OPINION

Rajiv Gandhi once said that out of every rupee spent by the government on poor people only 10 paise actually reach their intended beneficiaries. In case you have not heard, the Garib Kalyan Melas that were held recently across Gujarat have changed this reality for better.

Fifty such Melas were held all across Gujarat within just 2 months. A whopping Rs. 1,500 crore of funds (in the form of checks, auto and cycle repairing kits, cycles, sewing machines, cycles for the disabled, etc.) were distributed directly to 25 lakh poor people without the involvement of any middlemen. This assistance amounts to Rs. 6,000 per average beneficiary. The number of poor in Gujarat being given plots under this scheme will exceed all those who were given such plots by the government in the past 50 years combined! Assuming that each of these beneficiaries is part of an average family of 4, this scheme has benefited one crore Gujaratis out of a statewide population of 5.5 crore. That is a staggering 18% of population! Thus, the magnitude, speed, distribution efficiency and penetration of this outreach to the poorest of the poor without corrupt leakage are simply unheard of in the history of India!

The effectiveness of such a scheme in poverty alleviation will only be proven over time. It will depend as much on the proper follow-up guidance and motivation of individuals as on initial distribution of resources and infrastructure-rich atmosphere that the Gujarat government is providing to its citizens.

We need to grasp the big-picture strategy and reasons behind Garib Kalyan Mela since it offers a significantly better poverty alleviation model than that followed by governments at all levels within India since independence.

India spent the first 45 years of independence pursuing a socialist development model in which redistribution of resources, rather than all-round growth, was pursued as the primary means to uplift poor people out of poverty. All-too-pervasive corruption in the process of redistribution of resources ensured that the expected poverty alleviation results never materialized.

It was only when the Congress party ran out of gas pursuing this socialist path (we literally had enough foreign exchange left to pay for just a few weeks worth of imports), that it pursued the path of liberalization out of compulsion rather than out of conviction. This liberalization process finally put economical growth on the fast track. BJP and its previous incarnation – Jan Sangh had always believed in liberalization. This enabled NDA government, out of conviction, to vigorously continue the march of economic growth with liberalization as a means of poverty alleviation.

So, a logical question arises as to which is a better model for poverty alleviation – redistribution or growth? Extensive research the world over in the last two decades indicates that “in the medium to long run, between 66% and 90% of the variation in changes in poverty can be accounted for by growth in average incomes, with the remainder due to changes in income distribution”. In other words, increase in average income (economic growth) helps alleviate poverty to a greater extent than does distribution of resources. Also, growth as a primary means and distribution as a secondary means of poverty alleviation have a greater impact on poverty alleviation than either of the two alone.

This is precisely what Narendra Modi has tried to achieve through the Garib Kalyan Melas now that economic growth in Gujarat is on fast track. Over time, the rising tide of economic growth in Gujarat will lift a majority of population out of poverty. This can be effectively supported by targeted distribution of resources to poor people. This reduces the inequality of opportunities, means and infrastructure available for them to climb out of poverty.

Bypassing the middlemen in the Garib Kalyan Mela has ensured that 100% of the funds are reaching 100% of their intended beneficiaries in Gujarat. Compare this against the UPA government's scheme under the "National Rural Employment Guarantee Act" (NREGA) that was enacted in February 2006. This act promises guaranteed employment for 100 days to all the registered rural households. However, according to the Comptroller and Auditor General (CAG) of India, only 10 to 15 % of rural households were actually provided 100 days of employment in the first 3 years of this scheme. The national average of the number of working days per household under NREGA was a paltry 48 days in the last fiscal year, hopelessly insufficient to put food on the table for the whole year. The existing NREGA scheme must have certainly filled the coffers of corrupt politicians and bureaucrats all over India. It certainly played a key role in the return of Congress to power at the center in May 2009.

Thus, wrong socialist strategy (redistribution of resources as a primary means of poverty alleviation) combined with even worse implementation (through corrupt politicians & bureaucracy) ensured that 90% the resources meant for poverty alleviation were wasted in the first 45 years of Congress’ rule. The right strategy (of growth as a primary means supplanted by targeted distribution of resources as a secondary means of poverty alleviation) combined with transparent & efficient implementation is expected to achieve results that other governments should also emulate.