The downsides of New Welfarism

Few noticed when former chief economic advisor Arvind Subramanian co-authored an article in a daily in December 2020 with fellow economists Abhishek Anand and Vikas Dimble. Titled “New Welfarism of Modi govt represents distinctive approach to redistribution and inclusion”, it provided new insights into the focus of India’s welfare programmes. After the latest round of state elections it is imperative that those be reiterated.

This article came immediately after the first round of National Family Health Survey (NFHS-5) of 2019-20 came out, providing health related data on 17 states and 5 union territories covering 54% of the population. They first noticed a significant divergence in India’s performance in child stunting (below 5 years) that the NFHS-5 revealed as against the outcomes of several welfare programmes of the central government since 2015 — access to bank accounts (for women), cooking gas, toilets, electricity, housing, water and cash transfers — which they called “new welfarism” for reasons that would be clear soon.

While child stunting (low height for age due to malnutrition, repeated infection) showed a steady decline between 2005-06 and 2015-16 (previous two round of NFHS), there was a “reversal thereafter” between 2015-16 and 2019-20 with “overall stunting rates flattening and urban rates rising”. This was in sharp contrast with a remarkable improvement in the access to banking (for women), electricity, clean cooking fuel and sanitation after 2015 that they mapped (they didn’t map housing for lack of data and cash transfers which was a new development).

They asked what would explain the difference between the success of ‘new welfarism’ and the failure in health outcome, in the instant case, child stunting? They answered that “traditional redistribution, which aims to deliver on intangibles like health and education, has ceded to a distinctive ‘New Welfarism’, where Centre is demonstrably providing tangible essentials to citizens”.

What did they mean by it?

They said, the new welfarism embodies a vision, both imbued with “conviction and laden with calculation”: The conviction is that such goods and services make a critical difference to the lives of the poor and the calculation was that “there is rich electoral opportunity in providing tangible goods and services, which are relatively straightforward to deliver, measure and monitor.” They explained that “traditional government services such as primary education are intangible, which are difficult even to define, much less measure. But when the government promises toilets, for example, everyone can monitor progress. Either a toilet has been installed, or it has not”.

They expanded the study to look at other findings of the NHFS-5 and found a mixed bag of results. They wrote in December 2021 and that India continued to be successful in preventing child deaths but the health and nutrition of the surviving, living child had deteriorated. Of the 10 outcomes, there was improvement (between 2015-16 and 2019-20) in four areas — infant mortality, under-5 mortality, neonatal death and wasting. Six indicators where outcomes had deteriorated related to post survival health (anaemia, diarrhoea and acute respiratory illness) and nutrition (stunting and over-weight).

This reaffirmed that there was gap between the tangible and intangible (healthcare). What they concluded is critical for understanding what the just concluded elections reveal and what the future holds for welfarism, and hence, needs to be read in full.

Their conclusion: “In some ways, this Indian experience is consistent with a broader global trend (Poland, Hungary and Turkey). Even without delivering broad-based prosperity, populist leaders and parties are finding electoral success through a potent, new cocktail: leveraging the identity politics of the right, embracing tepidly, even rejecting, the market-focused neo-liberalism of the center, and appropriating the redistributive economics of the left. Except that in India today, traditional redistribution (strong safety nets or improved public good provision) has ceded to a distinctive New Welfarism, where the central government is demonstrably and effectively providing tangible essentials to its citizens.”

What they wrote has come to sharper focus after the recent round of elections.

Thumbs up for free ration and cash transfers

Welfarism, called freebies when it comes at the time of elections or ahead, is a familiar phenomenon in India. Tamil Nadu is classic case. For years the two major contestants — DMK and AIADMK — promised (also delivered) bonanza for voters (TV, kitchen appliances, idli-sambhar at ₹1, sambar rice at ₹5, curd rice at ₹3, and what not). While voters lapped it up, they kept rotating the government every five years for 27 years until AIADMK chief J Jayalalithaa broke the jinx and won a second consecutive term in 2016.

The just concluded elections demonstrated that one of the key factors for the BJP to win back four states (Uttar Pradesh, Uttarakhand, Goa and Manipur) was the Centre’s free ration under the Garib Kalyan Anna Yojana (5 kg rice or wheat per ration card holder) and cash transfers (₹6,000 per year for farmers under PM-Kisan and ₹500 under Ujjwala). Ground reports long suggested this; the post-poll survey of Lokniti-CSDS and the exit-poll of Axis-My India confirmed that.

Both Lokniti-CDSC and Axis-My India explained that although economic distress and other governance failures (pandemic mismanagement) were serious issues for the electorate, those were neutralised by the excellent delivery of free ration and cash transfers. They said a new vote bank of “labharthi” (beneficiaries) had been created which voted for the BJP. In fact, the Lokniti-CSDS survey said, except Punjab (where the Aam Admi Party dislodged the Congress government), voters were more satisfied with the central government (which provided free ration and cash transfers), than they were with the state governments (also ran by the BJP).

The Axis-My India exit poll called the delivery of central government welfare schemes as one of the “particular” reasons for the BJP’s successes.

Political scientist Hilal Ahmed of the CSDS explains how the BJP deployed a three-tier mechanism to harness the votes from it: first the benefits were spelt out in the ‘sankalp patra’ (poll promises), which the leaders spoke about in their election rallies and then, local level party workers translated it to voters in everyday languages (and also followed up through the polling, apparently).

This isn’t new or unknown though. It was first noticed in 2019 general elections.

What is wrong with New Welfarism?

Arvind Subramanian and his colleagues have already explained how this focus on welfare measures that are straight forward to deliver, measure and monitor, providing electoral benefits, comes at a cost: Neglect of healthcare (as NFHS-5 showed).

The same is true of education (also intangible, as Subramanian and his colleagues pointed out). In the Budget for FY23, allocations for health and education remains abysmally low as ever: 0.3% of the GDP for health and for 0.4% for education.

This is one set of problems that new welfarism brings: Short-changing intangible essentials like health and education. But these are very critical for human resource development and future growth prospects and can’t be, and shouldn’t be, neglected.

There is yet another set of problems that the just concluded elections threw up.

If free ration and cash transfers can overcome massive governance failures and renew the mandate for the ruling dispensation, then why would any government or the party in power waste time and energy in providing two other intangible essentials — jobs and poverty alleviation? It needs no elaboration that a large mass of people is battling with chronic job crisis and impoverishment caused by the pre-pandemic economic slowdown and the pandemic disruptions. But there is no sign of roadmaps, specific plans and strategies yet to address them, other than banking on high GDP growth, even when the evidence points to the contrary.

The PLFS of 2017-18, which showed unemployment rate at a 45-year high, and the Household Consumption Expenditure of Survey of 2017-18, which was junked for showing a fall in real consumption for the first time in 40 years, showed that while the GDP growth was robust during 2011-12 and 2017-18 (pre-pandemic years), jobs were disappearing and poverty was rising.

What needs to be done is clear.

In addition to the tangible essentials mentioned, the Centre must focus on the four intangibles too — health, education, employment and poverty alleviation. Else, prosperity and high living standards would forever elude the vast majority.