Economic Reforms and Social Policy - Zenodo

EconomicReforms andSocial Policy

Edited by

Dr. B. Sarangapani

Phone: 9440828487

PREFACE

The Hindu College, Post -Graduate Department of Economics has conducted a National Seminar on

'Economic Reforms and Social Policy' in which many distinguished economists, policy analysts and

academicians participated. The National Seminar which was sponsored by the University Grants

Commission was organised to analyse the impact of economic reforms on social sectors, to examine

the trends in the social sector expenditures, to review the progress made on the human development

front and to identify the gaps in the social sector policies.

The focus of the seminar was on social policy issues with a particular reference to Andhra

Pradesh. Several far reaching and simultaneous reforms have been introduced in Andhra Pradesh

in the different sectors of the economy. Hence, it was felt to take stock of the reforms introduced and

assess their impact on different sectors and different sections of the community and to have a critical

assessment of the performance of Andhra Pradesh on the human development front. Identification

of the policy gaps for providing social safety nets to the marginalized was another important area of

the focus of the seminar.

Prof. G. Haragopal, Dean, Social Sciences, University of Hyderabad gave the keynote

address. The first technical session was chaired by Prof. S. Subrahmanyam, Centre for Social

Studies, Hyderabad and the issues of Political Economy of Reforms has been analysed in that

session. The second technical session on issues of social policy and human development was

chaired by Prof. I Ramabrahmam, University of Hyderabad. Prof. CSN Raju of Acharya Nagarjuna

University chaired the Valedictory session. The distinguished economist and former Professor of

Economics, Prof M L Kantha Rao, Sri Krishnadevaraya University delivered Valedictory address.

The Present publication is brought out with important papers submitted at the National

Seminar. The organisers are thankful to the UGC, Managing Committee of the Hindu College and

distinguished participants.

CONTENTS

S. No. Title of the Paper P. No.

1 ECONOMIC REFORMS IN ANDHRA PRADESH: CONSEQUENCES AND DILEMMAS

1

- S. Subrahmanyam and P. L. Raghu Ram 2 CHANGING CONTOURS OF SOCIAL POLICY: A KEY-NOTE 17

- G. Haragopal 3 SOCIAL POLICY IN THE CONTEXT OF ECONOMIC REFORMS 20 - Dr. B. Saranga Pani

4 ECONOMIC REFORMS - A BOON OR A CURSE? 25 - S. Indrakant

5 ENHANCING POLICY CAPACITY FOR EFFECTIVE GOVERNANCE 30 - Prof. I. Ramabrahmam and Prof. M. Kodandaram

6 TRENDS IN NEW INDUSTRIAL LABOUR MARKET AND RELEVANCE OF THE SECOND LABOUR COMMISSION REPORT

33

- G. Vijay 7 REFORMS-SOME REFLECTIONS 58

- Prof. K. Koteswara Rao

8 ECONOMIC REFORMS AND SOCIAL POLICY: SOME ISSUES 62

- Dr. P. Perraju Sarma

9 ECONOMIC REFORMS & HEALTH ACCESS IN ANDHRA PRADESH 66 - Dr. A. K. Vasudevachary

10 THE PATENT (AMENDMENT) ORDINANCE, 2004 NEED FOR A PRAGMATIC SOCIAL POLICY FOR HEALTH

75

- Dr. Noorbasha Abdul 11 IMPACT OF PRIVATE SECTOR ON PUBLIC HOSPITALS 83

- Smt K. Vijaya Lakshmi 12 GATS, BUSINESS PROCESS OUTSOURCING AND IMPLICATIONS

TO INDIAN ECONOMY 86

- Prof. K. Sri Ramamurthy 13 GATS AND HIGHER EDUCATION IN INDIA 91

- B. Shiva Reddy and K. Anji Reddy 14 ACCESS TO EDUCATION-SOME ISSUES 96

- V. Sujatha and K. B. Sujatha 15 INDIA'S GLOBAL POSITION ON HUMAN DEVELOPMENT 101

- Prof. M. Sundara Rao 16 HUMAN DEVELOPMENT INDEX IN ANDHRA PRADESH

AN ANALYSIS OF DEMOGRAPHIC INDICATORS 109

- Dr. M. V. Narasimha Sarma, Dr. Ch. Purnachandra Rao, and D. Kailasa Rao

17 ECONOMIC REFORMS AND AGRARIAN CRISIS IN ANANTAPUR DISTRICT

120

- Prof. K. Nageswara Rao 18 AGRARIAN CRISIS IN ANDHRA PRADESH 125

- Dr. A. V. S. Bhaskara Rao and Abdul Shukur

S. No. Title of the Paper P. No.

19 WELFARE PROGRAMS AND FOOD SECURITY IN INDIA 132 - Prof. C.S.N. Raju and Dr. Ch. Purnachandra Rao

20 THE POLICY AND SOCIAL SECTOR EXPENDITURES: ANALYSIS OF AP STATE BUDGETS

148

- Dr. Prabhakar Reddy 21 ECONOMIC REFORMS AND PRIMARY HEALTH CARE SERVICES 160

- Dr. V. V. S. K. Prasad 22 SOCIAL POLICY AND RETREATING STATE IN THE ERA OF

DEREGULATION 166

- Dr. B. Saranga Pani 23 REFORMS AND EXPENDITURE ON SOCIAL SECTOR IN ANDHRA

PRADESH 172

- Prof. M. L. Kantha Rao

Economic Reforms and Social Policy

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ECONOMIC REFORMS IN ANDHRA PRADESH:

CONSEQUENCES AND DILEMMAS

S. Subrahmanyam

Senior Professor, Centre for Economic and Social Studies, Hyderabad.

P. L. Raghu Ram

Research Scholar, Centre for Economic and Social Studies, Hyderabad.

1 Introduction

With a geographical area of 274.40 lakh hectares and a population of 7.5 crores in

2001, Andhra Pradesh is the fifth largest state in the country both in area and

population density. The State has a share of 8.97 percent in and 7.42 percent of

population of the country. It has a large extent of forest area covering 23% of the

geographical arca, a long coastal line of 974 kms, which is second largest in the

country and 2764 TMC of water available from the river systems at 75% dependability.

The economy is basically agrarian in nature with 75 percent of the rural workers

depending on agriculture. The State has the highest proportion of agricultural labour

among Indian States at 47.5 percent of the rural workers. The corresponding

proportion for the nation is only 33.2 percent.

Land is scarce partly because of high density of population and partly due to

low proportion of geographical area under cultivation (35 percent). Even the irrigation

ratio is not high (40 percent). The State is backward both economically and

educationally with a lower per capita income as well as literacy rate as compared to

the national average.

The State experienced two significant shocks in the nineties. The first shock

was the severe balance of payments crisis. The nation availed the structural

adjustment loan from the International Monetary Fund and implemented economic

reforms that are conditional to the sanction of the loan. The second shock was the

fiscal crisis in 1995 96 due to fall in the tax revenue and increase in the expenditure

on rice subsidy. The State is found to be in severe fiscal crisis and hence approached

the World Bank for Structural Adjustment Loan (SAL). To fulfil the conditions imposed

by the. World Bank, the State had to introduce several reform measures. The

consequences of these two reform measures need scrutiny. The impact of national

level reforms can be understood by studying the dynamic changes that occurred in the


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nineties. The impact of State level reforms can be understood by observing the

dynamic changes occurred between early nineties and the later period.

2 Growth Performance in the Eighties and Nineties

2.1 Steep deceleration in agricultural growth

Agricultural sector of Andhra Pradesh turned around from accelerated growth in the

eighties to deceleration in the nineties. The growth rate of NSDP from agriculture.

declined from 2.9 per cent per annum in the eighties to 1.3 per cent in the nineties.

The growth rate of crop output, calculated on the basis of Divisi index, which

takes into account changes in the production structure due to changes in prices, also

showed a similar decline in growth from 3.1 per cent to 2.3 per cent. Both food and

non-food grains exhibited this pattern of deceleration in output growth. Pulses are,

affected more severely than cereals and non-food grains more severely than food.

Almost all the crops were responsible for this deceleration of growth. For instance,

rice, the most important crop in the state accounting for 30 per cent of the cropped

area, showed a dismal performance in the nineties with steep fall in the growth rate

from 3.1 per cent per annum to 1.3 per cent. In the case of black gram even the

absolute level of yield declined. The growth rate of cotton yield declined from 3.4 per

cent to 1.4 per cent per annum. Though groundnut has not experienced deceleration,

the growth rate of yield was very low at 0.7 per cent per annum. Thus, almost all the

crops showed a poor performance in the nineties.

Stagnation in yields may take place if saturation is reached. But the situation is

not so. The yield levels are far below the levels attained in the other states in India.

For instance, yield of rice falls short by 27.8 per cent. For the remaining crops, the

yield levels in Andhra Pradesh are lower than in the other southern states (Table 3).

For instance, yield of sugarcane is lower than in Tamil Nadu by 39.5 Per cent.

This poor performance at the state level is due to the poor performance of certain

regions. Andhra Pradesh can be divided into five zones based on agricultural

development. Among these zones, North Coastal and South Telangana are the most

backward zones in agricultural development.

These two zones are mainly responsible for the poor performance of the state.

For instance, the poor performance of rice in the state is because of the poor

performance in North Coastal Andhra, yield of rice in this zone is lower by 47.8 per

cent than in South Coastal Andhra. Rice is an important crop in North Coastal Andhra


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accounting for one-third of the gross cropped area. Similarly, jowar and pulses are

important crops in South Telangana accounting for 17.1 per cent and 8.2 per cent of

gross cropped area, respectively. While the former has a shortfall of 57.1 per cent, the

later has a shortfall of more than 130 per cent. Cotton is another crop with a wide

regional variation in yield. The crop is grown in South Coastal Andhra, North

Telangana, and Scanty Rainfall zones. The yield of the crop is lower in the latter-two-

zones-by-40.1-per--cent- and-64.7--per-cent- respectively. Similarly, groundnut,

which accounts for one-half of the cropped area in the scanty rainfall zone, has a low.

yield of 780 kgs per hectare, while the yield in South Coastal Andhra is as high as

1500 kgs per hectare. This variation in yields is partly due spread of a crop to areas

where the soil is not suitable for the crop. For instance, cotton is spread to North

Telangana region and groundnut became the dominant crop in South Telangana. The

soils appear to be not highly suitable for these crops and this has resulted in low yields.

2.2 Imbalance between surface and groundwater irrigation

Agricultural backwardness is generally related to irrigation, fertilizer use and seed

technology. Though irrigated area has been expanding continuously in the state, entire

expansion is contributed by groundwater in recent years. The proportion of net

irrigated area in net area sown increased from 35 per cent in 1988-89-to-43.5----

percent in 1998-99, the share of surface irrigated area declined from 73.1 per cent to

58.8 per cent. Further, there is absolute decline in the extent of surface irrigated area

from 27.23 lakh hectares to 25.25 lakh hectares during the period. It is striking to note

that even canal-irrigated area declined by 1.5 lakh hectares and tank irrigated area by

1.1 lakh hectares. This is an Indication of decline in public investment in agriculture.

The decline in surface irrigation and steep increase in groundwater irrigation resulted

in unsustainable agriculture. The ratio of groundwater to surface irrigation increased

from 0.23 in mid-seventies to 0.64 by the end of nineties. A very peculiar feature of

Andhra Pradesh is the positive association between rainfall and irrigation. As a result,

more rapid expansion of groundwater irrigation has taken place in the areas with low

rainfall and low surface irrigation.

2.3 Deceleration in growth of investment

Andhra Pradesh agriculture witnessed steep decline in the growth of investment from

6.9 per cent in the eighties to 1.1 per cent in the nineties. The share of public

investment declined steeply from 59.2 per cent in 1995-96 to 55 percent by 1998-99.


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Gross fixed capital formation as a proportion of NSDP fell sharply from 24 per cent in

1989-90 to 13.9 percent in 1999-2000 (Subrahmanyam and Reddy, 2004).

2.4 Crisis in Andhra Pradesh Agriculture

Andhra Pradesh agriculture is subjected to crisis in recent times and more than 1000

farmers committed suicides during the last one year. Various explanations have been

offered for the crisis. High investment in bore-wells with a high failure rate, use of

spurious pesticides and seeds, high cost of cultivation, exploitation of traders through

interlinked markets have been identified as some of the reasons. The data from cost

of cultivation surveys indicate that there is a gradual decline in per hectare income

from agriculture. For instance, income from paddy cultivation declined from Rs. 1817

in 1994-95 to Rs. 1446 in 1999-2000 at current prices. The decline in real will be very

high. If we consider the paid-out cost (cost A2), income per hectare is Rs. 12990,

which forms only 69.9 per cent of the poverty line. In other words, a family of five

members requires 1.43 hectares of land to cross the poverty line. Income from

groundnut has been negative if total cost is considered and there is continuous decline

if only paid out cost is considered. Income per hectare is only Rs. 2094, which indicates

that a farmer requires 8.87 hectares of land. Even cotton gives a low income of Rs.

11413 per hectare, indicating that a family of five members needed 1.63 hectares of

land to come out of poverty. These results indicate that given the structure of input

and output prices, agriculture cannot provide adequate income to push a family out of

poverty.

Another factor responsible for crisis is the dependence of farmers on traders

and private moneylenders. A study in Ranga Reddy district in Andhra Pradesh

revealed that almost all the farmers with less than 2 hectares of land are depending

on informal credit market. Further, the major dependence is on traders. It is striking to

find that even among large farmers, more than one-half are depending on and the

proportion is as high as 73.3 per cent in the case of marginal and small farmers. It is

found that the implicit rate of interest on the inputs purchased on credit basis is as high

as 45 per cent. In addition to this, farmers lose about 5 per cent while selling the output

to traders because of wrong weight. Thus, the crisis in Andhra Pradesh agriculture is

mainly because of the failure of the organized credit market and steep increase in the

cost of production (Subrahmanyam et.al, 2003).


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2.5 Low Development of Manufacturing Sector

Andhra Pradesh is industrially backward with a low share of manufacturing in NSDP

at (12.3 per cent) and there is not much improvement since the beginning of the

eighties. The growth rate of manufacturing is only 5 per cent in the eighties as well as

nineties. But the decade of nineties witnessed steep deceleration in the

growth of registered manufacturing.

2.6 Acceleration in the Growth of Working Age Population

Using the NSS data for the 50th and 55th rounds, many scholars have estimated the

employment growth at the aggregate as well as sectoral levels and found that there is

a steep decline in the growth rate of employment in the nineties (Chadha G:K and

Sahu, 2002). However, it is also argued that the 50th round data is an outlier and the

conclusions based on this data are erroneous (Sundaram K, 2001). We examine the

data relating to rural Andhra Pradesh to understand the dynamic changes and to find

out the proper participation rates to be used in labour force projections.

The NSS data indicate that work participation rate increased from 53.3 per cent

in 1987-88 to 57.5 per cent in 1993-94 and again came down to 54.4 per cent in 1999

2000. There is an increase in the work participation rate by 1.1 percentage points

between 1987-88 and 1999-00. As work participation rates are not likely to fluctuate

so wildly in a short period, the rates of 1993-94 appear to be outliers. Both male and

female rates exhibited the same extent of variation. If the rates of 1987-88 are low

because of drought in that year, we can say that work participation rates have not

increased but remained constant in the nineties. The trend in census rates and a

comparison between census and NSS rates also indicate the unreliability of 50th round

NSS rates. It can be observed that the 1991 Census rates are close to the NSS rates

of 1987-88 and 2001 Census rates are closure to NSS rates of 1999-2000, but not to

the NSS rates of 1993-94. However, census rates are always lower than the NSS rates

and the gap is wider for females than for males. While the male rates differ by

percentage points, female-rates differ-by-4.6 percentage-points. These results

indicate the appropriateness of 43rd and 55th round NSS rates of work participation.

While the use of 50th and 55th rounds data indicates that rural employment grew at a

low rate of 0.35 per cent per annum, the use of 43rd and 55th rounds NSS data

indicates a growth rate of 1.66 per cent per annum. Further female employment has

shown absolute decline according to the former source. However, employment must


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grow at annual rate of 2.7 per cent, as the population in the working age is likely to

grow at this rate.

3 Economic Reforms in Andhra Pradesh

Growth rate of GSDP in Andhra Pradesh decelerated from 5.50% in the eighties to

5.31 % during the nineties, whereas the nation witnessed acceleration growth from

5.37% to 6.13% during the same period. The per capita GSDP was growing at lower

rate in the state (4.04 percent) as compared to the growth at the national level (4.38

percent) in the nineties. The absolute level of per capita income of the state was lower

at Rs. 10,591 as compared to Rs. 11,589 at the national level in 1999-00 (Dev and

Ravi, 2003). While this is the scenario of growth, the state witnessed fiscal crisis in the

year 1995-96. State's own tax revenues as per cent of GSDP dropped by neatly three

percentage points between 1990-91 and 1995-96, largely due to fall in excise revenue

due to the imposition of prohibition and rise in the rice subsidy due to poor targeting

(Rao and Dev, 2003). This tendency of deceleration in the growth rate of GSDP and

fiscal crisis compelled the Government of Andhra Pradesh to approach the World Bank

for loan and introduce economic reforms on mutually agreed conditions. The loan was

sought for improving the infrastructure. The World Bank prepared the pre-appraisal

report and approved the total cost at US $ 830 million of which loan will be US $ 543.2

(65.4 per cent) will be loan and the remaining amount is the margin money to be

invested by the GOAP.

The loan carries nine per cent rate of interest to the Government of India (GOI).

As the repayment must be in dollars, exchange rate fluctuations also affect the amount

to be repaid in rupee terms. To meet this risk, the GOI collects interest at 12.5 per cent

from the GOAP. The loan is sanctioned under the project title, Andhra Pradesh

Economic Restructuring Project (APERP). Reducing malnutrition, increasing the level

of educational achievement, improving access to and quality of health services,

reversing the deterioration in irrigation and road infrastructure, and putting state

finances on a sustainable path are the objectives of the assistance as stated by the

World Bank (World Bank, 1997). In fact, these are the goals specified in the Country

(India) Assistance Strategy (CAS) of the World Bank. The allocation of the project cost

to components reveals that 41.2 per cent will go for health and education, 55.6 per

cent for rural roads and irrigation rehabilitation and only 3.2 per cent for public

enterprise reform. Irrigation maintenance and rehabilitation is the single most


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important item in the cost structure covering 34 percent of the total project cost.

Subsequently, this project cost was reappraised at US $ 1020.

Table 1: Planned Future Adjustment Operations and possible Amounts

(in millions of US dollars)

2001-02 2003-04 2004-05 2005-06 Total

Bank

lending

250 220 250 280 1000

DFID Grant 100 100 100 100 400

To bring back the state finances to the sustainable path, the World Bank attached the

following ten conditions on fiscal reforms.

1. The fiscal deficit of the State must be reduced by 0.5 percentage points per annum

in the program period.

2. The revenue account must achieve a positive balance of 0.4 percent of GSDP in

2000-01 and maintain it at least at that level thereafter.

3. The ratio of guarantees given to various enterprises should not exceed present

average level of nine per cent of Gross State Domestic Product.

4. Employment in the State Government (excluding primary education) has to be

reduced at 1.9 percent per annum.

5. The ratio of salary to GSDP must be reduced from the present 5.3 per cent in

1997-98 to 5.0 percent in 2002-03.

6. Increase Total expenditure in primary education and primary health must be

increased from the estimated 0.9 percent of GSDP in 1997-98 to 1.8 percent in

2002-03.

7. Expenditure on non-salary component of operation and maintenance (O&M) has

to be increased from the present 1.2 percent of GSDP in 1997-98 to 2.0 per cent

by September 2000, the time for mid-term appraisal, and maintain it at least at that

level.

8. Expenditure on capital outlays (excluding net loans and advances) should be

increased from the estimated 1.1 per cent of GSDP to 2.0 percent by September

2000 and maintain it at least at that level.

9. Rice subsidy should be targeted properly by eliminating illegally held ration cards.


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10. Collection rate of irrigation charges must reach at least to 90 percent by March

2001.

To reduce fiscal deficit, reform of public enterprises and cooperatives is

considered as the most important tool. In Andhra Pradesh, Government is the

dominant shareholder in 39 public enterprises (PES) and more than 60 cooperatives.

These enterprises receive direct and indirect subsidies of more than one per cent of

GSDP. To implement reforms in these enterprises, the GOAP constituted a Working

Group (WG) to recommend a reform program for each enterprise and a Cabinet Sub-

committee to review the recommendations of the WG. The recommendations included

privatization of several units, closure of unviable ones, and merger and restructuring

of others. Following the recommendations, two enterprises have been privatized and

four were closed as a prelude to availing: the structural adjustment loan from the World

Bank. Consultants have completed the review of Singareni Coal Company, a large

company in the public sector, and the results were presented to GOAP in May 1998.

However, due to the sensitivities involved in privatizing a large enterprise such as the

Singareni, the government soft pedalled the issue, and instead, argued that small and

medium enterprises and cooperatives be targeted first and proceed further on the

basis of the experience gained. As a consequence, about 20 sugar and spinning mills

in the cooperative sector and several small and medium scale units such as Andhra

Pradesh Small Scale Industries Development Corporation (APSSIDC), Andhra

Pradesh Electronics, APANRICH and Alwin Watch were closed, apart from downsizing

several others such as APAGRO, Andhra Pradesh Irrigation Development Corporation

(APIDC) and Andhra Pradesh Industrial Development Corporation. A State Renewal

Fund was established in 1995, to-finance severance pay-under a voluntary retirement

scheme (VRS) and other retrenchment benefits. Over 2,000 employees have been

severed under this scheme by 1998 as a precondition for availing the loan.

Weaknesses in the institutional framework for privatization and lack of resources to

finance severance costs were identified as factors that would hinder progress in

implementing the reforms. The PE reform program was structured to have two

components to be implemented over a period of five years. The first component is the

implementation of the Phase-I Action Plan, which includes privatization and closure of

twelve medium and small size companies, and a social safety net program for the

affected workers, strengthening the institutional capacity to plan and implement the


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PE reform program under technical assistance. The second component is the

preparation of the Phase-II Action Plan for the remaining companies and cooperatives.

APERP would support Phase-I through financing part of the severance cost to the

extent of 65% of the total cost. The social safety net program and an institutional

capacity building program are supported with technical assistance under parallel

financing from the Department for International Development (DFID) of the U.K.

Government. Phase-I of the APERP focused on twelve small and medium enterprises

that operate in competitive markets and whose restructuring and privatization would

not involve complex institutional and social issues. This. approach was considered

more likely to demonstrate the feasibility of the reform process and help build public

acceptance. The Government has chosen twelve units, which offer potential for easy

disposition and are relatively unobtrusive in terms of social impact. These enterprises

have nearly 14,000 employees, of which 7,250 would be surplus because of

restructuring, privatization, and closure. About 1,450 employees were in the five firms

to be wound up (APSSIDC, APTEX) or through the closure of unviable assets (Agro

Industries, Meat and Poultry Corporation). The remaining 5,550 are in the four

cooperative spinning mills and the PEs that are to be restructured and privatized,

including NSL, APSIDC and Alwin Watch (together accounted for about 60 percent of

the surplus). The surplus estimates were derived on the basis of earlier studies at the

enterprise level (as in the case of NSL), comparisons with industry norms (as in the

case of spinning mills), and information gathered by the Government from the

companies. Based on these estimates, the government calculated that the total cost

of extrait payment for voluntary retirement (VRS) for these twelve enterprises would

amount US$ 26.2 million.

APERP would cover all the rest of the public enterprises and cooperatives other

than the APSEB. The power sector reforms were treated as a separate item and loan

was sanctioned separately. While Phase-I of the public enterprise reform program

aimed at twelve enterprises for restructuring or closure, the target was revised to

eighteen enterprises2.

All conditions of negotiations were met. These conditions include (a)

requirements for establishing management structures for all enterprises and the

project as a whole (b) receipt by the Bank of satisfactory Program Implementation Plan

(PIP) for each component (c) passage of the Power Sector Reform Bill in the State


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Assembly (d) receipt by the Bank of the agreed Letter of Development Policy (e)

approval of an Irrigation Sector Policy Statement and (f) approval of technical

assistance for preparation for the introduction of a Value Added Tax in the State. At

the Mid-Term Review conducted in September 2000 a detailed evaluation of progress

of implementation was conducted and it was stated in the report that continued support

from the Bank would be contingent on satisfactory performance.

3.1 Andhra Pradesh Economic Restructuring Loan - 2

The second Andhra Pradesh Economic Restructuring Loan/Credit (APERL-2) is

continuation of APERL-1 to support the ongoing reform program and it includes six

components viz., (I) improving poverty monitoring and pro-poor policy formulation and

implementation (ii) implementing structural measures to foster economic growth (iii)

restructuring and privatizing public enterprises (iv) improving fiscal discipline, the

composition of spending, public expenditure management, and financial accountability

(v) strengthening governance, and (vi) facilitating sectoral reforms in education, health

and power. The World Bank appraisal document on APERL-2 expects the following

benefits: (a) Improvement in the state's investment climate through increased

competition in agriculture and greater labour market flexibility (b) fiscal savings from

further public enterprise reform (c) improved delivery of public services as a result of

public expenditure, financial management and governance reforms and (d) freed up

resources for other development priorities from the continued curtailment of power

sector losses.

The appraisal document perceived several risks. They stem from tightening of

fiscal targets in the next few years, leaving very little room for slackness, the difficulties

in metering of agricultural connections and fixing tariffs for power, vulnerability to

exogenous shocks like poor monsoons, and risk of changes in policy priorities as a

result of elections due in 2004.

There is a noticeable shift in the strategy for APERL-2. The overall medium-

term development strategy has two main objectives (I) eradicating poverty and

focusing on human development, and (ii) accelerating economic growth. The goals of

eradicating poverty and accelerating human development are to be achieved through

the Velugu Program, financed by DFID. grant which was initially initiated in six districts

(two districts in each of the three regions) which was financed entirely. by way of grant

from DFID. However, the program has been extended throughout the state with a loan


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component from World Bank. The program aims at building the capabilities of the poor

and disadvantaged groups (by improving literacy and health), empowering women by

addressing gender inequalities in education and increasing gender sensitivity in health

programs and by accelerating pro-poor growth.

APERL-2 is the second operation in a series of planned SALs of Andhra

Pradesh. It is based on the strength of State's overall reform program and on progress

on the fourteen key indicative actions that were documented in APERL-1. The loan

supports the state's medium-term reform program through another single tranche

loan/credit to the extent of US$ 220 million (50 percent IBRD, 50 percent IDA). Like

the first, this operation will also be co-financed by DFID with a grant amount of about

US$ 100 million. This has been disbursed January 2004.

The appraisal document notes that the state has fulfilled the APERL-2

conditions. However, implementation of the reform program to underpin APERL-2 has

fallen short of the steps envisaged at the time of APERL-1. For instance, the financial

performance of the power sector was weak in 2001-02; with losses exceeding Rs. 490

crores. IV Performance in the Pre and Post Reform Periods in Andhra Pradesh The

World Bank claims that with its reform agenda gaining momentum, the lineage of

Andhra Pradesh as a backward state began to change. Many of these reforms were

projected as producing encouraging results and the state must bridge the wide

development gap that existed between Andhra Pradesh and more developed Indian

States. In this study, Andhra Pradesh was designated as the "Fastest Mover". The

World Bank supports its argument by taking recourse to a study undertaken by India

Today, which ranked Indian states. However, an in-depth analysis of the data gives a

contrary picture.

3.2 Post reform fiscal position of A.P.

Experience and evidence suggest that the APERP was poorly formulated. While the

major goal was to enhance the GSDP, the results achieved are negative in effect. All

the sectors except tertiary sector experienced steep deceleration in the late nineties

as compared to early nineties.

Andhra Pradesh has a literacy rate of 61.1% (2001) as against the neighbouring

Kerala's 90.9%, Tamandu’s 73.3%. Even the smaller hill state of Himachal Pradesh

accounts for a better 77.1%. In the last decade 1991-2001, population grew in Andhra

Pradesh at 13.9% while the neighbouring Tamil Nadu has shown a better figure of


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11.4% and Kerala 9.4%. Surely, AP's performance is way behind neighbouring states

in what is certainly an important social development indicator. The figures for life

expectancy and infant mortality provide an adequate insight into the sorry situation of

healthcare in the state as well as the inadequacy of the system.

Quite the contrary picture emerges from the Human Development Index

brought out by the Planning Commission. The state has slipped down between 1991

and 2001.

Fiscal Position

The financial position of A.P, marked as it is, by a continuous run of revenue and fiscal

deficits, year after year, is in disarray. Economic reforms were aimed at improving the

state finances and stabilize the position. Indeed, that is the processed aim of structural

reforms and the structural adjustment programs. The APERP is expected to achieve

fiscal stability. However, the financial position of the state has seen a marked

deterioration. The fiscal situation in the state has been going from bad to worse and is

now precarious and even unsustainable. The state is becoming more and more

dependent on external loans even for current expenditure and implementation of the

plan. We are not able to create capital assets due to reduction: of capital expenditure.

Social services sector is worst hit. As the Andhra Pradesh Government put in its

memorandum to the 12th Finance Commission, “the state governments over the years

are utilizing the increased proportion of borrowed funds to meet the current

expenditure needs, leaving fewer funds for the developmental activities in the states.

Even though the state governments are using the borrowed funds for capital formation,

the returns from them are not susceptible to monetization and hence it has not been

possible to generate returns for payment of borrowed loans either from the Central

Government or for other sources".

A look at the finances of the state from 1995-96 to 2003-04 leaves us with the

conclusion that the reforms have accentuated the fiscal problems of the state. The

fiscal deficit increased from Rs. 2417 crores in 1995-96 to Rs. 7426 crores in 2003-

04. While the World Bank has set the targets at 3% of GSDP for the year 1998-99, it

turned out to the 5%. For the years 1999-2000 and 2000-01, the fiscal deficits are 5

and 6.13% respectively. Revenue expenditure has increased from 86.35% in 1995-

96. to 88.03% in 2003-04. Public debt has ballooned from Rs. 15163 crores in 1995-

96 to Rs. 57588 crores in 2003-04. Interest payments have seen a sharp rise from Rs.


| 13

1527 in 1995-96 to Rs. 6919 crores in 2003-04. The state is servicing Rs. 20 crores

interest everyday debt outstanding as percent of GSDP has gone up from 18.99

percent in 1995-96 to 32.37 percent in 2003-2004, in spite of the increased debt and

consequential interest burden, the capital expenditure in the total outlay has declined

from 19.70 percent in 1995 -1996 to 10.08 percent in 2003-2004 (GOAP, 2004).

The planning commission of the government of India has brought out the

Human Development Report, India. The central government has been prodding all the

state governments to bring out Human Development Reports. In fact, Tamil Nadu,

Karnataka, Madhya Pradesh were among the first states to bring out the HDRs for,

their respective states. The government of Andhra Pradesh has availed a grant from

the government of India for bringing out the Human Development Report for Andhra

Pradesh. Till date, the HIOR for the state has not seen the light of the day. Obviously,

the government did not bring out the HDR, simply be lustre performance on the Human

Development front and the poor Human Development indices. Yet, let us look at some

of the indicators.

There was steep fall in the revenues of the state government by the mid-

nineties. The own tax revenue of the state as a percentage of the Gross State

Domestic Product declined by three percentage points between 1990-91 and 1995-

96. Fall in the revenue from state excise consequent to the introduction of prohibition,

untargeted subsidy on rice and the low electricity rates for agricultural use are

identified as the factory responsible for the fiscal crisis. Beginning with 1996 the

Government of Andhra Pradesh has initiated several reforms as a prelude to avail the

World Bank loan called the Andhra Pradesh Economic Restructuring Loan (APERL).

The total amount of the loan is US $1000 million, and it will be distributed in four

instalments. The first instalment of US $ 250 million called APERL - 1 was disbursed

in March 2002 and the second instalment known as APERL-2 of US $ 220 million was

released in: January 2004. The APERL-3 estimated at US $ 250 million and APERL-

4 for US $ 280 1. ...million are expected to become operational during 2005-06 and

2006-07 respectively.

As these loans are intended for structural adjustment: several conditions

accompanied them as in the case of structural adjustment loans provided by the World

Bank. The economic reform measures introduced at the national and state levels

imposed severe strain on the economy and led to some adverse consequences: The


| 14

period of nineties is also classified into pre-reform and post-reform periods at the state

level.

4 Policy Dilemmas in Andhra Pradesh

There are several dilemmas before the government on the SAP. This is particularly ...

so with reference to the sustainability of the conditionalities. For instance, the power:

sector reforms. Till date supply of power is metered. On the contrary the new

government has already waived off power charges to the farmers and has made a

commitment to give free power to the farmers. This year alone the government has

written off Rs. 1400 crores on account of power dues from farmers. The dilemma is

how does one reconcile the government's promise with the conditionalities already

agreed with the World Bank on the front.

Secondly, the growth indicators such as the GSDP and Sectoral growth rates

have shown declined. This is attributed to the general decline in the allocation on

account of capital expenditure. The dilemma is weather to increase allocations in

infrastructure or to pursue the upfront tasks suggested APERL-2, which mainly

focuses on poverty alleviation programs.

Thirdly, the interest rates of Indian financial institutions coming down, it now

appears more attractive to borrow from our institutions rather than borrowed

multilateral agencies such as the World Bank. This dilemma is already evident in the

case of power sector loans where the government of Andhra Pradesh has backed out

after availing the 50 % of the loans from the World Bank for the power sector reforms.

Lastly, a change in the government in the elections of May 2004 has brought

into focus a shift on the policy formulations. For instance, the government has

allocated for the financial year 2004-05 Rs. 4000 crores on creating irrigation

infrastructure as against Rs.1300 crores in the previous year. This again is an answer

to the dilemma in pursuing of the originally conceived formulation under the APRP,

which has emphasized more on social infrastructure.

Notes

1. Restructuring of the State Electricity Board (APSEB) was supported under the

operation of the power sector reform, a separate loan approved for US $ 1000 million

at an interest rate of 12.5 percent as in the case of APERP. The GOAP utilized half of

the amount in three years from 1999-2000 onwards and informed the Bank in the


| 15

fourth year (2004-05) that the remaining portion of the loan is not needed in view of

the availability of financial resources from domestic sources at lower rate of interest...!

2. Enterprises privatized are: Sri hanuman Co-operative Sugar Mill, ASM Co-operative

Sugar Mill, Adilabad Cooperative Spinning Mill, Rajahmundry Co-operative Spinning

Mill, Nizam Sugar Limited, Chagallu Distillery, Shakarnagar Sugar Mill, Shakarnagar

Distillery, Momboojipalli Sugar Mill, Metpalli Sugar Mill, Latchyapet Sugar Mill,

Madunagar Sugar Mill, Momboojipally distillery, Nandyal Co-operative Sugar Mill,

Nagarjuna Co-operative sugar Mill and Purchur Co-operative Spinning Mill.

Enterprises closed are:

Andhra Pradesh Small Scale Industries Development Corporation, Andhra Pradesh

Textile Development Corporation, Alwyn Watches Limited, Nellore Co-operative

Spinning Mill and Chilakaluripet Co-operative Spinning Mill. Enterprise restructured

are:

Andhra Pradesh State Irrigation Development Corporation, Andhra Pradesh State

Meat Development Corporation, Andhra Pradesh State Agro Industries Development

Corporation and Andhra Pradesh Handicrafts Development Corporation.

References

1. C.H. Hanumantha Rao and S. Mahendra Dev: 'Economic Reforms and

Challenges Ahead: An Overview', Economic and Political Weekly, Vol.38 (12 and 13)

pp.1130-1141, March 28-April 4, 2003.

2. Chadha, GK and Sahu, PF (2002): 'Post Reforms Setbacks in Rural

Employment: Issues That Need Further Scrutiny', Economic and Political Weekly, Vol.

37 (21) pp 1998-2026, May 25-31.

3. GOAP (2004): Economic Survey 2003-2004, Planning Department, Andhra

Pradesh, Secretariat, Hyderabad

4. J.V.M. Sarma: 'Fiscal Management: A Review', Economic and Political Weekly,

Vol.38 i (12 and 13) p.1158-1170, March 28-April 4, 2003.

5. Mahendra Dev and C. Ravi: 'Macro-economic Scene: Performance and

Policies’, Economic and Political Weekly, Vol.38 (12 and 13) p.1143-1157, March 28-

April 4, 2003.

6. S. Subrahmanyam and K.C. Reddy( 2004): 'Capital Formation and Economic

Growth in Andhra Pradesh', paper presented at the Annual Conference of Andhra


| 16

Pradesh Economic Association held at Bhimavaram.

7. S. Subrahmanyam and P. Satya Sekhar: 'Agricultural Growth: Pattern and

Prospects', Economic and Political Weekly, Vol.38 (12 and 13) p.1202-1211, March

28-April 4, 2003.

8. S. Subrahmanyam, S. Sudhakar Reddy, Karin Verstralen (2003):'Labour and

Financial markets from Employers-Perspective - The Case of Ranga Reddy District in

Andhra Pradesh', Centre for Economic and Social Studies, Hyderabad.

9. Sundaram, K (2001):' Employment and Poverty in 1990s: Further Results from

NSS 55th Round Employment - Unemployment Survey, 1999-2000, Economic and

Political Weekly, Vol. 36 (32), pp 3039-3049, August 11.

10. T.L. Sankar: 'Power Sector: The Rise, Fall and reform', Economic and Political

Weekly, Vol.38 (12 and 13) p.1171-1178, March 28-April 4, 2003

11. World Bank (1998): 'Project Appraisal Document on Proposed Credit for

Andhra Pradesh Economic Restructuring Project’ Report No: 17710-IN, Poverty

Reduction and Economic Management Unit, South Asia Region

12. World Bank (2004): 'International Development Association and International

Bank for Reconstruction and Development for The Second Andhra Pradesh Economic

Reform Loan/Credit' Report No: 26534-IN, Poverty Reduction and Economic

Management, South Asia Region.


| 17

CHANGING CONTOURS OF SOCIAL POLICY: A KEY-NOTE

G. Haragopal

Professor and Dean, School of Social Sciences, University of Hyderabad.

Indian Constitution envisaged a pro-active role for the state. This is in a way a

departure from the earlier liberal notions of the state - which basically expect the state

as the maintainer of the order. In contrast the Indian state in essence must not maintain

the order but transform the existing order. 'This has drawn the state into a wide range

of activities starting with agricultural and industrial development to changing the caste,

gender and other social relationships. It is also to endeavour for growth but combine

it with Justice. Added to it, the state has a huge task of nation-building. It is, in this

wide terrain the question of social policy is to be located.

The vision emanating from the Constitutional mandate determined the nature

of social policy in the early fifties. In 1954, at Avadi Congress session, they adopted

socialist pattern of society. It is in a way reiteration of Article 38, 39 of the Indian

Constitution. However, the drift from the vision began from the Second Five Year Plan

itself, when we went for a Soviet model of development with an emphasis on heavy

industry and major irrigation projects. While these initiatives were considered as a part

of infrastructure development, they had the inner propensity to tilt the developmental

process in favour of the propertied resulting in widening of the gap between the rich

and the poor. The manifestations of this process became clear by the Third Five Year

Plan period. And therefore, by the late sixties, poverty had to be recognized as an

important challenge to the Indian planners and policy formulators. It was this hard

reality that led Mrs. Gandhi to talk about poverty and make it as one of es which not

only won her the power but the good will of the large millions of the people. This

popularity continues to be one of the political resources for the Nehru Gandhi family.

It also continues to be one of the reference points to the social policy.

Mr. Gandhi’s phase could be characterized as the phase of social articulation

giving rise to policy packages for the poor. The entire target group approach taking the

vulnerability of the socio-economic groups as the defining factor for public policy

formulation is a significant development in the evolution of social policy. However, the

experience with this social policy was two sold; one) it raised the levels of expectations


| 18

without matching performance, two) it brought in institutional mechanisms without the

ability to deliver the goods. It also led to serious ups and downs in the political fortunes

of the political parties. It was the political uncertainties that became a cause of serious

anxiety to the political masters.

Paradox of Development

The paradox of development has been that those who benefited from the

developmental process got better organized, while those who did not benefit started

resisting the path of development. The Indian state got caught in this crossfire and has

not been in a position, to cope with the crisis. It was at this stage of development in

1980s they chose the path of borrowing the capital and technology from the outside.

This paved the way for the process of globalization, privatization, and liberalization.

This brought in the conditionalities that eroded the autonomy and freedom of the Indian

state to formulate their own policies not to talk of social policies.

The reckless borrowing of capital and technology, while benefited a small

section of the neo-rich, it led to serious imbalances in the foreign exchange reserves.

It was this deep crisis that compelled India to become a part of the process of

globalization and it has come to be widely believed that it is irreversible. Globalization

in its very nature results in inclusion-exclusion syndrome. And many the vulnerable

that figured in as an important factor in the fourth plan and after are no more cared.

The neo-liberal model not only excludes them but also offers ideological justification

for the exclusion. One of the arguments has been that the state both as allocator, of

values and deliverer of the goods and services is incapable of performing those tasks.

Hence, the argument for the minimalist state.

The pilgrimage of the Indian state from a pro-active interventionists state to that

of a retreating state with a minimalist role in socio-economic progress has hit the entire

terrain of social policy. The fallout of this path of development has been graphically

narrated by Joseph Stiglitz in his Nobel Prize winning brook Globalization and its

Discontents and in his latest work the Roaring Nineties. In Indian context, one can see

the consequences of what Stiglitz describes as root-less, ruthless, and jobless growth.

The growing deprivation, appearance of ultra-poor, suicides of farmers, growing urban

slums, and large reservoir of army of educated unemployed. This is the volcano on

which the system is resting. It may explode at any point. The widespread unrest, crime,


| 19

violence, social strife is all the result of deprivation and destitution.

It is this context, in which the seminar on social policy is being organized. It is

necessary that. academia addresses this question so that we signal and act as a

warning system. That is, in fact, one of the functions of institutions of higher learning.

At this stage, a seminar on social policy is swimming against the current fashion. But

questioning the fashions and raising the basic concerns about the poor, deprived,

vulnerable is the need of the hour. It is that historic need that this seminar is responding

to.


| 20

SOCIAL POLICY IN THE CONTEXT OF ECONOMIC REFORMS

Dr. B. Sarangapani

Reader and Head, Post Graduate Department of Economics, The Hindu College,

Machilipatnam.

The focus of attention of the 1991 economic reforms has been, almost exclusively, on

the opening-up of the Indian Economy. The liberalization agenda is largely influenced

by the assumption, that India's past failures, are due to over-regulation and insufficient

market incentives. Hence, radical deregulation is being pursued to kick-start the

economy.

But over-regulation and stifling of markets in certain sectors are only partly

responsible for India's slow growth. There are other equally important factors, such as

widespread illiteracy, inadequate infrastructure, endemic political and bureaucratic

corruption, the paralysis of the legal system, the malfunctioning of democratic

institutions, low levels of human development, which have contributed substantially to

India's sluggish growth.

However, economic reforms initiated, overlooked these factors, and thereby

ignored the lack of pre-conditions in the Indian economy for the kind of take-off, that

has followed market-oriented reforms in countries such as China and Vietnam.

Reforms emphasized only deregulation. Deregulation policies never seriously took

into consideration the deep complementarities between market efficiency and state

action. The fact that market efficiency is contingent upon various forms of state action

has been conveniently ignored. It is believed that deregulation by itself would lead to

rapid economic growth. The experience of rural India suggests that deregulation by

itself is not a sufficient condition for sustained growth. Despite the deregulation

initiated long back, and with free play of market forces, the rural economy is not

prospering. In fact, in recent times, it is stagnating.

Too much of Government in certain areas

India has too much government in certain areas and insufficient and ineffective

Governance in certain other areas. In areas where there is excessive regulation, it has

led to the consolidation of vested interests of the ruling elites and concentration of


| 21

economic and political power. In areas where there is ineffective regulation, it has

negative impacts on the poor. For example, in areas like environmental protection,

social security arrangements, public health and education, public distribution,

provision of necessary inputs for agriculture and handlooms, rehabilitation of the

displaced due to big dams and projects, etc., there is ineffective and insufficient

regulation. Thus, the twin problems of over-regulation and ineffective regulation must

be addressed. This requires an altogether different approach from what is now being

followed in the present form of reforms.

Much of the public debate about economic reforms has been largely around the

need for, the content of, the sequence and pace of, and consequences of such

reforms. The issues of social policy and governance have not attracted the attention

of the scholars and policy as they ought to be. The implications of GATS for social

sector policies are also not examined critically. Hence there is a need to take the

debate on economic policy well beyond the issue of economic reforms in the present

form.

Increased Deprivation

There is now unanimity among the scholars that economic expansion associated with

LPG Policies has resulted in jobless economic growth. It expanded employment to a

few thousands in narrow fields- in high technology areas such as ITC sector and in

low technology areas such as garment factories. The employment opportunities in

other areas such as traditional manufacturing, agriculture and non-farm activities have

been shrinking. The stipulated benefits of economic reforms in terms of better income

earning and employment opportunities and more choice in consumption occurred only

for a minority in India. The majority are suffering from fewer employment opportunities,

increased deprivation, and higher incidence of poverty. Markets have been free in the

negative sense in rising the prices of goods and services and hurting the poor without

providing them the opportunities. Markets are in fact, discriminating against the poor

and unorganized with the emergence of a powerful rentier class which has access to

all economic opportunities thrown open by the reforms.

The uneducated, semiskilled and unskilled workers and those dependent on

public services, small firms, producers of primary products, firms without much market

access and no branding, and producers and sellers who operate in the local markets


| 22

are being severely hurt because of the reforms.

Trade liberalization is hurting the domestic producers and is leading to

unemployment at the expense of the poor. Financial market liberalization is making it

difficult for the poor farmers to procure credit at reasonable terms. Fiscal austerity,

which is pursued blindly, is also leading to unemployment. In other words, liberalization

before safety nets were put in place, privatization without adequate regulation and

downsizing public enterprises before employment opportunities were created in the

private sector have adverse consequences on the poor and the unorganized.

Need for a Coherent Social Policy

Markets exclude people as consumers if they do not have any incomes or sufficient

incomes. This exclusion is attributable to the lack of entitlements. Markets exclude

such people as producers if they have neither assets nor skills nor capabilities. People

without assets - physical or financial are excluded. Similarly, people without

CAPABILITIES are also excluded. In the ultimate analysis, such CAPABILITIES are

defined by the market itself. The government must introduce correctives to pre-empt

exclusion or interventions to limit adverse consequences of exclusion. The reason is

simple. Governments are accountable to the people. Markets are not. Globalization is

a market driven process which reinforces exclusion. In the context of globalization, it

may be difficult for the governments to limit such exclusions through economic policies

alone. Hence there is a need for a coherent and consistent social policy.

Reforms have resulted in the dismantling of the traditional support systems in

the community. The social bond between social groups has weakened. In most cases

the Governments are unwilling to step in and provide safety nets. Even if some

Governments are willing, they do not have the ability at their tax revenues are falling

steeply due to reduced tax rates, tax holidays to the private sector and tariff reductions

to the foreign companies. Whenever governments tried to bring down their deficits, the

axe inevitably falls on social expenditures and within social expenditures, primary

education, primary health care and food subsidies for the poor are the worst hit.

Besides many governments have yet to design suitable safety nets to the poor.

Thus, institutions and mechanisms needed to assist the economic transition are

not simply there or if they exist, they remain weak. Market regulation, which is meant


| 23

for protecting the poor and unorganized, has been very poor and ineffective. In the

event of job destruction, outmatching job creation and exposure to risk outmatching,

the ability to create institution for coping with risk, designing and implementing

effective social safety nets becomes very important. In two important sectors of the

economy - agriculture and small business, suitable social safety nets are not available.

Family and community risk sharing, and other informal arrangements may be

insufficient to deal with the situations arising out of exclusions. Social safety nets are

required for this purpose. Social safety nets comprise policies and programmes that

provide short term income support and access to basic social services to the poor and

marginalized. Ensuring food security, providing employment, and maintaining access

to critical services become the basic objectives of social safety nets.

Social Safety Nets

In these circumstances, the State must play a key role in accelerating human

development and in providing social security to the vulnerable. The achievements in

human development largely influence the success of either individuals or national

economies in the Globalized economy. It is also necessary to spend as much time and

resources on correcting social fundamentals as on correcting economic fundamentals.

There lies the importance of focusing on social policy.

There are people who argue that inefficiencies of the markets are relatively

small, and inefficiencies of the governments are relatively large. We must realize that

both markets and governments failed to produce efficient outcomes. There are both

market and government failures. Hence, we must introduce corrective devices against

them. An unbridled economic role for the government in the name of distributive justice

is often recipe for disaster in the long run, but on the other hand market solutions are

ruthless to the poor. There are desirable interventions by the government which can

improve upon the efficiency of the market. If government suddenly withdraws from an

activity, there is no guarantee that a vibrant private sector will emerge automatically.

Many of these policies fiscal austerity, privatization and market liberalization is being

pursued as ends in themselves, rather than means to more equitable and sustainable

growth These policies are pursued to the exclusion of other policies needed. The

process of development and rapid changes are putting enormous stress on society.

The sizable food grain stocks and foreign exchange reserves would seem to suggest


| 24

that the economy has some cushion to absorb higher fiscal deficit to finance increases

in public expenditure for the implementation of needed social policies.

Governments at the state level are closer to the people and reforms at that level

can have greater effect on the people. The responsibility of the delivery of social

services lies with state and local governments. The quality of delivery of social services

depends upon the quality of governance at the state and local levels. Hence

Governance reforms at the state and local levels for better delivery of public services

with greater accountability to the people becomes important from the social policy

perspective.


| 25

ECONOMIC REFORMS - A BOON OR A CURSE?

S. Indra Kant

Professor of Economics, Osmania University.

Introduction:

The large number of papers that have been published in reputed National Journals I.

and large number of Seminars on Economic Reforms being held in Universities and

Research Institutes in the recent past reflect the concerns of the social scientists il...

(perhaps rightly so) on the impact of economic reforms that are being implemented in

the country. The same degree of concern however has not been exhibited in the

methodology adopted for the research study on impact of reforms. As a result, the

findings of the study are not reliable and, in many cases, they only reemphasize the

point of view held by the authors of the works. Consequently, the results of the study

do not have much policy implications. Therefore, there is a need to devote some

attention on the methodology to be used for studying the impact of reforms.

In the literature, basically three methods have been used to study the impact of

a program. The first method is the comparison of situation before the implementation

of the programmer with the situation after the implementation of L. the program. This

is the most popular method used in social science research and is also appealing to

the common man. In this method, first difficulty encountered by. the researcher is the

definition of 'before' and 'after'. What is the appropriate time which reflects the 'before'

situation and what is the reasonable time-period for the full impact of the program to

be felt? The difficulty involved in this method is that in many cases, the respondents

will not be able to furnish the information relating to the earlier period. The longer the

time gap, lesser is the reliability of the information furnished by the respondents. In

addition to this problem, it is recognized that the impact of a program cannot be fully

realized in. the short-run and it involves quite some time for the full impact of the

program to be felt. In this regard, it is not clear how long one should wait to examine

the full impact of the program. Further, there is a tendency to attribute all the observed

changes to the program, which may not be correct. The second method used for

impact study is to compare group under treatment with controlled group which is like

the treatment group. In this case, the difficulty is the selection of controlled group

having similar characters-possessed by the treatment group. In many cases, group


| 26

which are not comparable are used for the study which reduces the usefulness of such

comparative study. The third method, which is a combination of the first and the

second methods is more scientific. In this method, the differences that are observed

between before situation and after situation in the treatment group are compared with

changes that are observed in the controlled group during the same period. The

advantage of this method is that the results of the study would be more reliable

provided proper control group is selected and bias in the response is less.

Besides these three methods, one can also carry out simulation exercises using

a model constructed for the economy based on the past data. The reliability of this

method depends upon whether the past behaviour of the economic agents and

economic relationship hold true for the future. Building up the model requires large

amount of statistical data and good number of approximations in the absence of the

required data. This imposes big constraint on the use of simulation method. Social

scientists can also use SWOT (strength, weakness, opportunity, and threats) analysis

which is generally employed by the managers. This basically depends upon assessing

our strengths and weaknesses and how best we can seize the opportunities and meet

the challenges that we may face.

The implementation of economic reforms is taking place when the process of

globalization is underway. Therefore, it is not out of place to briefly invention few

important features of World Trade Organization which will also clear some of the

misconceptions. World Trade Organization (WTO) was established in 1995 he is

replacing General Agreement on Tariff and Trade (GATT) which was in existence from

1948 to 1994. GATT covered only trade aspects while the coverage of Two’s more

comprehensive, wider, and increasing with passage of time. The Agreement on

Agriculture seeks to make free and market-oriented trading system in agriculture. Its

main features are:

1. Tariffication: It implies the replacement of non-tariff barriers by tariff. Further,

the developed countries were to reduce the tariff bindings by higher percentage points,

and in shorter time compared to developing countries. Least developed countries were

exempted from the condition.

2. Market access: It implies that the member countries should provide market

access to exports in terms of certain percentage point of its total expenditure, the

percentage point is slightly higher for developed countries. This clause is not


| 27

applicable to commodity which is traditionally staple diet of developing countries.

3. Domestic Support: Aggregate Measure of Support (AMS) covering both

product specific subsidy i.e., price support and non-product specific subsidy i.e., input

subsidy should not exceed 5% of GDP in case of developed countries and by 10% in

case of developing countries. In case it exceeds, it should be brought down in phased

manner. There is some exemption to this clause.

Green Box Support: The support given to items which have minimal impact on trade

like research, pest and disease control, training and advisory services, infrastructure

services, food security, buffer stock operations are exempted.

Blue Box: It is product limited subsidy and covers the fixed cost of farmers. Special

and Differential Treatment Box: Investment subsidy in agriculture on farm

development work, input subsidy to poor farmers etc., are exempted from inclusion in

AMS.

4. Export Competition: The member countries are expected to reduce direct

export subsidy by stipulated rate within stipulated timeframe. There are some

misconceptions which need to be cleared at the outset. Generally, there is an

allegation that the subsidy per farmer in America is more compared to many other

countries. This necessarily does not imply violation of WTO restriction. The restriction

is only on aggregate measure of support which should not exceed 5% of GDP. A

country with a smaller number of farmers and having high GDP can have high subsidy

per farmer, and still it may be within the restrictions imposed by WTO negotiations.

However, it is possible that subsidies to the farmers may be provided in a disguised

form in the name of green box, blue box, etc., On the other hand, in less developed

countries, the subsidy per farmer may be low but it may violate WTO condition

because the number of farmers may be more and the subsidy may be more. than 10%

of GDP (which is very low in absolute terms).

Review of Government Policy:

The first and foremost issue that strikes the mind of a reviewer of government

agricultural policy during the post-reform era is the agricultural subsidy. There are no

two opinions regarding whether there should be subsidy or not. So long as there. is

imperfection in the market and so long as there are wide inequalities in income and

wealth there is a need for government to provide subsidy. However, the important


| 28

considerations are for whom subsidy should be given and for what purpose. The policy

of unrestricted free supply of power to farmers is likely to benefit richer farmers more

than the others. Another important issue is that in dry area, underground water may

be excessively exploited without adequate replenishment. The procurement policy is

benefiting the large farmer growing superior cereals and having surplus grain. The

minimum support price policy for coarse cereals is not effective. The government is

not having comprehensive seed policy. For various reasons the farmers depend upon

trader (who combines the role of input supplier, purchaser of output and financer). The

news of farmers committing suicide is "becoming more and more common but the

news of trader committing suicide is rare.

The impact of reforms on agriculture depends upon how the economy gets

adjusted to the changed conditions. No developed country can afford to have 50-60%

of its labour force working in agriculture sector. In many developed countries, less than

10% of labour force working in agriculture sector can feed the ninety percent of their

population. Sometimes they are in a position even to export food to other countries.

So, there is an urgent need to increase the productivity in agriculture Sector in less

developed countries and simultaneously re-deploy the existing work force in

agriculture in other sectors like medium and small scale industries and in - tertiary

sector. Sooner it is done, lesser will be the hardship imposed by the reforms process.

This does not necessarily imply that persons working in agricultural sector should

migrate to urban area. They may be productively employed in non-farm sector and

rural industries. Secondly, the agriculturists must shift from traditional crops which are

not remunerative to crops which are suitable from climatic conditions prevailing in the

country. The agriculture scientists recommend that floriculture and horticulture would

be more appropriate in Indian conditions. So, Indian farmers must shift from the

traditional agriculture to horticulture and floriculture. Sooner the better. All this cannot

take place without government intervention. Generally, one is under the impression

that liberalization, privatization, and globalization implies no role for government, but

this is not true. The role of government shifts in the post-economic reform’s era from

an active partner in production process to a regulator. Government cannot be a silent

spectator. There can be no game without an umpire. So also, in the market economy,

there cannot be smooth functioning without active and alert government. Government

must play the role of regulator and facilitator of development process. This involves


| 29

building up of infrastructure in the form of connecting villages to the regulated markets

by roads and providing transport and communication facilities. There is also urgent

need to provide storing facilities for the perishable items in the village as well as in the

market yards. Government also should provide facilities for processing of food, grading

and packaging of items. The extent of realization of potential benefits of reforms

greatly depends upon the efficiency of the government in providing these facilities.

Whether the reforms will a boon or a curse greatly depends upon the performance of

the government in its new role during the post reform period.


| 30

ENHANCING POLICY CAPACITY FOR EFFECTIVE GOVERNANCE

Prof. I. Ramabrahmam

Department of Political Science, University of Hyderabad, Hyderabad.

Prof. M. Kodandaram

Department of Political Science, University of Hyderabad, Hyderabad.

According to Ali Kazancajel (1999) Governance can be analysed and assessed in

social science literature from two perspectives: rational choice theory and Public Policy

on the one hand and historical and sociology of institutions on the other (Leca: 1996).

The advocates of rational choice theory consider governance as the best political

framework for policy making whereas sociologists and historians opt for critical and

comparative perspectives. Governance is mostly used in urban context, especially,

the problem-solving approaches with accent on efficiency. But, over a period,

governance model is being extensively used at the Central Government level besides

to those in the management of transition economies.

According to Daniel Bell, the State had become too big for small problems and

too small for big ones. Traditional government, with its vertical framework, large

bureaucracies and intervention is unable to adapt to a fast changing economic, social,

and cultural context. This is leading to crisis on account of creating complexity of

issues as also plurality of agencies of government, civil society in policy processes

(Dror 1999).

Institutional Reforms Needed

In response to compulsions of neo-liberal economies, institutional reform towards

enhanced policy capacity is attempted in developing countries. The OECD offered a

forum for this debate. A greater State-society interaction followed by governance

reforms it was thought would improve quality of policy process thereby leading to

better governance. Emphasis was on achieving greater efficiency. The re-enactment

of Taylorism perhaps! Being effective at the least possible cost and through increased

output and shrinking bureaucracies in sum and substance accounts for governance

reforms. If one observes the titles of reports, one will easily understand this. In 1993

the Vice-President of US Mr. Gore submitted a report to the President entitled

"Creating a Government that Works Better and Costs Less: From Red Tape to


| 31

Results". He proposed improved public service with lower budget, less bureaucracy,

and fewer regulations (Leca: 1996).

Non-State organizations started showing interest in this issue, particularly, in

relation to the debate on development, advocating adoption by developing and

transitional countries of both neo-liberal economic policies and through a new

governance model.

Further features are attributed to the governance reforms which concern

efficiency, such as fiscal rigour (Indian Government also passed an Act in this regard

called Fiscal Responsibility Act), market oriented policies, a reduced role for

government intervention and privatization. The list includes such other issues that

cover (a) accountability (b) transparency (c) equality (d) justice (e) promotion of rule

of law (1) civic and socio-economic rights and (1) decentralization.

Good Governance Reports

One should see in this perception only adjectives that include good governance by the

World Bank and OECD, sound governance by the UNDP, democratic governance in

UNESCO (IBRD, OECD, DAC). The Commission on Global Governance stated that

some of ways of strengthening institutions: public and private managing their common

affairs is what is governance. Further, it is stated that a continuing process through

which conflicting and diverse interests may be accommodated and cooperative action

is taken is referred to as governance. It includes. formal institutions empowered to

enforce compliance as well as informal arrangements cither agreed or perceived to be

in their interest. Coming to the policy capacity', one should regard governance as a

horizontal policy making mechanism which may include certain missions of

governance, the process of governance, limiting, the number of public agencies shows

a trend towards privatization with limited control by politically controlled executive.

Certain policy fields and actors, il appears, resist democratic politics. The general

interest may have to be sacrificed in this process. It was pointed out by critical social

scientists that the task of public administration shifts from serving society to sectoral

interests and. customers/consumers. This has the risk of aggravating inequalities

between citizens and regions of the country.


| 32

Policy Capacity:

Institutional Effectiveness enhancing policy capacity new studies must be initiated and

to know why do some institutions do better than others, how to appraise public

institutions? A new perspective should also be taken on institutional transformation.

Perhaps one should probe whether the civil society is weak institution or whether

character of social relations have an impact on institutions.

Enhancing policy capacity includes absorbing the information disseminated through

national/international agencies on the success stories of development interventions.

These are known with different labels. Wazin & Oudenhova in an interesting article

stated that replication, dissemination, going to scale extension, adoption, and

transmission,

Policy capacity refers to multi-agency partnerships. An understanding of the

blurring of responsibilities between public and non-public sectors, the emergence of

self-governing networks and the development of new governmental tasks. So are, the

policy capacity is restricted by weak normative underpinnings, blame avoiding and

scape-gloating, proliferation of unintended consequences and inadequate

accountability. In an interesting article entitled 'Governance & Modern Welfare States'

Francois Xavier Merrien stated that the new theory of governance represents

emergence of new thinking about welfare states.

The complexity of the modern world is forcing states to limit their field of action

and enter new action networks with private sector partners. The call for good

governance, therefore, sound too simple and tend to underestimate what states

inherited in the way of institutions and standards. All governments produce policy

analysis. However, the task of assessing the social desirability of the possible role for

policy capacity is complicated. It cannot be isolated from the political regime.

Policy analysis enhances policy capacity which will improve public discourse by

contributing policy alternatives. It provides better predictions of the consequences of

proposed policies. It makes provision for explicit arguments for the consideration of

the full range of proposed policies, social values especially those that were

underrepresented in a representative democracy. Professionalization of policy

analysis and capacity promotes virtues of humility, patience and fortitude besides

analytical integrity which will promote good society.


| 33

TRENDS IN NEW INDUSTRIAL LABOUR MARKET AND RELEVANCE OF THE

SECOND LABOUR COMMISSION REPORT

G. Vijay

Fellow, Centre for Social Concerns, Hyderabad.

Introduction:

The past two decades have seen an intense debate within liberal democratic capitalist

plank, between two perspectives on the role of labour unions. The two schools of

thought; characterized as institutionalists and free market thinkers have emerged as

the dominant perspectives at loggerheads with each other on the issue. In the post-

cold war era, Capitalism has unleashed itself in its pre-welfare variant form,

threatening the quality of life of workers and organized working class, while promising

an increased number of employment opportunities achieved through competition

which metaphorically reminds us of battlegrounds for survival, with not many rules.

While the promise is that many will participate in the battle, the fear is many more will

perish. The battle is justified, nevertheless on the grounds that prosperity comes at a

price. However, perverse purpose of competition is self-evident and leaves very little

space for wisdom of the welfare era with no institutions or mechanisms for

redistribution of new wealth in place. The price seems to be far higher for the third

world economies where regulating institutions in their initial instance itself have been

weak. The · policies of liberalization and deregulation contribute towards further

weakening of these institutions. With traditional social norms and hierarchies being

extremely disadvantageous for those deprived, the decades of welfare era have been

unsuccessful in accomplishing the task of decreasing inequalities. And deregulation

at this point would leave these sections with very: little defence mechanisms in this

battle. This paper focuses on the manufacturing industrial working classes and their

experience in this process. The Second Labour Commission Report therefore was

looked at by the working classes as a hope towards building this defence. In this

backdrop this paper tries to identify trends in the labour market in the backdrop of

debates around role played by organizations of the working class and the nature of

the newly emerging labour relations. The paper presents experiences of workers -

both organized and unorganized working in the industries of an industrial town; Kothur

in Mahbubnagar district of Andhra Pradesh and tries to analyse the outcomes for


| 34

workers in contexts where trade unions exist and where they don't. Based on this

analysis and the experiences of workers elsewhere referred to in literature, we analyse

the contributions made by the Second Labour Commission Report with reference to

the consequences it has had for the organized and unorganized working classes and

their rights, in enhancing access to various protections ensuring security and dignity

of employment.

2.1 Trade Unions Bargaining for Fairness - An Institutionalist Perspective

It is maintained that "a capitalist environment has consequences with important

implications for the nature of industrial relations. Most fundamentally, work has the

status of wage-labour. Jobs are located within the labour market; the prospective

worker must find an employer willing to pay a wage or salary in return for the disposal

of his skill), knowledge or physical strength. The capacity to work is thus bought and

sold, rather like fruit or vegetables...from the fact that labour is treated as a commodity

stem many of the fundamental conflicts in industry. The wages and conditions which

the worker naturally seeks, as a means to a decent life are a cost to the employer,

cutting into his profits, and he will equally naturally resist pressure for

improvements...because the employer must regard labour as a cost to be minimized,

it is in his interest to retain a worker in employment only while it is profitable to do so.

This means that worker's jobs are always at the mercy of economic and technological

vagaries". It is further maintained that "within capitalist industry, workers - are treated

less as men and women with distinctive needs and aspirations than as de humanized

'factors of production'. Their upbringing and education are devoted primarily to

rendering them in some narrow often devoted primarily to rendering them in some

narrow respect useful to an employer. In the absence of an immediate use, they are

declared redundant - useless, unwanted, surplus to requirements. So long as they are

employed it is their narrowly defined sphere of usefulness which dominates their work

experience. Utilitarian criteria may prescribe that they perform tasks which are

excessively strenuous or degrading or so monotonously repetitive as to eliminate any

significant scope for intrinsic employment in work... Pay differentials run in close

parallel with other inequalities at work. The highest paid normally have pleasant

working conditions, flexible working hours, long holidays, generous sickness and

pension schemes, secure employment. The lower paid are often exposed to accident

and disease and to insecurity of earnings and employment, -have the longest standard


| 35

hours of work, often have to work shifts and unsociable hours, and usually enjoy few

'fringe' benefits. They are also commonly required. to 'clock in' at work and are subject

to a range of other regulations and conditions which underline their inferior status. The

link between the hierarchies of pay and control is very close: in general, it is the

occupations with the least. formal autonomy, in the most subordinate positions, which

receive the lowest earnings. As the extent of control over subordinates increases, and

the closeness of direction from above diminishes, so income normally rises. At the

extreme, those rich enough to live comfortably on their unearned income can choose

work which altogether free from subordination. Economic inequalities pervade the rest

of the social life. The level of income defines the general possibilities of a family's

quality of living to material and cultural impoverishment or. enrichment. Health and life-

expectation vary directly with income and occupational status. The children of the rich

enjoy educational privileges, and hence are well placed to enjoy the same career

success as their parents. The political influence wielded by the wealthy and the

industrially powerful is disproportionately great." It is therefore argued that "there exist

two fundamental social groupings or classes. On the one hand are those who work in

a variety of manual occupations, in clerical positions, as technicians, or in minor

supervisory grades: men and women who make an obvious contribution to production

which is not adequately reflected in their pay and conditions. On the other, there are

those whose property allows them to live from the labour of others; and the top levels

of managers who, whether or not they have a major stake as hare holders of the

companies they control, pay themselves salaries which far exceed any contribution

they may make to the productive process. Between these two classes there exists a

radical conflict of interests..."

It is argued that "Marx denied, that there was any 'iron law of wages'... The level

of wages he insisted, was 'only settled by the continuous struggle between capital and

labour, the capitalist constantly tending to reduce wages to their physical minimum,

while the working man constantly pressed in the opposite direction'. Trade unionism

provided some protection and even a means of advancement..." The Marxist approach

further maintains that "trade unionists have often proclaimed far more radical aims:

the reconstruction of the social order: the abolition of the dominating role of profit; the

establishment of workers control of industry; the reorganization of the economy to

serve directly the needs of the producers and the general members of the society; the


| 36

humanization of work; the elimination of gross inequalities in standards of living and

conditions of life; the transformation of cultural richness from the privilege of a minority

to the property of all." (Hyman, 1985).

The rise of trade unions or organized working class cannot be rooted merely

through demands for higher wages or emoluments. Consciousness, structural

transformations, and changing social relations underlie this 'trivial exercise and to draw

rationale for existence of trade unions from the bargain between workers and

managements is very superficial. E.P. Thompson states that "the making of the

working class is a fact of political and cultural, as much as of economic, history. It was

not the spontaneous generation of the factory system. Nor should we think of an

external force - the 'industrial revolution' - working upon some nondescript

undifferentiated: raw material of humanity and turning it out at the other end as a 'fresh

race of beings'. The changing productive relations and working conditions of the

industrial revolution were imposed, not upon raw material, but upon free-born

Englishman - and the free-born Englishman as Paine had left him as the Methodists

had moulded him. The factory hand or stockinger was also the inheritor of Bunyan, of

remembered village rights, of notions of equality before law, of craft traditions. He was

the object of massive religious indoctrination and the creator of political traditions. The

working class made itself as much as it was made" (Thompson, 1968).

Thompson further states that "this growth in self-respect and political

consciousness was one real gain of the Industrial Revolution. It dispelled some forms

of superstition and of deference and made' certain kinds of oppression no longer

tolerable. We can find abundant testimony as to the steady growth of the ethos of

mutuality in the strength and ceremonial pride of the unions and the trades. clubs..."

(Thompson, 1968). Thompson maintains that "Luddism lingers in the popular mind as

an uncouth, spontaneous affair of illiterate hand workers, blindly resisting machinery.

But machine-breaking has a far longer history. The destruction of materials, looms,

threshing-machines, the flooding of pits or damage to pit-head gear, or the robbing or

firing of houses. or property of unpopular employers - these, and other forms of violent

direct action, were employed in the eighteenth century and the first half of the

nineteenth... more often they were means of enforcing customary conditions,

intimidating blacklegs, 'illegal men, or masters, or were (often effective) ancillary

means 'to strike or other trade union' action." (Thompson, 1968). Solow's observations


| 37

explain these actions. Solow maintains that the labour market is guided by the

common-sense idea of fairness. He quotes Marshall who states that "an employer acts

unfairly if he endeavours to make his profits not so much by able and energetic

management.

of his business as by paying his labour at a lower rate than his competitors; if he takes:

advantage of the necessities of individual workers, and perhaps of their ignorance of

what is going on elsewhere... In fact, trade unions arise as a natural response to the

unfair behaviour of the employers." (Solow, 1990)

The idea of fairness is intrinsic to aspirations of social security. And social

security comes as an alternative to mere increase in wages which can lead to inflation.

(ILO, 1979). It needs to be stated here that when dealing with sale of labour, one thing

which flows from extrapolating Solow's argument is that it is very different from the

sale of other commodities in that sale of labour comes as a package which includes

its dignity. The trade unions are commonly collective bar gainers who try to protect the

link between dignity and sale of labour.

2.2. Trade Unions as Arm Twisters - A Free Market Perspective:

The free market thinkers on the other hand propose that the prices (wages) in the

labour market should be determined by the market forces of demand and supply in a

competitive environment. They vehemently denounced any protections suggesting

that this would distort efficient prices and lead to misallocation of resources.

It is held by the free market thinkers that "trade unions.., are organizations whose

purpose is to improve the material welfare of members, principally by improving

working conditions and raising wages above the competitive wage level. There is little

dispute that, if unions emerge in competitive markets, higher union wages will

introduce allocative inefficiencies into the economy. The ability of the unions to achieve

wage gains is called the 'monopoly' role of. trade unions. (Booth, 1995). It is held by

Hayek that "It is the continuous change of real live market prices and particularly

wages which alone can bring about that steady adjustment of the proportions of the

different efforts to the distribution of demand, and thus a steady flow of the stream of

products. It is this incessant adaptation of wage to the ever changing, magnitudes, .at

which the trade unions have set out to inhibit. Wages are no longer determined by

demand and supply but by alleged considerations of justice, which means in effect not

only simply custom and tradition but increasingly sheer power. The market is thereby


| 38

deprived of the function of guiding labour to where it can be sold." (Havek, 1980). A

similar view is voiced by other writers (Burkitt & Bowers, 1979, Freeman & Medoff,

1984, Pencavel, 1991). Hayek further holds "these legalized. powers of the unions

have become the biggest Obstacle to raising the living standards of the working class.

They are the chief cause of the unnecessary big difference between the best - and

worst-paid workers. They are the prime source of unemployment...the crucial truth,

which is not generally understood, is that all the powers employed by the individual

trade unions to raise the remuneration of their members rest on depriving other

workers of opportunities"

Following this logic is the analysis that trade unions are rent seekers. Buchanan

states that "rent is that part of the payment to an owner of resources over and above

that which those resources could command in any alternative use. Rent is receipt more

than opportunity cost. In one sense, it is an allocatively unnecessary payment not

required to attract the resources to the particular employment.” It is maintained that

"the term rent-seeking is designed to describe behaviour in institutional settings where

individual efforts to maximize value generate social waste rather than social surplus."

It is further maintained that "all economic rent tends to be eroded or dissipated as

adjustments take place through time. Above-cost payments to any entrepreneurs or

resource owners must attract other profit rent seekers to enter identical or closely

related employments. As such entry proceeds, rents earned initially are driven down

and, in the limit, disappear altogether." However, trade unions prevent free entry of

new employees in to markets where they have monopoly power and thus become

rent-seekers. (Rosen, 1969, Calvo, 1978)

The Neo-liberal argument therefore suggests that trade unionism essentially

reflects an interest group. It is maintained that "the aim of the union is primarily to

benefit the group of workers concerned rather than workers as a whole or society as

a whole, its theories which attempt to explain the determination of wages, hours,

conditions of employment etc., are not general but primarily group theories. They are

attempts to explain how the wages, hours and conditions of employment are

determined for a group of workers. the principles of action which it lays down are

primarily group principles and its economic policies, demands and methods are

primarily intended to protect and benefit the group of workers concerned... The

principal economic aims of the union are to prevent the lowering and, if possible, to


| 39

raise the wages of all the members of the group; to shorten the hours of work of the

group; to increase the security and continuity of employment of the members of the

group and, if possible, to secure steady and assured work for all in it; to prevent the

deterioration and, if . possible the general conditions of employment of all the members

of the group - especially to. better the conditions of safety and sanitation in the shop

and to prevent arbitrary discipline, demotion and discharge of workers and arbitrary

fining and docking of wages.". (Hoxie, 1985). I It is reflected in the idea that "despite

new methods of selecting management and training, management, there are still too

many at the top of the tree who look upon the unions as organizations solely directed

at creating barriers to efficiency or prevent increased productivity." (Bergh, 1970).

2.3. Competitive Global Capitalism and the Role of Trade Unions:

While debates around how to analyse the role of trade unions gains momentum, in the

real world there is a growing danger that trade unions might well be a thing of the past.

Although theoreticians like Wallerstein have been very optimistic in their reading, of

possible direction, emerging trends would take, reality seems to have gone overboard.

Let us summarize some important arguments in Wallerstein's model. Firstly, in

Wallerstein's analytical framework capitalism is viewed as one big system. Secondly,

it is seen as a system operating in cycles. Thirdly, labour is seen in this process as

moving upwards in a secular trend, in terms of employment benefits and conditions.

Fourthly, it is predicted that all the labour will be formalized over the long term,

implying-eventual-homogeneity-in-the-labour market: - And fifthly, this process-in-the

labour market, along with certain other processes, is seen as reducing capital

accumulation and leading to a crisis in capitalism.

Alternatively what seems to be a more plausible trend in the real world situation

is proposed by scholars like Schwab and Smadja (1996) who contend that, in the era

of restructuring, "labour reductions, made possible by technological and organizational

changes, also contribute to the higher remuneration of capital. Clearly productivity

increases no longer necessarily translate secured jobs and higher wages. Whilst in

the past "higher profits meant ignore job security and better wages", global competition

'tends to de-link the fate of the corporation from the fate of its employees' (quoted in

Sideri, 1997:40).

This de-linking is operationalized through the process of informalization. 'For

many years’ informal employment, although its existence was not denied, was


| 40

assigned to be in decline and/or of. little relevance for understanding and interpreting

advanced economies and their prospects. Instead, an assumption prevailed that

informal employment was a mere leftover from a previous era of production. Work and

welfare would become increasingly formalized and result in an end-state of full

employment and comprehensive and universal formal welfare provision. However, the

history of the past twenty years in advanced economies and beyond has taught us

that such an assumption can no longer be accepted' (Williams and Windebank,

1998:5).

Williams and Windebank argue that ‘a popular prejudice that characterizes the

study of economic development, and one that is seldom questioned, is that there is a

natural and inevitable shift towards the formalization of goods and services provision

as societies become more "advanced" (i.e. the "formalization of work thesis"). Indeed,

this is frequently taken as the "measuring rod” that defines third world countries as

"developing" and the first world as "advanced". In this view, the existence of the

supposedly "traditional" informal activities is a manifestation of "backwardness, and it

is assumed that they will disappear with economic "advancement" and

"modernization”. However, there are good reasons for questioning the universality of

this unit-dimensional trajectory of economic development. Although over the long

wave of history, a relative formalization of work has undoubtedly taken place, there is

good deal of evidence that the natural culmination of formalization - full-employment -

has not only never been achieved but also that some advanced economies are moving

even further away from this holy grail' (Williams and Windebank, 1999). .

Edmund Heery and Jolin Salmon observe that 'for some, we live in an "age of

insecurity," and risk and instability have become defining features of contemporary

social life. Underlying this viewpoint is a coherent set of statements about the nature,

causes and effects of recent change in employment relations which can be labelled

the "insecurity thesis". This thesis informs a great deal of contemporary debate and

commentary and includes among its key propositions; that economic risk is being

transferred increasingly from employers to employees, through shortened job tenure

and : contingent employment and remuneration; that insecurity is damaging to long-

term economic performance, through its promotion of employment relationship

founded on opportunism, mistrust and low commitment; and that the emergence of an

insecure workforce imposes severe costs on both individuals and the wider society'


| 41

(Heery and Salmon, 2000:1).

They go on to suggest an insecurity thesis with the following ten propositions (ilvid.:2-

10):

Proposition One: Employment in the developed economies has become more

insecure or unstable in the sense that both continued employment and the level of

remuneration have become less predictable and contingent on factors which lie

beyond the employee's control; Proposition Two: The trend towards insecure

employment has been compounded by changes in the external labour market and

national systems of employment regulation that serve to exacerbate insecurity;

Proposition Three: Employees increasingly regard themselves as insecure and the

issue of job insecurity has become more salient in recent years; Proposition Four: The

incidence of both job instability and feelings of insecurity is changing, and previously

secure groups are now finding themselves in a precarious position; Proposition Five:

The increase in work-force insecurity can be traced either to globalization of the world

economy and resultant pressure for cost reduction within national economics, or to

national systems of capitalism which promote dominance of financial interests and the

short-term management of company assets in the interest of 'shareholder value';

Proposition Six: The emergence of the insecure work-force is prompting a change in

the balance of expectations within the employment relationships and is associated

with the erosion of employees' commitment, encouragement of opportunistic

bargaining, higher transaction costs and il disincentive for employers to train;

Proposition Seven: The spread of insecure employment imposes both economic and

psychological costs on employees and has been associated with both the

intensification of work and the widespread abuse of management authority; .

Proposition Eight: The emergence of a more insecure work-force is stimulating

demand from employees for protective legislation and is furnishing a new

representative opportunity to trade unions; Proposition Nine: The emergence of a

more insecure work-force is associated with a range of wider social Ills, including

barriers to skill development in the system of production, erosion of consumer

confidence the field of consumption, rising inequality in income and wealth and a

reduction in social cohesion which is manifest in rising crime, family breakdown and

political alienation; Proposition Ten: The emergence of an insecure work-force

necessitates action to reform the system of employment, which may take the form of


| 42

voluntary action by employers to rebuild job security or promote 'employability', legal

regulation to eliminate insecure work, or the reform of corporate governance to ensure

companies become more responsive to the interests of employees.

With reference to Trade Unions scholars maintain that 'An almost complete

erosion of possible action strategies has occurred in Third World countries. With

structural adjustment the state is no longer able to share benefits. The ceremonial side

of collective bargaining, whether in the form of corporatist state controls, may still be

there but any nominal wage increases are more than neutralized by subsequent

inflationary pressures. Instead of benefits, trade unions receive messages. of

retrenchment, reductions, in tenured employment and worsening contractual

conditions' (Thomas, 1995:15). Further, 'it goes without saying that the large and

increasing proportion of workers who are engaged in various categories of informal

work relations, and who are victims of casualization of. work in medium and large-

scale enterprises, represents a further problem to trade union recruitment (ibid.).

To follow up on the debate on the role of trade unions, the above discussed

diverging readings of trends suggest different roles for trade unions. Trade unions

have been perceived by institutionalists as agencies ensuring dignity for workers while

the free market thinkers have seen trade unions as rent seekers, monopolizing

opportunities at the cost of large sections of unorganized workers. While Wallerstein's

reading reinforces the free market argument indirectly - that trade unions are indeed

taking far more share than the system can afford, suggested by the undeterred secular

upward mobility of labour, thus, contributing to crisis. Heery and Solomon suggest that

the times to come are likely to become far more unjust for the working class denying

them not only dignity but minimum security and stability of employment. In this

process, while Wallerstein foresees strengthening of class war as the trend, scholars

like Thomas see it as leaving very little substance in the Trade Union movement

implying, that there could be a denial of survival opportunities for working class

organizations.

Even before we analyse the concrete trends, in the following few paragraphs

we try to show the difference between an organized secure working class and the

emerging insecure employment patterns.

3.1 What Does Secured and In-secured Employment Mean:

It is stated that 'India has enacted several legislations to provide social security to the


| 43

industrial workers. the most important legislations are:

Workmen's Compensation Act, 1923: provides for compensation to workmen or

survivors in case of industrial accidents and occupational diseases, resulting in

disablement or death.

Employee's State Insurance Act, 1948: provides for health care and cash benefits in

cases of sickness, maternity, and employment injury.

Employees' Provident Fund and Miscellaneous Provisions Act, 1952; The Pension

Ordinance, 1995 (amended in 1996): provides for provident fund, employees' deposit

linked insurance and a pension to the workers and their-families.

Maternity Benefit Act, 1961: Regulates the employment of women before and after

childbirth and provides for 12 weeks of maternity leave, medical bonus, and certain

other benefits.

Payment of Gratuity Act, 1972: provides for payment of gratuity at half month's wages

for every completed year of service or part of thereof, more than seven months.

for the workmen

Industrial Disputes Act: provided for job and income security covered under the act.

The Minimum Wages Act: guarantees the minimum wages.

Payment of Wages Act: guarantees that wages are paid as stipulated and in

accordance with certain norms on time limits for payments, payment for extra work,

permissible deductions etc., the act also provides for the payment of compensation in

the event of retrenchment. Any retrenchment, closure or lay-off requires notice,

consultation, compensation, and prior notice of administrative clearance by a

competent authority.

1957 Resolution, 'Automation without Tears': ensures that there will not be any

retrenchment because of automation.

Apart from these there are some legislations made for some specific groups of

workers:

Separate laws to cover coal mines and tea plantations.

Separate legislations for workers employed in beedi, cine and mining industries,

which provide for housing, medical, educational, and recreational facilities. There is a

separate legislation for ports and docks, which deals with their employment. conditions

and safety and health aspects. (Thakur and Venkata Ratnam, 2001).


| 44

3.2. Perspectives on Regulating Labour Markets:

In developing countries legal restrictions, it is argued have contributed to different

types of labour market rigidities. Labour Market flexibility is thus interpreted to mean

the marginal role for if not absence of norms and institutions and is regarded as

essential for maximization of both employment and economic growth (Ajit, K.Gosh,

1995; Minor Mora Salas, 1998). In India, there are different 'rigidities' placed by the

existing legal system:

i. Restrictions on hiring. The Contract Labour (Regulation and Abolition) Act, (1970)

pronounces clearly that the system must be abolished in the long run and it must be

permitted only where permanent labour is also not used to perform the same functions.

The Children (Pledging of Labour) Act, 1933, Child Labour (Prohibition and

Regulation) Act, 1986 and Employment of Children Act, 1938 prohibits children being

employed in hazardous jobs.

ii. Protection against dismissal: The Industrial Disputes. Act (IDA 1976) stipulates that

factories with more than 300 workers are required to take permission from the

government before retrenching workers. The amendment to IDA in 1982 requires all

factories with more than 200 workers to take permission from the respective state

governments before laying off or closing the factories (K.V. Ramaswamy, 1999).

iii. Restrictions on working time and functions: The Industrial Employment (standing

orders) Act sets rights and obligations of employees and employers relating to

classification of employees, shift working, hours of work, entry and exit, attendance,

stoppage of work, leave and holidays, punishments for misconduct, suspension or

dismissal, separation, on retirement, grievances, redressal procedures etc., (Ajeet N.

Mathur, 1992).

iv. Regulations on pay and social security: Payment of Wages - Act, 1936, Minimum

Wages Act, 1948, Payment of Bonus Act, 1965, Equal Remuneration Act, 1976,

regulate the pay and Workmen's Compensation Act, 1923, Employees State

Insurance Act, 1948, Employee's Provident Fund Miscellaneous Provisions Act, 1952,

Maternity Benefit Act, 1961, Payment of Gratuity Act, 1972, regulate social security of

workers.

v. Regulation of Association: In India, any seven individuals could form a trade union

according to the Trade Unions Act. After economic reforms, in 1993 this act was


| 45

amended. Now, the act requires a minimum membership of ten percent of the

employees in any firm to form a union (Agarwal Pradeep, 1997).

It has been observed by Guy Standing (1997) that the era of social regulation had

assured different forms of securities:

i. Labour market security: Adequate full employment; employment opportunities,

through state guaranteed.

ii. Employment security: protection against arbitrary dismissal, regulations on

hiring and firing, imposition of costs on the employers, etc.,

iii. Job security: A niche designated as an occupation or 'career', plus tolerance of

demarcation practices, barriers to skill dilution, craft boundaries, job qualifications,

restrictive practices, etc.,

iv. Work security: Protection against accidents and illness at work, through safety and

health regulations, limiting on working time, unsociable hours, night work for women,

etc.,

iv. Skill reproduction security: Widespread opportunities to gain and retain skills,

through apprenticeships, employment training, etc.,

v. Income security: protection of income through minimum wage machinery, wage

indexation, comprehensive social security, progressive taxation, etc.,

vi. Representation security: Protection of collective voice in the labour market, through

independent trade unions and employer associations incorporated economically and

politically into the state, with the right to strike, etc.,

In the post flexibilization phase Guy Standing argues that these securities have

manifest themselves in their respective forms of insecurities.

It is quite evident from the above analysis, that even at the level of analyzing

the several legislations, the divergence of ideas is manifest clearly. While for a set of

scholars the labour market related legislations are construed as 'rigidities' and

'restrictions', for others it connotes different types of 'securities. How do we know if an

established norm is to be defined as a ‘rigidity', 'restrictions' or as 'security'? To answer

this question, we need to answer the question what does 'rigidity' or 'restriction' mean

and what does 'security' mean? As already stated, the claim of free market thinkers is

that the present legal regulations of the labour market leads to unproductive

investment of resources on labour who by exercising their monopoly power get a share


| 46

of resource that they do not deserve and as a result, this becomes a constraint on the

expansion of the organized sector. The claim of those constructing legal regulations

as ''security' is that without these regulations, labour suffer 'deprivation and

vulnerability to deprivation'. Implying that they lose their capacity to resist a rapid

decline in labour standards. In what follows we present the recent trends in the labour

markets with reference to shares of organized and unorganized sectors in the total

labour force.

4.1. Is Informalization a Dominant Trend in the Labour Market?

(i) Evidence Suggesting Rough Weather for Trade Unions:

According to Bhattacharjee (2001) 'shows decline in unions submitting annual ‘returns'

to central government'. It is argued that the power balance has shifted towards capital.

This is suggested by the increased number of strikes that failed. And the number of

closures (account of lock outs being more than the number of closures on account of

strikes. The man days lost on account of strikes were 70.7 percent and man days lost

on account of lockouts was 29.3 percent during 1965-69. However, the man day's lost

on account of strikes has decreased to 38.6 percent and the man days lost on account

of lock outs has increased to 61.40 percent during 1995-98 (Anil.K. Sen Gupta, 2003).

All this means that the agencies monopolizing opportunities have become lesser of a

constraint on capital's expansion in the organized sector. One would naturally

therefore expect expansion of the organized sector. Further, it is almost over one and

a half decades since the structural reforms have been introduced. And in the parlance

of economic theoreticians this period suffices the requirement to assess the long-term

impact of reforms. Although 'optimistic' economists owing their allegiance to the reform

package, still think their 'long term is longer than this. Nevertheless, given that the

existence of the conventional idea of 'long term has been around longer than these

economists, we go with conventional wisdom rather than wisdom of convenience.

Is Kothur an Exception to the Rule:

Kothur is not an exceptional case- it represents a general pattern of what has come to

be known as the new industrialization model. Labour conditions like those in the new

industries of Kothur, have also been observed by researchers in other regions of the

country. These scholars have studied the new industries located in both old industrial

areas as well as new industri.il towns (Holmstróm, 1998; Kattuman, 1998; Tewari,


| 47

1998; Knorringa, 1998). For example, Rajsamand in Rajasthan and Tiruchengodu in

Tamil Nadu (Cadene, 1998), Tiruppur in Tamil Nadu (Swaminathan and Jeyaranjan,

1999), Vapi in Gujarat (Gorter 1996 and 1998), and Patancheru, Jeedimetla,

Gaddapotharam and Bollaram in Andhra Pradesh (Vijay, 2000; Vanamala, 2000) have

all grown into industrial towns only over the past 15 years. Let us briefly look at the

observations of these researchers about trends in industrialization and conditions of

labor to establish the point that new industrialization is a reality and a general trend.

Peter Knorringa observed the process of growing informalization in the Agra

footwear industry in northern India. He points to the presence of 'informal, insecure,

and low-paying sweat-shop employment conditions' (1996:178). The decade of the

1990s was a watershed period during which the nature of the labour market changed,

with a marked increase in informal sweat-shop employment patterns in new units.

Commenting on the industry's prospects, Knorringa states that 'continuing on the

same footing with predominantly sweat-shop employment would result in stagnation,

decreasing employment and further deterioration of employment conditions

(ibid.:178). He identifies the increased role of sub-contracting and introduction of

flexibility in the labor markets. as factors contributing towards this deterioration. The

observations made about trends of employment patterns in the new industries of

Kothur are like Knorringa's findings. Knorringa also observes that 'most large firms and

a few. "independents” follow a runaway strategy, while direct exporters and suppliers

to domestic premium market segments: serve leading actors who follow a premium

artisanal strategy' (ibid.:178). Thus, the fact that there is multiple employment. patterns

and that the quality of employment opportunities depends on various factors, which in

this instance is identified as the market to which these industries cater, is akin to the

classification of industries made in the work on Kothur. Obviously, the essence of this

observation is that the stability of markets has come to determine the stability of

employment patterns. ' ..

The findings of Peter Gorter, who studied another newly emerging industrial

estate, Vapi in the western Indian state of Gujarat, at around the same time, indicate

that informalization is not limited to the labour market but is all pervasive. Gorter refers

to the increased role of informal cliques of industrialists that lobby the bureaucracy

and political representatives over matter such as 'subsidies, transport facilities,

pilferages, pollution, licensing, and even labour unrest (1996:135). Thus, these


| 48

industries succeed in escaping the administration and various regulating institutions,

violating several legally set norms and standards. In Vapi's industries, Gorter notes

that industrialists · recruit workers from different linguistic backgrounds. He quotes one

industrialist as saying, 'if workers are from different communities, they will not unite so

easily against me' (ibid.:121). With respect to working class movements, Gorter also

notes that 'it is much easier for industrialists to deal with labour unrest in small. units

where most of the workers are neither permanently employed nor organized.

Punalekar and Desai (1994:93) found only_27.6 percent of the interviewed workers in

Vapi's-small-scale enterprises had the status of permanent employees. Of course, this

is a major reason for decentralizing production wherever possible' (ibid.:122). Gorter

also points out that the often-used tactics to break strikes in small units include closing

a unit and starting a new one with new workers, bribing the unionists, or using police

force to intimidate and criminalize politically. active workers' (ibid.:122). The

observations made in the work on Kothur about the predominance of informal

employment patterns and conscious recruitment of workers from various regional

backgrounds holds true even in the Vapi industries. Although Gorter does not identify

the workers of Various linguistic backgrounds, the phrase clearly suggests recruitment

of migrant labour. The methods used to disorganize workers and dismantle trade

unions in Vapi are also quite like the strategies employed by industrialists in Kothur.

Observations on migrant workers and their role in the overall transition of labour

market patterns emerge more clearly in Veronique Dupont's study of the industrial

town Jetpur in Gujarat. Dupont notes that 'the system of contract labour is still limited

in the Jetpur textile printing industry. Interstate migrant contract workers form about 5

to 10 percent of the total workforce of industry, depending on the level of economic

activity. However, this type of recruitment which is far from exceptional in India is

indicative of a new' economic logic and likely to lead to reinforced trend... they ensure

a very elastic labour supply. (1998:321-2). Thus, the trend of employers taking

advantage of migrant labour’s vulnerability and the crucial role of the vulnerability of

this section of the workforce in. advancing the process of informalization is confirmed

by Dupont's study.

Swaminathan and Jeyaranjan (1999) present a case from southern India with

a special focus. on gender discrimination in employment opportunities in the new

industries, where the experiences of female workers are like those of female


| 49

employees in Kothur. Ambattur industrial estate in Chennai, with 2000 industries, is

the biggest in South Asia. Although it is also one of the oldest, its boom began only

during the 1990s, and instead of the traditional engineering industry it experienced an

increase in garment and leather industries. Swaminathan and Jeyaranjan note that

'One important factor that has enabled the Indian exporters in gaining ground in the

international market, albeit at the lower end of the product spectrum, is the availability

of relatively cheap labour. More specifically, women labour is available to the industry

in large numbers and at an even lower wage' (ibid.).

They argue that 'the complex interplay of poor material conditions and

patriarchal forces, both at home and in the labour market, is an important reason why

capital is not only assured of a continuous supply of women labour but is also able to

get this supply relatively cheap...Such an interplay of material conditions and

patriarchal ideology is a boon to employers assuring them of a steady supply of cheap

labour. More important, it subsidizes considerably the cost of production for employers

in several ways: by enabling employers to hire workers on temporary basis without

entering into contractual arrangement that are legally tenable, thereby also enabling

the evasion of payment of any benefits (statutory or otherwise) to workers like

maternity leave with pay, ESI, PF etc. From the women's point of view, this

arrangement inhibits the accumulation of experience apart from exploiting them in

every way' (ibid.).

In the new industrial town of Patancheru in Andhra Pradesh, informal

employment patterns, characterized as fleeting employment by M. Vanamala (2000),

is to be found among female workers. This is the same as the employment pattern

that Peter Knorringa refers to as runaway employment. In both, there is a preference

for young; unmarried women who cannot be long-term employees because eventually,

after marriage, they would have to migrate to their in-law’s place of residence. Thus,

their employment creates a rise in informal patterns of employment, relieving

employers of the need to provide benefits, including security and career benefits, that

come with long service.

Production costs can also be kept low in other ways, as observed by Vijay

(1998, 2003) with reference to the new chemical industries that emerged in India after

1987. In the newly emerging industrial town of Gaddapotharam, Andhra Pradesh,

industries have been releasing untreated toxic effluents into the village tank with


| 50

impunity. No action has been initiated against then even though they have caused

considerable damage to the health, livelihoods, cattle, and land of the village

community over the past decade. This shifting of costs suggests both a shift-of-dirty

industries from developed countries, taking advantage of the collapse of formal

institutions or lack of institutions in the developing world. Also, since the findings

suggest that most of the victims are Dalits and · minorities, it may be argued that

vulnerable sections ultimately end up paying these costs. Similar observations are

made in studies of other new industrial areas, including Bollaram, Patancheru and

Jedimetla, where people have suffered a similar fate (Ratna V. Reddy and Bhagirath

Behera, 2002). Thus, the observation in study on Kothur about non-functioning of

formal institutions or lack of institutions in the new industrial towns leading to shifting

of costs to certain vulnerable social groups is true not only of labour but also of other

vulnerable sections of society and other kinds of social costs.

The above studies establish that the new industrialization, wherever it has come

up, in northern, western or southern India, displays similar trends, especially with

reference to organization of production, social background of workers, employment

patterns, conditions of labour, workers' Organizations, and regulatory institutions.

Given the objective of several laws providing social security being removing certain

undesirable practices and forms of employment, and capital being unsuccessful in

expanding the organized sector, we raise the question of appropriateness of the

present policy approach towards labour given the experiences of new industrial labour

in Kothur and elsewhere in India. In what follows therefore we propose to review the

Second Labour Commission Report by raising this fundamental question - What has

the Second Labour Commission Report suggested to address the problem of

vulnerability which is at the crux of the problem of informalization and insecurity.

Relevance of the Second Labour Commission:

It is one year since the Labour Law Journal published the details of the

recommendations made by the Second Labour Commission Report. Let us analyze

the policy framework relating to labour as enumerated in the Second Labour

Commission Report and see how it proposes to address the problems of vulnerability,

informalization and insecurity found in the newly emerging industries. Is the Labour

Commission Report a compass meant to change the direction of trends or is it merely


| 51

a torchlight helping us walk in the direction already known ?

The Second Labour Commission Report discusses the significance of

Gandhian and Nehruvian thought in the making of labour policy. However, the report

itself it seems is designed to accommodate the demands of the newly emerging trends

in the market, and all the other concerns must take a back seat. While there is rhetoric

about the problems of rural. Poverty, choice of technology, self-reliance, inequality,

backwardness, illiteracy, vulnerability, discrimination, and democratization of labour

relations, the report focuses more on the un-organized sector than on the organized

sector. This may not in itself be a weakness. However, it treats trade unions and

employers unequally. In the case of the organized sector, the report gives a history of

the trade union movement and presents a critique of its strategies, methods, and

leadership. It identifies the perversions in the movement. As part of this critique, the

report homes in on the competitive militancy, the adventurism of leaders, the

involvement of the mafia in unions, the corruption, the non-work culture, and the

monopoly. It notes that there has been a decrease in unionization over the years. The

report states that, therefore, central unions are not only taking joint actions but are

also critiquing government policy. The report cautions that the methods adopted by

the unions are leading to loss of public sympathy. Unfortunately, however, the report

does not provide a quality detailed critique of employers' strategies to weaken the

workers and dismantle trade unions. While noting that 'the. forces ranged against them

(unions) are strong and further strengthened by multinational forces...governments

themselves are under pressure to withdraw from the field (Second Labour Commission

Report: 122), it does not suggest alternatives for workers to express their demands.

The Commission states that 'the system of social security envisaged in this report

comprises social, assistance programs for people at the bottom of the income

hierarchy., social insurance programs for those at the top of the hierarchy and a

combination of the two for those in between' (Ibid., : 58). While our evidence suggests

what may be called the 'downward spiral in conditions of all categories of workers, and

it seems odd that the report does not suggest how to prevent further deterioration in

the conditions of workers in relatively higher levels of the hierarchy.

Instead of advising a strong role for the state in the wake of the threat to the

trade union movement, the report merely maintains that 'we have no doubt that

bilateralism is an essential ingredient of industrial, relations, and that both parties (the


| 52

management and unions) should rely on it as far as possible' (ibid.: 16). A lack of

orientation seems to be the hallmark of the report. For example, when discussing the

problem of a rise in contractual employment, far from addressing it with the kind of

seriousness.it deserves, the report uses it as a comical instance to critique corruption

in the trade unions (ibid.,: 130) As if implying that contractualization is totally a result

of the failure of unions. Though the commission reports the increasing role of mafia in

trade unions, it fails to point out that the cause of the decreasing space for civilized

negotiations. The Commission notes that there is fragmentation in the unions. This is

not a valid critique at all, not because it is not true but because there is nothing wrong

with such fragnientatic.17. India as a nation has been led by unstable coalition

governments because of the multi-layered and complex fragmentation in the society.

The so-called competitive militancy is only an expression of the larger context, and

any attempt to regulate it would scuttle democracy. It would amount to forcing people

to vote for a large party to have a stable government. When large trade unions become

vulnerable to corruption, there must be scope for alternative initiatives, even if they

represent a minority to begin with.

In its discussion on social security, the report states that one of the basic

requirements of social protection policy is to preserve the delicate balance implied by

this notion of shared. responsibility. Thus, attention should also be paid to the

encouragement of individual thrift and initiative, the traditional strength of family or

community support, as well as the development of institutionalized schemes based on

national or group solidarity...' (ibid: 48). However, the report: does not actually address

the problems with and complexities involved in dealing with the individual, groups,

community, and institutional levels of providing social security. Thus, this reference to

shared responsibility is reduced to superficiality.

With reference to un-organized workers, the report notes that 'they (people who

are employed on casual, temporary or intermittent basis) need continuity of

employment. Various decasualization measures would be relevant in this context.'

Though from this it seems casualization is recognized as a problem, when it comes to

suggesting measures to prevent it, the report recommends constituting welfare boards

with contributions from workers. Thus, while most of the casual workers earn less than

the minimum wages, the commission wants contributions from them. Worse, this is

supposedly a decasualization policy. The threat of casualization is highest in small-


| 53

scale industries. However, data from the Commissioner of Sales and Excise Tax show

that small-scale industries make good profits in case of Kothur for instance. It is not

true that small-scale industries are always making low profits. The Commission,

however, is swayed by stereotypical constructs and declares in its report that, ‘, the

liability of small and tiny industries may be minimized. Similarly, persons employed on

contract or temporary basis may be covered for ... limited benefits such as health care

and old age benefit at less cost' (ibid.: 58). This is more dangerous, given that large

industries are choosing to outsource their production to small units. It would have a

negative impact on the prospects of workers in small industries. In addition, the

Commission warns that 'there should not be harassment by inspectors or the

imposition of extra administrative burdens to file returns' (ibid.,73). As it is the Assistant

Labour Commissioner's Office and other similar formal bodies are not doing their job

properly. Such statements would be misinterpreted to mean nothing should be done.

However, the Commission does propose comprehensive social security measures for

unorganized workers. This report apparently is a very promising report for the un-

organized sector. It states that in its proposed umbrella legislation 'protection includes

protection of the ability to meet the essential requirements of life and a minimum

standard and quality of life, as well as protection of the rights that are essential to

"protect" one's bargaining power and social status. The absence of bargaining power

will pave the way to a life of deprivation, distress sale of one's work power, violation of

human dignity, and exploitation' (ibid: 10). It further notes that “it is equally clear that a

scheme of protection and welfare has to include assistance to meet exigencies that

arise as a result of unemployment, temporary unemployment, under-employment,

accidents al places of work, the need for insurance cover against accidents and

occupational health hazards; the demands of pensionary, domiciliary ani other kinds

of care in the old age; the need for housing, allocation of children, medical and

nutritional care of the family - particularly-dependents.--and the constant up-gradation

of the skills necessary for continued employment (ibid: 10). However, we have seen

that there is lot of stratification and segmentation in the market, based on gender and

region (caste, class skill may also be mentioned) and other similar factors. Access to

resources, institutions, organizations, and services itself is heterogeneous and

unequal. Under such circumstances, to propose an umbrella legislation without getting

into the complexities of the process and the inclusion-exclusion dynamics, would


| 54

ultimately deny access to many the workforce. Even with the legislation in place it will

be yet another farce. Further, this strong insistence on the un-organized sector and

the casual! analysis of the organized sector has strengthened fears about what the

commission was constituted for. Trade unions have voiced many apprehensions. They

have viewed the Commission mainly as an onslaught on the security and emoluments

of unionized workers, though there is insufficient evidence in the report itself to

substantiate this viewpoint. The fears of the trade unions include 'loss of rights,

increase in number of hours of work, loss of number of holidays, increase in contract

labour' translated from Telugu daily, Vaarta, 5 December 2002). This very

conventional unionist view, being very protective about those who are secure without

looking into the context of those that are unorganized, can be counterproductive for

the trade union movement. It is only by mobilizing those at the bottom of the hierarchy

that the trade union movement can survive. The Commission in a way has only paved

the way for what is inevitable through the liberalization, privatization, and globalization

policies. It has not suggested any way to counter the emerging trends. It has

recommended minimum protections for un-organized workers. By doing so, it has

effectively prepared the institutional ground for the process of informalization. When

the unions know that informalization is coming on a large scale, instead of sticking to

the conventional political base of secured employees, the unions must take this as a

challenge to mobilize the new categories of workers and make a comeback to

influence policy through a larger democratic channel. If they do not do so, not only will

what is now protected labour probably lose all its benefits, which almost seems

inevitable, the unions may also find it too late to mobilize an insecure, highly mobile,

conflict-ridden, diverse, vulnerable, and impoverished working population.

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Weekly, Vol.38, No.48, November 29-December 5.

35. Williams, C. Colin, and Jan Windebank (1998), Informal Employment in the

Advanced Economies: Implications for Work and Welfare, Routledge: London.


| 58

REFORMS-SOME REFLECTIONS

Prof. K. Koteswara Rao

Dean, Commerce and Management Studies, Ambedkar Open University,

Hyderabad.

The scope of the reforms undertaken since 1991 has been wide ranging covering such

spheres as international trade, industrial production, financial markets, and foreign

investment. The reforms related to two major areas - 1. Trade Liberalization aimed at

out word orientation and integrating with the rest of the world and 2. Deregulation and

privatization aimed at putting the private sector as the 'dominant player.

Trade liberalization involved abolition of import quotas, and rationalization of tariffs,

introduction of market determined foreign exchange rate and current account

convertibility. Deregulation involved abolition of industrial licensing system, promotion

of Foreign Direct Investment and Portfolio Investment, interest rate deregulation and

privatization and restructuring of public enterprises.

Indian economy grew at an annual rate of 3.5 percent for about 3 decades since

1950s. It was called as the Hindu rate of growth. During the period between 1981-90

the growth rate accelerated to 5.6 percent. However, the high growth has been

achieved with severe macro-economic imbalances reflected in huge fiscal deficit, large

current account deficit, high volume of public debt and a high debt service ratio. The

unsustainable nature of this growth has resulted in 1991 economic crisis when it ·

could not meet the oil price rise and other shocks arising from the Gulf war.

The reform measures introduced since 1991 have resulted in a higher growth

rate of 7.5 percent for three consecutive years - 1994-95 to 1996-97. However, the

growth rate has fallen to 5.5 percent since 1997-98. This growth rate seems to be

sustainable because of the following reasons:

The economy has withstood the East Asian economic crisis, global depression,

the war in Iraq, oil price fluctuations, a major drought without any large-scale

disruption.

The growth rates in the liberalization period seem to have taken place in a

competitive environment when compared to 1980s.

Inflation is low, exchange rate is reasonably stable, foreign exchange reserves

have been rising, short term external debt is low and food grain stocks are adequate


| 59

even after a drought year.

These achievements are by no means smaller and the reforms introduced must

be credited for these achievements. However, there are regional variations in the.:

growth performance of the states. Some states like Gujarat, Haryana, Karnataka,

Kerala, Punjab, and Rajasthan have done well both on the growth front and on the

poverty front. On the other hand, states like Orissa, Assam, Bihar have been lagging

on both growth as well as poverty fronts.

The source of higher growth since 1992 has been the service sector. In fact,

average annual growth rates in both the agriculture, and industrial sectors seem to be

lower by about half percent during the post liberalization era compared to the pre-

liberalization period. It is only the service sector that lies accelerated to 7.8 percent

during 1992-2002 from 6.7 percent during 1981-90. Thus, the service sector has been

the principle engine of growth.

However, it would be difficult to maintain a high growth rate of 7 to 8 percent

without a strong expansion of the manufacturing sector. Agriculture continues to be

the main source of employment. About 60 percent of the total workforce are still

employed in the agriculture, though its share in GDP has fallen to about a quarter. This

implies that production of a typical worker in agriculture is one fourth of that of his

counterpart in the non-agriculture.

The NSS data suggests that employment growth decelerated in the Indian

economy in 1990s. The employment growth relative to the income growth has fallen

sharply in recent years. There has been hardly any employment growth in the

agricultural sector. Another feature of the labor market is the increasing casualization

of the labour force as revealed by an increase in the share of casual workers in total

employment. The casual workers are most vulnerable sections of the society.

Comparison with China:

In this context, a comparison of performance of China and India reveal several

interesting aspects. China has enjoyed a fastest economic advance in human history

averaging real per capital growth of 8.1 percent per annum over the past decade. In

India it is only 4.4 percent. The per capita income of China in 2001 is $3976 in

purchasing power parity terms. While the per capita income of India is only $2358.

Thus, there are considerable differences in the per capita income levels of China and

India and between their growth rates.


| 60

The one reason for China's exceptional growth is that it started market-based

reforms in 1978 well before India's reforms started in 1991. China is the largest

recipient of foreign direct investment among the developing countries with annual

investments ranging from zero in 1978 to about $52 billion in 2002. This constitutes

nearly 5 percent of G.D.P of China. F.D.I in India has also increased significantly

though at much lower levels, growing from $129 million in 1991 to $4. billions in 2002.

This constitutes less than one percent of G.D.P of India. China had commendable

success in its export performance. Its exports reached $320 billion in 2001 compared

to $35 billion for India. China has had success in moving from labour intensive to

technology intensive exports. Telecommunications equipment and computers now

account for a quarter of its exports. India has yet to significantly diversify its export

base.

These numbers do not mean that everyone in China and India are experiencing

greater wellbeing. China and India still have larger pockets persistent poverty and

deprivation that require the attention of suitable domestic policies.

However, China has made considerable progress on the social front. Literacy

stands at 84 percent in China, infant mortality rate at 32 per 1000 live births and under

5 mortality rate at 40 per 1000 live births. India's Human development indicators are

very poor in relation to those of China. Literacy stands at 65 percent, infant mortality

at 68 per 1000 live births and under five mortality is 96 per 1000 live births. This is not

surprising since China is spending 2.3 percent of its. G.D.P on education and 2.1

percent on health whereas India is spending only 1.3 percent of its G.D.P on health.

The expenditure on education has increased significantly from 0.8 percent of G.D.P in

1950 to around 3.2 percent today.

Conclusions:

It seems that a sound manufacturing base is a precondition for getting benefited from

the economic reforms. This is one of the important lessons which we can draw from

China's development experience. India must strengthen its manufacturing sector and

through suitable policies expand the same. Reliance on the service sector is not a

sustainable solution. Secondly, the structural constrains for sustained growth and

economic governance constrains to these thresholds have to be clearly distinguished

and measures must be initiated to improve economic governance. Thirdly, major


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progresses must be made in sectors like health, nutrition, education, water, and

sanitation. Big gains in education and health are required before per capital incomes

are substantially raised. Fourthly, social safety nets must be designed and

implemented to safeguard the interests of those who are going to be bypassed by the

reforms. Fifthly, political institutions must allow poor people to participate in the

decisions that affect their lives and protect them from arbitrary and unaccountable

actions by the governments. Strategies ensuring women's right to education,

reproductive health services, property ownership, labour force participation and

secure land tenure will go a long way in empowering women, particularly poorer

women. Lastly, given the low employment - income elasticities, a very high-income

growth would be needed for solving the unemployment problem within a reasonable

time.

A Task Force setup by the government had suggested 9 percent GDP growth

target per annum to generate adequate employment. But it might be difficult to realize

above 7 percent growth rate without drastic policy changes. Against this background,

it would be important to have agricultural growth for: employment generation.


| 62

ECONOMIC REFORMS AND SOCIAL POLICY: SOME ISSUES

Dr. P. Perraju Sarma

Reader in Economics (Retd.), The Hindu College, Machilipatnam.

Economic reforms are a drastic change in economic policy which is an aspect of social

policy. The question is who formulates Social Policy? A policy is a plan of action with

a definite goal. The problem lies with the qualifying word 'Social'. The word social is

derived from the word society and society is a collection of individuals. Every individual

has his own mind, but society has no mind of its own. So social policy must be obtained

from individual preferences. There will be conflicts in individual preferences since real

life economics is a' case of pareto optimality. Thus, the important question is what are

the sources of social policy?

Sources of Social Policy

In the case of our country, the constitution is an important guidebook for social policy.

For example, the directive principles given in our constitution are ready references for

formulating and implementing social policy. In a dynamic society there is need for a

change in social policy and there must be provision for making such changes. So, the

government must have the power to formulate and change social policy. The courts

can and will interfere wherever such changes are in contravention of the constitution.

This is one of the limitations on the Governments' power to change social policy.

The second important source of social policy is the "election manifesto" of the party in

power (a common minimum program in the case of a coalition government.) The

"election manifestos" must be given a legal status which is very important if want to

avoid the “stealth character" of reforms. No public debate proceeded the introduction

of the 1990s reforms. A public debate must precede whenever the government

contemplates major changes in socio economic policy affecting millions of people.

India arrived at an “ideological consensus” in the 1950s, also known as Nehru

Model. It relied on extensive industrialization to generate faster economic growth.

Secondary, the major initiative for economic and social change must come from the

state. But the 1990s economic reforms where introduced without arriving at an

“ideological consensus”. It is frequently argued that the reforms got a ‘Post-facto'

approval from the people (as revealed by the 1999 election results). Another indicator


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of acceptance is the limited opposition from the people. This is no doubt an important

indicator if we consider the fact it is much easier to mobilize people in LDCs against

something rather than for something.

Disenchantment with Government

The important question is how reforms could consolidate (themselves) in 1990s? Why

there is only limited opposition to them? Though many factors are cited as answer, the

most important factor responsive for this is the people’s disenchantment many with

governments. In Peter Drucker's "Age of Discontinuity" the last discontinuity is

“disenchantment with government". "What explains this disenchantment with

government”? he asks; and answerers. “we expected miracles - and thus always

produces disillusionment". There is the popular "revolution of rising expectations about

the government thesis (thaumaturgic expectations). The thesis is correct, but it cannot

be held responsible for disenchantment with government. Nobody imagined that the

government has a magic wand in its hand and that it can produce development with a

sleight of hand.

Drucker defends government against clichés. Yes, government resists

changes, but its "inability to innovate is grounded in government's legitimate and

necessary function as society's protective and conserving organ". Yes, government is

a poor manager, but "government is also properly conscious of the fact that it

administers public funds and must account for every penny. It has no choice by to be

bureaucratic....... Any government there is not a "government of a forms" degenerates

rapidly into a mutual looting society". A government cannot be run like a business. We

are all familiar with the defending characteristics of government and they cannot be

held responsible for people's disenchantment with government. No doubt some

changes are necessary, and the proposed changes are called governance reforms.

Some other factors must have brought on the disenchantment. In this context

there are two perceptive observations. “The generations the reached manhood

between 1918 and 1960”. Drucker says, were "in love" with government. They were

as the turn of affairs when the disenchantment with government started 2)The--former

V.S Vice-- President Al Gore's "performance review" of the federal government begins

with the words, “The federal government is not simply broke, it is broken". Who is

responsible for this? Naturally, the people of the helm of affairs corruption,


| 64

malperformance and the abuse of power, not thaumaturgic expectations or the

defining characteristics of government, are responsible for the crisis of confidence is

government.

Darwinian capitalism

Drucker wants to fix government, not tear is down to clear the field for. Darwinian

capitalism. Never, he writes, "has strong, effective, truly performing government been

needed more than in this dangerous world of ours". Government is not simply a drain

on the economic "Effective government is a prerequisite of social and economic

growth”. The cardinal difference between government and business or non-profit

organizations is democratic accountability government is the only institution which is

answerable to the people at large.

Gkun strongly feels that "the market needs a place, and the market needs to

be kept in its place". He values the market as a decentralized and efficiency system

and for spurring and channelling productive effort and for promoting experiment and

innovation. But he insists that other values must be protected from the potential

tyranny of the market or demand and supply. "The domain of rights is part of what

checks and balances on the market designed to preserve values that are not

denominated in dollars. Economic reforms are meant for promoting efficiency or total

factor productivity in the economy. But social policy incorporates explicit value

judgments of the society and efficiency must also be measured in terms of

achievement of social objectives. Society also adopts a portfolio approach, and it

diversifies its mechanism for production, distribution, and allocation”.

Globalization and disenchantments with government make a dangerous

combination. The former affects the lives and livelihoods of millions of people and the

government must protect them with its portfolio approach. While there is talk of the

retreat of the state (Probably meaning retreat from welfare responsibility) the capitalist

class will need the state more than ever because the regulative tasks will increase.

The state will be expected to manage the popular agitation against globalization the

state will be crucial in providing necessary "nationalist” backing during the process of

globalization. These are only examples.


| 65

Keeping the market in its place

But we must recognize that the regulative tasks of government include “keeping the

market in its place”. It does not simply mean price control and taxing or the corporate

sector. It mainly means implicitly and explicitly increasing the domain of rights of the

people. The recent judgments of the Supreme Court increasing people's access to

education food etc., must be viewed against this background. This is dubbed as

“judicial activism". But it is based on the assertion that the courts have a right to pass

judgment including value judgments (no more an anathema for the social scientists)

when the devises of the community are obvious but ignored by the state for different

reasons. judicial activism is also an important source of social policy when other

institutions in the society are dillydallying.

The state in the North-Western European Countries two hundred years ago

was generally means more corrupt and much less soft than the state in the present

day LDCs. During the liberal interlude between feudalism and modern welfare state,

the strong and hard state came into being". One of the characteristics of the liberal

state because a system of a politics and administration marked by a high degree of

personal integrity and efficiency”. “It was probably accomplished by strengthening of

morals in the higher strata backed by legislated sanctions". This has not sharpened in

post independent India. The situation has become so desperate that people are crying

for a halt in the proliferation of the activities of the state.

To restore people's confidence in government there is need for concerted

action on the part of people working in the government and in public sector in general.

They should not forget the fact that they are the beneficiaries of the political capital

accumulated by previous generations and enter this capital is almost spent. They must

build up that capital again by increasing their efficiency in work and by providing

corruption free administration.


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ECONOMIC REFORMS & HEALTH ACCESS IN ANDHRA PRADESH

Dr. A. K. Vasudeva chary

Associate Professor, Dept of Economics, Osmania University, Hyderabad.

Introduction:

Health and Medicare does not mean mere focus on an increasing provision of health

services. It should mean a more holistic approach that looks at people’s access and

social security (Hanumanth Rao, 1998). Therefore, the main objective in the national

health policy of 2002 is to achieve an acceptable standard of health amongst the

general population of the country, through an increased access to the decentralized

public health system. This objective is planned to be achieved by establishing new

infrastructure in deficient areas, and by upgrading the infrastructure in the existing

institutions. Equitable access to health services will receive focus. This paper is related

to some aspects of health care in Andhra Pradesh.

Government expenditure and public health

To achieve the objective set forth in the New National Health Policy 2002, Central

government has planned to increase total health sector expenditure from 5.27 per cent

of GDP as at present to 6 percent of GDP. But the allocation to Health Sector reveals

that there has been continuous decline in expenditure on health between the First Plan

and Eighth Plan. Can we take it as an indication of the government to withdraw from

the sector?

In Andhra Pradesh expenditure on health sector has been on the following

items: a) National diseases b) Hospital and dispensaries c) maternal and child health

d) family welfare e) medical education & Research and. f) Health administration.

The component-wise expenditure made by state government between 1960 to

1995 was presented in Table:1: Expenditure on each item is given as a percentage of

total health expenditure. Over a period, the percentage of expenditure to the total

health expenditure reveals that the highest percentage of expenditure was made on

the hospitals and dispensaries, followed by national diseases programmes.

Expenditure on family welfare and maternal and child health was made since 1980s

only. And about 4-10% of the total health expenditure was spent on health

administration during the above period.


| 67

A mere 32% of all hospitals, 20% of all beds and about 41% of all trained

Doctors were in rural areas where over 70% of India's population lived. In recent years

since the introduction of liberalization policies the gap taking place even in between

public and private health care also. It is estimated that about 85% of all qualified

Doctors in India are in the private sector and about 65% of all hospitals are privately

owned. Among out-patients 75% in Rural Andhra Pradesh use private health care as

against 72%in Urban areas while among In-Patients in Rural areas 70% use private

health care as against 62% in Urban areas (Sheela Prasad, 2002). It clearly shows

that private health care is used more in rural than in Urban, thereby pointing to the lack

of access to public health services in rural areas in the state. It reflects on the

government's abdication of its responsibility of providing basic health to its population.

Table 2 shows that there are 379 allopathic (General & Special Treatment)

hospitals, 1386 Primary Health Centers, 263 dispensaries in A.P. In all the hospitals,

bed strength is 34,948, of which, 23,100 for common purpose, 5,546 for men, 5,024

for women and 1,278 for children. Number of Doctors including available are 8,617

who were drawn from different departments like medical education development, AP

Vaidya Vidhana Parishad, Directorate of Health, Insurance & Medical services. The

per capita figures in the state shows that, on an average there is one Doctor for 8,844

persons, one bed for 2,181 persons while the one hospital must serve the needs of

about 43,252 persons,

District wise Medical facilities:

District-wise Medical statistics of Andhra Pradesh in Table 3 reveals that the East

Godavari district is in first place in terms of number of hospitals (94), Visakhapatnam

is in the first position in terms of number of beds (2637) and Doctors (632) among the

coastal Andhra districts.

In Rayalaseema region, Chittoor district is in the first position in terms of number

of hospitals (104) and number of Doctors (583) While Kurnool with the highest number

of beds (2083) is in the top position. As regards Telangana region, excluding

Hyderabad, the district of Mahbubnagar has the highest number of hospitals (93) while

Warangal district has the highest number of beds (1531) as well as Doctors (448).

In fact, medical disparities are glaringly visible if we observe region-wise analysis of

medical facilities. In A.P, according to 2001 census, out of a total population is 762


| 68

lakhs, 40.66 percent are living in Telangana, 41,6 per cent are in Coastal Andhra and

17.74 per cent are in Rayalaseema. But the percentage of hospitals available in

Coastal Andhra is 40.9 per cent, 38.8 per cent in Telangana and 20.3 percent in

Rayalaseema, The percentage availability of hospitals are more than the requirement

level in Coastal Andhra and Rayalaseema but less in Telangana. Similar situation can

be seen about number of beds and number of Doctors also.

Per capital Availability of health facilities:

A P State as a whole, the Doctor-population ratio is 1:8844, Beds-population ratio is

1:2181 and Hospital Population ratio is 1: 43252. About 14 districts in the State are

found to be below the state average pertaining to Doctor-population Ratio and Beds

population Ratio is also below the state average in about 16 districts (Table-IV). Even

hospital- population Ratio is also not an exception because about Nine districts are

having the less than the state average figure. This shows that still several districts in

the state are in the pathetic situation in terms of medical facilities offered by public

sector. So that there is an emergency need of upgradation/modernization of the

existing facilities and establishment of new facilities in these districts.

Conclusion:

At the outset, State is not equipped with the sufficient medical/health facilities to meet

the requirements of increasing population. Further, Government is reducing budget

allotment to health sector. Private sector is being pampered. The corporate sector

almost exclusively monopolizes cure of heart diseases rather than the infectious

diseases because they wanted to fetch more money. Particularly after the introduction

of the new economic policy health has eased to be a basic right of the people, either

in the country or in the state: those who pay for it only get it, if poor don't have the

means to pay, it is their look out.

The trend of growing privatization in the 90s has been only widen the regional

inequalities in the health sector and the withdrawal of the government will add to the

burden of the people. The analyses pertaining to per capita availability of health

facilities reveals that either the number of doctors, beds or the number of hospitals is

unable to serve the requirements of the minimum number of people in the society. So

that it is suggested that government must take immediate policy decision to establish/

modernize a greater number of health facilities. Government should also withdraw


| 69

user fee in public hospitals because global experience of user fees at any level shows

that it will drive out the poor and the indigent. And government should judiciously

allocate funds to the backward regions and districts.


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Table 1: Health Expenditure in Andhra Pradesh (%)

Source: Andhra Pradesh at 50: A Data based Analysis, Data News Features, Hyderabad.1998

Period National

disease

programm

es

Hospitals &

dispensari

es

Maternal

& Child

health

Family

welfare

Medical

education

&

research

Health

administratio

n

Revenue

expenditu

re

Capital

expenditu

re

60-61 14.2 56.2 - - 12.8 9.7 8.9 -

70-71 10.8 47.2 - - 7.4 24.8 8.7 -

80-81 15.0 46.9 0.30 14.1 7.4 3.5 7.6 2.46

90-91 17.3 31.7 1.76 19.7 7.3 2.3 5.8 2.40

94-95 1808 31.3 0.57 13.6 7.9 5.8 5.6 13.08


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Table 2: Medical Facilities in Andhra Pradesh (Allopathic) as on 31-03-2003

Item Medical Education

Department

AP Vaidya

Vidhana

parishad

Directorate

of Health

Insurance

medical

services dept.

Total

I Hospitals

General Hospitals 21 193 119 11 344

Hospitals with special

Treatment

24 10 1 - 35

Total 45 203 120 11 379

II PIICs - - 1386 - 1386

III Beds available

Mail 5546 - - - 5546

Female 5024 - - - 5024

Children 1278 - - - 1278

Common 1939 15208 4804 1149 23100

Total 13787 15208 4804 1149 34948

IV Dispensaries - 25 105 133 263

V Doctors 3438 1987 1922 631 7978

VI Contact Doctors - - 639 - 639

Source: AP Statistical Abstracts, Directorate of Economics & Statistics, Govt of AP, Hyderabad.


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Table 3: District-wise Medical facilities in A P (as on 31-03-2003)

Sl. No. District Hospitals Beds Doctors

1. Srikakulam 77 934 202

2. Vijayanagaram 63 620 195

3. Visakhapatnam 84 2637 632

4. East Godavari 94 2153 594

5. West Godavari 75 896 220

6. Krishna 84 1550 485

7. Guntur 82 2263 559

8. Prakasam 84 824 229

9. Nellore 78 1297 232

10. Chittoor 104 1844 583

11. Cuddapah 71 828 222

12. Anantapur 89 1120 391

13. Kurnool 93 2083 516

14. Mahbubnagar` 93 1067 264

15. Rangareddy 52 1275 226

16. Hyderabad 24 6491 1278

17. Medak 73 918 361

18. Nizamabad 76 890 182

19. Adilabad 56 1026 198

20. Karimnagar 80 1044 192

21. Warangal 77 1531 448

22. Khammam 71 765 192

23. Nalgonda 82 892 216

Andhra Pradesh 1762 34948 8617

Source: AP Statistical Abstracts, Directorate of Economics & Statistics, Govt. of AP

Hyderabad.


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Table 4: Per Capita availability of Doctors, Hospitals and Beds in AP

(as on 31-03-2003)

Sl. No. District Doctors Beds Hospitals

1. Srikakulam 12562.3 2716.9 32955.8

2. Vizianagaram 11534.6 3627.8 35702.4

3. Visakhapatnam 6063.8 1453.3 45623.0

4. East Godavari 8251.5 2276.6 52142.8

5. West Godavari 17288.7 4245.0 50713.6

6. Krishna 8634.7 2701.8 49855.3

7. Guntur 7987.7 1973.1 54453.0

8. Prakasam 13359.9 3712.9 36421.7

9. Nellore 11502.5 2057.5 34212.6

10. Chittoor 6425.2 2031.4 36018.0

11. Cuddapah 11719.8 3142.3 36645.0

12. Anantapur 9310.7 3250.4 40904.2

13. Kurnool 6840.1 1694.4 37951.5

14. Mahbubnagar 13310.4 32193.3 37784.2

15. Rangareddy 15818.9 2804.0 68751.2

16. Hyderabad 2996.7 590.0 159573.0

17. Medak 7396.4 2908.6 36576.7

18. Nizamabad 12888.4 2635.6 30864.3

19. Adilabad 12565.7 2425.0 44428.6

20. Karimnagar 18186.6 3344.7 43647.8

21. Warangal 7245.5 2120.2 42155.9

22. Khammam 13431.9 3371.1 36322.9

23. Nalgonda 15037.0 3641.2 39609.5

Andhra Pradesh 8844.1 2180.7 43252.0

Source: AP Statistical Abstracts, Directorate of Economics & Statistics, Govt. of AP

Hyderabad.


| 74

References:

1. P. R Panchmukhi (1987): 'Cost-benefit analysis of Health Services in metropolitan.

areas (mimeo), Centre for Policy Research, Bombay.

2. Sheela prasad (2002): Health Status and Services in AP- A Regional perspective in

'Development of Andhra Pradesh-1956-2001: A study of Regional disparities” (Ed) YV

Krishna Rao, CR Foundation, Hyderabad.

3. Hanmantha Rao (1998): ' Andhra Pradesh at 50: A Data based analysis, Data News

Features, Hyderabad

4. Rama V Baru (1993): 'Inter-regional variations in Health services in AP ‘Economic

Political Weekly, May 15.

5. V R Muralee ((1993): When is Access to Health Care Equal? Some public policy

Issues, Economic Political Weekly, June 19.

6. Alternative Economic Survey (2002): Draft NHP; 2001- A Brief Critique, Praja Shakti

Book House, Hyderabad.


| 75

THE PATENT (AMENDMENT) ORDINANCE, 2004

NEED FOR A PRAGMATIC SOCIAL POLICY FOR HEALTH

Dr. Noor Basha Abdul

Professor of Commerce, Acharya Nagarjuna University

"A better world is one in which medical discoveries would be free from patent and there

will be no profiteering from life and death."

- Smt. Indira Gandhi, Late Prime Minister of India

The Patent (Amendment) Ordinance released hurriedly, by the UPA Govt., in

December 2004 has got every tendency for creating an MNC-centered monopolistic

drug market in India and thus disrupting the minimum access to health, especially for

the poor. The Ordinance proposes the third amendment to the Indian Patents Act,

1970, under the dictates of the WTO. The Act was previously amended twice first in

1999 and secondly in 2002. The present ordinance facilitated the product patents in

pharmaceuticals, food, and agricultural chemicals operative from January 1,2005.

With this, the ongoing era of process patenting which facilitated the availability of

medicines to the nation at the world's lowest prices shall therefore become history.

Prior to 1970, when India had product patents for the drug industry, MNCs

especially from the US, UK and Germany dominated the domestic market for

pharmaceuticals, with a share of 85 per cent. However, after changes in the law in

1970, recognizing only process patents, the share of MNCs has gradually declined

over the years and was at about 35 per cent, while Indian companies increased their

market share to nearly 65 per cent in 2003. (1) Now, TRIPS has been the result of an

active lobbying by MNCs and also strong pressures from the US and the other such

developed countries.

.

Impact of the Ordinance

Once the Ordinance is passed by the parliament, the medicines that would be newly

patented command monopoly prices laid down by the sole patent holder, and all.

others shall be prevented from manufacturing, selling, distributing, or importing the

patented product. The term of patent protection would also be extended from seven


| 76

to 20 years and Exclusive Marketing Rights (EMR) shall be made available, for the

manufacturers, even before their patent applications are approved.

This apart, what is more embarrassing is the fact that the present Ordinance

appears to have failed in properly utilizing the rarest positive provisions being offered

by the Doha Declaration, and thus would ultimately damage the interests of both its

own country as well as the world's poor. The ordinance also is all set to put the

country's hard- earned sovereignty, status, prestige, and obligations on the altar of the

global giants. The ordinance in the final analysis go contrary to the spirit of the basic

humane and pro-poor health policy as was propounded by several international

covenants such as 1978 Alma Ata Declaration and the 2000 Peoples' Charter for

Health as well as the domestic ones like the 1946 Report of the Health Survey and

1983 National Health Policy

Drug Prices Set to Skyrocket:

One of the potential threats of the withdrawal of the process patent system would be

the skyrocketing of prices. Among those likely to be affected are the large numbers of

people suffering from a wide range of illness such as diabetes, asthma, · hypertension,

coronary heart disease, depression, cancer, HIV/AIDS, arthritis and respiratory and

urinary tract infections. Because, the relatively low cost, locally manufactured generic

drugs that are currently available to patients have to be withdrawn from the market

once the product patenting is introduced. (2)

Consider certain facts relating to the Indian Health sector. While India

comprises 16 per cent of the world's population, it accounts for a mere 1 per cent of

global health care spending. Its per capita consumption of drug amounts to less than

$ 3 per annum compared to$ 191 in the US. India's domestic health care system only

covers 3.7 per cent of its population of over one billion. Therefore, 75 per cent of

expenditure on medicines is borne privately by patients. Given these circumstances

and low per capita incomes, prices must be maintained at an affordable level. (2A).

Experience with Product Patent Regime

If the experience is any indication, the product patent regime is believed, to inflate the

prices to the maximum extent. For example, the generic version of the drug produced

in India to treat CML, costs only Rs.9000 to Rs.12,000 per month. The minute the EMR

holding-Gleevec, the Cancer drug, manufactured by the Swiss MNC Novelties gets a

product patent, the generic versions are bound to disappear · from the market and the


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Gleevec shall further shoot up from its present astronomical price of Rs.1,20,000 per

month.(3)

For health volunteers, the worries are more pressing. Medicines Sans Frontiers

(MSF), the Noble Prize-Winning medical relief Organization says it sources more than

a third of the anti-retroviral (ARV) AIDS drugs from India. Indian makers of combination

drugs have been instrumental in crashing the price from about $ 10,500 per patient

per month to just $ 350 per year. It further observed that “India revolutionized the

treatment and care of AIDS across the world".

The pricing position of some of the generic drugs in India where the process

patenting is in vogue and the rest of the world with the product patenting system, can

be taken as an eye opener for the proponents of the new world order with the product

patenting system. (See Table 1)

Initially, the TRIPS agreement may affect a small proportion of drugs (newly

patented) in India. However, the impact will gradually increase over time as virtually

all new drugs entering the market in future would be patent protected and many of the

old drugs can be expected to become ineffective over time as the disease causing

bacteria viruses develop resistance to them, thereby forcing people to switch to the

new more expensive drugs. (4).

Domestic Companies Apprehensive:

While the Government- along with foreign multinationals- is keen to implement the

TRIPS agreement, it has faced resistance from local drug manufacturers and

consumers. The Indian Drug Manufacturers Association (IDMA) protested in 1994 that

" prices of drugs shall go up by 5 to 20 times as a consequence of accepting the TRIPS

proposals". Leading firms like Nicholas Piramal, Cipla, Ranbaxy, Dr. Reddy's,

Wockhardt, Sun pharma and Zydus Cadila have already expressed their

apprehensions over the product patent regime.

Even those companies with larger exposure to R&D, such as Dr. Reddy's and

Ranbaxy are eyeing, growth driven by first mover benefits in the regulated Generic

markets of the US and EU. Particularly, the small and medium sized companies in

India’s Rs. 19,700 crore ($ 3.9 bn) pharmaceutical industry are not prepared to face

the new patent regime. In other words, 95% of the 20,000 pharma companies are

bound to fall in an unprecedented risk (5). The only solace offered in the TRIPS


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agreement is that the 49 countries which were designated by the UN as the Least

Developed Countries were extended time to enforce the new patent. regime up to

2016.

The difficulty of ensuring even a minimum degree of democratic access to life

saving drugs is compounded by the high degree of concentration in the international

drug industry. The top 10 companies controlled 36 per cent of the market and the top

20 companies controlled 57 per cent of the world sales.

The product patent Regime would not ensure the speedy spread and marketing of the

new drugs for they take abnormally long time of about 10-15 years to arrive at the rest

of the world. Keayla had also observed that in the process patent system, India was

able to introduce the new drugs within a period of. three-five years only. Table II

demonstrates the facts.

UPA Desires a Trips Plus Regime:

The Doha declaration 2001 specifically indicated that the WTO and TRIPS agreement

“Can and should be interpreted and implemented in a manner supportive of WTO

members' right to protect public health and, in particular, to promote access to

medicine for all...and enable access to existing medicines and research and

development into new medicines".

The Doha declaration also permits over riding corporate patents to provide cheap

drugs to deal with AIDS, Tuberculosis, Malaria and other epidemics. The TRIPS thus

permit the member-Governments the freedom to institute a liberal regime of

compulsory licensing that would keep the patent monopolies under check. Yet the

proposed third amendment has done nothing to build this flexibility into the law. The

Economic and Political Weekly has aptly remarked that both the NDA and the UPA

Governments were keen in stretching the limits of the TRIPS agreement, as was

evident in the Ordinance, and were thus proved to have been enthusiastic in

establishing in India a TRIPS- plus regime. (6). Because, all the harmful provisions of

the NDA's 2003 proposal, were sufficiently legitimized through the present NDA's

Ordinance.

Loose ends in the Ordinance:

The following points in the Ordinance would reveal the deficiencies and objectionable


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provisions from the viewpoint of the people at grass roots.

a) Patentability: One of the deficiencies of the ordinance is related to its improper

definition of patentability. In the present condition, there are chances for manufacturers

coming up with spurious applications with doubtful antecedents or with only minor

modifications to the original products. Such cases may lead to endless litigation as is

already happening with the anti- cancer drug, Gleevec. The ultimate sufferer anyhow,

shall be the society only. The Indian Drug Manufacturers Association and the Bulk

Drug Manufacturers Association want the scope of patentability to be restricted to new

chemical entities (NCES), but not the MNCs practice of "ever greening" - making

variations on the same drug through the use of different salts and derivatives, to extend

the scope of the patent life beyond the original 20 years. In fact, even the US could

not be able to surmount this sort of the problem. In the US, out of the 1,035 patents

awarded during the years1989-2000, it was identified that only 35 per cent of the drugs

got new molecules.

b) Pre-grant opposition: The Third Amendment Bill and the Ordinance that followed

have done away with the pre grant opposition that was available in the Indian Patents

Act, 1970. TRIPS is silent on the matter relating to the pre-grant opposition, to allow

the individual countries for full powers to decide. Most EU countries, in fact, have got

these provisions in their legislations. As against this, in India, 4,700 applications are

already pending with the Mailbox. Once patents are granted to them, the MNCs will

not only monopolize the Rs.36,000 crore drug market (inclusive of exports of

Rs.15,000 crore) but will also squeeze down the Indian pharma in the legal battle. In

fact, the second amendment not only approved the pre grant opposition but also

strengthened it. The present Ordinance does away with this right and replaces it by a.

week' Representation by way of opposition' (7), the provision which is available only

after the patent is granted.

c) Compulsory Licensing; Yet another omission is related to the Compulsory Licensing

(CL) procedure. The I present procedure, being very lengthy and time consuming,

defeats the very purpose of the CL and ends up in abusive pricing and inadequate

supply by the monopoly patent holder. It is observed that about two-thirds of patented

products by MNCs were never produced. (8). They were patented just to from the field,

while the firms concerned continue to produce a similar product catering to the same

type of consumer need. Besides, the original August 30 resolution maintains that any


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member country that grants patents is authorized to issue a CL to meet the

emergencies in the LDCs and also to export to such depriving countries. However, the

present ordinance provides that only the suffering required to issue the CL, if any.

d) False claims of MNCs Rewarded: The MNCs' argument that they invest billions of

dollars of money on R&D prior to the commercial production cannot stand for scrutiny.

Generally speaking, most basic scientific research is undertaken with public fund,

mainly by the universities and research institutions patronized by the Government.

With public subsidy, "once discovered, an invention can be disseminated virtually

without cost" and it can be shown that such common 'knowledge products are efficient

to finance publicly. MNCs use fruits of such basic research free of cost and monopolize

the patent rights only by adaptive research.(9) This logic is grossly ignored in the

present ordinance and therefore offers an unduly long period of patent duration in the

name of ploughing back the initial R&D outlay

One needs to understand that the US, EU and Japan put together capture as

high as 90 per cent share in the world drug market. The world's top 10 drug companies

spend only 8-19 per cent of their sales on R&D, while most Indian Drug firms still

averages a mere 2 per cent of their total turnover. the drug monopolies spend a ·

meager amount of less than 10 per cent of their total R&D expenditure on the diseases

of the poor. (10) At the same time the big firms' profit margins range between 20-30

per cent. Besides, the drug monopolists have already enjoyed lot of tax benefits and

foundation funds from the Government agencies.

Suggestions

Exporting rights to assist the least Developed countries with no technical ability to

utilize their compulsory licensing as provided for under the Doha Declaration are to be

exercised by India; India has to exercise its right of enforcing the CL at a reasonable

royalty of say 10 per cent of the cost of producing it in the host country. It has to enforce

the price controls also, say, after the first five years of an invention at least in the case

of life saving drugs and drugs of mass consumption.

India should make use of the positive aspects of even the TRIPS. According to Art. 7

& 8(2), priority shall be given to the public welfare goals over the intellectual property

rights. Hence the social policy with regard to the public health must offer top priority in


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terms of availability and the prices of the patented drugs.

India must permit pre-grant opposition, so that spurious applications with doubtful

antecedents can be rigorously scrutinized. The policy makers should bear in mind the

distinction between techniques, accidental discovery and innovations. Even the official

Committee headed by Dr. R.A. Mashlekar, had recommended only in 2003 that

patents should be given only to new chemical molecules.

India must vary the length of the patent depending on the sunken cost instead of 0-20

years; it can be 5,8,15 and 20 depending on costs based on credible disclosures.

Help make Indian firms more capable in exports. This can be facilitated by providing

generous tax concessions for undertaking Research & Development and minimum

import duties on raw materials; the drug industry will require a quantum increase in the

level of R&D expenditure. The R&D expenditure in India is very low at around 4 per

cent of sales compared to 15% -20 % spent by global pharma companies. The

Government ! should commit for a social policy of enhancing the support for the

development of the R&D to make the domestic drug industry stronger and :

sustainable amidst the tough patent regime; Post 2005, there will be a dire necessity

of shifting from process research to basic research to have an independent' growth of

the domestic pharmaceutical industry.

• India has to comply with the covenant of the Alma Ata 1978, which obligates the

signatory governments to achieve "health for all by. 2000'. For that, like in the case of

the European countries, which also adapt the product patent system, India should

raise the public expenditure component to 80 per cent (presently 20% only) and keep

under check the anarchic tendency of the private hospitals and also evolve a policy of

overseeing the adequate availability of drugs for the masses at the affordable prices.

Table 1: Prices under process and product patent systems

(Source: Business World, December 20,2004)

Drugs India Pakistan Indonesia UK US

Ciprofloxacin HCL 500mg 10 tabs

29 424 393 1,186 2,353

Diclofenac Sodium 50mg 10 tabs

04 85 60 61 675

Ranitidine 150mg 10 tabs 06 74 178 247 864 Ziduvudine 58 313 393 N.A. N.A. Simvastatin 25 283 187 N.A. N.A.


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Table 2: Time lag in introduction of new drugs

Source: Business World, December 20,2004)

References:

1. Agarwal Pradeep and P. Saibaba, "TRIPS and India's pharmaceutical Industry",

Economic and Political Weekly, September 29, 2001, P. 3787.

2. Ammu Joseph," Patently Unfair", The Hindu, 12 December 2004. A. Paul Justine,

International Business, (New Delhi: Prentice-Hall of India Pvt.Ltd.,2004), P.92

3. Latha Jishnu," Indian Product Patents: Growing Global Concerns”, Business World,

December 20,2004

4. Agarwal, op.cit, P.3788

5. Business World, October 20, 2003.

6. Editorials, Economic & Political Weekly, December 25, 2004.,. Financial Express,

1-1-2005.

8. Das Gupta, Biplab, "Patent Lies- Latent Danger, Economic & Political Weekly, April

17-24,1999.

9.Gajan Wakankar, ' Patent Ordinance Weak on Eligibility, Pre-grant Rules', Financial

Express, January 1, 2005.

Name of the

drug

Introduced

globally

Introduced in

India

Time lag in

years

Salbutamol 1973 1977 4

Mebendazole 1974 1978 4

Rifampicin 1974 1980 6

Naproxen 1978 1982 4

Bromhexine 1976 1982 6

Ranitidine 1981 1985 4

Captopril 1981 1985 4

Norfloxacin 1884 1988 4


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IMPACT OF PRIVATE SECTOR ON PUBLIC HOSPITALS

K. Vijaya Lakshmi

Lecturer, Department of Economics, K.T.R. Women's College, Gudivada.

The purpose of this paper is to examine the impact of private sector on public hospitals.

In the First section it deals with the concept of Health Care. The Second section deals

with the impact of private sector on public hospitals.

Health Care implies "Services provided to individuals or communities by a

health care system or by professionals to promote, maintain, monitor, or restore

health. Health care contains a broad spectrum of services and activities delivered by

a team of health personnel. Services provided to individuals or communities by agents

of the health services or professions to promote, maintain, monitor, or restore health.

Health care is not limited to, medical care, which implies therapeutic action by or under

the supervision of a physician. The term is sometimes extended to include self-care

includes all reasonable and necessary medical aid, medical examinations, medical

treatments, medical diagnoses, medical evaluations, and medical services. The term

does not include vocational rehabilitation. Healthcare means the preservation of

mental and physical health by preventing or treating illness through services offered

by the health profession.

The bulk of the private sector consists of individual practitioners, both trained

and untrained followed by nursing homes and hospitals which are owned by a single

owner or in partnership. Privatization has influenced the perception and practice of the

medical professional. With an increased reliance on high technology, there is a greater

emphasis on specialization and a devalued role assigned to general practice. Private

practitioners, nursing homes and hospitals are mainly located in urban areas. The real

spurt in the growth of private hospitals occurred mainly in the 1980s and the 1990s.

The growth of private diagnostic centres is an even more recent phenomenon. Most

of them were established only during 1990s.

The growth of private hospitals and diagnostic centres was encouraged directly

by the central and state governments by offering tax exemptions, land at concession

rates etc. in return for provision of free treatment for the poor, free treatment to at least

40% of our patients and 10% of inpatients. Apart from availing the tax concessions

some hospitals received special benefits like allotment of government land at an


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insignificant part of market price. For instance, in 1989 à corporate hospital in

Hyderabad was given 30 acres of government land in a posh locality at a throw away

price on the condition of reserving additional 15% of beds for the poor.

Recently private sector's share is increasing when compared to public sector.

Rapid urbanization, expansion of middle class with higher purchasing power and

growing health awareness have together provided necessary conditions for the rise of

private sector in medical care. Urbanization accompanied by the increase in size of

middle classes, created. market for the medical care.

Impact of Private Sector on Public Hospitals

The state's patronage to the private sector is sometimes justified on the ground that it

would ease out pressure on the government hospitals. But the private hospitals are

replacing rather than complementing the public hospitals by weaning away the

resources from the govt hospitals. The adverse impact of Privatization on public

hospitals is identified on the following grounds.

1. Lack of patronage to public hospitals

2. Luring away specialists from public hospitals

3. Transfer of critical cases from private to public hospitals

4. Growing capital intensity etc.

1. Lack of patronage to public hospitals

a) With the large-scale expansion of private health care in 1980s and 1990s the rich

and middle classes no longer go to the govt hospitals.

b) The public hospitals are used mostly by the poor at present.

c) The public hospitals are facing unfair competition in mobilizing resources.

d) Apart from depravation of resources the day-day maintenance of public hospitals

is also neglected.

e) Whenever public services are used exclusively by the poor their quality is

degenerating due to lack of resources and effective supervision.

f) The growth of private cooperate hospitals was found to have adverse impact on

govt hospitals.

2. Luring away specialists from public hospitals:

There is severe competition between corporate hospitals to attract reputed specialists

by offering higher remuneration. This tendency has further adverse effect on the image

of govt hospitals. The govt sector has thus become a cheap source of well-trained


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specialists.

3. Transfer of critical cases from private to public hospitals:

Public hospitals are used for dumping unwanted cases, to transfer serious cases and

AIDS patients etc.

4. Growing capital intensity:

With privatization and corporatization, the medical care became very capital intensive

and added to escalation of cost inflation.

Conclusion:

The private sector in medical care forms a very strong bureaucratic and political lobby

and would manipulate the state and further weaken the public health care system by

draining out the resources. Public policy towards the private sector should be confined

to the regulation of quality and pricing of medical care. The basic need is to increase

the allocations to the health sector in the state budget. Medical care has unique

economic characteristic, which deviate from the basic prerequisites market model of

economy.

As a system the private hospitals are highly prone to unethical and harmful practices.

Given the complexity of medical care, it may be more difficult for the state to regulate

private sector than providing the medical care directly.

References:

1. Dept of Health, Medical and Family welfare, Government of A.P (1998),Project

implementation Plan for the Primary Health Care Component of A.P Economic

Rehabilitation Project

2. Narayana K.V (1998), Public and Private mix in the Medical care in A.P.,

Centre for Economic and Social studies, Hyderabad.

3. Ministry of Health and family welfare, Govt of India 1981- Health Policy

statement, New Delhi.

4. Govt of Andhra .Pradesh (1999), Vision 2020, Page: 93


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GATS, BUSINESS PROCESS OUTSOURCING AND IMPLICATIONS TO

INDIAN ECONOMY

Prof. K. Sri Ramamurthy

Dept. Of Economics, Andhra University, Visakhapatnam.

.

Introduction

The Uruguay round of GATT is considered as the landmark in the economic history of

the world. It has not only widened the scope of GATT but also led to the replacement

of GATT with World Trade Organization (WTO). This supra-national phenomenon of

globalization has far reaching Economic; Social, Political, Cultural, Environmental and

Technological consequences to the world at large. The General Agreement on trade

in services (GATS) is legally enforceable multi-lateral agreement under WTO with an

objective of a) progressively liberalizing trade in services and b) providing secure,

transparent, nondiscriminatory, free, fair, and open market in services similar to that

of trade in goods and merchandise. Further, the service sector has experienced a

phenomenal growth in recent years in developed and. developing countries. The

general agreement on trade in services (GATS) was introduced in 1995 under WTO

regime to promote further globalization of the services trade. According to GATS, there

are four possible modes of supply viz.,

Mode 1: Cross-border supply i.e., supply of a service from one country to another

country.

Mode 2: Consumption abroad i.e., supply of a service in one country to the service

consumer of any other member country.

Mode 3: Commercial presence i.e., supply of services by a service supplier of one

country through commercial presence in another country.

Mode 4: Movement of natural persons i.e., temporary cross-border movement of

service providers.

However, it is pertinent to observe that developed countries are showing

interest in the first three modes of service as they have competitive edge. Despite

liberalization of markets in developing countries such as India, the developed countries

have not liberalized Mode 4 services because of the fear that it may adversely affect

their domestic employment.

However, with the advent of faster communication through satellites the whole


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world is shrinking into a global village. This prompted the multi-national corporations

(MNCs) to opt for outsourcing to enhance their profitability without compromising on

quality. Thus, outsourcing has emerged as a major trade in the world today. Many

corporate giants in the US, Europe, Australia, and Japan have opened International

procurement organization (IPOs) in developing countries like India, China, Mexico,

and Brazil.

The Debate:

A heated and unending debate is going on in many developed countries like the US

on the issue of outsourcing. according to the antagonists outsourcing as global white-

collar migration which is resulting in job losses in several areas. It is estimated that in

US alone more than 2.2 million people lost their jobs in the last four years. It is further

estimated that another 3.3 million would lose their jobs by 2015 which, of course is a

small fraction of the employment level of 132 million.

On the other hand, the protagonists argue that outsourcing would help the

developed economics in the long run. Greggory Mankiw, Chairman of the presidential

council of economic advisers, remarked that outstanding is probably plus for the

economy in the long-un. Joining the debate Mr. Alan Green Span, the federal reserve

chairman, argued that protectionist cures might worsen the situation for US economy.

He hopes that US would manage foreign competition with jobs in advanced industries

as it has done in the past.

The Political Economy of Outsourcing:

Global sourcing or outsourcing is as old as the East India Company. Further it is held

that the rise of the multinational corporation (MNCs) would not have been possible

without outsourcing. During the post-world war period, several manufacturing firms

producing light engineering goods, were relocated from developed countries to

developing countries which are low wage destinations. Companies such as Nike,

Adidas, Reebok, are known for this style of operations.

However, with revolutionary changes in electronics, telecommunications and

information technology on the one hand and ever increasing wage structure in ·

developed countries on the other influenced the process of relocation of production

units and service centers in developing countries like India , china , Malaysia and

brazil. Most of the corporate giants of the developed countries have been segmenting

their production chains and shifting their labor-intensive parts to low-wage location.


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Business Process Outsourcing - The Process:

The process of business process outsourcing (BPO) refers to the digitization of labor

or service and access it from abroad through wires. In other words, it is the process of

producing a service without relocating the entire unit. Initially, these services were

restricted to back office functions such as call centers, helpdesks and customer

support etc., today outsourcing covers a wide range of activities including 11 enabled

services such as engineering design, architecture, radiology, pharmaceuticals, and

soon. Further, several organizations around the world are striving to improve the

quality of their bottom lines. This makes BPO as the new imperative which positioned

services as tradable items in the world market.

India- Major Destination for BPO:

Through many developing countries are visiting with each other in this new business,

India has emerged as a superpower when it comes to IT solutions. Several fortune -

500 companies like Microsoft, oracle, Citibank, AT&T, General Electric, Reebok, IBM,

General Motors, Sony, Boeing, Swiss air, Phillips, Lucas, British Aerospace' have their

outsourcing business in India. Today, India's contributing to the IT industry is worth

$16 billion accounting for 3.2 percent of GDP. It is projected that the exports in the

next five years are like to touch $50 billion.

Next to the IT industry, Indian pharmaceutical industry is all set to take a big

leap is tapping BPO. Several drug majors including Ranbaxy, Dr Reddy Labs, Cipla,

Glaxo and Zydus have already begun tapping the outsourcing market which is

estimated at $10 billion annually in generic drugs. According to Pankaj Patel,

Chairman and Managing Director of Zydus cedilla, India had definite advantages in

manufacturing generic formulation. These include good customer service, lower costs

and regulatory know how" he also pointed out that India is in a position to capture 30

percent of the pharma BPO market closely competed by China, Brazil and Mexico.

Further, the developed countries like US are finding it profitable to use the Indian IT

companies as the retirement plan provides and third-party administrators (TPAs). For

example, a single. company called congruent solutions Pvt. Limited clinched an

outsourcing deal with California based third party administrator which has an asset

base of $20 million, handling 450 plans for 70 odd clients. It operates on verticals such

as financial accounting, insurance, retail, and e-learning.

Thus BPO firms in India are engaged in providing full spectrum of BPO services


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covering all five levels viz., 1) data entry : 2) rules-set processing 3) decision making

4) direct customer interface and 5) expert knowledge services,

Advantage India:

India along with China is billed as the most important source of skilled manpower with

slight edge over its big brother in terms of knowledge of software and English.

According to the future world of work study the workface in Asia growing in numbers

and skills and shrinking in region such as Europe and japan. Multinational companies

can ill-afford to ignore this. This has been emphasized by Mr. Herbertson, Managing

Director of manpower. Inc. of US, who pointed out that half of the worlds labor force

will be in India and china within a decade.

Indian advantage as a potential power in BPO may be attributed to

1) Availability of highly qualified and technically skilled English-speaking computer

professionals.

2) Low personal costs and wage costs compared to the developed countries.

3) Standard quality of IT firms

4) Reliable communication facilities

5) Fast growth of the economy

6) Location of technologically advanced outsourcing firms

7) Stable government policies

8) Reliable infrastructure facilities

9) Well-structured tax system.

In view of these advantages, India can provide an integrated and highly flexible mix of

on-site, off-site, near-shore and off-shore delivery option. India already carved a niche

in terins of world class project management with reduced outsourcing risk, consistent

and quality outsourcing delivery system.

A Cause for Concern:

Though outsourcing is helpful in generating employment and income to a growing

economy like ours, there are certain areas of concern to us. They include.

1) with BPO workers defying tome zones to interact with clients worldwide, a pander

as box of psychological issues and ailments is opening. Stiff targets and career

competition are often affecting the health of the young professionals who strive to work

more and more. In view of the low personal costs and low literacy rates, the

pharmaceuticals majors are conducting clinical trials of genetically engineered drugs


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on human beings without proper safeguards of genetic engineering approval.

committee (GEAC). This is causing severe damage to health and life of the poor and

destitute population. In the euphoria of BPO, the state and the public are neglecting

the importance of basic sciences. As a result of the conventional universities, colleges

and other educational institution are being neglected. This may have serious

consequences in the long run.

Conclusion:

Given the opportunities and concerns, it may be still argued that outsourcing is a.

bonanza for developing countries like India. As such the government and the corporate

bodies must evolve plans to successfully transform India as a global service

outsourcing hub.

References:

1) Sudip Chaudhuri (2003): ‘Trade in Services: Policy Issues”, “Economic and Political

Weekly”, Aug23,2003.

2) Goyal, P.K. (2004): 'Outsourcing: Win-Win for All Business Line’, November

16,2004

3) Subramanyam, K (2004).: 'The Economic Fallout of Outsourcing', Business Line,

Nov.24,2004.

4) Indrani Dutta (2004): 'Pharma Sector Begins Tapping BPO Segment' THE HINDU,

Dec.5, 2004.

5) AIU (2005): GATS and Its Implications on Higher Education.


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GATS AND HIGHER EDUCATION IN INDIA

B. Shiva Reddy

Professor, Department of Economics, Osmania University.

K. Anji Reddy

Reader, Department of Economics, Osmania University.

Introduction:

In this paper, a modest attempt has been made to examine the implications of WTO

for higher education sector in India. It is based on secondary sources of information

and on the available data. Some of the studies related to the theme are used to

examine the issues rather than making any special attempt to analyze them.

The last decade is known for several important developments all over the world. There

has been a perceptible change in the values and goals. New goals, policies and

practices replaced traditional and well-established values, concepts, and approaches.

Market driven policies have been replacing social democratic and welfare-oriented

policies. The world is moving towards globalization making existing arrangements

economic, cultural, and legal - obsolete and irrelevant. The most important

development in the 1990s is the emergence of WTO, that has significantly affecting

almost all sectors, sections, and regions of the world. India is not an exception to this.

Internationally education is a trillion- dollar industry. The global market for international

higher education was estimated at 27 billion dollars in 1995.

Education Services under GATS:

GATS rules apply to education services in four ways: Each member country, including

India, has to give Most Favored Nation (MFN) status to all member countries; Each

member country, including India, has to make a request offer or a particular service to

be a part of the agreement .Each member country, including India, must eliminate any

restraint on competition when requested by another member country .Each member

country, including India, must ensure that all measures are administered in reasonable

and impartial manner.

Five levels of education have been identified for trade. They are: Primary

Education, secondary Education, Higher Education, Adult Education and Other

Education. Though identified the first two are still restricted to domestic providers. The

last three have received more attention as tradable services. Even among them higher


| 92

education has become focus of attention because it in this sector that trade is already

in existence and likely to expand under WTO regime. WTO has identified four modes

of trade in education which are having different implications.

Mode-1: Cross Border Supply: This mode of trade does not require the students

to move physically, Cross border supply of service includes any type of course that is

provided through distance education, web based program, any testing service and

educational material which can cross national boundaries. Emergence of new

technologies and IT revolution has expanded the scope of distance education through

cross border supply. India's presence in this mode is limited though efforts are being

made to increase the scope of it. When compared to other modes, Mode-1 is generally

non-controversial in nature. However, even under this mode there are certain barriers,

particularly related to the use of national satellites or receiving dishes and certain types

of educational materials.

Mode-2: Consumption Abroad: This mode involves the education of foreign

students. Students have to move to the country of supplier for pursuing all or part of

their education in another country. Of the four modes of trade in education services,

Consumption Abroad (Mode-II) has existed for centuries. Quite a few Indian students

have been going abroad for higher education which has been tagged along with brain

drain. Available Statistics suggest that most of the Indians are going to developed

counties for studies. And very few from these countries are coming for studies in India.

During 1994-95 and 1996-96 the number of foreign students enrolled in Indian

universities has declined. However, there is some increase in foreign students in

recent years. Most of those coming for studies in India are from developing countries.

At present this is the major mode of trade in higher education services and on this

front India is losing considerable amount. The number of Indian students studying in

USA alone increased more than two-fold in the last decade. As proportion of foreign

students, Indians increased from about 8% to 13% during the same period indicating

the dependence of American Higher Education system. There is excess supply in

counties like USA and excess demand for higher education in countries like India.

Therefore, excess demand in India is satisfied by the excess supply available in USA.

The net direct gainer in the process is USA as many institutions/ courses there

are supported by fees contributions from foreign students. For USA education and


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training services generated 7.5 billion dollars in export. Higher education accounted

for the fifth largest service sector of exports by the USA. In another way also India is

losing in the form of brain drain. Most of those go for higher studies settle there and

make significant contribution for the development of the USA economy and in return

India gets hardly anything. Needless to say, most of those going abroad for higher

studies have been the beneficiaries of subsidized education in India.

Two types of organizations are functioning in India to deal with the consumption

abroad. They are:((i) Centers set up by Embassies to provide information on various

aspects of higher education abroad such as United states Education Foundation in

India (USEFI), Canadian Education Centre (CEC). They provide information and

counseling services to Indian students interested in pursuing higher education in their

countries. (ii) Private Agencies: Private Agencies are commercial organizations whose

main business is to advertise courses offered by their collaborative foreign institutions

and render paid services to interested Indian students for securing admission and

sending them to these institutions. Many Indian students are approaching these

agencies, existing in almost all major cities; provide necessary help in getting

admission for a payment.

The way foreign universities are marketing their higher education in India

through information centers and by tying up with private organizations to maintain their

commercial presence, they have generated a demand for themselves in India in the

field of higher education. Limited number of seats in colleges and universities in

professional as well as non-professional courses in India and increasing willingness

of parents to send their children abroad for higher studies irrespective of the heavy

costs, have further increased the demand for foreign universities in India.

Mode-3: Commercial Presence: This mode involves the service provider

establishing.an educational facility in another country to provide the service. In other

words, the actual presence of the foreign investors in the host country, such as foreign

universities setting up of institutions and courses in other country, are covered under

this mode. This mode also includes offshore campuses, joint ventures, and

subsidiaries.

With the GATS coming into effect shortly, Mode-3 may become the important

mode of trade in higher education and again India is likely to be net loser than gainer.

As a part of this foreign providers of education establish their own branch in one form


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or the other and supply the education services. Mode-2 may gradually be replaced by

Mode-III as it is cheaper for students to study within their country of origin than going

abroad for the same purpose. In India presence of foreign providers of education has

already felt 1990s saw the entering of Foreign Providers in the higher education

market under Mode-III. The number of providers increased sharply in the last few

years. The main providers are from the developed world and that too selected

counties-UK, USA, Canada, and Australia. Indian higher education market is likely to

be dominated by providers from these countries once the GATS come into existence

in the next few months.

Mode-4: Presence of Natural Persons: This mode refers to the ability and the

freedom for the people to move between countries to provide education service

through temporary stay.

As far as the mode-4 is concerned India is already has a presence. Brain drain from

India inherently implied movement for employment in jobs abroad for a short period.

However, the scope under GATS is restricted to movement to and presence in foreign

Implications for India: Increased trade in educational services has both advantages

and risks. Except in Information Technology India has not realized its potential despite

having a vast pool of highly skilled and mobile human resources.

According to Kaushik, India is in a strong position to benefit from both export

and import of higher education. India is in an advantageous position both politically

and economically by exporting education, particularly to developing countries that

have substantial Indian diaspora. This is the appropriate time to change and attract

the students. “Any loss of time would cause irreversible damage in terms of loss of

market, credibility, resources and opportunity to transform to meet the new challenges.

Import of education also helps India as local provision of education may benefit from

international collaboration with quality institution and competition with them.

However, according to Altbatch, multinational higher education always has elements

of inequality. When the reputed providers enter the country with high quality programs

the access to these services are open only privileged few with economic means to pay

for them. The inequality in education leads to inequality in economic opportunities as

most of the courses offered by these institutions guarantees entry to given profession.

Therefore, the very purpose of education to create a democratic and more equitable

society is put to acid test.


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Further, they (foreign suppliers) provide ‘off-the-shelf “programs, which are

simply used overseas. The decision about curriculum, standard, faculty and

requirement are always made by the sponsoring institution. The motive for establishing

institutions by them is always to make money. British and Australian institutions have

been active internationally, including in India, as a way of making up for budget cuts

at home.

India is not in a comfortable position as far as internationalization of higher

education is concerned. India has to take crucial decisions related to

internationalization of higher education. First, important step in this direction is to lay

down a viable regulatory mechanism to control the inflow of foreign institutions, vying

with one another to open their campuses in India or enter into some kind of

arrangement with their ever too willing Indian counterparts.

Conclusion:

Available statistics suggest that India continues to be net importer of higher education

despite having huge human resources. Indian higher education system developed

more on democratic, equity-s oriented lines and hence not paid much attention to the

efficiency and quality concerns. Now the new situation demands that every action

should be based on these concerns. Therefore, it is time to re-look into the relevance

of earlier concerns in the new situation which demands more market orientation in

every sphere of activity including in education. It is not an easy task to completely

reorient the system that has been built over the last half century and which has become

immune to adjust to the changing global scenario.


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ACCESS TO EDUCATION-SOME ISSUES

V. Sujatha

Lecturer in Economics

K. B. Sujatha

Lecturer in English

K. T. Reddy Women's College, Gudivada

The purpose of this paper is to study the trends in literacy rates and rural – urban,

gender and regional disparities enrolment and dropout ratios and access to education.

The paper is divided in to three parts. The first part states the problem. The second

part deals. with the trends in literacy rates and disparities in access to education. The

policy implications are discussed in the third part.

Introduction:

Education is one of the most important social indicators that is directly linked with

economic development. Level of literacy or education is directly associated with gross

product, indirectly with poverty, population growth, health, and crime rate. Despite its

importance education continues to be a neglected area at the policy level. After 50

years of planning, enormous funding and promises, total literacy remains to be a

distant dream. The dead- line for achieving total literacy is postponed year after year.

Apart from overall low: levels of literacy at the national level, disparities across regions,

genders, social groups etc. are of serious concern. Education is recognized as a basic

input for empowerment to the individual and to the I development of the society.

Expenditure on education and its sectoral allocation in general appears to be the main

factor influencing literacy levels.

Trends in Literacy Rates:

Literacy rate in A.P. has been much below the all- India level during the last four

decades. The gap between the two narrowed down during the last decade (2001). The

gap is more in the case of male literacy than that of female literacy. The estimates of

literacy rates from different sources especially National council for Applied economic

Research (NCAER) during the 1990's have also shown some improvement in the

states performance. Female literacy has recorded a significant improvement in the

state when compared to the all- India level. This could be attributed to the literacy

campaign focused on women (Akshara. Sankranthi) in the state during 2000.The


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literacy rates of S.T. and SC population at all India level are relatively high indicating

a social gap in rural A.P. The female literacy rates of these groups are still only around

10 per cent. In rural A.P. there are 731 households for every 1000 households without

a female literate and 465 households without any literate in the family. As a result, the

effective literacy rate will be much below that of all India level.

Rural and Urban Disparities:

Three fourths of the urban and more than half of the rural people had attained literacy

by the year 2001 in A.P. The increase in literacy rate both urban and rural is higher in

1991-2001 compared to earlier decades in all regions except coastal Andhra. Inter

district variation are steadily increasing over the period both in rural and urban areas.

Interestingly by 1991 all regions attained equal status in urban Literacy rates but by

2001, Rayalaseema has fallen behind marginally.

Gender and Social Disparities:

Telangana region has been lagging in terms of both male and female literacy rates for

the last four decades. Over the period, inter- district variations in female literacy - have

declined faster than that of male literacy rates. The decline was prominent during;

1990s, which may be due to the realization of the importance of female literacy. The

gender disparity in the state has been shrinking steadily, from 55 per cent to 28 percent

though the gap is still substantial. Among the regions, disparities have declined faster

in Rayalaseema and Telangana when compared to coastal Andhra and hence the

narrowing of the inter- regional variations. Similarly, social disparities are also

shrinking across the regions.

To sum up the performance of A.P. in primary education does not reflect its

position in economic development. As per the 2001 census it occupies the 28th

position among the 35 states and union territories in the country. Its growth in literacy

rate was slightly better than Bihar, U.P. and Rajasthan but lower than M.P. and

Arunachal Pradesh among the low literacy rate states. It compares poorly with all India

Averages in all respects except in the case of ST literacy rates.

Access to Education:

The poor performance in attaining higher literacy rates could be viewed from the

supply as well as demand sides. The supply side aspects include availability of schools

in vicinity, Infrastructure, quality of education etc. On the demand side the problems

are high opportunity costs, high costs of education, low returns from education · etc.


| 98

Since primary education has been made a fundamental right the stress is often on the

supply side factors, though demand factors also play an important role. Moreover, the

demand side factors are directly linked with economic development, provided a

threshold level of development has been achieved with reasonable equity across

regions and socio- economic groups.

Physical access to schools is an important dimension in terms of both supply

and demand factors. Access is often defined as availability of school to all school going

children within a radius of 1 km. of late, location of the school is also considered

important in defining access. For it is observed that children from lower social strata

are not comfortable going to schools located in the areas where upper social strata

people live and vice versa.

At all India level every two out of three villages have less than 500 population

and a quarter of the rural population lives in these small villages (1991). only a sixth

of the total villages were in the category of above 2000 population housing less than

50 percent of the people. Therefore, majority of the people live in villages with

unfavorable conditions for supply of basic amenities including education. In this regard

A.P. is placed in a favorable position. Only 10.5 per cent of the population lives in

villages with less than 1,000 population (census 1981 and 1991. NCERT1997.).

Compared to all India situation, a large proportion of the state's rural population

has the advantage of easy access. (supply side). Though the distribution of habitations

by their size explains the social disparities, it does not really explain the overall

performance of the state in literacy rates.

All India educational surveys have attempted to examine the problem of

remoteness in terms of access to primary and upper primary schools. In A.P. the

percentage of habitations having a primary school has increased. This is clearly

reflected in the coverage of scheduled tribe population by primary schools. Only 82

percent of the tribal population is being covered by primary schools within 3 km of the

habitations against above 97 percent in the case of scheduled castes and all

categories of population. The situation is similar even in the case of upper primary

schools. The sixth All India Educational Survey estimated that about 93 per cent of

population in 70 per cent of habitations was covered by primary schools. The

proportion of population having access to a school within walking distance is 98 per

cent in 89 per cent of the habitations.


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Enrollment vis-à-vis Dropouts: Enrolment is a necessary condition for obtaining

literacy in a formal system but not sufficient to attain literacy. Higher enrolment leads

to higher literacy rates provided dropouts do not increase at the same rate. As per the

estimates of the education department enrolment ratio in the state was as high as 90

percent in 2000 compared to 73 per cent in 1991-1992.

Coastal Andhra region seems to have reached saturation in enrolment ratios

and Rayalaseema has the highest enrolment ratios in both the periods, while

Telangana moved from third position to second position. Interestingly, dropout ratios

are also high in the state, which may be due to fictitious enrolment. There are wide

variations in drop out ratios across districts. Telangana recorded the highest dropout

ratios followed by coastal Andhra and Rayalaseema regions. Rayalaseema with

highest enrolment ratio recorded the lowest: drop out ratio. Similarly, girls have

recorded higher drop out ratios 100. One of the recent field studies in the three regions

of Andhra Pradesh indicates the high enrolment ratios through the variations across

the regions are not the same. On the contrary drop out ratios are quite low (between

10 and 15 percent) in all the three regions.

While the differences across regions are marginal in the case of enrolment, they

are substantial in the case of dropouts. This is true even in the care of developed and

backward regions within the regions. Backward regions record the highest dropout

ratios. This indicates that the problem is of retention rather than enrolment.

Policy initiatives and implications

The performance of A.P. in attaining literacy has been dismal. It compares

poorly with all India averages in almost all indicators such as rural-urban disparities,

gender disparities etc. The vision 2020 document rightly identifies the problem calling

the education system in the state. The document identified low literacy levels of

parents, poverty, lack of access to school and poor infrastructure facilities as the main

causes of low literacy rates.

The three important programmes initiated in tune with the new education policy

1986 or Operation Black board (OBB), A.P. Primary Education Project (APPEP) and

District t Primary Education (DEEP). The OBB. Program supported by the Government

of India, focuses on supportive infrastructure such as construction of School Buildings

providing teaching aids, playgrounds, and creation of additional teacher posts. The

APPE Project was assisted by the overseas Development authority (ODA) with the


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objective of improving the quality of schooling, construction of additional classrooms

and teacher training centers. This program was merged with the DPEP after 1995.

This program has many incentive schemes such as midday meal /supply of dry rations

to enhance enrolment, regular attendance of the students and to reduce drop out and

to maintain nutritional status of the students.

Suggestions to improve access to education:

1. The schemes designed to solve these problems such as residential schools, Angan

vadi centers, pre-primary schools, supply of dry, ration, textbooks, uniform etc. are

more supply side in nature.

2. The State Government has also adopted the bridge school concept of MV

foundation in the name of Back to School programmes.

3. From the demand side, generation of productive employment and minimum wages

go a long way in reducing the households, dependence on children. In other words,

rural economy has to be liberated from the vicious circle of agricultural involution, that

is, low employment, low wages and high participation rates.

4. Specific policies are required to address the problems of the disadvantaged groups

such as gender and social disparities. Employment of more female teachers appears

to be an effective instrument in improving the female literacy and enrolment.

5. Socio cultural aspects ought to be taken into account while planning more schools

for SC and ST populations. Even designing of the curriculum for these groups needs

special attention.

References:

1. PROBE (1999), Public Report on Basic Education in INDIA, Oxford University

Press, New Delhi.

2. Enrolment ratios in Primary Schools (5 to 9 age group) - Department of Education,

Government of A.P.E.P.W, March 22nd – 29th 2003.

3. a) Expansion of Primary and Upper Primary Schools - All India Education survey

1997 (N.C.E.R.T.) E.P.W March 22nd – 29th 2003. b) Availability of Primary Schools

by Social Groups (1993) All India Education survey 1997 (N.C.E.R.T.) E.P.W March

22nd - 29th 2003.

C) Access to Primary School by Regions and Social Groups.

4. Tilak, J.B.G. (1999), Exploding some Economic Myths of Elementary study, The

Hindu Oct 5th. s


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INDIA'S GLOBAL POSITION ON HUMAN DEVELOPMENT

Prof. M. Sundara Rao

Department of Economics, Andhra University.

Introduction

Social development is a process of transformation in values, institutions and practices,

brought about the deliberate use of instruments of policy and planning with the active

involvement of concerned people for the purpose of raising their levels of living and

quality of life. Social sector refers to those activities, which contribute to human capital

formation and human development. Education, health and medical care, housing and

sanitation, drinking water, etc., are the main factors, which contribute to the process

of development of the human capital. As far as the importance of the social sector in

the economic development is concerned, it does not need nay emphasis. In fact, both

are complimentary to each other. The issue of development of the social sector has

acquired increased importance in recent times. It is being increasingly recognized that

economic development, should be adequately matched by development of social

sector if the process of development is to lead to increase in welfare of the concern

man.

In the context of Indian planning, the development of social sector has always

been an area of prime concern for planners and academicians and has therefore

figured at the core of Five- Year Plans since its inception. After attaining political

independence, efforts to develop social sector were also taken up and given equal

weightage just like the economic sector. The impact of planned efforts became more

conspicuous on economic sectors where the nation emerged as a leader in many

areas by achieving path-breaking success. However, on the social sector front, the

progress achieved was relatively slow and its impact is a mixed one. The introduction

of different welfare schemes and empowerment programmes in different Five-Year

Plans stands testimony to the government's commitment to ensure the basic

requirements of the society.

However, the benefits of the programmes reach different segments of the

population at different rates, thorough different means and channels. Social sector

planning in each plan has tried to ensure that appropriate policy and programmes

initiatives should be taken and adequate investment should be provided by the state


| 102

in the social sector so that the poorer and vulnerable segments of the population can

have access to essential commodities, facilities and services. By introducing the public

distribution system (PDS) from the very beginning of the Five-Year Plans, the

government has introduced many programmes, e.g. family welfare planning

programme, Literacy programme, Command Area Development Programme, the

Integrated Rural Development Programme, Basic Minimum Services, etc. in the

subsequent five year plans, it has shown its concern towards socially deprived sectors.

However, with the passage of time, it became clear that the impact of these

programmes has not been uniformly distributed and the benefits of the development

have been concerned by a small section of population and people at large have ·been

sidelined, isolated and gradually marginalized.

Against this background an attempt is made in the present study to examine

the impact of recent new economic reform on resource allocation to social sector

(section 1) and India's global position on human development (section 2). Conclusions

are presented at the end (section 3).

1. Impact of Economic Reforms on Allocation of Resources to the Social

Sector: The impact of development strategy of the last two decades on social sector-

a sector of high priority-as measured in indicators such as poverty, demographics,

education and health indicate significant improvements. Yet there is a need to

accelerate improvements in the quality. of life and human well-being through

enhanced availability of public services, and. development of economic and social

opportunities.

Indian planning, since its inception, in early fifties till the late eighties could to be

working on centralized pattern, wherein, the government played a pivotal role in all

major sectors and all the decisions regarding the plan and programmes, its

implementation, etc. were pre conceived at the central or top levels and the entire

planning process-was--quite-rigid. However, by the early nineties, the government

initiated economic reforms package, the role of the state was also redefined. The

major thrust was on dismantling the control over the economy and pulling the

government out of business to enable it to devote its resources to social sector.

In 1991, India witnessed significant changes in its economic policy when we

adopted the economic reform measures in the wake of acute balance of payments

crisis and mounting fiscal deficit. There are many apprehensions that new economic


| 103

reforms have not succeeded so for in achieving the objectives laid down in the 1991

Industrial Policy Statement. Notwithstanding the significant achievements of the Indian

Economy during the past 50 years, admittedly, the performance had fallen short of

expectations. Some economists have argued that in the short run, the adjustment

process would affect the poor adversely because the costs would be felt quickly,

whereas the benefits would take time to materialize. Therefore, it is the responsibility

of the Government to take care of the poor as far as possible by maintaining the social

sector expenditure during the adjustment period. This is important even for the

success of economic reforms. The Indian constitution in the various articles gives a

prominent place to the development of the human factor.

The major thrust was on dismantling the control over the economy and pulling

the government out of business to enable it to devote its resources to social sector.

The main planks of economic reforms were liberalization, privatization, and

globalization (LPG). All this is undertaken with a view to loosen the hold of the

government on the economy, on one hand, and to provide a check on the deficit in the

Plan outlays. The subsequent cuts in plan expenditure, in all directions, affected the

outlay of all major sectors. However, the initial brunt of the expenditure reduction was

borne by subsidies and the social sectors. Also, recent economic policy contains an

important fiscal component, i.e. bringing down the size of the fiscal deficit. Normally,

the economic sectors or the commodity sector gets the priority over the social sector

spending. Whenever any cut is contemplated to reduce the fiscal deficit, it is always

the social sector, which has to bear the brunt of deficit reduction.

Trends witnessed in the total plan and non-plan expenditure on the social

sectors by both Centre and States given in the Table 1 indicate that there had been a

continuous decline in. the share of Social Sector in total expenditure since 2000-01.

However, available evidence so far, reveals that slowing down in the plan expenditure

has also adversely affected the state plans and outlay for vital sectors like agriculture,

irrigation and social sectors where the outlay for them has considerably reduced

Further, it has also become abundantly clear that unless crucial issues like poverty

alleviation and social objectives are placed on high national. agenda by mobilizing the

requisite resources and mustering necessary will for social engineering, it would be

difficult to prevent market forces, unleashed under the existing package of economic

reforms from further marginalizing the weaker sections.


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Likewise, the less developed states, which deserve additional capital

investment, have also been severely hit hard because of resource crunch. It has also

been feared that the downsizing of fiscal deficits would not affect the economic or, so

much, because they are treated as non-negotiable sectors hence government

expenditure for these sectors could not be reduced, significantly. It would only be the

social sector, which would have to bear the brunt of deficit reduction, and the adverse

impact of economic reforms on social sector, in the ling-term, would have long-term

damaging effect on the economy in the form of slowing: down of human capital

formation.

2. India's Global position on Human Development:

The need for rapid improvement in the social sector is manifest from India's rank of

127 among 175 countries in terms of the UNDP Human Development Index (HDI) with

an HDI of 0.590 for the year 2001 (Table- 2). The ranking however is down from 124

among 173 countries. in 2000 partly because of a change in the composition of

countries in the calculation for 2000 and 2001. the HDI measures the overall

achievements in a country in three basic dimensions of human development-longevity

and health, education and knowledge and a decent standard of living. The HDI and

the Gender Development Index (GDI) have improved in the last decade, but these

continue to be low compared to even some countries in the region.:

In socio-demographic parameters, despite considerable progress over the last

two decades the country continues to lag sever-al other countries in the region (Table

3). To correct this deficiency the Tenth Plan envisages a reduction in Infant Mortality

Rate (IMR) to 45 per 1,000 by 2007 and 28 per 1,000 by 2012, reduction in Maternal

Mortality Rate (MMR) to 2 per 1,000 live births by 2007 and 1 per 1,000 live births by

2012.and reduction in decadal growth rate of the population between 2001-2011 to

16.2 per cent. As against the allocation of Rs.15,120 crore for the Ninth Five Year

Plan, the allocation for the Department of Family Welfare is Rs.27,125 crore for the

Tenth Plan for the Annual Plan 2003-2004, the allocation increased to Rs.4,930 crore

from Rs.4,150 crore in 2002-03 (RE). The development experience of various

countries of the world reveals that the nations with rich human resources, consisting

of healthy and educated people, with a sense of discipline, dedication and work culture

could ultimately gear the economic system in the desired channels of: growth. Thus,


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it became clear that economic development has to be supplemented with social

development in order to provide sustenance to the overall process of development,

which brings into focus the role of human development as a resource and the

indispensable role played by the components of social sectors in economic

development.

Literacy rates in India have risen dramatically from only 18.3 per cent in 1951

to 64.8 per cent in 2001. However, India continues to lag behind several other

developing countries in the region (Table 4). Census data from 1981 to 2001 indicate

that the increase in population of the age-group 7 years and above has been 26-27

per cent during each decade. The number of literates grew by 52 per cent in 1981-91

and 59 per cent in 1991-2001. The absolute number of illiterates increased during

1991-2001. Literacy improved by 8.6 percentage points during 1981-91 while the

increase during 1991-2001 was by 12.6 percentage points (Table 5). For the first time,

education efforts have overtaken the growth in population and the absolute number of

illiterates has started declining.

3. Conclusion:

There is no conflict between social sector reforms and economic reforms because a

country cannot achieve higher level of human development without having high rate

of economic growth. There is no trade-off between the two. Both are complimentary

to each other. Although, it has been established that the theory of trickle-down effect

had failed in case of India, but what we need is a special drive against poverty,

malnutrition, illiteracy, hunger,' deprivation and unemployment. Since, borne more by

the vulnerable sections, so we need a special policy.

The problem of poverty and unemployment has to be based on four types of

strategy consisting of higher growth, redistribution, basic needs and directed

programmes. We can conceive of two forms of targeting, i.e. direct targeting, and

characteristic targeting. The planners missed the inescapable fact that growth and

reduction in inequality are both indispensable for a successful attack on mass poverty,

but our planning strategy considered production and distribution separately. However,

the forces of production determine the distribution pattern and thus there is no

justification for treating productive efficiency and distributive justice as two

independent variables of growth. Unless the pattern of income distribution is altered,


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the objective of increasing the production of wage goods sufficiently to remove poverty

will be distorted.

The sustainable growth and development over longer period of time in the economy

can be achieved only by fostering Human Resource and Social Development.

Therefore, the basic objective of the Second Generation of Reforms before Indian

should be to intensify efforts so as to increase public as well as private investment and

spending on key Social Services, particularly Education, Social Welfare and Nutrition,

Water Supply, Sanitation, Housing and Urban Development, and Health and Family

Welfare, etc. To achieve the above objective, it is essential to declare Social Sectors

as a priority sector and encourage Foreign Direct Investment into Social Sectors.

Table 1: Total Expenditure of Government on Social Services (Combined

Centre and States)

Source: Economic Survey 2003-2004, Government of India

Items 1986-87 1990-91 1995-96 2000-01 2001-02 2002-03

(RE)

2003-04

(RE)

Absolute Amounts in Rs. Crores

Total

expenditure

1,00,470 1,63,67 3,03,586 5,95,598 6,52,928 7,51,950 8,23,642

Social

Services

18,967 33,254 65,465 1,31,016 1,37,286 1,52,191 1,63,464

Education 8,650 17,093 35,289 65,718 68,071 74,709 80,987 Health 3,049 5,317 10,179 27,903 29,799 34,417 36,803

Others 7,268 10,844 19,997 37,395 39,417 43,124 45,673

As % of total expenditure

Social

Services

18.9 20.3 21.6 22.0 21.0 20.2 19.8

Education 8.6 10.4 11.6 11.0 10.4 9.9 9.8

Health 3.0 3.2 3.4 4.7 4.6 4.6 4.5

Others 7.2 6.6 6.6 6.3 6.0 5.7 5.5 As % of expenditure on Social Services

Education 45.6 51.4 53.9 50.2 49.6 49.1 49.5

Health 16.1 16.0 15.5 21.3 21.7 22.6 22.5 Others 38.3 32.6 30.5 28.5 28.7 28.3 27.9


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Table. 2: India’s Global position on Human and Gender Development

Country Human

Development

Index (HDI)

Gender

Development

Index (GDI)

Gender

Empowerment

Measures (GEM)

2001 1990 2001 1992 2001 1992

Norway 0.944 0.9 0.941 0.911 0.837 0.752

Australia 0.939 0.886 0.938 0.901 0.754 0.568

Sri Lanka 0.73 0.692 0.726 0.66 0.272 0.288

China 0.721 0.624 0.718 0.578 0.483 0.474

Indonesia 0.682 0.619 0.677 0.591 0.362 0.362

India 0.59 0.519 0.574 0.401 0.240 0.226

Pakistan 0.499 0.44 0.469 0.36 0.414 0.153

Bangladesh 0.502 0.414 0.495 0.334 0.218 0.287

Nepal 0.499 0.413 0.479 0.31 NA 0.315

Mozambique 0.356 0.317 0.341 0.229 0.428 0.35

Niger 0.292 0.264 0.279 0.196 NA 0.205


Table 3: India’s Global Position in terms of Socio-Demographic Parameters

Country Life

expectancy

at birth

(years)

Under-

five

mortality

rate (per

1,000

live

births

Infant

mortality rate

(per 1,000 live

births)

Maternal mortality

ratio (per 1,00,000

live births)

2001 1990 2001 1990 2001 1995

China 70.6 49 39 38 31 60

India 63.3 123 93 80 67 44

Nepal 59.1 145 91 100 66 830

Pakistan 60.4 128 109 96 84 200

Sri Lanka 72.3 23 19 19 17 60

Bangladesh 60.5 144 77 96 51 600

South Asia 62.8 126 96 84 69 427



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Table 4: India’s Global position on Adult and Youth Literacy rates

Country Adult Literacy Rates (percent

15 years)

Youth Literacy Rates (percent

15-24 years & above

1990 2001 1990 2001

China 78.3 85.8 95.3 97.9

India 49.3 58.0 64.3 73.3

Nepal 30.4 42.9 46.6 61.6

Pakistan 35.4 44.0 47.4 57.8

Sri Lanka 88.7 91.9 95.1 96.9

Bangladesh 34.2 40.6 42.0 49.1


Table 5: Literacy rates in India


References:

1. Haq, Mehbub-UI Quoted in Indian Economy by Ruddar Datt and. K.P.M. Sundaram,

S. Chand & Co, Ltd, 2004.

2. Dev.S. Mahendra (1995): Economic Reforms and the Rural Poor, Economic and

Political Weekly, Aug,19,1995, Vol.XXX, No.33.

3. Dhindsa, Paramjeet (1998): Human Resource Development, Economic Association

Conference Volume, Bangalore, 1998.

4. Manpower Profile India (1999): Institute of Applied Manpower Research, New Delhi.

5. UNDP: Human Development Reportss

6. Economic Survey 2003-2004, Government of India.

Census year Persons Males Females Male-female

gap in literacy

rate

1951 18.33 27.16 8.86 18.30

1961 28.30 40.40 15.35 25.05

1971 34.45 45.96 21.97 23.98

1981 43.57 56.38 29.76 26.62

1991 52.21 64.13 39.29 24.84

2001 64.84 75.85 54.16 21.69


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HUMAN DEVELOPMENT INDEX IN ANDHRA PRADESH

AN ANALYSIS OF DEMOGRAPHIC INDICATORS

Dr. M. V. Narasimha Sarma

Professor, Department of Economics, Acharya Nagarjuna University.

Dr. Ch. Purnachandra Rao

CESS, Hyderabad.

D. Kailasa Rao

Reader, Department of Economics, Sarada College, Vijayawada.

The concept of development has undergone a lot of change in emphasis because of

recent debates. The objectives and underlying values of development showed a

perceptible structural change over time. In the classical era, the word development

refers to progress, Classical conception of development was development of

productive resources. It is the development of resources which directly adds to the

output and well-being. Traditionally, development is explained in terms of income per

head of the population, education, and labor force participation. However, in recent

times, with the introduction of Human Development Index (HDI) in the Human

Development Report 1990 of UNDP, social indicators of development are also

included in measuring development. The human development index measures the

overall achievement in three basic dimensions of human development namely,

longevity, knowledge, and standard of living1.

Noble Laureate Amartya Sen has, for some time, argued persuasively that

human development is best defined as the expansion of individual freedoms or

capabilities in education, health, income, political processes, and economic exchange.

Enhancing the capabilities of the members of society to live the kind of lives they have

reason to value characterizes Sen's development ideology. Only when each of

society's members has the capacity to avoid impediments to happiness like poverty,

under education, malnutrition and gender inequality can that society be referred to as

developed. Human Development thus concerns more than the form capabilities such

as improved health and knowledge. Human development is the end-economic growth

a means. So, the purpose of growth should be to enrich people's lives. People should

have, include a long and healthy life, access to knowledge and income, assets, and

employment for a decent standard of living. In the ultimate analysis, human


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development is development of the people, and by the people.

The present study falls under the new approach of development, where an

attempt is made to work out a composite index for measurement of human

development. The present study is based on UNDP's methodology for constructing

human development index for different districts of Andhra Pradesh.

Human Development

Human Development has traditionally been perceived by economic thinkers as a

progressive transformation of society. Human development is the end-means of

economic growth. The purpose of growth should be to enrich people's lives. Human

development is an essential input for promoting economic growth and development.

Only when each of society's members have the capacity to avoid impediments to

happiness like poverty, malnutrition, and gender inequality that society can be referred

to as developed. Inequality is not a new phenomenon in the history of economic

thought. In fact, some schools of economic thought desired some tolerable level of

inequality as an inducing factor for the overall development of a state. The idea behind

the above approach was that the benefits of economic growth, which will be emerged

out from the selected better off packets will automatically and slowly trickle down to

the poor states. The view of human development as a progressive transformation of

society was inherent in the writings of all the schools of economic thought. Though all

these schools shared this common vision, what was lacking was a coherent and

comprehensive analytical framework for its measurement.

Studies in Andhra Pradesh:

S.A.R. Sastry (1978)2 says that there has been a shift in the focus, on the structure of

development as well as direct and relevant indicators of welfare like consumer

expenditure and nutritional intake. Conveying the strong nexus between per capita

expenditure and levels of development, he has taken per capita expenditure as a proxy

for the level of development. His exercise uses 26th round NSS (1971-72, State

Sample) data. The per capita household consumer expenditure data are corrected for

discrepancies in the distribution by adopting Sen's welfare. index. Finally, all the

districts were ranked based on their index.

Another important study relating to evaluation of levels of development across

different districts of Andhra Pradesh, was done by Appa Rao (1979)3. The study

considers all the districts of Andhra Pradesh with variables relating to agricultural


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sector, manufacturing, health, and education for the year 1975-76. The study works

out sector-wise indices by using principal component are used for calculating an

overall index. By using the percentile method, the class intervals are fixed, and all the

districts are classified into five groups, as very low, low, medium, high, very high.

Based on the above methodology, the identified very low districts were Nalgonda,

Mahabubnagar, Cuddapah, Nellore and Karimnagar. Low development districts were,

Anantapur, Khammam, Chittoor, Warangal, Srikakulam and Adilabad. Medium

developed districts were Medak, Prakasam, Krishna, East Godavari. High developed

districts were Kurnool, West Godavari, Nizamabad. and very high development

districts were Guntur, Visakhapatnam and Hyderabad.

In the year 1984, the Centre for Economic and Social Studies (CESS)4 also

attempted to identify backward areas at district level. This study was a follow-up to the

study in the backward area in Andhra Pradesh by technical committee constituted

under the Chairmanship of Sri B.P.R. Vithal. This study was an update version of the

earlier report using 1984 data. For classifying the districts by different dimensions of

development, factor loading approach was used.

K.S. Chalam (2000)5 analyzed the human development in the South Indian

states is found to be much higher than what is expected of them in terms of their ranks

in per capita NSDP. Most of these states are now experiencing demographic

transition. Andhra Pradesh is found to be backward in educational development

compared with its record in other components of human development. According to

the study the factors responsible for the educational underdevelopment in Andhra

Pradesh are examined through an in-depth study. The inter-caste and intra-caste

differences among the scheduled castes, which constitute 16 per cent of the

population, and the alienation of these communities in rural areas, are some of the

factors identified as responsible for this backwardness.

S. Mahendra Dev (2002)6 developed the analysis of Income Poverty and

Human Development. Poverty ratios show very low levels of rural poverty (11%) and

high levels of urban poverty (26.6%) for Andhra Pradesh as compared with All-India

(27% and 23.6% respectively) for 1999-2000. The concept of poverty is multi -

dimensional (viz., income poverty and non-income poverty). It covers not only levels

of income and consumption, but also health and education, vulnerability and risk, and

marginalization and exclusion of the poor from the mainstream of society. The official


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estimates of poverty ratio in urban areas of Andhra Pradesh are more than double

than those for rural areas in the 1990s. This is quite contrary to what one would expect

on the basis of the rural-urban differences in per capita income and wages. It is,

nevertheless, a matter of concern that the decline in rural poverty in Andhra Pradesh

was much slower than for all-India and the growth of mean consumption for rural

Andhra Pradesh was the lowest among southern states in the - 1990s.

Objectives of The Study

The present study addresses itself to the following objectives:

To analyze human development with the help of demographic indicators for Andhra

Pradesh.

To assess the impact of demographic indicators on Human in Andhra Pradesh

To study the behavior of demographic factors on HDI in Andhra Pradesh

To suggest suitable plans and reforms in demographic indicators to achieve a better

HIDI.

Methodology for Human Development:

United Nations Development Program (UNDP) was adopted for calculation of Human

Development Index. The report, recognizing the broad-based consensus that exists

on the three critical dimensions of well-being, focuses on identifying the various

contextually relevant indicators on each of them. These dimensions of well-being are

related to:

Longevity: The ability to live long and healthy life; Education The ability to read, write

and acquire knowledge; and the ability to enjoy a decent standard of living and have

a socially meaningful life. The HD1 is a summary measure of human development.

HDI measure the average achievement in three basic dimensions of human

development. These are: A long and healthy life, as measured by life expectancy at

birth, Knowledge (educational attainment), as measured by a combination of the adult

literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary

gross enrolment ratio (with one-third weight).

However, in the present study only the demographic indicators like Total

Fertility Rate (TFR), Infant Mortality Rate (IMR), Population growth and sex ratio are

taken into consideration for the analysis of variations in HDI during 1981 and 2001

census in Andhra Pradesh.

Andhra Pradesh is fourth lowest state in literacy among the major 16 states.


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Despite a higher rate of improvement in literacy during the nineties than the national

average. Literacy is likely to be influenced by the level of economic development. It is

of interest to see the strength of association between per capita income and literacy

rate. The high performance in literacy in the nineties is mainly due to the

implementation of an organized mass campaign for literacy. The National Literacy

Mission (NLM), established in 1988, provided financial assistance for Total Literacy,

Campaign. The mission defines a person as literate if he/she has acquired basic

literacy and numeric skills, functional knowledge, and social awareness. But the

census does not use such a rigorous definition. Though literacy rate increased:

significantly as per the 2001 census, it is necessary to ensure that these neo-lite rates

do not relapse to illiteracy after eight to ten months in the absence of continuing

education programs. The data relating to NSS 47th round relating to 1991 reveals that

11.3 per cent of the male literates and 3.1 per cent of the female literates in Andhra

Pradesh relapsed into-illiteracy. It is proper to calculate this proportion for those who

acquired literacy through adult literacy programs as the question of sustainability of

literacy arises mainly for these literates. The danger of relapse into illiteracy is likely to

be quite high in the recent period because of the spurt in literacy. (Table-I)

Human Development Impact on Demographic Indicators in Andhra Pradesh

In this study, an attempt has been made to analyze the relationship between HDI and

some of the demographic parameters, viz., the Total Fertility Rate (TFR), Infant

Mortality Rate (IMR), Population growth and sex ratio on the basis of district-level data

of the Andhra Pradesh. We have also carried out a rank correlation coefficient analysis

to find out the relationship between HDI and demographic parameters. Table 1

presents the some of the demographic indicators.

Table - 2 gives rank correlation matrix between different demographic indicators

in Andhra Pradesh. In assigning of ranks for calculation of rank correlation the HDI

and sex ratio are ranked from highest to lowest while Total Fertility Rate (TFR), Infant

Mortality Rate (IMR) and population growth rate are ranked such that the lowest figure

is ranked first and the highest rate gets the higher rank. This is because the HDI and

sex ratio should be higher for better economic development whereas the TFR, IMR

and population growth rate should have lower rates.

The Human Development index (HDI) has a positive impact on the Infant

Mortality Rate (IMR) and the Total Fertility Rate (TFR) in all the districts in the state.


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The HDI has a positive correlation with the TFR, the IMR in 1981. But HDI and the

population growth rate, the sex ratio has negative correlation. The HDI has a positive

correlation with the TFR, the IMR and the population growth rate, but HDI and sex

ratio shows a negative correlation in 2001. (Table-III)

From the above analysis, it may be deducted that the TFR has contributed more

when compared to any other indicator for HDI. Taking the correlation between HDI

and IMR, the later has proven its impact for an improved HDI in the year 1991 when

compared to the year 1981. However, the value of correlation has decreased in 1991

when compared to 1981 which indicates the contribution of IMR for an improvement

of HDI has decreased.

The relationship between HDI and population growth rate is very interesting. In

the year 1981, the relationship is negative but due to the massive hard work of

government there is a substantial decrease in population growth rate by the year 2001

which in turn could help for improvement in HDI as well as in their inter relation. The

relationship between the HDI and sex ratio is negative in both the time periods which

indicates that the sex ratio is falling and is not helping for an improvement in HDI.

However, from the rank correlation results it may be observed that there is an increase

in its value which supports the increase in sex ratio for growth in HDI.

In case of human resource development, the state improved its male and

female literacy between 1981 and 2001. This may be due to three major important

programs initiated in tune with the new education policy (1986) viz., Operation Block

Board (OBB), Andhra Pradesh Primary Education Project (APPEP) and District

Primary Education Project (DPEP). The OBB program supported by the government

of India, focuses on supportive infrastructure such as construction of social building,

providing teacher aids and creation of additional teacher posts. The APPE project was

assisted by the Overseas Development Authority (ODA) with the objective of

improving the quality of schooling, construction of additional classrooms and teacher

training centers. This program was merged with the DPEP after 1995.

The enrolment ratio has increased between 1981 and 2001 in the State. The

school data always indicates very high participation of children in education because

children are not removed from the roll as soon as they discontinue. Some of them

might have been enrolled in some other school: Some children may study for more

than five years in which case the enrolment ratio comes out as an overestimate. Since


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age of enrollment varies, some of the children to be enrolled soon will also be shown

as not attending school. This is likely to give an underestimate of participation in

education.

Government medical facilities have been improved in the state between 1981

and 2001. Number of hospitals, beds and doctors have improved during the period.

This is because Andhra Pradesh is one of the few states where the private sector in

medical care has outgrown the size of public sector through direct and indirect state

patronage. The financial incentives to the private sector and overcrowding at the public

hospitals have created conditions for the rapid growth of private hospitals in the state.

Private hospitals dominate the public sector in the state.

The Gross District Domestic Product has increased between 1981 and 2001 in

the State. Among the districts, Visakhapatnam, East Godavari, West Godavari,

Krishna, Guntur, and Hyderabad districts have recorded the highest GDDP while

Srikakulam, Vizianagaram and Adilabad districts have the lowest GDDP. However, all

the districts have improved GDDP during the period. Andhra Pradesh has been

pursuing economic reforms to step up the GDDP growth rate and alleviating poverty,

while protecting the environment. Significant strides have been made in respect of

participatory management of land, water and forest resources through the watershed

development committees, water users association and joint forest management.

Women's self - help groups are a success story in the ". state and have formed a

central element in the strategy for poverty: eradication through social mobilization,

community empowerment and capacity building. Agriculture has been an era of

strength for Andhra Pradesh but has not received adequate priority in the last two

decades. The promotion of female literacy, family planning facilities, as well as open

and informed public discussion can enhance the voice and decisional role of women

in family affairs, women empowerment can have a very strong effect in reducing

fertility rates and population growth.

Suggestions

An analysis of the policy initiatives of Andhra Pradesh revels that it has made

substantial progress. Between 1981 and 2001 the literacy level increased in the state,

the next step is to achieve the goal of universal elementary education for all children

in the age group of 6-14. The problem of dropout at the primary level must be tackled

especially in some of districts viz., Mahbubnagar, Adilabad, Medak and Nizamabad.


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There should be a shift in approach in dealing with the provision of health facilities to

the poor. It is evident that substantive part of provision as well: as financing of health

care in Andhra Pradesh is private. In such situations the critical role of the Government

should be to ensure equitable access for poor to essential clinical care including public

health services and make sure people get value for the money being spent. Building

on the lessons learnt from ICDS, (Integrated Child Development Services) and the

experience of APERP Nutrition Project the Government could look at further

strengthening the ICDS Program. Decentralization efforts of the program should be

strengthened, including providing and targeting of food supplements, to the mother's

committees to improve community ownership. The targeting of the program could be

improved to focus on children under 3 years to improve the program's nutrition focus.

In addition, an external assessment of the effectiveness of the food supplements in

improving nutritional status should be done and an assessment of which social and

economic groups are capturing the benefits of- ICDS should also be undertaken.

Sustaining the social mobilization and empowerment programmes should be a primary

focus of the human development strategy. The experience gained so far from the

working of Panchayati Raj institutions in the state has brought out the need for greater

devolution of functions, finances and powers, along with capacity building of the

functionaries, for ensuring the relevance and quality of works designed as well as for

their effective implementation. Andhra Pradesh needs to make significant progress

towards financially and administratively strengthening these institutions, making them

self-sustaining.

References:

1. UNDP (1996), Human Development Report, 1996, Oxford University, New York.

2. Sastry SAR. “Inequality, Welfare and Ranking: A study of Andhra Pradesh, Artha

Vijnana, Vol. xx, No.4, Dec 1978.

3. Narava Appa Rao, “Levels of Development – A study of Inter-districts Variations in

Andhra Pradesh”, An Unpublished M.Phil. Dissertation, Andhra university, 1979.

4. Project Work, Centre for economic and Social Studies (CESS), Hyderabad,1984.

5. Chalam K.S, “Human Resources Development in South India”, Journal of Social

and Economic Development, vol 11, No2, Dec 2000.

6. Dev Mahendra S “Human Development in Andhra Pradesh”, Development of

Andhra Pradesh: 1956-2001 – A Study of regional Disparities, vol.1, No.3, May

2002.


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Table 1: Demographic Status of Andhra Pradesh and India

NA- Not Available

Source: Sample Registration System data for various years.

Indicator Period Andhra Pradesh India

CBR (Births per

1000)

1971 34.8 36.9

1981 31.6 33.8

1992-93 24.1 29.1

1998-99 22.1 NA

CDR 2001 20.4 25.9

1971 14.6 14.9

1981 11.7 12.7

1992 9.2 9.7

TFR (Per Women)

1971 4.6 NA

1981 4.3 NA

1991 3.4 3.6

2001 2.3 3.2

IMR (Per 1000 Live births)

1971 113 127

1981 91 NA

1991 73 80

1999 65 72

CMR (per 1000 Live births)

1981 139 NA

1991 67 NA

Full Immunisation (%)

1992-93 45 NA

1998-99 58 NA


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Table – 2: Rank Correlation Matrix for Andhra Pradesh State for the Year 1981

Correlation Matrix

Human

Development

Index

Total

Fertility

Rate

Infant

Mortality

Rate

Population

on Growth

Rate

Sex

Ratio

Spearman’s

Rank Correlation

Correlation

Coefficient

Human

Development

Index

1.000

Total Fertility Rate .155 1.000

Infant Mortality

Rate

.776(**) .195 1.000

Population Growth

Rate

-.303 .426 (*) -.304 1.000

Sex Ratio -.183 .520 (*) .039 .296 1.000

Sig.(2-tailed) Human

Development

Index

Total Fertility Rate .480

Infant Mortality

Rate

.000 .373

Population Growth

Rate

.159 .043 .158

Sex Ratio .404 .011 .861 .170

** Correlation is significant at the .01 level (2-tailed)

*Correlation is significant at the .05 level (2-tailed)


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Table – 3: Rank Correlation Matrix for Andhra Pradesh State for the Year 2001

Correlation Matrix

Human

Development

Index

Total

Fertility

Rate

Infant

Mortality

Rate

Population on

Growth Rate

Sex

Ratio

Spearman’s

Rank

Correlation

Correlation

Coefficient

Human

Development

Index

1.000

Total Fertility Rate .650(**) 1.000

Infant Mortality

Rate

.613(**) .490(*) 1.000

Population

Growth Rate

.058 .422(*) -.126 1.000

Sex Ratio -.194 .066 -.134 .395 1.000

Sig.(2-tailed) Human

Development

Index

Total Fertility Rate .001

Infant Mortality

Rate

.002 .018

Population

Growth Rate

.792 .045 .568

Sex Ratio .376 .765 .541 .062

** Correlation is significant at the .01 level (2-tailed)

*Correlation is significant at the .05 level (2-tailed)


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ECONOMIC REFORMS AND AGRARIAN CRISIS IN ANANTAPUR DISTRICT

Prof. K. Nageswara Rao

Department of Economics, Sri Krishnadevaraya University, Anantapur

The tempo and intensity with which economic reforms have been implemented in the

agriculture sector are undoubtedly low and diffused. Globalization facilitated

modernization and use of improved technologies in agriculture. However, these new

technologies increased reliance on outside inputs, economic viability and sustainability

have adversely affected the agriculture sector during the period of economic reforms.

Cultivation of new crops like cotton, chilly, oil seeds, pulses with hybrids in different

parts of the state, more specifically in the drought prone areas, and intensive use of

chemical fertilizers in addition to the problems of irrigation, soil fertility, credit, low

prices have resulted in a serious an agrarian crisis leading to the suicides of farmers.

The perceptions of the agrarian crisis range from the failure of specific crops, recurring

drought conditions, outbreak of pest, failure of technology increasing debt burden etc.

on the rise. Though, Andhra Pradesh state, along with some other states, witnessed

farmers' suicides in 1997-98, the trend has been on the rise in an alarming magnitude.

The changed role of the State in the context of liberalization and globalization during

the last decade is stated to be one of the main factors that failed to resolve the crisis

in agriculture sector.

Purpose of the study:

Development and stabilization of agriculture and thereby promoting the living

standards of the rural people, to a larger extent, depends on the magnitude of support

extended by the government to the farmers and the rural population. New Agricultural

strategies and the package of Agricultural development programmes failed to yield the

expected results in the drought prone areas. On the other hand, the distress among

the farmers has been increasing leading to suicide deaths. In view of these

circumstances an attempt is made here to examine the factors that contributed to the

agrarian crisis in the drought prone Anantapur district. Further, this paper enquires into

the causes for the present crisis and presents a set of measures to minimize the

intensity of crisis in agriculture sector of Anantapur district.

Anantapur district:

Anantapur is geographically the largest district in Andhra Pradesh state with lowest


| 121

rainfall embracing the status of a drought prone district. This district occupies first

place based on rain fed cultivation and last place based on irrigated crops among the

districts in the state. Groundnut has been the major crop in the district and the district

is the lead district in producing ground nut. However, recurring drought conditions

force the farmers of the district to cultivate groundnut crop in alternative years.

Further, it is interesting to note that the yield of the crop realized in the alternative

years does not exceed one half of its potential.

Budget allocations are crucial for the effective implementation of the

developmental programmes in agriculture and social sector, more specifically, in

backward and drought prone zones. In fact, these allocations for the development of

rural areas, irrigation, agriculture, and human development programmes are to be

increased over a period. Special packages and increased allocations are to be granted

to the drought prone areas. Unfortunately, such allocations to drought prone areas are

decreasing over a period and the indifference of the government resulted in smaller

allocations to the backward districts. Further, these funds could not be utilized and

spent in time due to the delay in the release of the funds by the government.

Allocation of funds to the drought district has been fluctuating and is not keeping

pace with the intensity of drought. On an average, the plan allocation to the district has

been around Rs. 4.00 Crores. In 2001-02 budget amount sanctioned for crop irrigation

in Anantapur district was Rs. 42.25 lakhs and this also was not spent fully. In 2002-03

budget, only two crores were allocated to Anantapur district by the Irrigation

Department while more than fifteen crores were allocated for Tungabhadra High Level

canal works. Thus, the allocations by all the Departments to Anantapur district have

been meager and inadequate to meet the requirements of the district.

Agrarian crisis: Apart from several natural, physical, and other factors indifferent

policies of the government of Andhra Pradesh also contributed for the agricultural

crisis in Anantapur district. Introduction of some programmes in some years and

discontinuing them after some period reveals the indifference and non-commitment of

the government to develop agriculture in drought prone areas.

In 1992 a package programme for the development of agriculture in Anantapur district

was formulated by the district collector and a group of National Experts at an estimated

cost of Rs.1086 crores Government of Andhra Pradesh rejected this package and

proposed employment assurance schemes and watershed programmes for the


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development of agriculture. However, with a change in the government in 1993, even

these proposed schemes were not implemented properly. Further, funds sanctioned

to these schemes were mis- utilized and a High-level Vigilance Committee was

appointed to probe into the irregularities in the execution of these programmes.

In 1998 the district collector of Anantapur prepared 3 schemes for the

development of minor irrigation and rural development. These schemes failed to see

the light. On the directions of the state government, a new package programme was

proposed by the district collector for the development of horticulture, dairying, and

watershed development on one lakh hectares with an estimated cost of 300 crores.

However, Agricultural experts viewed that these estimates were unrealistic as the

development of horticulture requires Rs. 600 crores - sinking of bore wells in one lakh

hectares needs Rs. 200 crores, erection of submersible pump sets needs Rs. 150

crores and the expenditure on drip irrigation another Rs. 150. crores. This package

also could not be implemented due to recurring drought conditions. In fact, orchard

gardens on 50,000 acres in the district were destroyed because of the depletion of

ground water table. For instance, in Rapthadu manual alone orchard gardens on 500

acres were destroyed for the problem of water shortage.

Effects of reforms on agriculture:

It is very clear that the agrarian crisis in Anantapur district is the result of many factors

such as recurring drought conditions, neglect of agriculture sector by the earlier

government, defective policies of the government relating to electricity policy, subsidy

policy, fertilizer, pesticide and seed supply operations etc. Mainly Government policies

on the budget allocations to agriculture and electricity charges affected the agricultural

sector adversely. Change in the role of the State during the reforms period and the

influence of world Bank stipulations are suspected to be the reasons for the

indifference of the government to the development of agriculture sector.

The advent of globalization resulted in the exploitation of the farmers by the

middlemen and money lenders. Crop cultivation became uncertain and the cost of

cultivation is increasing over time imposing heavy burden on the farmers. The average

cost of cultivating ground nut crop in the district is estimated to be Rs. 3,000 per acre

while the revenue realized is Rs. 3,500 thus yielding a net benefit of Rs. 500 in many

years to small and marginal farmers.

Rationalization of subsidies resulting in inadequate financial support to farmers


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and the increasing burden of electricity bills are stated to be the reasons for the

distress of the farers. In fact, electricity supply to 21,000 pump sets in the district was

stopped as the farmers did not clear the payment of bills. The farmers in Anantapur

district suffer from non-remunerative price to the ground nuts.

Further, the import policy of the government permitting the import of palm oil is

adding to the miseries of groundnut farmers. In fact, the palm oil imports exceeded 40

million tons a year leading to a steep fall in the demand for groundnut. On an average,

Rs. 1500/- per hectare is provided for the development of palm oil production by the

Central government through the Department of Biotechnology. But the governmental

expenditure per hectare on groundnut crop works out to Rs. 8/- only. The Bio-

technology Department has been implementing 15 programmes for the development

of agriculture covering several crops in Andhra Pradesh. Unfortunately, groundnut

crop failed to find a place in the package of crops for development by Bio-technology

Department.

Under the Oil Seeds Development Programme Anantapur district should get

Rs. 5.85 crores assistance but it received only Rs. 33.96 lakhs and even this amount

was not also spent in the district for the development of groundnut crop due to the

delay in the release of the funds by the government. The National Oil Seeds and Oil

Development Corporation implemented programmes covering a set of crops raised in

the districts of Kurnool, Chittoor, Mahbubnagar and Adilabad. The programmes

implemented by this Corporation failed to cover the groundnut crop and the Anantapur

district.

Bank officials started the recovery of loans and announced the auction of gold

pledged by 568 farmers in February 2002. Later, the Transco officials insisted upon

the payment of the electricity bills by the farmers. Moneylenders also recovered loans

forcibly from the farmers. Unable to bear with the sufferings inflicted by all these

agencies many farmers ended their lives by committing suicides. During the period of

one and a half year from September 2002, more than 80 suicide deaths of the farmers

were recorded in the district. In fact, the number of farmers' suicide deaths increased

alarmingly in the last year. (approximately to 178).

We have taken up a study to probe into the agrarian crisis or the causes for the

farmers' suicides in Anantapur district under U.G.C sponsored Special Assistance

Programme and the survey is in progress. However, it is acknowledged that the data


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relating to the suicide deaths of the farmers in Anantapur district may be different for

different agencies and groups.

Measures to mitigate agrarian crisis:

As the present survey and study is in progress, a few measures have been presented

hereunder to meet the challenges of agrarian crisis in Anantapur district.

o In the wake of World Trade Organization Stipulations Government of India must

enforce the anti-dumping measures to protect the demand for Indian agricultural

product. It is most urgent to mitigate the effects of globalization by cutting down the

import of palm oi on a large scale. Blue box measures are to be made use of fully by

the government to enhance financial support to the agriculture sector.

o For the benefit of farmers in drought prone areas groundnut prices are to be

made more remunerative through price-support measures. Crop insurance measures

are to be extended to the ground farmers to save them from distress.

o Budget allocations to agriculture are to be enhanced to benefit the farmers in

backward and drought prone areas. Excessive use of fertilizers and pesticides are to

be discouraged to reduce the cost of cultivation in drought prone areas.

o Supply of quality seeds to the farmers by the Department of Agriculture is to

be ensured to prevent farmers' distress.

o Sinking of bore wells and deep wells in drought prone areas is to be abandoned

to prevent the depletion of ground water resources. On the other hand, minor irrigation

tanks and percolation tanks are to be reconstructed and maintained to preserve the

rainwater for the purpose of recharging the wells around.

o Drip irrigation under the watershed programme with reasonable subsidy is to

be encouraged for the benefit of orchard garden growers.

o Bank credit to farmers is to be enhanced to farmers to save them from the

exploitation of middlemen. Uniform policy of the government for the development of

agriculture may have different effects of regions with different level of development.

Hence, special package programmes are to be implemented for the benefit of

backward and drought prone areas in the state.

o Rationalization of power tariff for agricultural uses through a flexible and

accommodative tariff policy rather than a policy of free supply of power to all regions

and all farmers is to be implemented for the benefit of drought prone areas. Revenues

realized by implementing a rational power tariff policy may be utilized for the

development of agriculture in backward and drought prone areas.


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AGRARIAN CRISIS IN ANDHRA PRADESH

Dr. A. V. S. Bhaskara Rao

Senior Faculty, Post-Graduate Department of Commerce A.N.R. College, Gudivada

Abdul Shukur

Senior Faculty, Post-Graduate Department of Commerce A.N.R. College, Gudivada

Agriculture occupied a prominent place in the overall. strategy of development in the

Indian economy. In fact, the importance of agriculture in the economy is well

recognized at the beginning of the planning process itself. Though agriculture is a state

subject, most of the agricultural policies are designed at the central level, and they are

implemented by the states. In addition to this, states also design some policies for

meeting their specific needs. The main objectives of these policies are to improve

agricultural performance and living conditions of rural masses, and to ensure food

security in the country. The success of these policies mainly depends on the nature of

the policies and the actions initiated at the State level.

Indian Agricultural Policy in the Planning Era:

In India, an era of planning started in 1951 when the First Five Year Plan was

launched. During the first three decades of planning, the focus of agricultural policy

was on the following issues:

Bringing agrarian reforms on three fronts, viz., the abolition of intermediary

tenures like Zamindars and Inams, the security of tenure to tenants in the

ryotwari area, the imposition of ceiling on land holdings and the distribution of

surplus lands to the landless and uneconomic classes,

Associating agricultural classes with the formulation and execution

of development programmes.

iii Providing irrigation through major and medium irrigation projects and of

power for minor irrigation through rural electrification, and

Providing credit through co-operatives.

The first two measures represent major institutional reforms and the other two

constitute the core of the infrastructure, which are beyond the means of individual

cultivators and which could be provided only through active participation of

government. Regarding abolition of zamindars, inams and intermediary tenures, there


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was complete success. In respect of other measures, the achievements are quite

substantial, though they cannot be treated as a success considering the requirements

of Indian Agriculture.

Policy Instruments

For the adoption of technology, improving the resource use efficiency and for

achieving high growth of output, the policy instruments chosen arc prices, credit, and

subsidies. So, the policies on agricultural prices, policies on agricultural credit and the

policies on input subsidies in agriculture, gained prominence.

The effectiveness of these policies on growth of output was quite substantial.

During this period agricultural output recorded a growth rate of about 2.5 per cent per

annum. However, on the equity side there was a failure. The landowners seem to have

gained proportionately more than the landless labourers and large farmers gained

proportionately more than the small. These developments are traceable to the

deficiency in public investment in irrigation, the dominance of rich in credit societies

and the large technological gap between rice and the other crops in dry regions. The

policies of land reform, taxation, credit, and prices have also been heavily biased

towards big farmers who wield considerable political power at the state level and who

influence the formulation as well as implementation of such policies.

In the eighties there was no specific policy for the creation of agricultural infrastructure.

Public investment had been slowed down. However, the policies on prices, credit and

input subsidies were continued during this period. The infrastructure created earlier,

and the continuation of other policies made possible the achievement of a high rate of

growth of output.

In the nineties India launched a program of economic reforms and became a

signatory to the new world trade arrangement, which for the first time included.

agriculture. Then, the agricultural policy. framework was subjected to a rigorous

review. With the advent of W.T.O., like many other countries, India also faces the

challenges of removing domestic support in the form of subsidies, removing

quantitative restrictions and other non-tariff and tariff barriers on imports and exports.

Though several steps have been taken to implement the various clauses of W.T.O.,

the process has been very gradual and cautious. This may be due to the concern for

household food security, levels of poverty and regional disparities in


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development. Most of these policies were implemented in Andhra Pradesh along with

some State specific policies.

Trends in the Agricultural Economy of Andhra Pradesh:

Andhra Pradesh is a centrally located place in the country with varied agro-climatic

conditions conducive to diversified agriculture and the farmers are known for their

enterprise and willingness to take risk. It was among a few states in the country which

heralded the green revolution especially in respect of rice in the seventies. The

adoption of HYV technology and the other policy interventions of the government

brought some variations in the performance of agriculture in the state, over the last

fifty years. These variations can be traced over distinct periods, viz., pre-green

revolution period (before 1969-70), the first phase of green revolution (the seventies),

the second phase of green revolution (the eighties) and the economic liberalization

period (the nineties).

The aggregate output recorded a growth rate of 1.9 percent per annum during

the pre-green revolution period and it accelerated to 3.5 per cent per annum in the

first phase of green 'revolution. This high acceleration is not merely due to rise, but

also due to good performance of all food grain crops. However, the performance of

non- food grain crops, except cotton was not satisfactory. The second phase of green

revolution maintained the growth rate attained in the first phase. In the nineties, the

period of economic liberalization, there was a deceleration in the growth of aggregate

output. The growth rate declined from 3.4 per cent of the eighties to 2.3 per cent per

annum in the nineties.

The area under cultivation, an important determinant of agricultural output

marginally increased in the pre-green revolution period but declined continuously in

the first and second phases of green revolution. The decline was mainly due to

increase in the fallow lands. However, the area under cultivation recovered marginally

in the economic liberalization period. Thus, the area under cultivation is not a factor

responsible for deceleration in the growth of aggregate output in the nineties. Even the

cropping intensity is not responsible for the deceleration as the cropping intensity

increased steeply in the nineties. It is only the deceleration in the growth of yields of

several crops that is mainly responsible for the deceleration in the growth of

agricultural output in Andhra Pradesh.


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The critical factors behind the crop yields are technology, irrigation, and

fertilizer. In Andhra Pradesh, the adoption of HYV technology is very high. The

proportion of total area under HYV in the total cropped area increased from 53.17 per

cent in 1980 81 to 85.92 per cent in 1995-96. For individual crops, during the same

period, this proportion increased from 76,75 per cent to 94.07 per cent for paddy, from

16.16 per cent to 53.32 per cent for Jowar, from 47.16 per cent to 81.82 per cent for

Bazra and from 36.18 per cent to 84.08 percent for Maize. At the time of the formation

of the State, the gross irrigated area in groșs cropped area was only 26.01 per cent,

which increased to 43.34 per cent by triennium ending 1999-2000. In the seventies it

increased at a rate of 1.5 per cent per annum but in the eighties, there was a

deceleration to 0.6 per cent per annum. However, in the nineties the growth

accelerated to reach 1.9 per cent per annum. The high growth in the irrigated area in

the seventies was contributed by both canal and ground water sources. The eighties

witnessed a slowdown in the growth of canal irrigation and an increase in the ground

water irrigation. In the nineties there was a decline in the canal irrigation and a

phenomenal rise in the ground water irrigation

The consumption of chemical fertilizer is relatively higher in Andhra Pradesh.

During 1999-2000 the average intake-was-140 kgs per hectare, while it was 90 kgs

per hectare at all India level. The level of application is higher than the recommended

level for most of the crops.

High Cost of Cultivation

The deceleration/ stagnation in the growth of yields and high input use are leading to

increase in the cost of cultivation. For instance, the cost of production of paddy,

increased from Rs.77.06 per qtl. in 1974-75 to Rs. 405.82 per qtl. in 1996-97. Likewise,

the cost of production of groundnut increased from Rs.343.45 per qtl. in 1981-82 to

Rs. 1244.85 per qtl. in 1996-97 and for cotton it increased from Rs.537.88 per qtl.

in 1975-76 to Rs. 1832.91 per qtl. in 1996-97. The increase in the cost of production

without the proportionate increase in the product prices reduces the profit rate and

consequently the farm incomes. In the absence of adequate opportunities for non-

farm employment, many of the farmhouse holds especially the small and marginal are

entering into debt trap which is leading to great distress among farmers often resulting


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in the farmers committing suicides. During the five- year period 1997-2002, a total of

877 cases of farmers suicides in the state were reported in the newspapers.

Another important area for promoting agricultural development is marketing. In

between the product and input markets in Andhra Pradesh, the State intervention is

mostly found in the product markets, and the prices in these markets are relatively

stable and imperfections are relatively less. On the other hand, in the case of input

markets the private sector has been enjoying a dominant position. About 90 percent

of the seed of HYV, fertilizers, plant protection chemicals, farm implements and

machinery are being supplied to the farmers through private agencies and the State

has been playing a regulatory role in maintaining the quality of inputs. However, some

studies conducted in the state revealed that many multinational companies involved

in seed, fertilizer, pesticide markets, are very often deceiving gullible farmers through

their marketing strategies and supplying spurious inputs. The consequence is crop

loss and misery to farmers.

Against this background, an attempt has been made in this paper to bring out

the State's concern on agriculture and to record the State's view on the changing

economic situation. This study is based on the information drawn from both the primary

and secondary sources. The secondary sources are the documents prepared by the

State Government Departments arid various issues of Season and Crop Reports. The

primary data are collected through the discussions held with various government

officials in charge of agriculture and some other stake holders of agriculture like

farmers' organizations, entrepreneurs of agro-processing industries, etc.

Important Issues and Concerns

The following are the main concerns:

Deceleration in the rate of growth of output

Existence of large chunk of under -utilized lands and their increase over time,

especially the fallow lands,

Shift in the cropping pattern in favour of high-risk crop under the conditions of

low risk bearing capacity of the farmers,

Stagnation/deceleration of crop yields,

Decline in the surface irrigation and increase in the ground water irrigation,


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large areas of rain fed agriculture with erratic rain fall and frequent occurrence

of droughts,

Inadequate public investments for creation of agricultural

infrastructure, especially irrigation

Inadequacies in the timely supply of quality seed, excess/ deficient or

imbalanced use of fertilizer, supply of spurious pesticides and inappropriate

application of pesticides by farmers, on some crops,

Declining access to institutional sources of credit and increasing dependence

on private money lenders/ traders for credit,

inadequate market infrastructure and marketing, covering mainly the product

markets, leaving input markets to private sector.

Almost all the government officials in charge of agriculture and allied activities

in the state, with whom we interacted, expressed the view that the above-mentioned

factors are indeed the major issues of concern in the state,

State Officials’ views on changing economic situation:

The views of government officials on the factors responsible for the changes in

agriculture in reform period are divergent. However, none of them expressed directly

that the implementation of W.T.O. Agreements is mainly responsible for these

changes. Majority of them expressed the view that broadly the economic policy and

specifically, the agricultural policy designed at the national level, which is implemented

in the state is responsible for these changes in the agrarian economy The policy

designed with economic reforms favouring liberalization, globalization and

privatization as a base failed to address the basic problems of irrigation, marketing,

provision of credit, extension services and development of post harvesting technology.

A few also expressed the view that W.T.O. is indirectly responsible for these

undesirable changes in the agrarian economy: Regarding the perceptions of these

officials on the changes in the agrarian economy, the W.T.O. Agreements and their

impact on agriculture, our assessment is that most of the officials have very clear idea

about the changes that are taking place in agriculture and allied sectors. But, for

majority of them there is no proper understanding of W.T:0. Agreements and

commitments our country must meet. Therefore, their assessment of the likely impact


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of W.T.O. on agriculture in the State and correlating the changes in agriculture with

W.T.O. should be read with caution.

References:

1. Acharya, S.S., and Agarwal (1994): Agricultural Prices - Analysis and Policy, Oxford

and IBH Publishing

2. AERC (2003), Agricultural Policy in Andhra Pradesh : A Policy Matrix (Part-I), Agro-

Economic Research Centre, Andhra University, Visakhapatnam.

3. Government of Andhra Pradesh, Season and Crop Report of Andhra Pradesh,

various issues, Bureau of Economics and Statistics, Hyderabad

4. Hanumantha Rao, Ch. (1980), 'Agricultural Policy' in J.S.Mongia (ed) Indian

Economic Policies 1947-77, Allied Publishers Private Limited

5. Parthasarathy, G. (2000), Agricultural Development in Andhra Pradesh - Problems

and Prospects, Occasional Paper - 14, NABARD, Mumbai.


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WELFARE PROGRAMS AND FOOD SECURITY IN INDIA

Prof. C.S.N. Raju

Department of Economics, Acharya Nagarjuna University.

Dr. Ch. Purnachandra Rao

Centre for Economic and Social Studies (CESS), Hyderabad.

1. Introduction

Food security is always defined as access to enough food by all people. Food

insecurity is the lack of access to sufficient food, which may be either chronic or

transitory. The worst form transitory food insecurity is famine (Rautlinger, 1987).

Agricultural growth is an important tool for tackling chronic insecurity as it generates.

employment and income to the growing population. The transitory insecurity can be

addressed through the maintenance of buffer stocks.

Basically, food security implies that the entire population in a community has

“Access to enough food at all times for leading an active and healthy life” (World Bank:

1986). Food security also implies “Ensuring that all people at all times have both

physical and economic access to basic food they need” (FAO).

1.2. Ensuring Food security

Ensuring food security ought to be an issue of great importance for a country like India

where more than one-fourth of the population is estimated to be absolutely poor, and

one-half-of all children, malnourished in one way or another. There have been many

emerging issues in the context of food security particularly during the 1990s. These

are: a) economic liberalization in the 1990s and its impact on agriculture and food

security. b) Establishment of the WTO and particularly Agreement On Agriculture

(AOA) c) the phenomena of hunger amidst plenty., accumulation of more than 60

million tons of food stocks while 260 million or so people still live below the poverty

line d)the introduction of targeting in the public distribution system(PDS)for the first

time in the 1990s e)the ‘right to food campaign' for improving food security in the

country and the orders of the highest judicial body the supreme court of India-on mid-

day meal schemes; f) Monitorable targets under the Tenth Five Year Plan similar to

Millennium Development Goals (MDG's) on poverty and women and child nutrition.

These developments in the 1990s have provided opportunities and challenges for the

food and nutrition security of the country. It is well known that the question of food


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security has several dimensions that goes beyond the production, availability, and

demand for food. There has been paradigmatic shift in the concept of food security

from food availability and stability to household food security, and from the assessment

of input measures like energy intake to output indicators such as anthropometrical

measures and clinical signs of malnutrition.

2. The Concept of Food Security ·

The concept of Food Security can be considered at three levels: State, household and

individual (George, 1999). Food security at the national level can be monitored in

terms of demand and supply. At the household level, it needs employment and income

generation. Even when these two levels are monitored, there is no guarantee that food

security is ensured for all since certain vulnerable sections like children and women

under special condition, like pregnant and lactating women, may not get enough food

despite adequate income at the household level. Special nutritional programs for these

target groups provide a solution to this problem.

Though food availability at the national level is not a sufficient condition for food

security, it is necessary and other interventions are possible only when this condition

is fulfilled. In other words, the balance between demand and supply of food is a

necessary condition for food security. Since the concept of food security must focus

on the lower income groups who spend their income mostly on food grains, the

balance between demand and supply of food grains should be the primary concern.

World Development Report (1986) defined food security as "Access by all people at

all times to enough food for an active, healthy life". However, Food and Agriculture

Organization (FAO 1983) defined food security as ensuring that all people at all times

have both physical and economic access to basic food they need”. Staatz (1990)

defined food security as” the ability to assure, on a long-term basis that the food

system provides the total population access to a timely, reliable and nutritionally

adequate supply of food".

Food security involves physical availability of food to the entire population in a

country. However, to make adequate food available to all, it is necessary that the

people have enough purchasing power so that they can acquire the food they need.

For healthy life, the food available should be adequate in quality as well as quantity to

meet nutritional requirements. A nation may acquire self-sufficiency in food at a point

of time, but the concept of food security necessities that timely, reliable, and


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nutritionally adequate supply of food should be available on a long-term basis. This

implies that a nation must ensure the growth rate in food supply so that it takes care

of the increase in population as also the increase in demand resulting from increase

in the income of people.

The concept of food security has been discussed mostly in making available

minimum quantity of food grains to the entire population. In this sense, the concept is

narrow. But, in dynamic and developing economy, the concept of food security

undergoes a change with the stage of development reached by the society. From this

point of view, the following stages of food security may be visualized.

The most basic need from the point of view of human survival is to make an

adequate quantity of cereals available to all. In the second stage, we may think of food

security as the adequate 'availability of cereals and pulses. In the third stage, food

security should include cereals; pulses and milk and milk products. In the fourth stage

food security should include cereals, pulses, milk and milk products, and vegetables

and fruits, fish, eggs, and meal.

This paper delves into the problem of food security, in India. India has

achieved food security at the national level, which means that there is an adequate

supply of food for the entire population. But food security at the individual or household

level is yet to be achieved as a considerable large proportion of households do not

have access to enough food. Poverty is regarded as the principal cause of hunger,

and hence, food insecurity. In India, about 35 percent of population lives below the

poverty line (GOI 1997) which means that they do not have the means to buy enough

food that is considered biologically sufficient poverty is related to the inability to have

enough food, there will be wide variation in food security at the individual level.

Ensuring food security to the vulnerable sections of the society is the prime

responsibility of any welfare state. The Public Distribution System (PDS) in India plays

a pivotal role in providing essential food commodities to the poorer sections at

affordable prices, aiding thereby the process of social cohesion.

This paper consists of five sections. The first section is introduction, section II

analyses the concept of food security, need for food security is explained in section III.

This is followed in the IV section by food security in India. The V: section tells about

the shortcomings of food security finally; the section VI briefly outlines the suggestions

for improvement.


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3. Access to Food Security

Food security is said to be prevalent in the society when all the citizens always have

sufficiently food available which is culturally acceptable and having sufficient means

to obtain the. When we say culturally acceptable it means that by and large the food

that is consumed by people locally. There are two dimensions, by definition, to food

security. One is the availability or physical access to food and the second is the

purchasing power or economic access to food. In India, food security exists at the

macro level in terms of physical access to food. The economic access is far from

satisfactory, both at micro as well as macro level. When we say that economic access

to food is far from satisfactory, it is reflected in fact that a significant proportion of the

society is under poverty and is mal nourished also. This section of the society is under

privileged and less voiced. The question that arises is that who will ensure their food

security? Is it the state, market and the civil society or combined? The Article 21 of

Indian Constitution refers to "Right to Life”. Thus, right to food can be directly or

indirectly interpreted under this Article.

The state, market and the civil society have played a role ensuring food security

to the people of the country. However, food insecurity persists in some sections of the

society. The state provides access to food to all its citizens. However, there is no

recourse mechanism in-built in the system that will ensure each citizen access to

adequate food.

The market mechanism to a certain extent ensures access to food to its people.

This is however, limited, subject to overall sufficiency. Though market may ensure

access to adequate food it may not be socially and culturally acceptable. For instance,

inferior cereals and pulses, non-vegetarian food, etc., the civil society has still not

made its, presence in the cause of access to adequate food. It is only in the recent

past that the civil society is trying to bridge the gap between the state, market and

people by creating an awareness regarding the presence of persistent hunger in the

society, inadequacies in the Government system to ensure food security system.

People's Union of Civil Liberties' writ to the Supreme Court in 2001 is one such

example similarly, a national public hearing was held in Delhi on January 10 to 11

2003 on “Right to Food” (Chamaraj, 2003). Thus, an attempt is being made in this

paper to study the food security situation and the role of the state, market, and civil

society from human right perspective in providing adequate food.


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The impact of the new changes in policy is visible clearly from the available

data on quantities distributed under the PDS. First, let us look at the broad patron of

change during the last 15 years. The quantity of rice and wheat distributed through the

PDS network fell from 20.8 million in 1991 to 14 million tons in 1994. The quantity of

food grains supplied through the PDS rose again thereafter but the introduction of

targeting clearly led to a sharp reduction in off take. The provisional estimate for off

take in 200 was 12 million tones.

India is often cited as a land of paradoxes. This is certainly true when it comes

to food security. Despite a decline in poverty, close to 30 percent of its people are food

insecure and one-half of its children malnourished in one-way or another. And yet the

country has a stock of more than 60 million tons of food grains stored through

Government's procurement increased food prices, shrinkage of area under food grains

and escalating food subsidy are now the major concerns with regard to food security,

rather than freedom from hunger. Food security has several dimensions that go

beyond supply and demand. Ultimately, the key question is that of the ability to access

and effectively utilize food by all people, always to lead a health life.

4. Welfare Programs:

The following Programs have been strengthened and implemented effectively.

Public Distribution System (PDS): Public Distribution System is one of the

instruments for improving food security at the household level in India. PDS ensures

availability of essential commodities like rice, wheat, edible oils, and kerosene to the

consumers through a network of outlets or fair price shops. They are supplied at below

market prices to consumers, the access to the system till 1997 was universal. During

the first few decades of its existence, the PDS had never operated as an anti-poverty

program but merely as an instrument of price stabilization. Till late 1970s, the PDS

was mainly restricted to urban areas and food deficit regions. The main emphasis was

on price stabilization and as an alternative channel to private trade, Since the Sixth

Five Year Plan, however, the welfare importance of the PDS has been recognized.

Rural areas have also been covered in many states in the 1980s. In the 1990s the

Government has decided to restructure the PDS in the form of Revamped Public

Distribution System-(RPDS) and Targeted-Public Distribution System (TPDS). The

PDS has been effective during drought years, e.g. 1979-80 and 1987-88. It is also

effective in transferring food grains from surplus areas to few deficit regions. Over the


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years it has emerged as an instrument of Government policy to moderate open market

prices and to ensure food security at the household level. Under the PDS the Centre

Government has assumed responsibility for procurement, storage, and supply of

essential commodities to the State Governments/ Union Territories for distribution at

uniform and affordable prices to the public through a network of Fair Price Shops

(FPS).

Annapurna Scheme: The program is linked to the Targeted PDS. It provides 10

kg. of food grains for month for free to indigent senior citizens living alone. Approved

during the 1999/2000 budget, it is now being operationalized. It is targeted at those

who are eligible for old age pension but do not receive them and who do not live with

their children in the same village. The Ministry of Rural Development is charged with

its implementations with an annual food grain requirement estimated at 166,000

tonnes, issued by FCI at economic costs. The evaluation of this scheme is not readily

available.

Anthyodaya Annayojana: This program was introduced in early 2001 is

addressed to the poorest of the poor, as identified by Grama Panchayats and Grama

Subhas. Anthyodaya household have special ration cards and are entitle to 35 kg. of

grain a month at highly subsidized prices. (Rs.2 kg. for wheat and Rs.3 kg. for rice). In

a survey of destitution in Five States (Andhra Pradesh, Chhattisgarh, Jharkhand,

Rajasthan, and Uttar Pradesh) indicates that the program is doing well, in contrast,

with other components of the PDS. In the budget 2003-04, an additional allocation of

Rs.507 crores have been provided. With this expansion, 25. percent of the population

below the poverty line is to be covered in the fiscal year 2003-04.

Nutrition Programmes

Integrated Child Development Services (ICDS): Malnutrition among children

and women is severe in India. Integrated Child Development Services (ICDS) is one

of the main Programs for providing nutrition. ICDS is perhaps the largest of all the food

supplementation Programs in the World. It was initiated in 1975. ICOS services were

much in demand-but there are problems in delivery, quality, and coordination. The

program might perhaps be improving food security at household level but fail to

effectively address the issue of prevention detention and management of under

nourished child / mother. This is a unique program under which a package of

integrated services consisting of supplementary nutrition, immunization, health


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checkup, referral and education service are provided to the most vulnerable groups

even within children and women, i.e. children up 6 years of age and expectant/nursing

mother, through a common focal point called Anganwadi (the courtyard centers) in

each of the village/urban slums, to improve the nutritional and health status of children

in the age group 0-6 years to lay the foundation for proper psychological, physical, and

social development of the child., to reduce the incidence of mortality, morbidity,

malnutrition, and school dropout, to regulate effective coordination of policy and

program implementation amongst various departments to promote child development

to enhance the capability of the mother through proper nutrition education for taking

care of the normal health and nutritional needs and health of the child.

One ICDS project covers either a tribal or a rural Block, the territorial unit at sub district

level or a cluster of urban slums in an urban project. Preference in selection of Blocks

is given to those which have larger proportion of the population of tribal people and

other disadvantaged categories. The ICDS program was launched experimentally and

rather modestly, by covering 33 Blocks/slums in 1975-76. The author happened to be

the Director in charge of the program in the then Ministry of Education and Social

Welfare immediately thereafter when program was internally evaluated and expanded

to 66 Blocks. Since then, the program has been expanded gradually in a phased

manner and by the end of March 1993, it consisted of 3066 projects with 19.5 million

children and mothers receiving supplementary nutrition under the program. In addition,

9.34 million children were receiving pre-school stimulation. The entire expenditure of

the 287i centrally sponsored ICDS projects (of the total 3066 projects in place by the

end of March 1993) is borne by the Central Government, barring expenditure on

supplementary nutrition which concerned State Governments incur. Expenditure on

rest of the projects is borne of the state governments. How massive is the program

can be gauged by the fact that 21.4 million women and children are likely to have been

covered by one or other aspects of this program in 1993-94 and an amount of Rs.

4618 million is likely to have been spent by the Central Government itself. UNICEF

and some other international agencies are also assisting the program.

An evaluation of the ICDS program carried out in 1990-92 has revealed that

some of the positive impacts of program as follows:

(i) IMR in ICDS covered areas was significantly lower (66.6/1000) compared to

IMR in the non-ICDS areas (86/1000),


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(ii) immunization coverage in ICDS areas has been much better than in non ICDS

areas,

(iii) there has been better coverage of prophylaxis program of Vitamin.A, and Iron,

(iv) the nutritional status of covered children was going up and

(v) the percentage of low birth weight babies was also found to be lower.

(vi) On the negative side, the report has brought out inadequate community

participation and perhaps too much dependence on Government. Another

status appraisal of ICDS, carried out in four States by the National Institute of

Nutrition, Hyderabad revealed that "Nutritional status of ICDS beneficiaries in

Bihar was better than their non ICDS counterparts and only marginal

differences were observed in the remaining three States of Andhra Pradesh,

Madhya Pradesh and Orissa". This report, therefore, suggests better training

and motivation of ICDS workers to monitor growth properly and continuously

identify the children and mothers at risk, arrange for clinical intervention in

their cases, increase the quantum of their supplementary nutrition and so on.

In fact, NIN is now starting the "nutrition surveillance" in ICDS blocks in Andhra

Pradesh on pilot basis for achieving the abovementioned purposes.

It is now well recognized that proper and continuous training of. ICDS functionaries

at all levels and functional monitoring is vital to the success of a program like ICDS

which seeks of deliver a package of services. At the same time, motivation of the

village people to support the program is also a much-needed element. In fact, the

worker in charge of the focal point of delivery in the village i.e. Anganwadi worker is

supposed to be a girl from the village itself so that she does not have too many

overheads and does not take it as a job. being performed like by a Government

employee. She must be able to feel that she is enabling the children and women,

many of whom are her relatives in her own community, to derive the benefits from

the program.

Special Nutrition Program (SNP): This program was launched way back in

1970-71 for the same target group as in ICDS i.e. children below 6 years age and

expectant and nursing mothers. The program is a confined to tribal areas and slums.

Main activity under this program is to provide supplementary food to the beneficiaries

for 300 days in a year, although some individual initiatives were made in some States

to link some other services with supplementary feeding. For example, in early


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seventies in the small State of Tripura in North Eastern India, a school dropout tribal

girl was selected for running the feeding center, provided with some motivational

training and then encouraged to impart preschool education to the children, teach

them simple personal hygiene etc. Tribal communities were exhorted, and they

invariably did so, to construct a small hall where the pre-school activities could take

place. Under this program, every child is to receive .300 calories and 8 to 15 grams

of protein and every expectant and nursing mother 500 calories and 20 to 25 grams

of protein per day. As and when ICDS projects coyer 'tine areas having the SNP, the

program is merged with ICDS.

Bal wadi Nutrition Programme: Bal (children) wadi (home or center) Nutrition

Program is a contemporary of SNP and is being implemented since 1970-71 by the

Central Social Welfare Board and national level nongovernmental voluntary

organizations, namely, Indian Council for Child Welfare, Harijan (Scheduled Castes)

Sevak (Service) Sangh (Board), Bhartiya (Indian) Adivasi(Scheduled Tribe) Sevak

Sangh and Kasturba (wife of Mahatma Gandhi) National Memorial Trust. This segment

of nutrition program is thus implemented essentially by non-governmental

organizations. The Central Social Welfare Board, which is a semi-government

umbrella organization in the field of social work, gives in turn, grants-in-aid to voluntary

organizations to actually run the program and -so-do-the-other-four national--level

voluntary organizations, which also extend assistance lo various voluntary

organizations beside running some centers directly.

The beneficiaries of SNP are, basically from the disadvantaged section of the society

like tribal/scheduled caste people, urban slum dwellers and migrant laborers. The in-

charge of the Bal wadi Centre is an honorary worker, like Anganwadi worker of ICDS,

and is paid an honorarium which is Rs. 200 per month for trained and Rs. 150 for

untrained. She is assisted by a helper who is also an honorary worker. The Bal wadis

not only provide supplemental nutrition but also look after the social and emotional

development of children attending these Bal wadis.

A total number of 5641 Bal wadi centers are presently being run by the five

organizations. About 229 thousand children in the age group 3-5 years are covered

under the program. The budget for the SNP during 1993-94 stood at Rs. 100 million.

Creches for Children of Working and Ailing Women:

The scheme, implemented since 1975, has been designed to free the working, and in


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some cases ailing mothers, from the task of looking after their children while they are

on work or are sick. The coverage under the scheme is available only to those children

whose parent's total monthly income does not exceed Rs. 1800. Children generally

belong to casual migrant vendors, construction laborer’s groups etc. The services

available to the children include sleeping and daycare facilities, supplementary

nutrition immunization, medicines, entertainment, and checkups at weekly intervals.

The scheme is implemented by the Central Social Welfare Board which gives grants-

in-aid to various 'non-governmental organizations to manage the creches. Two other

national level voluntary organizations namely, Indian Council for Child Welfare and

Bhartiya Sewak Sangh also implement this scheme.

A total of 12470 creches are being run under this scheme; during 1993-94,

covering three hundred thousand children. Assistance to the tune of Rs. 230 million is

being provided to the CSWB and voluntary organizations to implement the scheme.

Wheat Based Supplementary Nutrition Program: The scheme was started with the

twin objective of providing supplementary nutrition to children and popularizing wheat

intake. Min of Food places at the disposal of the Department of Women and child

Development about 100 thousand tons of wheat from the central reserves annually

and that Department, in turn, sub-allocates this wheat among States which utilize the

wheat mostly to produce wheat based ready-to-eat nutrition supplements. With the

spread of ICDS, this wheat or its products are increasingly being utilized for distribution

of supplementary nutrition in ICDS and mid-day-meal programs The wheat is supplied

to the State Governments by the Food Corporation of India at the same subsidized

rates as for the public distribution system.

World Food Program Project: World Food Program-UN provides foodstuffs so that

supplementary nutrition could be provided through the projects supported by them.

WFP-India project has been extended from time to time and the present extension

would last till the end of March 1995. WFP currently supports 12 projects in India, with

a total commitment of 292 million dollars’ worth of food aid. "A major part of WFP's

assistance to India supports projects in forestry, irrigation and supplementary nutrition.

WFP's food assistance to India is focused on poverty alleviation, directly targeting the

most vulnerable section of the society" (WFP News 'letter April 94). The WFP provides

Soya Fortified Bulger Wheat, Corn Soya Blend, and edible oil to benefit about 2.1

million pre-school children, expectant and nursing mothers. For the last three years or


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so, the WFP obtains wheat or rice locally from the Food Corporation of India in

exchange for the butter oil it gets as donation from some European countries.

CARE Assisted Nutrition Programs: Under the Indo-CARE Agreement of 1950,

CARE-India extends food aid so that supplementary nutrition can be provided to pre-

school children of age less than six years and expectant/nursing mothers. The CARE

assistance is now dovetailed with ICDS projects and some of the ICDS projects utilize

this assistance for the nutrition component of the program. The program covers ICDS

projects in 10 States of the Indian Union. CARE has also monetized oil received by it

as donation for generating funds worth Rs. 100 million for implementing activities

supportive of ICDS program.

Tamilnadu Integrated Nutrition Project: This project located in the Southern

State of Tamilnadu, was started sometime in 1980-81 with the World Bank first time

extending assistance for nutrition programs in India. Second phase of the project with

a life of six years has started in 1990-91. The project would ultimately cover 316 of the

385 development Blocks in Tamilnadu. This will enable all the rural areas of the State

to come under the coverage of either this project or ICDS, as in most of nutrition

programs discussed earlier. The target groups in this project are also children up to 6

years of age and pregnant/nursing mothers. Like ICDS, pre-school education is

provided to children in 3 to 6 years group. The project seeks to provide enhanced

inputs in the areas of health, communications, training, project management,

operations, research, monitoring and evaluation. The NNMB repeat surveys for rural

areas in Tamilnadu showed that "the prevalence of severely underweight 1-5 (i.e.

below 60% NCHS median weight for age) dropped from 12.6% in 1975-79 to 4.2% in

1980-90, at a faster rate than all India improvement of 15%. to 8.7% in the same period

the rural IMR decreased from 121 in 1976 to 85 in 1988, as compared to all-India IMR

decrease from 139 to 102. A comparison of deaths among children 0-4 yrs. to total

deaths shows that Tamil Nadu at 22.2% (in 1987) is second only to Kerala (13.3%)

(with all India average was 42.0%)". (Ready, Mrs. Biondini, 1992) It, therefore, appears

that this project, implemented in just one state with strong political and administrative

back up, has been able to secure better coordination between nutrition, health and

educational services and certain strong points observed in this project need to be

replicated in other nutrition programs

UNICEF Assistance for Women and Children: India has been associated with


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UNICEF since 1949 and is one of the major countries as far as activities of UNICEF

are concerned. The activities are guided by the provisions of the Master Plan of Action,

the latest of which was signed between India and UNICEF on 30 May 1991 and

extends up to 1995. During the Five-year period, UNICEF is likely to spend around

U.S. $ 175 million in India from its general resources. UNICEF's assistance covers a

wide spectrum and is available in the sectors of health, education, nutrition, water and

sanitation, rural development urban basic services etc. Of course, the focus of all its

programs is essentially on children and on women, with the ultimate objective of better

child health survival & development.

NPNSPE: The National Program for Nutritional Support to Primary Education

(NPNSPA) aims to promote improved nutrition and attendance of primary school

children in the whole country. The program more popularly known as the mid-day

meals program, seeks to attract children to enroll themselves in primary school,

encourage regular attendance by providing supplementary feeding and improve their

nutritional status.

Wage Employment Programmes:

India has a long experience in experimenting with labor intensive public works. After

Independence 1947, many schemes were sponsored by the Centre Government

beginning with the Rural Manpower Program in 1960. The Employment Guarantee

Scheme (EGS) of Maharashtra has received acclaim from several sources. It is

particularly interesting example because of its unprecedented feature of guaranteed

rural employment which makes it a model for other states in India and throughout the

developing World. At the national level Jawahar Rojgar Yojana (JRY) and Employment

Assurance Scheme (EAS) are the important programs in rural areas. Food for Work

(FFW) program was started in 2001-2002 as a component of the EAS in eight notified

drought effected states of Chhattisgarh, Gujarat, Himachal Pradesh, Madhya Pradesh,

Orrisa, Rajasthan, Maharashtra, and Uttaranchal. In terms of person days of

employment created India's Rural Public Works Program are the largest in the World.

The JRY's reached around a billion person days in recent years. JRY share is quite

high in the social sector expenditure. Recently JRY was revamped and named as

JGSY (Jawahar Grameen Sam Riddhi Yojana).


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i. Employment Assurance Scheme

This employment generation scheme is being implemented in all the development

blocks of the State. The center and State are funding the scheme on 75:25 sharing

basis. The main objective of this program is to provide 100 days of assured casual

manual labor employment during lean agriculture season at statutory minimum wages

linked to the normal output of 8 hours of work. Creation of economic infrastructure and

community assets in the rural areas. The scheme is being implemented through

DRDAS and Panchayats.

ii. Jawahar Grama Samithi Yojana

Jawahar Gram Samridhi Yojana is a new program replacing Jawahar Rozgar Yojana,

which has been launched by the Government of India from the current financial year.

The Jawahar Gram Samridhi Yojna is being financed between center and state on

75:25 sharing basis. The central government will release funds directly to DRDAs on

the prescribed criteria of poverty arid population of SC/ST in the state.Creation of

durable assets / infrastructure at the village level, creation of productive assets,

exclusively for SC / ST for sustained employment and generation of supplementary

employment to the un-employed poor living below poverty line were the major activities

undertaken.

iii. Swarna Jayanti Gram Swarozgar Yojana

The Government of India by restructuring the self-employment programs has merged

IRDP, TRYSEM, DWCRA, SITRA, GKY and MWS into a new scheme namely "Swarna

Jayanti Gram Swarozgar Yojna" which has been launched from the current financial

year. This yojana is a holistic package covering all aspect of self-employment such as

organization of poor into self-help groups, training, credit, technology, infrastructure,

and marketing. The centre and state governments are funding the yojana on 75:25

sharing basis.

iv. Employment Guarantee Scheme

After independence, India embarked on an 'alternative' path of economic

development, which combined free with regulated market policies. Prompted by ideas

relating to democracy, nationalism, secularism and socialism, the elite in India devised

a programme of growth, which incorporated social obligations and a commitment to

social justice. As a part of this perspective, the state in India actively developed and

promoted anti-poverty programmes. In Maharashtra, the regional elite sponsored


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three kinds of institutions, as part of of 'alternative development.” The first was the

establishment of co-operatives, mainly based in the agricultural activities of sugar,

cotton, oilseeds and rice but also in credit. The second was the introduction of the local

self-government. Lastly to offset any distress to the poor because of drought, the

government introduced a Right to work through an innovative Employment Guarantee

Scheme (EGS).

Some the interesting questions in this context are-

1. The role of the political leadership in implementing the EGS. What political

compulsions motivated them?

2. The role-played by protest movements in promoting and sponsoring anti-poverty

programmes. What socio-economic conditions and ideologies motivated the

mobilization of the rural poor?

3. The structures of governance could not ensure equal access to all without

discrimination. What interests mediated to discriminate against deprived groups at the

EGS site level and how was this related to district and taluka politics?

4. How subsequent mobilization of the rural poor was of uneven nature more

specifically, mobilization declined in the late eighties.?

Conclusions

Welfare Programmes designed to improve food security in India. The PDS (making

available food grains at affordable prices) and Employment Generation Schemes

(improving purchasing power through self and wage employment) and nutritional

programmes have already been discussed in detail. In the face of continuing poverty

and malnutrition an alternative strategy of development comprising a frontal attack on

poverty, unemployment and malnutrition became a national priority from the beginning

of the Fifth Five Year Plan. This shift in strategy has given rise to a number of

interventions to increase the purchasing power of the poor, to improve the provisions

of basic services to the poor and to devise a security system through which the most

vulnerable sections of the poor can be protected.


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References:

1. Indra Kant, S. (2000), “Food Security and Public Support. A study of Andhra

Pradesh in N. Krislınaji and T.N. Krishna (eds), Public Support for Food Security – the

Public Distribution System in India, sage publications, New Delhi.

2. Nawani (1994), “Indian Experience on Household Food and Nutrition Security"

presented at Regional Expert Consultation, August 8-11, FAD-UN Bangkok, (Available

at www.fao.org/DOCREP/xo172e/).

3. Parikh K.S. (1994), “Who Gets How Much From PDS, How Effectively Does it reach

the Poor”. Sarvekshana, Vol.17 No.3.

4. Rao, V.M (1995), "Beyond 'surpluses': Food security in changing context', Economic

and Political Weekly, Vol.30. No.4, January 28.

5. Venupogal, K.R. (1992), Deliverance from Hunger- The Public Distribution System

in India, sage Publication, New Delhi.

6. Murthy, K.N. (1998), “Food grain Demand in India to 2020 - A Comment”, Economic

and Political Weekly, November 14, p.p. 2943-2944.

7. UNDP (2000), Human Development Report, Oxford University Press, New York.

8. World Bank (1999), World Development Report, Washington, D.C.

9. Mooij, Jas (1996), “Food Policy and the Indian State- The Public Distribution System

in South India, Oxford University Press, New Delhi.

10. Hanumantha Rao, C.H. (2000), "Declining Demand for Food grains in Rural India:

Causes and Implications” Economic and Political Weekly, Vol.35, No.4, p.p.201-206.

11. Planning Commission (2002), National Human Development Report, New Delhi.

12. UNFPA (1999), Population, Food Production and Nutrition in India, United Nations

Fund for Population Activities, New Delhi.

13. Ahluwalia, D. (1993),” Public Distribution of Food in India: Coverage Targeting and

Leakages”, Food Policy, Vol.18, No.1, p.p.33-54.

14. Radhakrishna, R. (1996), “Food Trends. Public Distribution and Food Security

Concerns”, Indian Journal of Agricultural Economics, Vol.51, No.1' nomics, Vol.51,

15. Mahendra Dev. S, Kannan, K.P, Ramachandran, Nira, “Towards a Food Secure

India - Issues and Policies", Institute for Human Development and Centre for

Economic and Social Studies.

16. Mahendra Dev, S. “Right to Food in India", Working Paper, Centre for Economic

and Social Studies (CESS) Hyderabad.


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17. Amit Shah (1997), “Food Security and Access to Natural Resource: A Review of

Recent Trends", Economic and Political Weekly, Vol.32, No.26, p.p.A46-A55.

18. George P.S. (1999). “Some Reflections on Food Security in India “, Indian Journal

of Agricultural Economics, Vol.54. No.4 April - December p.p.465 490...

19. Mahendra Dev, S. (1996), "Food Security: PDS Vs EGS, A Tale of Two States",

Economic and Political Weekly, Vol.31, No.27. ss


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THE POLICY AND SOCIAL SECTOR EXPENDITURES: ANALYSIS OF AP

STATE BUDGETS

Dr. Prabhakar Reddy,

Poverty Economist, Poverty and Social Analysis Monitoring Unit, Govt. of AP,

Hyderabad.

There has been a general opinion that the reforms would result in economic growth

and reduce poverty by creating a greater number of employment opportunities. While

it is true in the case of certain sections of society who possess some skills and

incomes. The situation of marginalized sections must be examined in view of ongoing

reforms. Besides, the government's strategy for poverty eradication recognizes that

long-term investment in core sectors such as agriculture, health and education will

accelerate the pace of poverty reduction in the state. Therefore, the rural poverty

reduction strategies are multi-pronged and multi-sectoral which can be classified into

three. a) intensive poverty reduction initiatives through social m pursuing rapid

agricultural growth, and c) provision of basic minimum services.

It is, in this context, important to mention an argument that the resource poor

will be affected adversely initially when the reforms are implemented. Therefore, there

is need for increasing public expenditures to the social sector. Against the above

background it is an attempt to examine the social sector expenditures (during nineties)

in relation to social policy and look into the utilization of funds particularly in the sectors

such as health and family welfare, education and drinking water.

The Policy

The policy with respect to the social sector is really ambitious and challenging and it

mentioned that the 'health for all' and 'compulsory education for all up to tenth e, if we

see the health sector strategy paper it is clear that several interventions were

undertaken with the following four broad goals (which are in a way similar to MDGs)

in perspective. They include reduction in maternal mortality rate, infant mortality rate,

increase in couple protection rate and reduction in fertility rate through social, political,

and economic empowerment of women, among others.

On the other hand, the interventions included decentralized organizational

structure, enhancing quality & expanding access of services, safe motherhood, child


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survival, increasing contraceptive prevalence, sector reforms, implementation of IEC

activities, active participation of community and NGOs, and strengthening the

management information system for better programme management. In fact, the

interventions listed above require plan funds.

Though the resource allocation to health sector, in the budget, is increasing

gradually the composition of allocation made for plan and non-plan expenditures are

worrisome. The non-plan expenditures are increasing at a faster rate than the plan

expenditure. As a result, the objectives mentioned earlier are not being really achieved

despite the need for more funds are emphasized every time. For instance, of the total

expenditure made in health sector during 1994-95 to 2001-02 there is no sign of

decrease in the non-plan expenditure in the state. If this is the situation, how can we

expect to expand the services to the rural areas and more importantly its utilization per

se is a question.

Going by strategy paper of health department the performance in the last few

years is far from satisfactory. Some of the indicators such as IMR, immunization and

safe deliveries yet present a concern in so far as achieving progress when related to

the MDGs of the state. On the other hand, improving the delivery of service at the PHC

and SC is another challenge for the government.

Budget Analysis

A cursory look at the recent budget 2004-05 presented an alarming picture in so far

as the non-plan expenditure is concerned. Despite the repeated statements that it

should be reduced it continued unabated every year. Besides, the development

expenditure has decreased from 61.02 per cent to 59.03 per cent while non

development expenditure has increased from 39 per cent to 41 per cent (during 1999

00 to 2004-05). However, in this context, year 2003-04 seems to be a favorable year

in reducing the non-plan expenditure.

An analysis of revenue expenditure over a period of six years revealed that the

expenditure has come down while non-development expenditure has gone up due to

debt services, which has increased from 17.53 per cent to 21.87 per cent. It indicates

that the debt service has taken away the major chunk of resources hither to spent for

development. Therefore, this would have a negative impact on the development of the

economy in the long run in so far as reduced development expenditure is concerned


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(consider table 1).

Further, an analysis of revenue expenditure highlighted the following facts (consider

table 2).

The share of general services has increased due to an increase in payments

and servicing of debt, administrative services, and pensions & miscellaneous general

services during the period under consideration.

The share of social services has declined indicating that it was not given due

importance by the government.

Although the share of education in total revenue expenditure has increased, the

revenue expenditure on health and family welfare, social welfare & nutrition have come

down. On the other, revenue expenditure on water supply & sanitation has come down

during 1999-2000 to 2002-03, it has picked up in the later period.

While the share of economic services in revenue expenditure has declined

during the period grants-in-aid has remained at the same level. The reason for the

decline is that the energy, industry and minerals, and science, technology and

environment have received less attention under revenue expenditure.

It seems that the revenue expenditure is biased towards general services than

that of social and economic services.

Table-3 has revealed the following changes in capital expenditure.

The composition of capital expenditure is in favor of economic services followed

by general and social services. From this it can be inferred that though economic

reforms are implemented in this decade the social sector expenditure has been

neglected.

The disaggregate data showed that the administrative services in general

services category has received much attention in the last three years wherein the

capital expenditure has grown from 0.31 per cent to 5.95 per cent. Further, the

education under social services category has been ignored continuously in so far as

capital expenditure is concerned. Similar is the case of health and family welfare

except for 1999-2000 during which 3.02 per cent of total capital expenditure is noticed.

Likewise, welfare of SCs, STs, and other backward classes has been neglected during

the period under consideration. All in all, the social services have been ignored during

the last nine-year period.

Though the capital expenditure on economic services has grown tremendously


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the share of agriculture and allied activities within it has been neglected. The lion's

share of capital expenditure under economic services has been taken away by

irrigation and flood control especially the major and medium irrigation.

Given the demand for, and situation of social sector it seems that there is.

justifiability in allocating more funds for education and health. li is a fact that the rural

health services are receiving fewer resources than that of urban health services needs

immediate correction. Despite the increase in plan outlays from year to year it has not

resulted in increasing the social sector expenditure.

Apart from allocation, it is believed that the proper utilization of resources

allocated under elementary and secondary education is highly important.

Analysis of Human Development

According to the Human Development Report of UNDP India has moved from 'low'

human development category to 'medium' human development category. It is the

social sector placed in the 115th rank in the world. Despite its efforts in development

the performance is far from satisfactory. (Tables IV-V)

As regards the human development index for India (combined rural and urban)

and different states it revealed that the rank of AP has fallen from 8 to 10 during 1981-

. 2001. In fact, it is causing an alarming situation in so far as the decreasing

expenditure on social services and the concomitant fall in the quality of services is

concerned.

On the other hand, Punjab has improved its position tremendously from 20 to

2 whereas Tamilnadu has also moved up from 6 to 3.Both the states have put in efforts

during 1981-91 and achieved good results, which need a closer examination perhaps,

from which AP can learn a lot.

While analyzing the indicators of human development the literacy rate is the lowest

(61.1%) among the south Indian states especially the female literacy rate (51 %).

Again, infant mortality rate (66) is also high as compared to southern states. Maternal

mortality rate is less when compared to Kerala and Karnataka states.

Social Sector Expenditure

When we look at the social sector expenditure as a percentage of GSDP it has fallen

from 7.5 to 6.9 during 1980-81 to 2000-01. Again, within social sector the social


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services expenditure also declined from 6.4 to 6 during the period under consideration.

While looking at the social sector expenditure as percentage of total public expenditure

it is obvious that it has come down from 43.8 to 35.7. Further, social services

expenditure as percentage of total public expenditure has also shown a decline from

37.4 to 32 per cent. Similarly, the expenditure on rural development has fallen from

6.4 to 3.6 per cent during the period consideration. While corroborating the above

trend a. study by NIPFP1, has noted that the aggregate government expenditures

allocated to poverty-oriented programmes during the years 2000 01and 2001-02 has

shown a constant percentage (around 23 per cent) whereas in the latter years (2002-

03 and 2003-04) it has risen a little though the actual figures may well be lower.

All this explains that the importance accorded to social services in the budget

allocations over a period has come down drastically. In fact, non-income poverty

aspects like health, education and drinking water and other services are essential in

our country as the expenditure on these items. is increasing to the households in rural

areas and pushing them into poverty is revealed in many studies. Hence, it is

appropriate not to neglect these sectors while budget allocations are made in the state.

Another important point is that though other sectors are given high priority based on

their need the relative shares of social services in the overall budget should go up from

year to year as it has a positive impact on the future generations. This is where exactly

the states like Punjab and Tamilnadu have made rapid strides with their conscious

efforts in the budget allocations.

Conclusions & Recommendations

From the foregoing analysis it is revealed that the share of social services in the budget

is decreasing from year to year. The composition of capital expenditure is in favor of

economic services followed by general and social services. From this it can be inferred

that though economic reforms are implemented in the nineties the social services have

been neglected. For instance, education under social services category has been

ignored continuously in so far as capital expenditure is concerned. Similar is the case

of health and family welfare apart from 1999-2000 during which 3.02 per cent of total

capital expenditure is noticed. The implications are such that the social services may

not be available to the increasing population and leading to deterioration in the quality

of service.


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An analysis of revenue expenditure over a period of six y:ars revealed that the

development expenditure has come down while non-development expenditure has

gone up due to debt services, which has increased from 17.53 per cent to 21.87 per

cent. It indicates that the debt service has taken away the major chunk of resources

hither to spent for development. Therefore, this would have a negative impact on the

development of the economy in the long run in so far as reduced development

expenditure is concerned.

As regards the human development index for India (combined rural and urban)

and different states, it revealed that the rank of AP has fallen from 8 to 10 during 1981

2001. It shows that there is a decline in the expenditure on social services and the

concomitant fall in the quality of services. Similarly, when we look at the indicators of

human development the state of Andhra Pradesh is discouraging, and it is lagging

other southern states.

Therefore, we recommend that the social services such as education, health and

drinking water should get relatively higher. allocations in the budget without obstructing

the prospects of future generations. If there are compulsions on the part of state

government in the budget allocations they should explore other sources of -

mobilization, which is not-a-burden on the people, rather-than-hampering the

improvement of social services.

Another pertinent point is that though other sectors are given high priority based

on their need, the relative shares of social services in the overall budget should not

decrease rather they should go up from year to year as it has a positive impact on the

lives of future generations.

Notes

1. The expenditure on social services as a ratio of GSDP during 2000-01 to 2003-04

revealed that the revenue expenditure was predominant, and the total expenditure

was constant. Again, within it, the expenditure on poverty reduction programs was the

highest.


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Source: AP Budget in Brief 2004-05, Vol VI

TABLE 1: REVENUE EXPENDITURE (% to total)

S.No. Particulars Accounts

1999-2000

Accounts

2000-01

Accounts

2001-02

Accounts

2002-03

R.E

2003-04

B.E

2004-05

1 Dev. Exp. 61.02 61.16 60.30 55.84 57.95 59.03

Non-Dev. Exp 38.98 38.84 39.70 44.16 42.05 40.97

Debt Services 17.53 16.77 18.91 23.53 22.82 21.87

2 Admin Services 7.43 7.20 6.70 6.40 6.08 5.94

Tax Collection

Charges

1.59 1.54 1.48 1.44 1.53 1.46

Other Exp 12.43 13.33 12.61 12.79 11.62 11.70


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TABLE 2: AN ANALYSIS OF REVENUE EXPENDITURE (% to total)

S.

No.

Particular Accounts

1996-97

Accounts

1997-98

Accounts

1998-99

Accounts

1999-2000

Accounts

2000-01

Accounts

2001-02

Accounts

2002-03

RE

2003-04

BE

2004-05

1 2 3 4 5 6 7 8 9 10

I General

Services

28.71 32.53 33.16 37.32 37.00 37.55 41.47 39.76 39.72

II Social

Services

36.24 37.63 41.64 40.64 34.82 33.17 32.95 34.48 33.79

Education 13.85 15.42 16.76 18.34 16.20 15.34 15.44 15.33 16.12

Health & FW 5.34 5.83 6.13 6.08 5.57 5.31 5.16 5.41 4.80

Water supply

& Sanitation,

Housing &

Urban dev

3.49 4.20 5.81 2.82 1.58 2.73 2.97 3.61 3.90

Social Welfare

& Nutrition

8.92 7.21 7.57 8.28 6.59 4.68 4.83 5.04 4.41

III Economic

Services

34.37 28.95 24.31 21.32 27.47 28.14 24.56 24.83 25.76

IV Grants-in-

aid

0.67 0.88 0.88 0.69 0.71 1.13 1.00 0.92 0.71


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TABLE 3: AN ANALYSIS OF CAPITAL EXPENDITURE (% to total Expenditure) S. No. Particulars 1996-97

% 1997-98

% 1998-99

% 1999-2000

% 2000-01

% 2001-02

% 2002-03

% 2003-04

% 2004-05

%

1 2 3 4 5 6 7 8 9 10 I General Services 13.76 2.00 1.8 1.50 1.86 2.32 7.33 6.68 6.56

Public Works 13.45 2.00 1.7 1.43 0.98 0.70 0.89 0.62 0.61 Other Administrative Services

0.31 0.00 0.1 0.07 0.87 1.62 6.44 6.06 5.95

II

Social Services 56.37 7.05 8.9 10.01 10.42 16.09 22.03 20.08 14.71 Education, Sports, Art, and Culture

4.01 0.78 0.4 0.41 0.05 2.49 0.04 0.13 0.00

Health and Family Welfare 0.62 0.24 0.1 3.02 1.76 1.72 0.88 0.57 0.18 Water Supply Sanitation, Housing and Urban Development

9.41 1.48 0.8 0.84 7.66 10.21 16.28 11.37 9.46

Welfare of Scheduled Castes, Scheduled Tribes & Other backward classes

29.27 2.63 4.6 1.03 0.91 1.60 2.09 7.87 4.93

Others 13.06 1.93 3.1 4.69 0.03 0.07 2.74 0.14 0.14

III

Economic Services 29.87 90.95 89.2 88.49 87.73 81.59 70.64 73.24 78.73 Agriculture & Allied Activities

9.23 1.84 2.6 0.62 0.71 0.60 0.41 0.85 0.11

Irrigation and Food Control 483.66 67.90 58.0 54.13 40.30 36.99 35.68 40.76 61.80 Major & Medium Irrigation 418.46 57.65 45.6 45.64 33.62 30.41 30.57 34.06 52.69 Minor Irrigation 46.31 8.18 9.5 6.20 4.09 4.21 3.75 5.88 7.88 Others 0.50 1.04 1.3 0.00 14.00 17.35 9.83 9.84 4.29

Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Source: AP Budget in Brief 2004-05, Vol VI


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Table-4: Social Sector Expenditure as Percentage of GSDP and Total Public Expenditure AP (1980-81 to 2001-02)

Years As percentage of GSDP As percentage of Total Public Exp.

Social Services

Rural Development

Total Social Sector

(Col 2-Col 3)

Social Services

Rural Development

Total Social Sector

(Col 5 + Col 6) 1 2 3 4 5 6 7

1980-81 6.4 1.1 7.50 37.40 6.40 43.8 1981-82 6.0 1.4 7.40 36.70 8.30 45.0 1982-83 6.3 1.1 7.40 39.20 6.80 46.0 1983-84 7.8 1.3 9.00 41.60 6.80 48.4 1984-85 7.9 1.7 9.60 38.00 8.00 46.0 1985-86 7.8 1.6 9.40 37.90 7.50 45.4 1986-87 8.9 2.1 11.00 39.20 9.10 48.4 1987-88 7.8 1.6 9.30 39.40 8.10 47.5 1988-89 6.7 1.5 8.20 35.00 7.70 42.8 1989-90 7.0 1.1 8.10 38.50 6.00 44.4 1990-91 6.5 1.4 7.90 36.20 7.90 44.1 1991-92 5.9 1.4 7.30 35.20 8.00 43.2 1992-93 6.3 1.6 7.90 34.90 8.90 43.8 1993-94 5.2 1.3 6.50 32.00 7.80 39.8 1994-95 5.1 0.9 5.90 30.50 5.20 35.6 1995-96 5.9 0.7 6.60 36.20 4.50 40.7 1996-97 5.9 0.8 6.70 36.40 5.00 41.5 1997-98 5.8 0.1 6.80 35.50 6.30 41.8 1998-99 6.3 1.3 7.50 39.20 8.10 47.3 1999-00 6.1 0.9 7.00 37.60 5.30 42.9 2000-01 6.0 0.7 6.90 32.10 3.60 35.7

Source: Dev SM, and Ravi C: Macroeconomic Scene: Performance and Policies, Economic and Political Weekly, March 22-

29,2003.


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Table 5: Human Development Index for India - combined (Rural + Urban)

States/UT’s 1981

value

1981

rank

1991

value

1991

rank

2001

value

2001

rank

Andhra

Pradesh

0.298 8 0.377 9 0.416 10

Assam 0.272 9 0.348 10 0.386 14

Bihar 0.237 14 0.308 15 0.367 15

Gujarat 0.360 4 0.431 6 0.497 6

Haryana 0.360 4 0.443 5 0.509 5

Karnataka 0.346 5 0.412 7 0.478 7

Kerala 0.500 1 0.0591 1 0.638 1

Madhya

Pradesh

0.245 13 0.328 13 0.394 12

Maharashtra 0.363 3 0.452 4 0.523 4

Orissa 0.267 10 0.345 12 0.404 11

Punjab 0.411 20 0.475 2 0.537 2

Rajasthan 0.256 11 0.347 11 0.424 9

Tamilnadu 0.343 6 0.466 3 0.531 3

Uttar Pradesh 0.255 12 0.314 14 0.388 13

West Bengal 0.305 7 0.404 8 0.472 8

All India 0.302

0.381

0.472

Source: Dev SM, and Ravi C: Macroeconomic Scene: Performance and Policies,

Economic and Political Weekly, March 22-29, 2003;

Table-6: SELECTED INDICATORS OF HUMAN DEVELOPMENT

State/UT’s Literacy 2001 Life

Expectancy

at Birth (1993-

97)

Infant

Mortality

Per 1000

live births

1999

Maternal

Mortality

per 1 lakh

live births

Male Female Total

Andhra

Pradesh

70.85 51.17 61.11 62.4 66 159

Assam 71.93 56.03 64.28 56.7 76 409

Bihar 60.32 33.57 47.53 59.6 63 452

Gujarat 80.5 58.6 69.97 61.9 63 28

Haryana 79.25 56.31 68.59 64.1 68 103

Karnataka 76.29 57.45 67.04 63.3 58 195

Madhya

Pradesh

76.8 50.28 64.11 55.5 90 498

Maharashtra 86.27 67.51 77.27 65.5 48 135


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State/UT’s Literacy 2001 Life

Expectancy

at Birth (1993-

97)

Infant

Mortality

Per 1000

live births

1999

Maternal

Mortality

per 1 lakh

live births

Orissa 75.95 50.97 63.61 57.2 97 367

Punjab 75.63 63.55 69.95 67.7 53 199

Rajasthan 76.46 44.34 61.03 60 81 670

Tamilnadu 82.33 61.46 69.68 64.1 52 79

Uttar

Pradesh

70.23 42.98 57.36 57.6 84 707

West Bengal 77.58 60.22 69.22 62.8 52 266

All India 75.85 54.16 65.38 61.1 70 407

Source: Dev SM, and Ravi C: Macroeconomic Scene: Performance and Policies,

Economic and Political Weekly, March 22-29, 2003.

References

1. AP Budget in Brief 2004-05 Vol. VI, Govt. of AP, Hyderabad.

2. Mahendra Dev, S. and Jos Mooij (2000):” Social Sector Expenditures in the

1990s, Analysis of Central and State Budgets"; Economic and Political Weekly, Vol.

XXXVII No.9, March 2.

3. Mahendra Dev, S & Ravi C (2003): Macroeconomic Scene: Performance and

Policies, Economic and Political Weekly, March 22-29

4. Prabhu, S (2001), Economic Reform and Social Sector Development, Sage

publications, New Delhi.

5. National Institute of Public Finance and Policy (2003): Public Expenditure for

the Poor in Andhra Pradesh

6. UNDP (1991), Human Development Report, 1991, Oxford University Press,

New York

7. Government of India, Planning Commission S (1997): National Human

Development Report


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ECONOMIC REFORMS AND PRIMARY HEALTH CARE SERVICES

Dr. V.V.S.K. Prasad

Department of Management Studies, The Hindu College, Machilipatnam

Health is an essential input for the development of the human resources and the

quality of life. A positive health status is defined as a state of complete physical, mental

and social well-being and not merely the absence of disease or infirmity' (WHO, 1946).

Health is regarded a priority for sustained development interventions at the individual,

community, and national levels. Improved health is a part of total socio-economic

development and is regarded as an index of social development. Therefore, the

primary goal of any health care delivery system is to organize the health services in

such a manner as to optimally utilize the available resources, knowledge and

technology, with a view to preventing and alleviating diseases, disabilities and

sufferings of the people. The present paper aims at examining the impact of the

economic reforms on health care services.

Primary Health Care

Primary Health Care is defined as 'essential healthcare and universally accessible to

all citizens and acceptable to them through their full participation and at a cost that the

community and country can afford' (WHO, 1978). It addresses the main health

problems in the community through preventive, curative, promotive and rehabilitative

medical and health services. Thus, the delivery of primary health care is the foundation

of rural health care system and forms an integral part of the National Health System.

The primacy accorded to primary health care reflects the essence of rural health care

system. India is one of the very few countries that had, from the very beginning,

planned health services as an integral part of general socio- economic development

and health was made a part of it.

With the announcement of the new program of reproductive and child health

(RCH), 1997 and the National Population Policy (2000),the local bodies or local self-

governments are going to be involved in the process of their implementation. The

Gram Sabha should be used to raise awareness levels of the people on crucial issues

of heath. It is expected that local self-governments will provide a better set of

administrative arrangements for the implementation of these policies as well as further

streamlining the health delivery system.


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Achievements and Limitations

Undoubtedly, the Indian health services infrastructure and its physical spread is one

of the largest in the world. Marked improvements have been brought about in several

areas of health care. The Infant Mortality Rate has fallen considerably thought it is still

high. The rates of maternal and child mortality, owing to diseases and malnutrition,

have been declining due to better medical care and improvements in economic

conditions. Life Expectancy has more than doubled since independence. Above all,

the general health awareness among people has gone up significantly. Perhaps the

most impressive achievement is the widely spread public sector health infrastructure.

Among the major achievements of the country, the important ones are: I) the

declining trend in vaccine preventable disorders due to improvement in immunization

coverage and II) efforts are being made for eradication of poliomyelitis through

country-wide Public Polio Immunization Programs. Guinea worm disease is on the

verge of eradication.

Meagre per capita expenditure on health

The current annual per capita public health expenditure in the country is no more

than Rs.200. It is no surprise that the reach and quality of public health services has

been below the desirable standard. Under the constitutional structure, public health is

the responsibility of the states. In this framework, it has been the expectation that the

principal contribution for the funding of public health resources will be from the

resources of the states, with some supplementary input from Central resources,

The policy focuses on building up credibility for the alternative systems, by

encouraging evidence based research to determine their efficacy, safety and dosage

and also encouraging certification and quality-marking of products to enable wider

popular acceptance of these systems of medicine. The policy also envisages the

consolidation of documentary knowledge contained in these systems to protect it

against attack from foreign commercial entities by way of malafide action under patent

laws of other countries.

The problems of health care are enormous. Access to primary health care is

inadequate to the majority of the. people because of low availability of basic preventive

and promotive health care packages, clinics, doctors, drugs, and para-medical

personnel in rural areas. Greater stress on preventive health care, medicine and health

education should be laid. Health literacy efforts should be made integral to preventive,


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promotive, curative, and rehabilitative health care. A meaningful involvement of the

private sector and NGOs is critical in all these endeavours for promoting a people

oriented and a sustainable health care system.

Still, many major diseases which were believed to have been brought under control

are resurging with deadly consequences. Thus, there is a resurgence of epidemics,

some old and others New. Malaria was thought to have been eradicated but is back

again. tuberculosis and leprosy were said to be under control but are as common today

as ever.

Plague was struck in Surat in claiming a heavy toll of lives perennially. Apart

from the traditional diseases of poverty, newer life-style related problems are posing

serious threats to public health. For example, ICMR estimates that there are 1.5

million: new cancer cases every year in India, 4.5 to 5.0 million cases at any given

time and 35 per cent of all cancer cases in the country are due to bad lifestyles. The

threats from drug addition, AIDS, Hepatitis B; Dengue etc. are becoming too real

(VHAI Health Status of India Document, 1995).

Poor Quality of Service

A vast network of rural health institutions has been developed. Rapid expansion has,

however, resulted in a considerable drop in the quality of functioning of health

institutions. For several reasons, the quality of services and work done by various

health institutions and by different categories of health personnel are poor, resulting in

low credibility among the rural community. Although slow and not necessarily

deliberate, the process of decentralization of rural health care started since

independence with the establishment of Sub-Centres and dispensaries in villages. The

current pattern of government of India norm provides one Sub-Centre for 3,000 to

5,000 population, one Primary Health Centre for 20,000 to 30,000 population and one

community Health Centre with 30 beds per one lakh population.

Unfortunately, the state governments have failed to decentralize authority and

resources. In most states, this decentralized infrastructure is directly managed by the

State Health Directorates. Despite a tremendous expansion of rural health

infrastructure, we are yet to reach all the 'have-nots' and the under-privileged. The

facilities and quality of service are poor. Supervision and support to the field staff are

missing. Hence, even the poorest of the people are not satisfied with state health care

and that is why they go to private practitioners. The rural health care facilities remain


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underutilized and the credibility of the state health services and hospitals is low.

Policy Promises

The National Health policy announced recently-aims at reviving the ailing health

system and increasing the primary health sector outlay to ensure a more equitable

access to health services across the social and geographical expanse of the country.

The government plans to increase its contribution to the health sector from 0.9 per

cent of the 'GDP at present to 2 per cent over the next eight years. By 2010, the policy

envisages an increase in aggregate expenditure on the health sector from 5.2 per cent

to 6 per cent. It has also been recommended to the states to increase expenditure

from 5.5 per cent to 7 per cent of their budget by 2005 and further to 8 per cent by

2010.

According to NHP, 55 per cent of the outlay would be for the primary sector and

35 per cent and 10 per cent for the. secondary and tertiary sectors, respectively. For

improvement of the public health infrastructure, it suggests revival of the primary

health system by providing essential drugs; levying of user charges for certain

secondary and tertiary public health care services for those who can afford to pay,

expanding the pool of medical practitioners and simplification of the recruitment

procedures for contract employment.

For funding and upgrading existing government medical and dental colleges, it

has suggested setting up of a Medical Grants Commission. Even the curriculum

should be modified to make it more need-based, the policy has stressed. It has also

suggested specialization in public health, which has been a neglected area, both for

medical doctors and non-medical graduates from allied fields.

Organization of health services has become complex, centralized, and

insensitive to the varying health felt needs. of the rural community. It is suggested that

Organizational set-up of health services needs reorganization. While the health

organization has grown tremendously in the past five decades, functionally the

structure has not changed with the dynamic and divergent demands of effective health

management, The middle-level management is weak because of the low and health

management and inadequate decentralization of authority and resources allocation.

The most important problem is the maldistribution of the health manpower/health

human resources, both geographically and category-wise. Both technical knowledge


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and skills and motivation to serve the rural people fall short of requirements and

expectations.

Conclusions

Communicable diseases such as malaria, tuberculosis, leprosy are likely to continue

to pose challenges to the country in the coming years. Non communicable diseases

will become a major public health problem in the country due to changes in lifestyle,

Increasing stress and tensions due to changes in social and cultural systems in the

society. With increase in the number of aged people, there will be higher incidence

and prevalence of diseases like hypertension, diabetes, cancer, and the whole range

of geriatrics problems. Equitable distribution of rural health care services for ensuring

verity for health care should be ensured by the government. Location of health

services and facilities should be such that these are easily accessible and available to

the rural community.

Greater importance is laid to the introduction of Multipurpose Workers (MPWS)

Scheme, the Integrated Child Development Services (ICDS) and Reproductive and

Child Health (RCH) Programme which have brought a new ray of hope to the rural

community and the expectations of the rural people have increased leading to more

demands for, institutionalized health care services.

In view of the experiences and difficulties faced in the provision of rural health

services, it has been realized that acceleration of the pace of implementation of rural

health programs is an urgent imperative and concerted efforts need to be made by the

State and Central Governments. Further, substantially large financial investments

need to be made for rapidly improving the health profile of the country. For making

rural health care services more meaningful to the rural community, it is needed to bring

about fundamental changes in the focus and approach to the entire health care

delivery system in general and rural health care, in particular. .

As regards the impact of globalization on the health sector, the policy admits

that there are some apprehensions about the possible adverse impact of economic

globalization on the health sector. Pharmaceutical drugs and other health services

have always been available in the country at extremely: inexpensive prices. India has

established a reputation around the globe for the innovative development of original

process patents for the manufacture of wide range of drugs and vaccines within the


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ambit of the existing patent laws. As a result of the process economic reforms

privatization of health services is recommended but privatization bound to affect

adversely the maintaining cost of health services of the poor. The cost of medicines

has been rising under the new economic reforms.

In this context, the policy merely states that it will address itself to the future

imperatives of health security in the country, in the post-TRIPS era. However, it does

not articulate any mechanism to regulate the exorbitant drug prices and ever-

increasing cost of health services to provide relief to the poor and vulnerable. Already,

prices of various essential drugs and formulations have gone up. This is the biggest

challenge for the successful implementation of the new health policy .

References:

1. Deodhar, N. S. (1999) : Rural Health Policy and Management Perspectives. In

Basic Rural Infrastructure and Services for Improved Quality of Life (ed.) R. C.

Choudhury & P. Durga prasad, NIRD, Hyderabad, pp. 296

2. Government of India ( 2001), National Health Policy.

3. Sushma Chandra(2002), New Health Policy focuses on Primary Sector,

Yojana July, P.25


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SOCIAL POLICY AND RETREATING STATE IN THE ERA OF DEREGULATION

Dr. B. Sarangapani

Reader and Head, Post Graduate Department of Economics, The Hindu College,

Machilipatnam.

Indian Constitution envisaged a pro-active role for the state. The Indian state is

supposed to transform the existing order and bring about a qualitative change in the

caste, gender, and other social relationships besides economic and industrial

development. The Directive Principles are a ready reference for formulating and

implementing social policy. The Directive Policies largely guided the contours of social

Policy up to 1991. With the introduction of economic reforms, the state began

retreating from the economic as well as the social sectors.

The target group approach taking the vulnerability of socio- economic groups

as the defining factor for public policy formulation during the early 70s is a significant

development in the evolution of social policy. However, all this changed with

globalization. The Neo- Liberal model adapted excluded the groups included in the

target group approach and offered ideological justification for the exclusion. The

transition of the India state from a pro-active interventionist state to that of a retreating

state with a minimal role in socio economic progress has hit the entire terrain of social

policy.

Social policy incorporates explicit value judgments of the society. The efficiency

of the State must also be measured in terms of achievement of both social and

economic objectives. The role of state will be crucial in providing necessary nationalist

backing during the process of globalization. The regulative tasks of the government

include not only keeping the market in its place but also increasing the domain of rights

of the people both implicitly and explicitly. This must be the guiding force behind any

social policy formulation.

Experience with Economic Reforms in Andhra Pradesh

Four important methods have been identified for studying the impact of reforms. These

are - a) Comparison before and after the implementation of reforms. b) Comparing the

group under treatment with controlled group which is like the treatment group. c)

Comparison of differences observed between before the situation and after the

situation in the treatment group with changes that are observed in the controlled group


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during the same period and d) SWOT Analysis with simulation exercises.

Experience and evidence presented suggested that AP Economic

Restructuring project undertaken with the help of the World Bank was poorly

formulated. While the major goal was to enhance the GDP, the results achieved are

negative in effect. All the sectors except the tertiary sector experienced steep

deceleration in the post reform period. Major Fiscal indicators such as Fiscal deficit,

Revenue deficit, Public Debt, debt servicing charges etc., increased steeply in the post

reform period. The capital expenditures fell sharply and budgetary allocations to the

social sectors declined significantly in the post reform period. Employment

opportunities dwindled and reforms put enormous strain on the state economy.

The Agricultural sector of AP turned around from an accelerated growth in the

80s to the deceleration in the 90s. The yields of major agricultural crops are below the

levels attained in other states in the country. The decline in surface irrigation and steep

increase in ground water irrigation resulted in unsustainable agriculture. The growth

of public investment declined significantly between 80s and 90s. Various factors have

been identified for the growing number of suicides of farmers in the state – high

investment in bore wells with a high failure rate, use of spurious pesticides and seeds,

high cost of cultivation, exploitation through interlinked markets, failure of the

organized credit markets to meet the credit requirements of the farmers, failure of the

regulatory authorities etc.

Though there are repeated lofty policy announcements like ‘health for all' and

'education for all’, the budgetary allocations and performance are not commensurate

with the goals. On the Human Development front, the state has slipped down between

1991 and 2001. It has been pointed out that about 14 districts in the state are found

below the state average pertaining to the Doctor-Population ratio. Beds-Population

ratio is also below the state average in about 16 districts. Hospital-Population ratio is

below the state average in 9 districts. Several districts in the state are found in a

pathetic situation in terms of medical facilities offered by the public sector. The

expenditure on public health services is on the decline. It was pointed out that the

corporate sector almost exclusively concentrated on heart diseases rather than on

infectious diseases.

Literacy rate in A.P. has been much below the All India average during the last

four decades. In Rural A.P. there are 731 households for every 1000 households


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without female literate and 465 households without any literate in the family. As per

2001 census, A.P. occupies the 28th position among the 35 states and union

territories. Its growth in literacy rate was slightly better than that of Bihar, U.P, and

Rajasthan but lower than that of Arunachal Pradesh and Madhya Pradesh among the

low literacy states.

Macro Reforms affecting Heath and Education.

Some of reforms introduced at the national level are affecting social sectors such as

heath, and education. It is feared that the recent amendment to the Indian Patent Act,

1970 introducing product patenting in the place of process patenting may likely to

increase the prices of drugs and the domination of multinational corporations in the

pharma sector. Prior to 1970, when India had product patent regime for drug industry,

the domestic pharma market was dominated by the foreign companies. After 1970,

during the process patenting regime, the Indian companies could increase their share

to 65 percent. Again with product patent regime, the domination of foreign companies

may increase and the prices of drugs used for diseases like diabetes, asthma,

hypertension, coronary heart diseases, depression, cancer, HIV/AIDS, arthritis, and

respiratory and urinary tract infections will raise abnormally. This will have adverse

consequences for the poor.

India is likely to be a net looser because of internationalization of education.

Domestic and equity considerations so far guided the Indian higher education. Quality

and efficiency considerations received scant attention. Five levels of education -

primary, secondary, higher, adult, and other education have been identified for GATS.

The first two are still restricted to domestic providers. WTO has identified four modes

of trade in the other three levels of education - (1) Cross border supply (distance mode)

(2) Consumption abroad (3) Commercial presence and (4) Presence of natural

persons. Each of these modes have different implications for India. Internationally

education is a trillion-dollar industry and India are losing considerably because of

excess demand for quality education which is mostly satisfied by excess capacity in

USA.

Food Security to the poor

Basically, food security implies that the entire population in a community has “Access

to enough food at all times for leading an active and healthy life” (World Bank: 1986).

Food security according to FAO, also implies “Ensuring that all people at all times have


| 169

both physical and economic access to basic food they need”. India is often cited as a

land of paradoxes. This is certainly true when it comes to food security. Despite a

decline in poverty, close to 30 percent of its people are food insecure and one-half of

its children malnourished in one-way or another. And yet the country has a stock of

more than 60 million tons of food grains stored through Government's procurement

increased food prices, shrinkage of area under food grains and escalating food

subsidy are now the major concerns with regard to food security, rather than freedom

from hunger. Food security has several dimensions that go beyond supply and

demand. Ultimately, the key question is that of the ability to access and effectively

utilize food by all people, always to lead a health life .However, the physical and

economical access to basic food decreased during the post reform period. Providing

food security is important in India where more than one fourth of the population is

estimated to be poor and one half of all children are malnourished in one way or

another.

Social Sector Expenditure

When we look at the social sector expenditure as a percentage of GSDP in Andhra

Pradesh, it has fallen from 7.5 to 6.9 during 1980-81 to 2000-01. Again, within social

sector the social services expenditure also declined from 6.4 to 6 in the post-reform

period. While looking at the social sector expenditure as percentage of total public

expenditure, it has come down from 43.8 to 35.7. Further, social services expenditure

as percentage of total public expenditure has also shown a decline from 37.4 to 32 per

cent. Similarly, the expenditure on rural development has fallen from 6.4 to 3.6 per

cent during the period consideration. The aggregate government expenditures

allocated to poverty-oriented programmes during the years 2000 01and 2001-02 has

shown a constant percentage (around 23 per cent) whereas in the latter years (2002-

03 and 2003-04) it has risen a little though the actual figures may well be lower.

All this explains that the importance accorded to social services in the budget

allocations over a period has come down drastically. In fact, non-income poverty

aspects like health, education and drinking water and other services are essential in

our country as the expenditure on these items. is increasing to the households in rural

areas and pushing them into poverty is revealed in many studies. Hence, it is

appropriate not to neglect these sectors while budget allocations are made in the state.

Another important point is that though other sectors are given high priority based on


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their need, the relative shares of social services in the overall budget should go up

from year to year as it has a positive impact on the future generations.

Improving Quality of Expenditure on Social Sector

The quality of expenditure on social sector is as important as quantity of expenditure.

The Comptroller and Auditor General in its report for 2000 has critically examined the

working of the four major schemes -- PDS, Employment Guarantee Program,

Integrated Child Development Services, Nutritional Support to Primary Education.

According to that report, in the six years ending March 1999, the Union Treasury spent

Rs.830 billion on these four schemes - A daily average spending of 30 127 crores. Yet

the effect was zero - GILCH (nothing). According to the CAG, the money leaks entirely

to those it is not meant for.

Traditional Government with its vertical framework and large bureaucracies is

unable to adapt to fast changing economic social and cultural contexts. Hence,

institutional reforms towards enhancing policy capacity and policy implementation are

needed. Creating a Government that works better and costs less is the need of the

hour. Effective government is a prerequisite of social and economic growth. The

cardinal difference between government and business or non-profit organizations is

democratic accountability. Government is the only institution which is answerable to

the people at large. A strong, effective, truly performing government is needed in the

present times of 'Darwinian Capitalism'.

The state has a key role in accelerating human development and in providing

social security to the vulnerable. The Government at the state level are closer to the

people and reforms at that level can have greater effect on the people. The

responsibility of social services lies with the state and local governments. The quality

of delivery of social services depends upon the quality of Governance at the state and

local levels. Hence governance reforms at the state and local levels for better delivery

of public services with greater accountability to the people becomes is important from

the social policy perspective.

A public debate must precede whenever Government contemplates major

changes in social policy effecting millions of people. In this context it is felt that the

election manifestos of political parties must be given a legal status to avoid the “stealth

character of any major changes”. Liberalization before safety nets were put in place,

privatization without adequate regulation and downsizing public enterprises before


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employment opportunities were created in the private sector have adverse

consequences for the poor and the unorganized. The uneducated, semiskilled and

unskilled workers and those dependent on public services, small firms, producers of

primary products, firms without much market access and no branding, producers and

sellers who operate in the local market are severely hurt because of the reforms.


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REFORMS AND EXPENDITURE ON SOCIAL SECTOR IN ANDHRA PRADESH

Prof. M. L. Kantha Rao,

Former Professor of Economics, SKD University, Anantapur

States in India play a key role in devising and implementing policies to reduce poverty,

promote human development, and stimulate growth. Under India's Constitution, they

are assigned significant responsibilities in major sectors such as agriculture, industry,

infrastructure, education, health, social welfare, and tax and expenditure policy at the

state-level. The budgets are also used for eliminating the regional imbalances and

improving the overall human development index, which is the weighted average index

of more than 70 parameters that define the well- being of the people.

Fifty years after independence, India remains home to about a third of the

world's poorest people. India has eliminated famines which were common earlier;

economic growth has substantially exceeded the rate of population growth and since

the 1970s there has been significant reduction in the proportion of people whose

incomes are below the poverty line.

There has also been progress towards human development objectives (such

as increasing literacy and reducing infant mortality). Yet India is far from where it could

have been. The absolute number of poor has not decreased. One of every three

persons in India was poor, and two of every three were undernourished or mal

nourished. The large sums invested in public anti -poverty programmes tend to focus

on poorly targeted subsidies and safety nets rather than long term investments in

education and health.

President A PJ Abdul Kalam said that to meet the challenge of uplifting 260

million. people living below the poverty line, there is need for the economy to grow at

the rate of 10 per cent per annum consistently for over a decade. Delivering the first

Professor Manohar Lal Sundhi lecture in New Delhi, he said, "Our nation is going

through a major challenge of uplifting 260 million who are below the poverty line. They

need habitat, they need food, health care and they need education and employment,

finally resulting in better life." In this context let us examine the trends in social sector

expenditure and its impact thereof. Social sector expenditure includes social services,

rural development and food storage and warehousing.

The states' increasingly large deficits mean their fiscal policy is an important


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factor not only in their own performance but in India's overall fiscal sustainability.

Deteriorating finances have caused state spending on critical sectors such as health,

education, irrigation, and infrastructure to decline below the levels required to make

further headway against poverty. Concurrently, there has been an increase in

spending on loss-making state enterprises and massive subsidies for power, water,

irrigation, and transport. For example, in Uttar Pradesh the State Electricity Board has

been a substantial financial burden: losses and subsidies in the power sector

amounted to about 2.7 percent of total state spending roughly the same as the amount

invested in the state's primary education and health combined.

The weaknesses in Slate Government finances have, persisted and are

manifest mainly in the sluggish non-tax revenues, downwardly rigid non

developmental committed expenditures, and inadequate allocations for education,

health, and infrastructure.

Let us examine the position in Andhra Pradesh (Tables -I, II, III, &IV).

Revenue Expenditure of Andhra Pradesh

Social Services: The allocation of budget to the Social Services is proposed to be

increased from Rs. 12079 crores (BE 2004-05) to Rs. 12927 crores (BE 2005-06). The

allocations for Social Services from 2003-04 are specified in TABLE II.

I. General Education: The allocation to General Education is proposed to be

increased from Rs.5169 crores (B.E.2004-05) to Rs. 5560 crores (BE 2005-06).

II. Medical and Health: The proposed allocation under Medical and Health sector

arc Rs. 1753 crores during 2005-06 as against Rs. 1659 crores in B.1. 2004-05 implies

the increase of Rs.94 crores.

III. Urban Development: There is steep increase in the proposed allocation to

Urban Development Sector as against the allocation of Rs. 1198 Crores during BE

2004-05. It is proposed to allocate Rs. 1355 crores during 2005-06.

IV. Welfare of SCs/STs/BCs and Minorities: The proposed allocation for Welfare

Sector is Rs. 1868 crores during 2005-06 as against the allocation of Rs. 1712 Crores

BE 2004-05.

State-wise Social Sector Expenditure

In 2003-04, social sector expenditure as a proportion of total expenditure was

estimated to be highest for Chhattisgarh at 48.2 per cent, followed by Jharkhand (44.2

per cent), and Assam (43.3 per cent) (The share of social sector expenditure in total


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expenditure of the States viz., Arunachal Pradesh, Bihar, Himachal Pradesh, Jammu

& Kashmir, Jharkhand, Madhya Pradesh, Manipur, Mizoran., Tripura, Uttar Pradesh,

and West Bengal was budgeted to decline in 2003-04 compared to the previous year.

Andhra Pradesh Vision

The Government of AP is perhaps the firs state government to develop a

comprehensive vision for poverty eradication. Vision 2020 aims to build human

resources, focus on high potential sectors as the engines of growth, and transform

governance. The Government has already shown some willingness to address fiscal

priorities and overhaul delivery of public services. However, the developmental

expenditure as part of revenue expenditure, was 69.5% in 1990- 91 and it declined to

63.7%. in 1997-98, to 57.4% in 2001-02 and to 55.1% in 2003 04(BE). On the other

hand, Non-developmental expenditure increased from 24.8% in 1990-91 to 36.4%in

2003-04. Of this, expenditure on social services takes away34%, Economic

services21%, Interest payments and Servicing of Debt around 20%, Administrative

services around 9 % and Pension payments about 9%.

Quality of expenditure is as important as the quantum of expenditure.

Amounts allocated should not be spent in full as specified. There should not be

leakages of any type. Over the years, a wide variety of anti-poverty programmes have

been attempted in India. While producing some benefits, these have suffered from

ineffective implementation and there is widespread public concern about the impact of

corruption on governance. The large sums invested in public anti- poverty

programmes lend to focus on poorly targeted subsidies and safety nets rather than

long term investments in education and health.

The proportion of the population of Andhra Pradesh in poverty has reduced

substantially over the last f fifty years. Approximately one in three of the population

lives below the Government of India official poverty line. The percentage is slightly

lower in rural areas and slightly higher in urban areas. Andhra Pradesh is ranked 10

out of 16 in the Human Development Index in India and is there therefore regarded as

a medium performing state. In the case of Rural Water Supply in AP, there are still

(2005)1,651 not covered habitations and 2,682 quality affected habitations in the

State. During the year 2005 06, it is programmed to tackle the above habitations under

various programmes such as ARWS, MNP, PMGY and NABARD.

Madhab (1999). however, observed, "The states have not been able to deliver


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the basic goods to the people. There is a growing discontentment-over-the-level of

corruption. The regional disparity between the other states of India and the north east

has widened as also the disparity between the rich and the poor within the region."

It is perhaps safe to conclude to that the rapid economic growth observed in some of

the states in the region is more superficial than real. With the states facing increasing

fiscal hardship, even this growth process may not be sustainable for long unless some

more genuine economic initiatives come up in the meantime.

However, the person on the street is condemned to grapple hopelessly with

corruption in almost every aspect of daily work and living. Most government offices

typically present a picture of a client public bewildered and harassed by opaque rules

and procedures and inordinate delays, constantly vulnerable to exploitation by

employees and touts.

In the quest for systemic answers to this chronic malaise, the sources of

corruption inherent within the character of the state machine include a determined

denial of transparency, accessibility and accountability, cumbersome and confusing

procedures, proliferation of mindless controls, and poor commitment at all levels to

real results of public welfare. Demystification of rules and procedures, complete

transparency, and pro-active dissemination of this relevant information amongst the

public is potentially a very strong safeguard against corruption. Ultimately the most

effective systemic check on corruption would be where the citizen herself or himself

has the right to take the initiative to seek information from the state and thereby to

enforce transparency and accountability.

It is in this context that the movement for right to information is so important,

Statutory right to information would be in many ways the most significant reform in

public administration in India in the last 50 years.

The term economy does not mean miserliness but wise spending. In terms of

benefits Governmental money should be made to go the farthest. However Let us

check the Dec. 2000, Report of the Comptroller and Auditor General (CAG) on the

working or four of the schemes on food security and nutritional support- the Pub

Distribution Scheme, Rural Employment Generation Programmes, Integrated Child

Development Services and Nutritional Support to Primary Education. In the six years

ending March '99, the Union treasury spent Rs 830 billion on these 4 schemes. That

is a daily average spending of Rs 30 crore. What is the return? What did we get for


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this torrent of money? The answer may appeal you. The CAG's answer: zero, in effect-

ZILCH (Zilch=nothing). The money leaks almost entirely, to those it is not meant for.

The plans have no relationship to the reality. CAG notes it has repeated this story

again and again; it is all known reports not of a slothful administrative system.

According to the PM of India, “The challenge before all of us is to collectively

rise to task ahead of us in terms of increasing rural incomes, getting rid of chronic

mass poverty and giving control to the local levels to plan for themselves, thereby

strengthening the democratic process. The challenge of rural employment is the most

obvious one. "We will be able to combine the short-term need of people for

employment with a medium-term objective of improving their land and water ·

resources to make our agriculture more productive. Social safety nets should not be

mere transfer payments, instead seen as productive job creation."

The availability of fund is only a part of the problem. These funds may not be

sufficient to transform rural India. One may also argue that more funds should be made

available for rural development out of the annual expenditure budget of Rs 4.5 lakh

crore. Bulk of India still resides in six lakh villages in miserable condition.

However, what is important is that how Rs 17,000 crore being spent annually

is: utilized. The PM, who is an economist himself, knows the importance of tax. payers'

money and the alternative use to which this huge fund can be put. If only used for

constructing houses, Rs 17,000 crores is enough to build more than 34 lakh rural

houses in a year and provide roof lo about 2 crore individuals.

In the broader enabling environment, the World Bank document flags certain issues.

Encouraging citizen demand for better services.

Increasing transparency.

Cracking down on civil service transfers and leaving reform champions. in place.

Establishing strong and independent anti-corruption commissions.

Realistic budgeting and implementation of budgets as passed.

Enhancing departmental accountability and flexibility in the budget process.

Tightened budgetary controls and curbing of open-ended and capital projects.

Tightened accounting and auditing arrangements.

Capacity building, Unfortunately, such initiatives seem to happen in the more

reform-minded states and not in the others. And there is no easy way to

incentivize.


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Table I- Revenue Expenditure of Andhra Pradesh

(Rs. In Crores)

Sl.

No

Particulars Accounts

2000-01

Accounts

2001-02

Accounts

2002-03

Accounts

2003-04

Revised Estimate

2004-05

Budget Estimate

2005-06

1 Development

Expenditure

14110.47 14909.93 14550.76 17281.29 20057.9 22115.70

Percentage to Total 61.16 60.30 55.84 57.93 59.95 59.17

2 Non-Development

Expenditure

8959.89 9816.40 11506.13 12548.85 13397.6 15262.21

Percentage to total 38.84 39.70 44.16 42.07 40.05 40.83

3 Debt Services 3869.97 4657.13 6130.71 6855.9 7228.22 7923.22

Percentage to total 7.20 6.70 6.39 6.12 5.87 5.36

4 Administrative Services 1661.46 1656.18 1666.00 1824.0 1963.60 2005.14


5 Tax Collection Charges 354.58 366.12 376.11 470.81 502.03 538.70


6 Other Expenditure 3073.88 3118.97 3333.31 3398.0 3703.71 4795.15


Total 23070.36 24726.33 26056.89 29830.14 33455.5 37377.91


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TABLE -II EXPENDITURE ON SOCIAL SECTORS

S.No Particulars Accounts

2003-04

BE

2004-05

BE

2005-06

1 2 3 4

1 Social Services 10586

(21.67)

12079

(23.62)

12927

(23.56)

2 General Education 4317 5169 5560

3 Medical and Health 1452 1659 1753

4 Urban Development 1022 1198 1355

5 Welfare of SCs/STs/BCs and Minorities 1631 1712 1868

Table - III Cost Recovery of Select Services of the State Governments*

(Percent)

Item 2002-03 P 2001-02 2000-01 1995-00 1990-95

1 2 3 4 5 6

Social Services

Education 1.4 1.2 1.2 1.1 1.2

Health 6.6 6.1 4.6 5.0 5.8

Economic Services

Irrigation 9.6 7.5 8.1 7.3 9.6

Power 10.9 6.4 6.5 10.8 16.1

Roads 13.3 19.4 16.1 15.0 15.0

P: Provisional. *: Ratio of Non-tax Revenue to Non-plan Revenue Expenditure.

Source: Budget documents of the State Governments. - RBI


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TABLE IV Developmental Expenditure: Major Heads

2002-03 2003-04 2004-05

Items (Accounts) (Budget

Es)

(Revised

Est)

1 2 3 4

Developmental Expenditure

(Revenue and Capital (A+B)

Social Services (1to11)

2,15,286.4

1,19,113.1

(52.1)

2,54,484.1

1,37,703.9

(51.2)

2,79,664.1

1,39,750.5

(46.3)

Education, Sports, Art, and culture 62,982.8 70,731.9 69,994.3

Medical and public health & family

welfare

17,093.6 20,135.2 19,993.1

Water Supply and Sanitation 9,114.3 10,954.2 10,952.3

Housing 2,122.7 2,780.6 2,587.6

Welfare of Scheduled Caste,

Scheduled Tribes & other backward

Classes

7,745.5 9,123.3 9,463.9

Labour and Labour Welfare 1,223.8 1,587.4 1,508.8

Social Security and Welfare 6,318.6 7,318.8 7,903.7

Nutrition 2,297.7 2,686.0 2,885.4

Relief on account of Natural

Calamities

4,169.2 3,644.6 5,383.6

Urban Development 4,630.3 6,458.2 7,469.1

Others* 1,414.5 2,283.8 1,638.7

Economic Services (1 to 9) 96,173.3

(42.1)

1,16,780.2

(43.4)

1,39,913.6

(46.4)

Agriculture & Allied Activities 17,136.1 20,503.6 19,897.6

Rural Development 13,976.7 20,178.6 19,372.3

Special Area Programmes 1,190.2 1,911.9 2,012.1

Irrigation and Flood Control 23,962.0 23,503.9 30,922.3

Energy 17,106.4 22,968.8 40,619.5

Industry and Minerals 2,924.8 6,807.1 3,822.6

Transport and Communications 15,174.7 18,408.8 18,223.6


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2002-03 2003-04 2004-05

Items (Accounts) (Budget

Es)

(Revised

Est)

1 2 3 4

Science, Technology and

Environment

117.4 335.7 339.7

General Economic Services 4,584.9 5,141.7 4,703.9

Loans and advances by State

Governments

Developmental Advances (A+B)

13,130.4

14,421.7

22,044.6

Social Services (1 to 3) 3,385.8 3,560.7 3,678.5

Housing 546.8 620.6 846.9

Government Servants (Housing) 788.6 1,017.5 973.2

Others @ 2,50.4 1,922.6 1,858.3

Economic Services (1 to 7) 9,744.6 10,861.0 18,366.1

Co-operation 1,209.1 828.9 909.4

Crop Husbandry 47.3 55.3 211.7

Soil and Water Conservation - 0.3 0.1

Power Projects 5,930.3 8,267.3 14,763.4

Village and Small Industries 163.0 96.0 105.7

Other Industries and Minerals 782.0 783.6 1,082.4

Others + 1,612.9 829.6 1,293.5

Total Development Expenditure

(I + II)

2,28,416.8 2,68,905.9 3,01,708.7

ABOUT THIS BOOK

This book offers valuable insights for understanding the impact of

economic reforms on the changed role of state and how a

retreating state can slow down programmes meant for social

development. It also brings out the importance of having a

coherent and consistent social policy. Academicians,

researchers, policy makers, and administrators have debated

several issues regarding the nature of fiscal crisis in Andhra

Pradesh and implementation of subsequent World Bank lent

Andhra Pradesh Economic Restructuring Project (APERP). This

volume contains several research papers on various aspects of

social policy in the context of on -going economic reforms.

ABOUT THE EDITOR

Dr. Bommaraju Sarangapani is Reader and Head, Post-Graduate

Department of Economics, The Hindu College, Machilipatnam.

He has vast experience both as a teacher and researcher. He is a

regular contributor to academic journals. Besides, he is also a

social activist, having associated with a good number of social

causes.

Documents

Economic Reforms and Social Policy - Zenodo