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Complex system of patronage, corruption blunts India’s efforts to help the poor out of poverty-Minhaz Merchant

-The Economic Times

Raebareli
The Rae Bareli seat in Uttar Pradesh has been a Gandhi family bastion since 1967 when Indira Gandhi first stood for election from there. Sonia Gandhi adopted the constituency in 2004 and was re-elected with a huge majority in 2009. It should, therefore, be one of India's most developed districts. Right? Wrong.

The Hunger and Malnutrition, or HUNGaMA, survey, released by the Prime Minister earlier this year, was carried out amongst children under the age of five in 112 rural districts across 3,360 villages in nine states. The results should shame politicians of every major party who represent the poor in these districts.

Rae Bareli is a sprawling district spread over 4,608 sq km with a population of 34.04 lakh. How does it fare? Poorly - even by the abysmal standards of the other 111 districts surveyed.

According to the report, coordinated by the Naandi Foundation and reviewed, among others, by economists Dr Abhijeet Banerjee and Dr Isher Judge Ahluwalia, "Rae Bareli with 70.40%, Koraput in Orissa with 68.86% and Dumka in Jharkhand with 63.65% have the highest number of stunted children."

This picture of poverty, hunger, malnutrition and lack of basic amenities like toilets is common across the districts, in both Congress and Opposition-ruled states, which were surveyed. If a constituency nurtured by the Gandhi family for over three decades can be so desolate, what does it say about political governance?

As the debate, within Parliament and outside, continues over the exact number of India's poor and destitute, consider a contrasting set of statistics (see accompanying chart). The number of MPs who are crorepatis increased from 156 in the 2004 Lok Sabha to 315 in the 2009 Lok Sabha.

The story in Vidhan Sabhas is the same: in state after state, the number of crorepati MLAs has risen by multiples of over 100%. In the specific case of the Manipur assembly, the number of crorepati MLAs has shot up by 563% over the last five years.

Even as politicians get wealthier, their constituents remain stuck in a vortex of poverty, hunger, malnutrition and primitive infrastructure. The UPA government has tried to tackle the problem with a strategy of ever-rising subsidies.

These include Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), Bharat Nirman and state-level initiatives. The Sonia Gandhi-led National Advisory Council (NAC) has made the food security Bill a pivot of its anti-poverty campaign.

MNREGA and other welfare schemes, however, remain riddled with corruption. The ecosystem of politicians, bureaucrats, district officials and middlemen siphon off up to 50% of the benefits meant for the poor.

Technical loopholes in MNREGA, for example, allow local officials to pay workers a fraction of the guaranteed wage of 100 a day based on whether they 'qualify' for the scheme - a subjective assessment done locally and vulnerable to abuse.

A study by Shikha Jha of the Asian Development Bank and Bharat Ramaswami of the Indian Statistical Institute has shown that only 10% of the benefits of the public distribution system (PDS) reach the 'deserving poor'.

Around 43% is siphoned off illegally, 28% goes towards administrative costs of the Food Corporation of India (FCI) and the balance 20% is misappropriated by other vested interests.

Pouring more money into this leaky system without first fixing it - as the NAC, to its credit, has suggested in its detailed submission on the proposed food security Bill - will lead to the worst possible outcome: the poor remain poor even as politicians become richer.

Meanwhile, the (heavily-underestimated) subsidy bill for 2012-13 has spiralled to over 1.9 lakh crore, swallowing 25% of the budgeted direct and indirect tax revenue of 7.7 lakh crore, net of allocations to the states. The deputy chairman of the Planning Commission, Montek Singh Ahluwalia, is fighting a rearguard action to staunch the flow of unproductive subsidies. "If India is to return to a GDP growth rate of 9% a year," Dr Ahluwalia warns, "subsidies must be reduced."

Subsidies are corruption-prone across the distribution chain. The remedy: reduce petroproduct and fertiliser subsidies. Decontrol diesel. Use the funds to invest in modernising agriculture and infrastructure. This will create productive assets to help the poor build prosperous, independent lives.

Debates over anti-poverty programmes - cash transfers versus PDS, universal coverage versus targeted coverage - miss the larger point: many politicians have a vested interest in the commerce of poverty. That is the principle reason why reforms in the agriculture sector - cutting out middlemen in the food chain and boosting crop productivity - have been allowed to languish.

Food inflation is a malign by-product. An empowered electorate is not in most politicians' interest: it would reject a government that allowed usurious corruption in anti-poverty programmes.

The debate must move forward from measuring poverty to mitigating it. The Central Vigilance Committee on the PDS, headed by Justice D P Wadhwa, delivered this stinging indictment, "In the PDS, it is the fair price shop (FPS) that is the breeding ground of corruption. It is in the knowledge of all, whether he is a politician, bureaucrat or any other public servant.

An honest FPS owner cannot survive from the income earned from the PDS. He has to indulge in diversion of food grain in the market. All are involved in this crime of diversion - the FPS owner, transporter, official, bureaucrat or politician."

The contrasting fortunes of MPs in Lutyens' Delhi and the malnourished destitute in districts like Rae Bareli across the country are an indictment of our economic and political governance.