Amartya Sen is one of the most important development thinkers. He was awarded the Nobel Prize for economics in 1998, a recognition of his important contribution to the discipline. He made the case that poverty was a symptom of inequality and a lack of rights.
Solutions to poverty will come through ensuring individual rights like education, health and food. The rights go beyond simple laws and rules, argues Sen. True freedoms are when people have the ability to make choice and gain access.
The ideas of Sen are summed up in his idea of redistribution through rights and entitlements (RRE). Inequality is reduced by creating policies that ensure rights and entitlements reach the greater population. The Food Security Bill passed recently in India is an example of these ideas in action.
The bill makes food a right for people and puts significant subsidies behind food prices for two-thirds of Indians. Pregnant women will also get free meals and healthcare as well as young children, malnourished children and homeless people.
Arvind Subramanian says the program and Sen’s approach is rife with problems. He says that RRE actually makes things worse by causing instability and vulnerability. Spending by the government at such high levels can impact wages for individuals and businesses.
Amongst emerging markets, India is the most macroeconomically vulnerable, with a deadly combination of high fiscal deficits, close to double-digit inflation, and high external deficits financed by short-term foreign capital inflows that may even now be starting to flow out of the country. How did we get here, though? Much of the blame must lie with the redistributional zeal of this government. The ultimate cause of macro-vulnerability is the high fiscal deficits in turn caused by the fact that government spending per capita (intrinsic to RRE) has increased by nearly 75 per cent by under this government.
He is not alone in his criticisms. Others point to the high cost of the program. Food subsidies will double to $23 billion. Spending so much more on a single problem will make it hard for India to reduce its fiscal deficit, as the government intends. Then there is the problem of distribution. If food is distributed through state-owned cheap food ration shops, there is reason to believe that graft will follow warns the BBC.
Various studies over the years have estimated that anything between 37% and 55% of the subsidised rice and wheat are illegally diverted from these shops and sold in the open market. Using these shops to distribute more food, they say, will mean more pilfering and more corruption.