In an effort to have inclusive growth both the central and state governments have introduced several welfare schemes. The government of Tamil Nadu had introduced rice at Rs. 2 Per kg through the public distribution scheme, 2 acres of land free , a colour television, free LPG connection amongst others. The Andhra Pradesh and Karnataka governments are also in the process of launching similar schemes or have already done so. If this reaches the poor it has significant real income effects and people can consume more with the same given income.But , as in economics we are wont to say "everything hangs together", the effects of these schemes can have other types of undesirable repercussions.
If these schemes do reach the rural poor it might just work to prevent migration of labour from rural to urban areas or even other states in search for a job. Take for instance construction labour. The construction industry in Bangalore employs labour from different states such as Tamil Nadu, Orissa, West Bengal and Bihar. Lack of jobs forces these people out and labour moves from areas of surplus to areas of deficit. This process lowers wages in deficit areas and increases the same in surplus areas. This is not an entirely painless process.
With the introduction of welfare 'schemes' construction sites have complained of a drop in the supply of labour from the neighbouring states, particularly Tamil Nadu. Coming at a time when the construction activity has slowed down it may not be a big constraint as yet. But what is interesting is the drop in labour supply due to an increase in the real value of income. This appears to indicate a backward bending supply curve of labour where people are less willing to move out for work and higher income and are happy with smaller incomes that have now have greater purchase value. Is this a problem? If government schemes give an incentive to be less productive it is certainly a cause for worry. But with free land they might not sit unemployed , they might actually work on the land given. Or they might lease or sell it if self cultivation is unviable. The latter option could lead to an increase in disguised unpemployment .It is not sure as to what type of land and what conditions are attached to the distribution of land. Along with these welfare schemes it is important to create job opportunities and conditionalities such that they can be gradually phased out an not make them dependant on such measures.
Down the line the market will adjust to these circumstances with an increase in wages. This is good for the unorganised construction labour and might just attract the migrant labour again. This remains to be seen.
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9 comments:
is it because of all these schemes that the govt's expenditure is always greater than the revenue incurred.
And even in the current budget,there is an alarming rate of fiscal deficit.What is the best possible measurre the govt. can resort to considering the societal set up and the rate of poverty ??
The scheme if implemented properly would,in my opinion turn out to be quite beneficial....If such schemes are launched all over India not only would it solve the problem of migration of labour...But would also help strengthen the ailing agricultural sector....
However one cant help but be skeptical about the implementation of such projects...Over the period of time we have seen how wonderful projects have fallen flat because of an inefficient bureaucracy and personal vendetta between different ruling political parties !
Taking into account the extent of poverty in our country and the fact that the living conditions of the poor have improved,I believe that such schemes are benificial for the country and should be encouraged.But the decrease in the supply of labour(as shown by the backward bending supply curve)is an important concern and could hamper the growth of the economy.
But it is for the government to ensure that the schemes are not misused to serve vested interests of individuals.
Perhaps the new Unique Identification Number scheme might help to solve this problem and ensure that the benefits reach only those persons for whom they are meant.
Every welfare scheme has its then pros and cons. It is true that the Government is unknowingly limiting the productivity of the poor by providing incentives, but the
Government in its welfare schemes is targeting to improvise the economical status by providing providing lands(assuming they are utilized for agricultural purposes)
employment to the poor, who depend upon uncertain means of income such as construction labor and providing rice for cheaper prices to counter the food crisis faced by the poor. The above two schemes implemented by the Government( according to
my opinion), shall rather uplift the productivity of the poor( the quality of the labor increases), as they can work more effectively, having gained better nutrition.
There sure is a decrease in the quantity of the labor, but the limited quantity of labor derived from the implementation of the the above mentioned schemes is more
qualitatively productive, hence providing a set of skilled labor to the market. On the other hand, the idea of providing telivision and LPG connection even though seem quite helpful in improvising the social status of the poor, does not increase the productivity of the poor. Thus, the Government must rather look upon the how the welfare schemes help in actual improvisation of the socio-economic status of the poor.
I think that a ban on sale and consumption of "Junk food"and"Tobbaco" was not a matured decision collage students are enough matured to decide what should they eat and what should they not eat and if govt. will ban it in collage canteen they can also purchase it from outside the collage than what is the effect of ban? as par my view it should be left on student's own conscious that what he is consumig is good for him or not.
If we see it in terms of school children it doesn't seems to be work there also.As disucussed in article if "Junk food" is banned in canteens thier parents are providing it so,need is here to counsel parents.
Siddharth Singh Shekhawat
1757
It is interesting to look at the actual effect of these poll sops from the point of view of economics.
I've discussed such schemes by the TN govt with some people in Pune. They were always perplexed as to how the TN govt could make such promises and then actually deliver.
I have never been able to give a clear answer. The two issues here are actually obvious-
One is - How does one make such promises of SUCH magnitude, and actually deliver? Obviously, the State funds are utilised. But is supplying colour TVs to every household the right step towards development?
Two - How do the people never understand that it is their own money that is spent on these TVs? Then again, assuming the people DO understand, how do they still participate in the process?
Could economics help in trying to understanding such behaviour?
Even though there is lack of labor in Bangalore but in humanitarian terms, is it not better for these poor people to earn in their homes because when they are employed in Bangalore and such other places, they also contribute to the growth of slums. not only that, their poor lifestyle results in poor health standards all over the place as these slums serve to be the breeding house of diseases like malaria and dengue which are currently rampant in Bangalore.
another perspective is that productivity is not the only priority of a welfare state. by providing these destitute people with incentives to work around their homes the state is ensuring a better lifestyle for them. I would say that this function of the state holds higher priority than ensuring "supply of construction labor".
In my opinion it is time for us to realize that productivity of people does not hold precedence over their happiness. If they are happy to work on their lands at home and are satisfied with their meager incomes, then that is the way it stays. hire machines to construct skyscrapers. do you really have to build the palace of Indian Promise on the broken backs these unfortunate souls?
As far as the implementation of these schemes is considered, one has to compromise. In a country of 400 million people who are below poverty line, perfection is not a rational expectation. even if these schemes are not perfect now, one could give them a chance to better themselves over time. dismissing them altogether would only worsen the present conditions.
Welfare schemes such as the ones mentioned above help in creating more problems rather than solving existing ones. Theoretically, there is a huge burden placed on the state exchequer to provide millions of color televisions and free land (that too in the form of a unilateral payment), which is not a good economic decision. Practically, schemes in India are more often than not poorly implemented, and there is a possibility that poor people may not even receive the benefits meant for them.
In that sense, isn't it better to implement schemes such as MGNREGA? It not only provides a livelihood to the poor, but also ensures that a society's human resources are properly utilized. There are several criticisms regarding its implementation. However, as compared to schemes where governments are expected to dole out televisions and land, MGNREGA prudently balances the state's goals of welfare and productivity.
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