Social Protection for a Changing India: Selected Findings and Future Considerations

1. Social Protection for a Changing India: Selected Findings and Future Considerations John Blomquist, New Delhi World Bank UNESCO-ICSSR Research Meeting on Social Protection Policies and Safety Nets in South Asia New Delhi 18-19 March 2010

2. Outline • Evolving social context in India; • Selected findings on CSS program performance; • Considering social protection for a changing India

3. Evolution of Poverty Since the 1970’s

4. Poverty: Rural, Small Urban Centers and Large Cities 2004/05

5. Coping with Shocks: Rich and Poor in Select States

6. Poverty, Inequality and Vulnerability • Poverty has significantly reduced over time and gradual progress on poverty reduction continues • Officially poor have declined from one half to closer to one quarter of the population • However, a large proportion of the population remains chronically poor • The decline in poverty reduction may have been slow due to the rising inequality since the 1990s • Economic inequality remains moderate by international standards • Sustained growth has increased the focus on the inclusiveness of growth and distributional outcomes • Growing urbanization of poverty • Majority of poor are still in rural areas, but poverty rates in small and medium towns are comparable, and even higher than rural poverty rates

7. Poverty, Inequality and Vulnerability • Significant disparities in poverty, inequality and vulnerability remain across the country, and across groups • Large share of households experience serious shocks and crisis events (natural calamities) • Coping strategies in the face of shocks vary across income groups and across states –some informal coping strategies provide inadequate protection and may have adverse long-term impacts • Large number of chronically poor people and vulnerable, addressing both may in some cases be less amenable to a simple growth-driven approach.

8. Summary Indicators of Main CSS SP Programs, mid 2000’s

9. Summary Indicators of Main CSS SP Programs, mid 2000’s

10. Selected Program Performance Indicators, All India 2004/05

11. Major CSS SP Program Share in Total Allocations (LHS) and Actual Releases (RHS) by Share of Total Poor/Poverty Rate 2004/05

12. Select Program Findings • While India spends significant resources on its core safety net programs (over 2 percent of GDP), the returns to spending in terms of poverty reduction have been much lower than could be expected • The main driver of poor cost effectiveness and impacts is its largest program – Public Distribution System (PDS). • 1% of GDP, covers up to 40% of households but • Has low impact due to high leakages to nonpoor and administrative features • Several national pilots and state initiatives to improve functioning, other proposals • While situation is not as critical in other programs, there are common problems which limit poverty reduction impacts

13. Common Issues • Lack of coordination and overlap in delivery of programs (both within and across levels of government), reduces accountability of those responsible for SP service delivery. • Maintenance of a “one size fits all” SP program and policy mix from the centre does not respond to the growing spatial diversity in living standards • A poorly designed and executed household targeting mechanism (BPL) • The basic “nuts and bolts” of program administration and procedures in most states are far below the standards that could be possible given India’s technological and human capital capacity • For a number of programs, expansion of and innovation in the private sector has created possibilities for new modalities of PPP program delivery which have yet to be explored by the public sector

14. SP for a Changing India • These conclusions suggest a broad direction for the future in the short/medium term and the longer term. • Short Term: Improving implementation of SP programs • Delineating clear lines of accountability accompanied by adequate staff and finances. • Rapid and substantial improvements in the basic “nuts and bolts” of program administration and procedures. • Overhauling existing targeting mechanisms, both at the household level and geographically. • Expanding social security for unorganized workers. Past experience suggests that direct public provision, financing and administration is neither feasible nor desirable..

15. SP for a Changing India • Long Term: Policy reform in Social Protection. Could be based on three elements • Rebalancing the policy mix across different public SP priorities • Increasing the emphasis on preventive programs • Rethinking programs which seek to promote movement out of poverty: • Move from administratively driven subsidized credit to public financing of a more diverse range of livelihood promotion approaches • Leverage participation in core education, health and possibly nutrition services to stimulate human development • Greater willingness to experiment in program design and inform decisions based on systematic evaluations. • Moving to more consolidated and more cash-based social assistance programs for the chronically poor • Address the neglect of urban social protection policy

16. SP for a Changing India • Consolidation to a core set of flagship programs. Several options, one could be to organize around 3 core CSS SP pillars, combined with an SP block grant to states(3+block grant): • a major social assistance program. Reformed PDS, perhaps toward more cash-based • a public works program, for which NREG would be the building block, as well as piloting expansion in urban areas • a basic social security package for those outside the formal sector • block transfer for states which they could use to finance other programs or supplement benefits under one of the pillar programs. • Introduce an element of choice and flexibility for states in the specific program mix of centrally-supported schemes that they operate; and • In some areas and for some programs, actively exploring the possibilities for leveraging the role of private players (both non-governmental and for-profit) in delivery of interventions