Letter from Prof C.H. Hanumantha Rao

The following is a letter from Prof C.H. Hanumantha Rao as a response to a request from the Mainstream editor to throw some light on the economic content of Indira Gandhi’s Garibi Hatao slogan in 1971 as he was in the decision-making apparatus of the Union Government in the 1980s.

Dear Shri Chakravartty,

It is so nice hearing from you. As desired, I am giving below my impressions on the current debate on schemes for reducing poverty and inequality. This piece is too small, as I am not in a position to prepare a full paper. This is just for your information. You may use it the way you like. I would appreciate a line from you.

As you have rightly observed, under Indira Gandhi’s Garibi Hatao initiative, the specific programmes launched, like IRDP, were for poverty alleviation and not for poverty eradication. This has indeed been so, to this day, with governnents of different persuasions, even though their ultimate objective has been eradication of poverty. Indira Gandhi’s Garibi Hatao initiative consisted of a number of policy measures as well as specific programmes for reducing poverty and depri-vation. For example, the nationalisation of major commercial banks by her government led to the significant rise in the volume of credit extended to agriculture and small and medium enterprises which had a favourable impact on the poor. It also contributed to a significant rise in the savings rate of the economy which facilitated the rise in public investment. Again, the scheme of differential rates of interest introduced in that period, under which the poor were extended loans at lower interest rates, contributed to reducing their dependence on rural money lenders who charged usurious rates.

In the course of the last few decades, the experience in the implementation of poverty alleviation schemes in a society like ours, where vested interests are strong, brought out the need to eliminate leakages in these programmes and for allowing greater freedom to the beneficiaries to allocate efficiently the assistance provided for them. This gave rise to the idea of transfering cash assistance directly to the individual beneficiaries, so that each individual can allocate the money in ways which would bring her maximum benefit. The activities could be agriculture, or education, or health services, etc. or a combination of them. This method has been followed in different countries, particularly in Latin America. Their experience with such a scheme has been quite encouraging.

The Nyay scheme, unveiled by Rahul Gandhi, meets the above concerns in the light of the international and our own experience. An important feature of this scheme is that it is targeted to the poorest of the poor only and not on everyone. Another desirable feature seems to be that the amount of assistance would be equal to the difference between the average income of the poorest individual and the income level at the poverty line. Under the Nyay scheme resources needed would be much less than for the one designed to give equal amount of assistance to everyone regardless of her income level. The Nyay scheme appears to be aimed at saving resources, enhancing efficiency of resource-use and reducing poverty and inequalities in income.

Hyderabad          C.h. Hanumantha Rao

The author, an eminent economist, is an Honorary Professor and Chairman, Centre for Economic and Social Studies, Hyderabad. He was in New Delhi in the 1980s—first, as a Member, Economic Administration Reforms Commission headed by L.K. Jha (April 1981 to April 1982) and then as a Member, Planning Commission (April 1982 to April 1986). He had worked under two Prime Ministers, Mrs Indira Gandhi and Rajiv Gandhi.