Archives: Publication

Economic insecurity caused by lockdowns during the early days of Covid-19 forced many households to rely on government welfare schemes to fulfil their consumption needs. Using data from the June 2020 round of the Delhi NCR Coronavirus Telephone Survey this article shows that few households received both foodgrains and cash transfers particularly in urban areas and urban residents were also eight percentage points less likely to receive cash transfers vis-à-vis their rural counterparts.

As India plunged into a nationwide lockdown on 25 March 2020 in response to rising rates of Covid-19 infection fears of a humanitarian crisis took over with households struggling to cope on account of the resulting livelihood shock. Results from a rapid access telephone survey by the National Council of Applied Economic Research (NCAER) with a recall period over April and May 2020 documented the tremendous precarity faced by households particularly those linked to informal employment and with little recourse to alternate sources of income or social safety nets.

The prevalence of the pandemic differed across urban and rural areas as did movement restrictions and hence place of residence and occupation moderated the impact of the lockdown on households. Farmers found it easier to engage in their trade since their work was typically limited to their localities. Consequently while 36% of farmers experienced a severe income shock 54% of unorganised sector1 salaried workers 71% of casual wage workers 69% of self-employed and 71% of businesses experienced a severe income shock. Further urban casual wage workers were more likely to face an income shock than their rural counterparts by nine percentage points.

Portending an impending crisis the central government extended the provision of cash and in-kind benefits aimed to provide immediate relief. These were: i) additional free food-grains under the public distribution system (PDS) and ii) transfer of cash to the beneficiaries’ bank accounts linked to a series of pre-existing welfare schemes. In our study (Choudhuri et al. 2022) we use data from the Delhi NCR Coronavirus Telephone Survey (DCVTS Round 3)2 a rapid telephone survey interviewing 3466 households held between 15 and 23 June 2020 to examine the effectiveness of the social welfare outreach across different occupational groups and how these differed across rural and urban regions. In particular we look at how informal workers who tend to lack access to social security benefits and are usually unable to tap into a regular stream of income coped during this period.

Disparities in welfare support in rural and urban areas

We find that since access to safety nets depended on pre-existing registries some of the households most affected by the lockdown were excluded. Further rural-urban differences in the experience of economic distress are not reflected in the access to social safety nets. Some households received foodgrains others received cash transfers but very few benefitted from both particularly in urban areas (see Figure 1). We also find that the predicted probability of urban residents receiving cash transfers was eight percentage points lower than their rural counterparts.

Figure 1. Rural-urban divide in the receipt of welfare support

Note: The black standard error bars represent the 95% confidence intervals. A 95% confidence interval means that if you were to repeat the experiment over and over with new samples 95% of the time the calculated confidence interval would contain the true effect.

Food support

Our findings suggest that 23.7% of households reporting casual wage work 18% of those reporting salaried work and 15.7% of those with small businesses suffered from the occasional unavailability of food. Not surprisingly 67% and 50% of the households with casual wage and informal salaried workers respectively reported that they had to borrow in order to manage their daily expenses and consumption. Nonetheless this proportion would likely have been considerably higher without the food distribution undertaken through the PDS system.

Overall we see that 57.7% of the households received food support 15.23% had no need and hence did not avail of food support and 27% suffered from an unmet need for foodgrains between April and May 2020. Data from DCVTS-3 indicate that the non-receipt of foodgrains is associated with lack of documentation – 59.8% of the households with an unmet need did not have ration cards.

To predict the probability of households receiving free additional foodgrains and that of unmet need for foodgrains we estimate a multinomial logistic regression3 with households who voluntarily chose not to receive PDS because they did not need it as the reference category (that is a category for comparison to other categories).4 Overall the foodgrain distribution programme was largely successful in addressing the needs of those most affected by the pandemic – casual wage workers unorganised sector salaried workers and households reporting self-employment.

However we also find that there was unmet need for foodgrains. As seen in Figure 2 the predicted probability for unmet need is 23% for casual wage workers 25.7% for unorganised sector salaried workers and 28% for the self-employed. Further the probability of unmet need increases amongst urban households – the predicted probability is higher by 11 percentage points for households reporting casual wage workers 14 percentage points for self-employment and 18 percentage points for small businesses (household enterprises) that hire workers indicating a greater possibility of being excluded in urban areas.

Figure 2. Rural-urban disparities in the change in predicted probability of unmet need for food ration

Notes: i) The occupational groups from left to right are cultivator government/public sector undertaking salaried (greater than or equal to 10 workers) salaried (less than 10 workers) casual wage business (which rarely/doesn’t hire) business (hires) and rent/remittances. ii) Figure shows change in probability from rural (0) to urban (1). iii) Standard errors have been calculated using the delta method. iv) Estimates use the 95% confidence intervals.

Cash support

We estimate the amount of cash received conditional on those who received the cash support5. The use of prior registries resulted in cash reaching beneficiary bank accounts in record time but the results also point towards a significant urban disadvantage.

The first stage regression results show that households reporting salaried work in the organised sector or as salaried workers in the unorganised sector or reporting businesses that hire workers are less likely to receive cash support compared to cultivators. The probability goes down by 10.6 21.2 and 28.3 percentage points respectively if such households are located in urban areas (see Figure 3 left panel). Conditional on receipt an urban household reporting informal salaried work is likely to receive an average predicted value of cash support of Rs. 696.5 per month (see Figure 3 right panel) or Rs. 23 per day for a representative family of five members – well below the official poverty line of Rs. 49 per day per person in an urban area6.

Figure 3. Rural-urban disparities in predicted probabilities (left panel) and value (right panel) of cash support

Notes: i) The occupational groups from left to right are cultivator government/public sector undertaking salaried (greater than or equal to 10 workers) salaried (less than 10 workers) casual wage business (which rarely/doesn’t hire) business (hires) and rent/remittances. ii) Figure shows change in probability from rural (0) to urban (1). iii) Standard errors have been calculated using the delta method. Estimates use the 95% confidence intervals. iv) The right panel provides estimates for predicted value of cash support conditional on receipt of such support.

Scheme-level support

A scheme-level breakdown of some of the key programmes sheds more light on the gaps in targetting. The government announced a transfer of Rs. 500 in three equal monthly payments to women account holders of the Pradhan Mantri Jan Dhan Yojana (PMJDY)7 account. Our findings suggest that 23.3% of all the sample households received such transfers with such transfers prevalent across both below poverty line (BPL) and non-BPL households. This is also consistent with findings from other studies (Pande et al. 2020 Somanchi 2020).

In terms of PM Kisan8 of the 18% farmer households in the DCVTS-3 sample only 21% received such transfers – 42% of these households belonged to the wealthiest assets tertile9 of the sample and another 28.5% belonged to the middle tertile. Further the PM Kisan scheme applies to landowners and therefore excludes agricultural workers or tenant farmers. However not all landed farmers received the benefits.

Conclusion

The prevalence of exclusion even though moderate necessitates discussions on targetting and selectivity. Targetting of the poor is often based on complex selection criteria which tends to be riddled with exclusion errors (Jhabvala and Standing 2010). These errors get amplified when economic insecurity is more widespread triggered by a large-scale shock. While social registries can ensure that cash is transferred expeditiously registries based on specific deprivations may not identify individuals who are most vulnerable in the event of a crisis.

Using data from the Indian Human Development Survey (IHDS) a study by Thorat et al. (2017) finds evidence that factors that allow families to move out of poverty may differ from the ones that push people into it. This poses a challenge for policymakers in targetting welfare beneficiaries in response to shocks and calls for the adoption of a more universal approach to designing relief packages for alleviating distress resulting from such dramatic shocks.

When external events affect all residents of an area focussing on geographical areas that are most affected by the crisis may be more effective than targetting individuals with specific characteristics. Considering that the immediate effect of the pandemic was more acutely felt in urban areas the targetting framework needs to take into consideration such geographical segregation and the need for putting in place a more robust institutional framework of local governance that can help create social registries in urban areas.

Notes:

1. Unorganised sector is defined as comprising individual employers and firms with less than 10 workers.
2. The DCVTS-3 is a combination of the pre-existing panel (DCVTS Round 1) and neighbours of the sample households drawn from the same listing frame interviewed for DCVTS Round 2. The DCVTS-1 drew upon a pre-existing panel of households that were first interviewed face-to-face in early 2019 (see Choudhuri et al. (2022) for more details).
3. Multinomial logistic regression is used to predict a categorical dependent variable with more than two categories.
4. We control for the gender and educational attainment of the respondent household size and asset tertile rank household location (rural or urban area) and the state of residence in our regression.
5. To do this we use the Heckman-type selection model. The outcome and participation equation are jointly estimated following the maximum likelihood method. The switching regression predicting the household’s probability of receiving cash support is identified by an instrument that captures the primary sampling unit (PSU)-level incidence of household participation in various pre-existing government welfare schemes (see appendix of Choudhuri et al. 2022). The independent variables used are similar to the one for food support.
6. We define this as the value using the (relatively lower) threshold defined by the Tendulkar poverty line adjusted for 2020 prices.
7. Pradhan Mantri Jan Dhan Yojana (PMJDY) is the Indian government’s flagship financial inclusion scheme. It envisages universal access to banking facilities with at least one basic banking account for every household; financial literacy access to credit insurance and pension facility.
8. PM Kisan is a central government scheme with under which an income support of Rs. 6000 per year is given in three equal instalments to all landholding farmer families.
9. If the assets of the various households are listed in ascending order the bottom tertile would refer to the bottom third of households in terms of their assets.

Whether in Tripura or Haryana there is little interaction between MSMEs and the ITIs. District Industries Centres should step in

Developing and implementing a vocational skill development policy for micro small and medium enterprises (MSMEs) is a challenging exercise especially for emerging countries. While imparting of vocational skills should typically be demand-driven MSMEs have neither the incentive nor the necessary fiscal/human capital or scale to train workers.

 Therefore any skill development policy for MSMEs should be supply-driven. However supply-driven vocational skill development policies run into the issue of a mismatch between what the skilling/training agencies are supplying and what firms want (NCAER Skills Report 2018). On the demand side too MSME workers typically need to be multi-skilled.

One solution to overcome this mismatch is to provide cluster-based vocational training. Broadly there are three approaches.

The home-grown initiative involves public-private partnerships (PPPs). The IL&FS had started a cluster-development initiative working in PPP (public-private partnership) mode with governments on MSME manufacturing clusters. The Tripura Bamboo Mission (TBM) is working to develop a value chain in the bamboo industry in the State starting from bamboo plantations (farmers) to producing bamboo handicrafts (self-help producer groups etc.) to actually help connect with the markets through both digital and off-line means. TBM provides the skilling and training needs throughout the value chain.

However when NCAER interviewed private enterprises in 2016 in the bamboo industry located in Agartala but outside the TBM found that the interaction between MSMEs and local Industrial Training Institutes (ITIs) was rather limited.

 The objective of the Model ITI programme launched by the Centre in 2014 was to upgrade some of the government ITIs into model ones. The key idea was to improve industry-ITI interaction. The ITIs would be located in industrial clusters. An industry partner chairs the Institute Management Committee providing inputs in course curriculum upgrading of skills of teachers and providing internships apprenticeships and employment etc. In a mid-term evaluation of the scheme in 2018 differences were found in the levels of involvement of industry partners.

German model

Germany has one of the better vocational skilling models in the world. There are several German institutions working on both the supply and demand sides of skilling — training workers and upgrading business member organisations so that they can come together on the skilling aspect along with other aspects. Elements of dual training systems had been introduced by the Ministry of Skill Development and Entrepreneurship in partnership with German International Cooperation in automobile electronics and construction clusters in India.

Under the aegis of the Indo-German Chamber of Commerce dual vocational training programmes are being provided by German auto companies in Pune since 2015 with a vocational training partner in the city. The course enables trainees to focus on practical skills and applications get shop floor experience in their respective training companies and join the working world immediately after graduation with great prospects for their future.

Despite the many initiatives a field trip to Karnal in December 2021 revealed that the clusters had little interaction with the ITIs or any vocational training partner. Maybe larger companies hired apprentices but there was nothing more than that. The MSMEs continued to report lack of skilled workers as a major constraint. Yet the cluster-based vocational skilling model has not been successfully scaled up. The policy question is: How to improve the interaction and thereby matching of skills between local industries and vocational training institutes?

 The Draft MSMEs 2022 policy emphasises skill development at the district level and recommends assessment of the demand and supply of vocational skills. This should be done at the level of industrial clusters as well. The District Industries Centres (DICs) may map the clusters in their regions and understand their skilling needs. It is recommended that the DICs work with the industrial clusters local vocational training partners especially ITIs and State-level departments. The idea is to increase interactions between all stakeholders and address skilling gaps.

Interactions between industrial clusters and ITIs may include elements of the Model ITI scheme and other examples cited above. It is recommended that the DICs act as a bridge between local clusters and State-level departments in terms of transmitting skilling needs on a real-time basis. Further the ITIs may offer short-term courses for upskilling/re-skilling especially during evenings/weekends. Public and private financing may help address these challenges.

The matching between industry needs and skilling providers has to improve if we want to address employability and employment issues in the backdrop of the Covid-19 pandemic.
 

The writer is a Senior Fellow at NCAER. Views are personal.

Gram Swaraj recently got a fillip as Government okayed continuation of Rashtriya Gram Swaraj Abhiyan

One of the unique features of governance in India is that its rural landscape is characterised by a system wherein each village and local unit is responsible for upgrading its own administrative structure and executing its developmental activities. This is facilitated to a large extent by the existence of panchayati raj institutions which as per the Eleventh Schedule of the Constitution are tasked with “economic development strengthening social justice and implementation of Central and state government schemes.”

Here it would be apt to briefly recount the history of the panchayati raj system in India which came into effect through the 73rd Constitutional Amendment in 1992. The modern panchayati raj system was subsequently formalised in 1999 on the basis of a study by an amalgam of Indian committees recommending a more decentralised administration and jointly financed by local body grants as approved by the respective State Finance Commissions as well as funds devolving from state government coffers and those allocated under Centrally-sponsored schemes.

The roots of this system of local self-governance in rural India however lie in Mahatma Gandhi’s dream of building a vibrant and effective democracy in the villages of the country which would enable the rural population to attain economic and social self-reliance through access to various services within the village itself. Popularised as ‘Gram Swaraj’ which translates as ‘self-rule in the village’ this concept implies decentralised functioning through adherence to certain human principles and values such as the right to full employment social equality and self-sufficiency deriving from the ethos of Swadeshi or the consumption of only indigenous goods. Hence if efficiently implemented Gram Swaraj would transform every village in the country into a self-sufficient and autonomous entity benefiting from sustainable development within a humanitarian framework that guarantees both personal happiness and dignified living for the rural residents. Although fructifying Gandhiji’s utopian dream would seem like a tall order its fulfillment at least partially was given a fillip in the form of the launch of the Rashtriya Gram Swaraj Abhiyan (RGSA) or Transformation of Aspirational Districts programme by the Union Ministry of Panchayati Raj on April 24 2018 by Prime Minister Narendra Modi. It was mandated that the RGSA would be implemented as a core Centrally-sponsored scheme for four years viz. from 2018-19 to 2021-22 with equivalent state and Central shares.

Further the selection of districts was to be based on various parameters like gender equality poverty alleviation livelihood generation and access to critical services like public health nutrition education sanitation and drinking water all of which correspond to the UN’s Sustainable Development Goals (SDGs) and also fall within the jurisdiction of the Panchayats.

The focus on Gram Swaraj has once again gained leverage with the Cabinet Committee of Economic Affairs recently approving the continuation of the revamped RGSA from fiscal years 2022-23 to 2025-26 co-terminus with the tenure of the Fifteenth Finance Commission and apportioning a total outlay of Rs 5911 crore for it comprising the Central and state shares of Rs 3700 crore and Rs 2211 crore respectively.

In this context a survey of different levels of stakeholders and panchayat functionaries across 12 major states undertaken by the National Council of Applied Economic Research (NCAER) during the reference period 2019-20 assumes critical significance. The NCAER survey covered both the Panchayats Extension to Scheduled Areas (PESA) and the Aspirational Districts. The findings suggest the need for improving training inputs at the village level to ensure optimal effectiveness and outreach of the programme.

The survey also highlighted the challenges confronting the training programmes at the Gram Panchayat (GP) level which could achieve better outcomes with the provision of more modern infrastructure training equipment and tools.

In keeping with the adage that ‘practice makes perfect’ the institutional training being imparted to the stakeholders and functionaries at the Panchayat level needs to be a sustained and intuitive process supplemented by handholding and mentoring by the elected representatives in the concerned aspirational districts.

Last but not the least the revamping process of the RGSA must pervade the entire administrative ecosystem as the changes proposed in the NCAER study are unlikely to become reality unless governance at the grassroots level in the GPs is made more participatory technology-driven and performance-oriented. Clearly a paradigmatic transformation has to be ushered in at all levels to optimise the functioning of the GPs and justify the time and money being invested by the Government in the Gram Swaraj Abhiyan.

Saurabh Bandyopadhyay is Senior Fellow Anupma Mehta is Editor and Laxmi Joshi is Fellow at NCAER. The views expressed are personal.

The right to obtain a legal abortion is vital to reduce inequalities

The United States Supreme Court seems poised to overturn its own 1973 ruling regarding women’s right to privacy as they seek abortion. The 1973 judgment in Roe vs Wade was a landmark judgment in which the U.S. Supreme Court on January 22 1973 ruled (7–2) that unduly restrictive State regulation of abortion is unconstitutional. If this judgment is overturned States will be free to enact their own legislation regulating access to abortion. The Guttmacher Institute estimates that as many as 26 out of 50 States are ready to ban or severely restrict abortions.

The crisis around the right to obtain legal abortion has been brewing for a while. For the Christian right it is a matter of sanctity of life; for women’s rights activists it is a matter of women’s control over their bodies. The PEW Research Center estimates that about 61% of Americans favour abortion being legal under most conditions whereas 37% say it should be illegal in most conditions. Support for making abortion illegal comes from evangelical white protestants and individuals ages 30 and above while younger and more educated individuals support continued access to abortion.

While this fight is shaped around competing claims of protecting life versus reproductive rights it is important to consider empirical research  two separate but related trends as we evaluate these claims.

Impact on individual lives of women

The first set of studies examines the impact of the legalisation of abortion in 1973 on the lives of individuals. Multiple studies found that the legalisation of abortion was associated with a decline in American fertility. For example in a study published in the Journal of Political Economy Caitlin Myers found that abortion legalisation reduced the number of women who became teen mothers by 34% and the number who became teen brides by 20%; moreover these effects were even larger for Black teens. Many studies including one by the 2021 Nobel Prize recipient Joshua Angrist also found that abortion legalisation increased women’s education labour force participation occupational prestige and earnings and that all these effects were particularly large for Black women.

The second set of studies shows that reliance on abortion has declined substantially over the past two decades. The Guttmacher Institute estimates that abortion rates in the U.S. have reached historic lows. In 1973 before Roe vs Wade the abortion rate was 16.3 per 1000 women ages 15- 44 it rose to 29.3 in 1981 and declined to 13.5 by 2017. This decline occurred as access to contraceptives grew particularly with increased access to long-acting reversible methods of contraception such as injectables implants and IUDs. 

Several factors played a role in improved access to contraception. Improved contraceptive technologies led to increased choice in contraceptives. MoreoverU.S. government policies played a major role in improving contraceptive access for the young and the poor. The Affordable Care Act passed under the Obama administration mandated all health insurance providers to cover contraceptive costs sharply reducing out-of-pocket costs for contraception. It also increased coverage for young people on their parents’ insurance. Joelle Abramowitz from the University of Michigan estimates that when women ages 20-24 were able to stay on their parent’s insurance the rate of abortions in this age group fell by between 9% and 14% compared to women who weren’t able to access that eligibility.

While improved access to contraception may reduce unplanned pregnancies and thereby reduce abortion research also shows that it may not be sufficient toelimina te all unplanned pregnancies. Data on contraceptive failure in the U.S. compiled by the Guttmacher Institute show that under typical use about 7% of individuals relying on contraceptive pills and 13% using condoms will become pregnant within a year. These are the methods that most younger Americans use.

Right to change their minds

Moreover life is full of unexpected turns especially for young women. In a longitudinal study of relationship dynamics for women ages 18-19 in Michigan sociologists Jennifer Barber and Heather Gatny found that two-thirds of the young women who were positive about having a child before pregnancy felt negative about their pregnancies after the fact mainly because their partners reacted negatively to the pregnancy. In more extreme cases women may also be subjected to reproductive coercion where their partners engage in a range of behaviours that restrict reproductive autonomy including pregnancy coercion birth control sabotage and controlling the outcome of a pregnancy. Research on this is more limited but available studies suggest that the experience of reproductive coercion is higher among younger women women with less education and Hispanic women.

Overturning Roe vs Wade and leaving legislation about abortion to State legislatures will simply exacerbate these inequalities. The experience of individuals living in the State of Texas foreshadows some of the potential effects. In September 2021 Texas passed a law that prohibits abortions whenever an ultrasound can detect what lawmakers defined as a fetal “heartbeat” often at six weeks of pregnancy. Researchers from the University of Texas found that many women were forced to seek abortions out of the State. Even for those who were able to obtain abortions out of the State a number of hurdles persisted including difficulties scheduling appointments in Texas while they were still eligible for in-State care; visits to pregnancy resource centres that discouraged abortion; limited availability of timely out-of-State appointments because of increased patient volume; complicated travel logistics that involved long journeys and overnight drives and increased economic hardship including lost wages paying for petrol and food and overnight stays for multiple days.

Circles of vulnerabilities

If Roe vs Wade is overturned and regulation of abortion is left to the States the effect is most likely to be felt in States that are dominated by Republicans many of them among the poorest in the U.S. This will compound the overlapping circles of vulnerabilities. Poor women often find it difficult to obtain expensive long-lasting reversible contraception and as result most often experience unwanted pregnancies. Increased expenses and logistical challenges will make it difficult for them to get an abortion. However they also have the least resources for raising children particularly under a political ideology that has progressively reduced the number of needy families receiving welfare benefits and the amount of benefits.

The strange paradox of this battle over abortion is that it is the red or consistently Republican-voting States that are most likely to restrict abortion while the blue or Democrat-voting states will probably continue to follow liberal abortion policies. The Georgetown Public Policy Review dashboard shows considerable preexisting income inequalities between the two groups of States. In 2018 compared to blue States per capita GDP in the red States was lower by $15995 and the poverty rate was higher by 2.8 percentage points. Abortion limitation in red States may well increase this disparity exacerbating the divide between the red and the blue States.

Sonalde Desai is Distinguished University Professor University of Maryland and Professor and Centre Director NCAER-National Data Innovation Centre. Views are personal.

NCAER is delighted to announce the appointment of Dr Mridul Saggar as the Investor Education and Protection Fund Authority (IEPF) Chair Professor at NCAER. He joins the Chair today. The Chair has been established with the support of the Investor Education and Protection Fund Authority under the Ministry of Corporate Affairs in the Government of India. Dr Saggar will lead a group focused on research and policy outreach in the broad area of regulatory and public policies including concerns about investor education and protection and financial sector reforms. He is expected to contribute widely to the IEPF Chair activities through his research and engagement with economists financial market participants policy makers and regulators while dealing with investors and investor education at the Centre and in the States interacting with various stakeholders including donors and the media.

The NCAER Director General Dr Poonam Gupta stated “We feel privileged to have Dr Mridul Saggar as the NCAER IEPF Chair Professor. He brings to the position tremendous expertise in the macroeconomics financial markets and banking space. He is also a distinguished academic and researcher in these areas. We look forward to him expanding NCAER’s research agenda with special focus on investor education and protection making a significant contribution to its intellectual legacy.”

A central banker for three decades Dr Saggar has extensive experience in various central banking functions. Prior to joining NCAER he was the Executive Director Reserve Bank of India (RBI) overseeing the central bank’s monetary policy and economics research functions. He was also one of the six members of the RBI’s Monetary Policy Committee (MPC) in charge of taking collegiate decisions on policy interest rate and the monetary policy stance as also of its Financial Markets Committee (FMC) that takes decisions on its financial market operations. Earlier he has served as the Head of the International Department of RBI representing India at various international bodies/G20 Working Groups/Task Forces. 

His research interests cover macroeconomics international finance monetary policy and monetary operations international financial architecture and international economic relations global financial regulatory reforms financial inclusion national accounts and agriculture policy.

Mridul Saggar holds a doctorate degree from Indira Gandhi Institute of Development Research Mumbai and has been a fellow at the Princeton University NJ USA. He has published widely in leading refereed national and international journals and has taught and delivered guest lectures at various eminent academic and professional institutions in India and abroad.