Financing Welfare Session 4-A

Session 4-A: Financing Welfare

• Topic: Welfare State, Case Studies in Centrally Sponsored Schemes
• Presenter: Prof Govinda Bhattacharjee

Session Structure

• Welfarism and welfare state
• Planning era distortions and Discretion Raj
• Budget and Welfare Expenditure
• Requirements of good policy
• Case Studies: Centrally Sponsored Schemes, Bolsa Familia, Beto Bachao Beti Padhao

Fundamental Assumptions behind Policy Making

• Welfare State: State controlled development for nearly 7 decades. Public sector dominates the economy, stifling the Public sector.
• Soviet Model of centralised Planning
• Planning Commission
• Reservation for weaker sections in education and employment: SC/ST/OBC
• Article 16(4): Allows state reservation of appointments for backward classes not adequately represented
• Subsidies for the poor: Food, petroleum
• Relief for agriculture: No tax, subsidized fertilizers, free electricity and water for farmers
• Distortions caused

Origin of Welfare State: UK

• On December 1st, 1942, Sir William Beveridge's review of social security was published in UK. It aimed to eliminate 'Want, Disease, Ignorance, Squalor, and Idleness'.
• The Beveridge Report proposed a comprehensive social insurance system 'from cradle to grave'.
• All working people contributed to the state for benefits for the unemployed, sick, retired and widowed.
• Aims included maintaining an acceptable minimum standard of living in Britain.
• Publication of Employment Policy White Paper in 1944 was heavily influenced by Keynesian ideas, aiming to maintain a high and stable level of employment.
• British public support for the policy led to the Labour party's landslide victory in June 1945.
• National Insurance Act 1946, National Assistance Act 1948, National Health Service 1948, etc. were enacted.
• Nationalisation of industries (coal 1947, railways/gas/electricity 1948, steel 1951) followed.

What is a Welfare State?

• Two interpretations:
  • Comprehensive model: state assumes primary responsibility for all welfare aspects, considered a universal "right".
  • Social safety net model: creating minimum standards of welfare (education, housing, sustenance, healthcare, pensions, unemployment insurance, etc.)

Welfare State in India

• Part IV: Directive Principles of State Policy (Art 36-51): Not enforceable but fundamental to governance.
• Principles promoting social and economic equality (Art. 39, 40, 41, 43A, 45A, 46).
• State should ensure adequate means of livelihood, fair distribution of resources, wealth not concentrated in a few hands, equal pay, decent standard of life, education for children below 6, participation of workers in factory management, protection of SCs, STs.
• Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989
• Childhood/youth protected against exploitation.
• State should ensure the right to work, education, and assistance in cases of unemployment/old age/sickness.

Application of Directive Principles in Public Policy

• Minimum wages fixed, equal wages for equal work, rural employment programs, village Panchayati Raj, free/compulsory education, laws to protect children/women, welfare for poor/SCs/STs.

Historical Evolution of Policy Making in India

• Nehruvian Socialism: Socialistic Pattern of Society
• Elitist model: IIT, IIM rather than focusing on primary education, health.
• Planning Commission led growth: Low growth, high unemployment, poverty, brain drain.
• Futile bureaucratic reforms, strong vested interests/bureaucrats/politicians.
• Emphasis on individual ability over systemic change from colonialism, inadequate governance.

Evolution of Public Policy

• 6th Plan (1980-81 to 1985-86): Increase in national income, technology, reducing poverty/unemployment, but led to famines.
• 7th Plan (1986-87-1991-92): Focus on food, work, productivity, but led to worsening economic conditions.
• Severe distortions in Public Financial Management: Centrally Sponsored Schemes, Direct Off-Budget transfers, economic reforms of 1991.
• Liberalization, privatization, globalization caused economic challenges.
• Bureaucracy/government size/political will issues hindered reforms.

Indian Scenario: Case Study

• Before 1970s, policy analysis focused on creation rather than implementation.
• Implementation of policies done mainly via Planning Commission—centralized planning via 5 year plans with lack of accountability.
• Many plan schemes examples of implementation failure.

Case Study: Plan Transfers

• Federal Transfer of Resources: Finance Commission & Planning Commission Transfers (including Article 275 (1)).
• Discretionary transfers of Planning Commission (1951-84) >60% of total.
• Scheme of Plan Transfers: Normal Central Assistance (NCA), Additional Central Assistance (ACA), ACA for Centrally Sponsored Schemes, Special Central Assistance (SCA), Advance Central Assistance.

Centrally Sponsored Schemes (CSS)

• Policies evolved from the Directive Principles of the Constitution, aimed at promoting welfare.
• "Secure a social order for the promotion of welfare of the people", "early childhood care and education to children below the age of six", and the right to work are central points of the schemes.
• Gol Resolution of 1950 noted the need for promoting welfare to advance living standards via resource exploitation.
• No transfers from the Centre to meet the needs of the schemes are envisaged.
• Direct Off Budget Transfers

Total Central Plan Assistance Received by States

• Data on assistance to states and UTs, 1997-2012-13 BE (through budget/off budget).

Total Central Assistance (TCA) Received by States

• Data on statutory transfers, plan transfers, discretionary transfers, and total transfer from 5th plan to 11th plan, presented in a table.

Number of Centrally Sponsored Schemes

• Number of centrally sponsored schemes from 5th to 11th plans, from 190 to 147, presented in a table.

Aberrations of CSS

• Questionable Schemes, corruption, leakages, waste, political factors, diversion of funds to ruling party.
• Doling out funds to rural electorates.
• Restructuring schemes to 6 core, 22 core, and 2 optional schemes.

Restructuring of Centrally Sponsored Schemes

• Changes in the core number of schemes to 38 in 2022-23 and 41 in 2023-24 budget plus 700+ Central Sector schemes.
• Core schemes, optional schemes, and funding patterns

Expenditure on Major Flagship CSS

• Expenditure data for major flagship CSS in 2019-20 through 2024-25 BE (Rs Lakh Crore), presented in a table.
• Expenditure and share (%) of expenditure on all schemes.

Designing Effective Public Policy

• Focus on rationality and choice, consultation, building accountability, and acceptance from the people.
• Successful policies address needs and use impactful methods such as evidence based design, well-targeted policies (e.g., Balika Cycle Yojana, Malaria control, Swacch Bharat), collaboration/institution building.

Rational Choices: Evidence-Based Design

• Social policies beyond government assistance and proactive engagement, using string-attached conditional cash transfers to incentivize positive outcomes.
• Examples: Conditional Cash Transfers (CCTs) in Brazil (Bolsa Familia), Progressa/Opportunidades in Mexico.
• Importance of effective programme design and consideration of individual situations in terms of income.

Bolsa Familia, Brazil

• Largest conditional program, addressing inequality, poverty, hunger across Brazil, including rural-urban gaps, with 75% beneficiaries being Afro-Brazilians and 54% being women by 2015.
• Increased employment opportunities for women, especially through formal sector jobs.
• Strong program design and management enabled success (coordination, evidence, support).

Reasons for Success

• Clarity of objectives (reducing specific issues: hunger, inequality, poverty).
• Program strength (evidence from other programmes).
• Feasibility (rapid scaling up).
• Alignment among government levels/agencies for consistent goals and implementation.
• Robust multi-layered management and efficient use of resources.

Explore the complexities of welfare state financing in this session led by Prof. Govinda Bhattacharjee. This quiz covers key topics like welfarism, budget allocations, and various centrally sponsored schemes, including Bolsa Familia and Beto Bachao Beti Padhao. Test your understanding of the underlying policy assumptions and their implications.