Retaining the Focus on Rural Development sans Wasteful Subsidy Outflows

Kurukshetra, Vol. 58, May 2010

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Abstract

In India, huge amounts of precious funds have been wasted in the past on price subsidies purportedly for the benefit of weaker sections of populations. However, a considerable share of this expenditure has regularly been misappropriated by the well-off sections and by layers of middle men. Budget 2010 brings with it the promise of increased fiscal discipline, rationalisation of subsidies and the deliberate movement towards targeted as opposed to generalised subsidies. This includes fuel, food and fertiliser subsidies which account for at least 90% of the government’s subsidy bill and is a much needed and very welcome development. Targeted subsidies would be a far more efficient, cost effective and transparent mechanism of achieving results. A similar approach needs to be considered for expenditure on social welfare schemes aimed at rural health, education and communications. This developmental expenditure is both a social necessity and an enabler of overall economic growth. A healthy educated and connected rural population is a basic requirement for sustained economic development, especially in a populous nation like India. The movement towards cash based incentives and redemption against vouchers for the rural poor becomes much easier with the penetration of ICT into rural areas. The Universal service Fund of India can along with programs like those of the Unique Identification Identity Authority of India (UIDAI) and Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) facilitate demand side initiatives to spread ICT to the poor. Mutual leveraging amongst these programs would further enable the Government to target the intended beneficiaries in a cost effective manner while also ensuring the concomitant benefits that access to ICT brings in its wake.