The politics of development -- the UPA’s gravy train in 2009 -- is dividing the Centre ideologically now.
At the centre of the maelstrom is the Direct Benefit Transfer (DBT) scheme, which is expected to bring subsidies to BPL families directly by eliminating middlemen.
The difference of opinion between two top Indian economists—Amartya Sen and Jagdish Bhagwati—has led to an open war between the PMO, Planning Commission and Finance Ministry on one side and the ministries of Rural Development, Social Justice and Empowerment, Health and Family Welfare on the other.
The fallout has affected the two economic power centres in the government: the Sonia school of welfare politics and the Manmohan school of growth. The pre-election scheme -- tagged by Bhagawati as ‘game changer’ -- envisages that the Union Government transfer 3.2 lakh crore a year to 10 crore families.
The Prime Minister claims that the DBT, which bears the strong imprint of his Cambridge classmate Bhagwati, should be in the hands of New Delhi and not the states.
Sen opposes this. “The rift on the DBT clearly reflects the confusion of the Union Government on economic policies. There are clearly two lines of thinking within. One belonging to the Bhagwati line of economic development, which focuses more on growth than distribution, and the others preferring the Sen model which gives more focus to distribution than growth,” said an academic turned politician within the government.
According to him, Bhagwati’s influence on Manmohan’s economic policies is very strong and this includes economic liberalisation, which really changed the face of Indian economy.
“But of late, especially with Sonia Gandhi’s National Advisory Council (NAC) gaining clout, Sen’s rights-based approach is reflected more in government as MNREGA and the Food Security Bill show,” he said.
The social sector ministries, headed by Sonia acolytes Jairam Ramesh, Selja Kumari and Ghulam Nabi Azad, want the funds to be routed through the states. The PM and the Planning Commission headed by Montek Singh Ahluwalia disagree, wanting the money to be given directly by the Centre bypassing the states.
Their stand is that New Delhi should be the custodian of the funds to avoid leakages and ensure accountability. They also argue that the state governments, 15 of them non-Congress, would take the credit if it is they who distribute the big bucks.
The social sector ministries, on the other hand, want the funds transfer along the lines of MNREGA, as advocated by Sen. Incidentally, the Nobel Prize winner’s long-time collaborator is Jean Dreze, a former member of the NAC, who had played a crucial role in shaping the MNREGA.
The ministries also argue that the target population of the UPA schemes lead a hand-to mouth existence and that any delay in transferring funds could plunge them into greater poverty, thus undoing the very intention of the scheme. This is one of Sen’s major grouses. “There was a meeting of all the ministries concerned earlier this month to sort out the differences. But they could not arrive at a decision as there was a clear rift on the mode of fund transfer,’’ said an official with the Rural Development Ministry.
To end the stalemate, the PMO has convened the meeting of the Executive Committee on Direct Cash Transfers in the second week of September.
The secretaries of the ministries concerned, the DG UIDAI and the Secretary, Planning Commission, will attend the meeting, chaired by Pulok Chattrejee, Principal Secretary to Prime Minister. According to the official, the Planning Commission has already held discussions with district collectors on the issue. The government’s plan is to cover all states by April 2014, just before the next Lok Sabha elections.
The scheme has already been initiated by linking LPG distribution to DBT in 20 districts. The Cabinet Committee on Economic Affairs had recently decided to extend the scheme to 269 districts. Officials of the social sector ministries are closely in touch with Sen and his loyalists in matters related to policy. While the Food Bill was being conceived, the officials incharge had sought his suggestions on several occasions to make it more “people friendly.’’
“The Food Bill is clearly influenced by Sen’s right based theories,’’ said an official who was involved in drafting the Bill. It is not a sheer coincidence that Bhagwati had been steadfastly opposing the Food Security Bill, saying it is “going to fuel inflation”.
The two economists had been sparring in public on Indian economy issues on the priority -- should it be-growth or redistribution.
Bhagavati had stated that “Sen puts the cart before the horse; and the cart is a dilapidated jalopy!’’
The Cambridge connection does not seem to have worked; Sen was also a student at the prestigious university along with Manmohan, but they did not share a rapport. All three economists, Sen, Bhagvati and Manmohan have won the Adam Smith prize in different years.