The Hindu Business Line : Empower local bodies

Nearly 75 per cent of the population have a per capita consumption expenditure of less than two dollars a day. This distress cannot be addressed from New Delhi alone; local governments will have to play a more important role.

Much as policy-makers in New Delhi would like the nation to believe that the economy is on course for another year of high growth, events may force some of them to a more realistic assessment of how growth will pan out. A more modest forecast would enable policymakers to join the battle with forces that could unravel the magic spell of the last four years. It is one thing to find ways to provide relief to exporters likely to be hit by falling markets as the US heads towards recession; that is the easy part. The more difficult one is to neutralise the baneful effects of rising food prices on the poor who have not only been neglected by growth but are now being buffeted by rising food prices. More than ever before, policymakers will be tested for their commitment to the common man.

To start with, it might help defining what they mean by the common man. Dr Arjun Sengupta and associates have tried to put numbers to the label; they estimate that (according to 2004-05 data) nearly 75 per cent of the population have a DPCE (daily per capita consumption expenditure) of less that two dollars — that is, nearly 800 million are below the international level of poverty. This distress cannot be addressed from New Delhi alone; local governments will have to play a more important role. States have made an auspicious start by setting their house in order. An RBI study shows State budgets to be in relatively good health. In 2007-08, the gross fiscal deficit of states, on average, had declined to 2.3 per cent of GDP; revenue receipts have been buoyant. The best news is that development expenditures are increasing even as non-productive ones, interest payouts, for example, are falling. States are experimenting with relief nets for distressed farmers and other less privileged people and are using tax breaks to attract employment-based investments. Attempts have been made to address the core issues of health, education and employment. Laudable as they are, the efforts are barely effective. The Comptroller and Auditor General of India found the National Rural Employment Guarantee Programme provided 100 days employment in a year to just 2.3 per cent of the households in 200 of the poorest districts, the average being just 18 days!

Much as fiscal discipline and increased development expenditures are welcome, income-augmenting programmes need time-bound delivery mechanisms. Urban local bodies and panchayati raj systems have to be armed with more powers to ensure that the States and New Delhi allocate work to benefit the needy. That is the need of the hour.

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