Where Are The Fishing Rods?
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Give a man a fish, goes the old proverb, and you feed him for a day, teach a man to fish and you feed him for a lifetime. Obviously, this is sensible advice and yet the Indian government’s priorities seem to be skewed towards handing out fish with both hands while largely ignoring those who might need fishing rods. With the Union Budget 2013 approaching, it is time to start correcting this imbalance.
I am using fishing as a metaphor for the goal of poverty reduction. The problem is complex and needs to be tackled on multiple fronts. The government relies heavily on direct benefit transfers, which may be necessary in some cases, while not doing enough to promote rural entrepreneurship, which is one of the strongest tools for uplifting the poor. The term ‘rural entrepreneurship’ includes both entrepreneurial ventures of people in underdeveloped areas as well as profitable investments by large corporates in these areas.
Now, let us look at the Union Budget 2012-13 to understand the priorities of the government. The flagship poverty reduction programme is the MGNREGS, which is clearly in the ‘fish-giving’ category, under which 100 days of unskilled employment is guaranteed. The budget allocation for MGNREGS was Rs 33,000 crores in 2012-13 and might be set for an even larger figure in this pre-election year.
Coming to the ‘teach fishing’ category, the leading scheme is the National Rural Livelihood Mission (NRLM, now renamed Aajeevika) which had a budget allocation of Rs 3,915 crores in 2012-13. The main objectives of Aajeevika are to bring below poverty line households under the self help group (SHG) net, set up dedicated implementation structures at various levels, provide enhanced capital subsidy for the beneficiaries and easy access to credit. A related allocation is for the National Skill Development Fund (NSDF) which got Rs 1,000 crores in Budget 2012-13.
As stated earlier, rural entrepreneurship can be a massive driver of rural livelihood. Currently, there are a number of barriers to rural entrepreneurship, some of which are socio-political and are beyond the scope of this article. Here, the focus is on economic factors, most prominent of which are the absence of marketable skills, limited access to markets and lack of finance. These three barriers are listed in their order of priority. The first requirement is to have marketable skills, then to have access to markets where these skills will find value and only then is finance required to actually make products or provide services and sell them. Similarly, those seeking private sector employment are hampered by their lack of vocational and business skills like English speaking, basic accounting, computer skills, etc. Clearly, skill-building is the most important prerequisite for creating rural livelihoods. Given this context, it is surprising that under Aajeevika, the government allocates only 20 per cent of the budget for skill building.
MGNREGS promises 100 days of employment for unskilled labour while a skilled worker can expect employment for the full year, that is, 3.65 times more income. It is a no-brainer that more money should go into investments in skill building because they give higher benefit than money invested on unskilled labour. Yet, the government allocates more than six times the money in low yielding MGNREGA than in higher yielding Aajeevika and NSDF. If we consider the government to be the fund manager of our tax payments then we should expect it to do a much better job of investing our money.
The government has the right ideas in the form of setting up the NSDF, the National Skill Development Council (NSDC) and Aajeevika. Yet, it doesn’t seem to believe enough in these ideas to fund them properly! It expects that MGNREGA is enough to get it votes, without comprehending that country is becoming increasingly aspirational. Our rural population is keen to invest in themselves to improve their lives but is the government even aware of this?
I think it’s time the Union Budget started to refocus its priorities by increasing allocation to skill building (“teach fishing”) initiatives while ensuring that there is co-ordination between these NSDC and Aajeevika to avoid overlaps and redundancies in skill development programmes. Further, the focus of the Aajeevika budget should be on creating an enabling framework of skilled manpower, and the appropriate regulatory structure for micro lending leaving the on-ground organisation of people through SHGs, producer’s companies etc. to the private sector.
Throwing truckloads of fish at a country that needs fishing rods will give decreasing incremental returns.
Charnalia is the co-founder and CEO of MandiBridge Microventure Partners LLP, a venture incubation and consulting firm working in less developed regions of India