in 1390. Quarantining and social distancing remain the most used public health policies against pandemics in history, but their success has often been determined by the factors we saw play out in this pandemic—the timeliness and strictness with which quarantines were imposed.
This first part of the book highlights the investments that need to be made to improve public utilities such as sewage and water as well as to increase global coordination against pandemics. The authors cite studies that conclude that in the United States, clean water helped reduce total mortality in major cities by half, infant-mortality by three quarters, and child mortality by nearly two-thirds. The studies point out that in the beginning of the twentieth century, U.S. towns were spending “as much on sewerage and clean water as the federal government was spending on everything except for the post office and the army.”
In highlighting this, the authors argue that the ability of cities to resist pandemics depends, in general, also on the health of its populace. They point out that COVID mortality rates were higher amongst the obese, smokers, and those with co-morbidities.
The authors also highlight that while cities can devise local responses to pandemics, they are also nodes on a global network and provide avenues for the entry of new diseases and pathogens into the population. This creates a problem of externality, where the problem of acting in time cannot often be solved by cities themselves. This requires global, coordinated action. The authors argue that the World Health Organization is ill suited for this purpose, and instead propose a NATO for health.
The book is at its best when it provides data highlighting how patterns of urban life both caused and were affected by Covid-19. For example, the authors cite studies to link mobility with the spread of Covid-19 cases in U.S. cities. In April and May 2020, in New York, they found “a 10 percent decline in the number of trips taken by people living in an area was associated with a 20 percent drop in the number of cases.” Similarly, the ongoing Opioid crisis worsened significantly due to the strain of isolation during the Covid lockdowns.
The Covid-19 pandemic also had a more lasting impact on the global economy than many previous pandemics. The authors detail studies from past pandemics, for example the Black Death, where a third of the population was wiped out, but Europe generally became more prosperous in its aftermath. The economy then was primarily agricultural, and the reduction in population meant greater land availability per person. Similarly, the U.S. economy rebounded sharply after the Spanish influenza epidemic of 1918-19. The authors argue that this is because “in 1910, 31 percent of Americans worked on farms and 38 percent were manual laborers. In 2015, farmers made up less than 1 percent of America’s workforce, and the share of manual laborers had dropped to 20 percent”. The nature of the U.S. urban economy is now primarily a service economy, and more than three-fourths of U.S. workers are service providers. These jobs require a high degree of personal interaction that was severely affected by social distancing and quarantines. The differential impact of Covid lockdowns was seen in India as well, with agriculture remaining relatively unscathed while all other sectors of the economy contracted.
A second feature of the pandemic has been the rise of telecommuting. The authors provide evidence to show that while telecommuting will become permanent for a small but significant minority of workers, this does not reflect a fundamental transformation in urban life. Humans crave close contact, and telecommuting does not do away with this need.
The authors also point out that moments of urban crises often bring underlying social problems, like inequality, to the fore. If cities are to survive episodes like these, the authors argue, it is necessary for them to identify mechanisms to make cities more affordable and equitable.
Glaeser and Cutler therefore make the case that cities need to reinvent themselves in light of the effects of the economic downturn and the public health crisis they have faced. They advocate reducing regulatory compliance requirements that affect small businesses, improving licensing and permit systems in low income and low employment areas, increasing housing supply, and easing land-use constraints.
The book traverses many domains and contains many useful insights on issues ranging from public health systems to economic geography. Much of the information provided can be used to design research on the effects of the pandemic in countries like India. Yet, the book is less than the sum of its parts. It is hard to identify a central argument that ties the different parts of this book together. Those interested in any of the many issues covered in this book may however, still find it engaging and useful.
—By Anirudh Burman