Welcome address by Chairperson on

'Economic Reforms for the Poor'

at Jawahar Bhawan, New Delhi

on December 6, 1998

Shri Sharad Joshi,

Dr. Rakesh Mohan,

Participants of this Seminar,

Friends,

One of the focus areas of the Rajiv Gandhi Institute for Contemporary Studies is economic affairs. Clearly any study on this today has to address the issue of economic reforms. The debate has moved on from whether or not reforms are needed. India is a progressive country and, to be competitive in the global market, reforms must surely continue. But we do need a fuller debate on the character and composition of these reforms and their impact on poverty. This is not only as measured by income. In the broader context we need to assess the impact of reforms on such indicators as life expectancy, infant mortality and adult literacy. Clearly, for reforms to be a demonstrable success, they must improve the quality of life for the very large percentage of our population that is disadvantaged and poor. The question this seminar was designed to address is how the process of reforms can be conducted so as to deliver tangible benefits to the poor in the shorter rather than the longer term.

We recognise that a necessary pre-condition to solving these problems is real economic growth. This is based on fairly strong correlation between high growth rate and poverty reduction across several countries. Growth provides resources that can be used for direct anti-poverty measures. What then needs to be done to achieve high growth rates? That is where efficiency, competition and reforms become important.

However, growth alone cannot be sufficient. Reforms involve a reliance on market-based solution, but disadvantaged groups may not be able to tap these opportunities because they do not have resources, education or even information. Therefore, as Professor Amartya Sen has argued, it is necessary to step up government spending in areas like primary education and rural health. But can this be done without cutting down on other government subsides that do not necessarily benefit only the poor? And what impact will this have on inflation? As Dr Manmohan Singh reminds us, inflation is the worst kind of tax that can be imposed on the poor. Inflation hurts the poor the most since their earnings cannot be indexed to price rises.

It is imperative, therefore, to design social safety nets, to devise direct poverty alleviation programmes. Rajiv Gandhi felt that less than 20 percent of expenditure on existing programmes reach the target beneficiaries, and this has recently been confirmed by empirical surveys conducted by economists. Obviously we need to improve delivery mechanisms, something that is linked to reforms of governance processes and decentralization.

The focus of today's discussion is agriculture. This is espacially relevant to the theme of "Economic Reforms for the Poor" since the bulk of India's poor live in rural areas and are dependent on agriculture for their livelihood. Even urban poverty is often a spillover of rural poverty. So, if poverty is going to be eliminated in India, Agricultural reforms are essential.

Travelling across India extensively, I have witnessed the utter misery of the poor in rural areas. Recent events have shown that while the farmer must get a reasonable price for his outpur, inefficiencies of the distribution system can result in unaffordable prices which especially hurt the poor. Yet, public expenditure on agriculture has to increase if we are to increase the levels of productivity. The form and content of that public expenditure has to be improved to take out the inefficiencies from the system. Among other corrective measures, rural credit processes need to be restructured, and effective crop insurance has to be provided to protect those for whom a failed crop means the loss of their whole livelihood.

I am very pleased that we have Sharad Joshi with us today to speak on what needs to be done on reforming Indian agriculture. Shri Joshi is not only an expert in the field, but has practical experience of working with farmers and understanding their problems. It will be especially interesting for us to hear what he has to say. I take pleasure in inviting him to address us.