India’s Urban Welfare Regime Om Prakash Mathur The 21 st Century Indian City:

1. India’s Urban Welfare Regime Om Prakash Mathur The 21st Century Indian City: Towns, Metros, and the Indian Economy 26-27 March, 2013 University of California, Berkeley and IIHS, Bangalore

2. PREAMBLE • Public provision of welfare – “Welfare Regime” - is an integral part of the development trajectories of most economies, irrespective of whether they are developed or developing. Recent years have observed an unprecedented expansion in the size of welfare regimes, triggered by a maze of factors including democratization, politico–social movements, need for food assistance under conditions of stagnant wages, ageing etc. • Broadly, welfare regimes fall into two categories: • Country-wide/national coverage, premise being that there are services that should reach out to everyone (e.g., health). Such regimes are non-discriminatory. • Coverage restricted to certain population groups or areas, postulate being that growth does not reach them or that the structures and institutions are such that they constrain growth from trickling down to the targeted groups or areas.

3. This presentation focuses on India’s Urban Welfare Regime which aims to target the `urban poor’ and `slum settlements’. It excludes any reference to the legendary 3-F welfare that absorbs, according to Surjit S. Bhalla, close to 2.2 percent of the country’s gross domestic product (GDP).

4. India’s Urban Welfare Regime • Scope of the Presentation • Urban Welfare Regime: Rationale, Aims, and Purposes • Financial size, including factors that enter into the determination of its size • Implementation strategy • Results and Performance • Prognosis – can it deliver?

5. Urban Welfare Regime Rationale, Aims and Purposes India’s urban welfare regime – a legacy of the 1970s – comprises a set of public sector initiatives for poverty reduction; significantly, these initiatives have rarely been conceptualised or analyzed as part of a `welfare regime’. In public finance lexicon, these initiatives are nothing but a transfer of resources, an intergovernmental transfer, to be used for poverty reduction; it draws its strength from the Musgravian principle that redistribution and welfare are the responsibility of higher governmental tiers. Such transfers are said to be poverty-reducing and instruments of inclusive growth. The rationale underlying the initiatives is simple: growth and the way it has occurred in India, is unevenly distributed across income groups. Additionally, there are structural impediments for growth to reach out to the lower percentile groups. Improving equity and targeting resources to urban poor households is the long-run aim of these initiatives.

6. India’s urban welfare regime addresses four types of vulnerabilities – • Absence or lack of basic services. Basic services to the Urban Poor (BSUP) • Lack of adequate shelter. Integrated Housing and Slum Development Programme (IHSDP), Rajiv Awas Yojna (RAY) • Inadequate tenurial security. Rajiv Awas Yojna (RAY) • Inadequate sources of livelihood, not generating enough income. National Urban Livelihood Mission (NULM) Swarna Jayanti Shahri Rojgar Yojna (SJSRY) • The initiatives BSUP, IHSDP, RAY, NULM and SJSRY are designed to neutralize the adverse impact of lack of services, inadequate shelter and tenure, and livelihood and provide security to the urban poor households.

7. Urban welfare regime FINANCIAL SIZE Estimation of the financial size of the welfare regime is complex -- -- comprising as it does different kinds of implicit and explicit subsidies, transfers and grants, and is contentious -- arguments that a substantial part of the welfare leaks out and is mistargeted and what reaches the poor households is a fraction of what they need to fight poverty. Netting out what reaches the poor remains a question mark.

8. In the case of urban welfare regime, the financial provisions are as under: (Rs. In million) Often argued that it will take about Rs. 72,216 million to lift the 76.5 million urban poor (2009-10) above the poverty line – this figure represents the difference between the current expenditure levels of the 76.5 million urban poor and the expenditure levels needed to stay above the poverty line (Rs. 859.6 being the MPCE). Thus, the existing provisions are grossly inadequate for neutralising urban poverty. Moreover, urban poverty is not just consumption poverty; it comprises of those who have inadequate shelter (93 million slum dwellers and many more who live in highly congested conditions), those who have insecure tenure and those who lack basic services. No estimates ever made to address these vulnerabilities.

9. IMPLEMENTATION STRATEGY Financial partnership between the three levels of governments – thus the financial provision for these initiatives is somewhat larger than shown in the previous slide which registers only the central government releases; Engagement of beneficiaries in the development of the initiatives Designed to involve the private sector – a unique experiment in beefing up the urban welfare regime Linked to `reforms’ that aim at long-run sustainability of poverty reduction strategies

10. Results and performance • Number of beneficiaries assisted for setting up of Micro enterprises • Wage employment: Number of mandays of work generated • Number of urban poor imparted skill training

11. Prognosis: Can it deliver? ?

12. Unclear of the directions – conceptually, three sets of issues arise • Far too many channels: Shelter, Tenurial security, Services, and Livelihood, implemented on stand-alone basis which, prime facie, reduce effectiveness and increase unit cost of implementation. • Economic and social outcomes remain undefined – do the mandays of work created and micro enterprises set up add up to or equal or exceed the investments made via these initiatives? Do or should these initiatives have a economic rationale? Should the case for such a Welfare Regime be argued on economic considerations? • A zero sum game: welfare regimes created to offset policy distortions.

13. Thank you opmathur@niua.org