Current Public Administration Magazine (May - 2015) - India's Complex Welfare System

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Welfare Administration

India's Complex Welfare System

The Directive Principles of State Policy, enshrined in Part IV of the Indian Constitution reflects that India is a welfare state. Seats are reserved for scheduled castes and scheduled tribes in government jobs, educational institutions, Lok Sabha and Vidhan Sabha.

The government has passed laws for the abolition of untouchability, Begar and Zamindari. The government has opened Fair Price Shops, where essential commodities are sold at reasonable prices to the poorer sections of the society.

In 2000, the union government's expenditure on social services (includes education, health, family welfare, women and child development, and social justice and empowerment), rural development, and basic minimum services was approximately US$7.7 billion (Rs361.7 billion), which was 11.1 percent of total government expenditures and 1.7 percent of gross domestic product (GDP).

The union and state governments maintain reserved seats in political and education institutions for lower castes, indigenous persons, and others based on their percentage of the population. Development programs have been produced — often at state or local levels — for social development and the empowerment of women and lower castes.

Prime Minister Narendra Modi has promised a bank account for every Indian household under a push to end "financial untouchability" that could revolutionise how the state aids poor people.Yet the complexity of India's $50 billion in transfer schemes, from fertiliser subsidies for farmers to cheap bags of rice and cooking gas canisters for households, will make reform a huge challenge.

Here is an overview of India's main welfare, food and farm aid programmes, with reform milestones:


FOOD- $18 billion

  • Families are entitled to 5 kg of food grains per person per month at a subsidised cost of 2-3 rupees per kg.
  • Plan: Overhaul the Food Corporation of India in six months to one year.
  • Milestone: Reduce grain purchases and partly introduce cash payments to poor households in cities over the next 2-3 years.


  • The government subsidises wheat and rice farmers by paying above-market minimum support prices, as well as offering subsidies for credit, power and irrigation. This has led India to accumulate vast surplus stockpiles.
  • Plan: Reduce the rate at which minimum support prices are increased to 4 percent a year, down from an average of 10 percent over the last five years.
  • Milestone: Implemented in June.

FERTILISERS- $10 billion

  • The government pays a subsidy to fertiliser producers, leading to overproduction and indiscriminate use by farmers of urea, the only fertiliser that India does not have to import.
  • Plan: Government considering making money payments to farmers' bank accounts to cover their fertiliser costs.
  • Milestone: Reviewing payment of subsidies to retailers on fertiliser sales. Cash subsidies could be paid into bank accounts by 2018/19.


  • India's previous government promised to provide 100 days' work a year for the rural poor.
  • Plan: Expedite payments and cut out corruption by paying wages straight into bank accounts of day labourers.
  • Milestone: Already happening in some states. Seeking to roll out in other states over the next one to two years.

COOKING GAS- $3 billion

  • Oil marketers incurred 465 billion rupees ($7.6 billion) in revenue losses on the sale of subsidised cooking gas to 160 million households last fiscal year, about half of which was funded by the upstream companies.
  • Plan: India last year launched direct payment into bank accounts towards the cost of cooking gas in about a third of districts, paying 20 billion rupees ($327 million).
  • Milestone: Officials believe that within a year, the government could roll out the direct payment scheme across the country.

KEROSENE- $3 billion

  • The central government supplies subsidised kerosene to the state governments, which distribute it to consumers through state-run shops.
  • Plan: Officials are still not clear how this subsidy could be directly transferred into bank accounts as an earlier attempt in some states failed.


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