The political economy of SP policy reorientation is

complex, and will require intensive efforts to build

consensus on reforms. In particular, it will be important

to ensure that the interests of perceived “losers” of SP

and broader economic reforms are taken into account.

While reforms that involve expanded coverage or new

types of interventions are unlikely to be controversial,

there are strong interests in preserving the status quo

in SP programs among a range of actors, including

administrators, politicians, contractors and others.

Simply cutting programs or excluding certain groups of

beneficiaries or institutional players is therefore unlikely

to be successful unless incentives for institutions and

households which will be affected by reforms can be

part of the reform package. The political economy of SP

reform is challenging in all countries, and governments

in India would benefit from more innovation in their

efforts to create a broader societal understanding of the

need for and benefits of reforms.

some of the political economy challenges that the

SP system confronts if it is to become more coherent

and more effective as a tool for promoting poverty

reduction and inclusive growth include:

* As in many areas of policy reform in India,

consolidation and reform of the SP system

within a coherent strategy will run counter to

the past experience of scheme-driven initiatives

by a plethora of Ministries, and the observed

tendency of each new government at both

central and state levels to want new SP programs

clearly distinguishable from their predecessors.

Reducing these natural bureaucratic and political

tendencies will be very challenging. A first step is

obviously having an integrated SP strategy which

is driven by the top politicians and bureaucrats

at central and state levels, with strong inputs

from civil society in its development, including

opposition parties. However, even if such a

strategy process can be developed, it will be

important for it not to become a “one shot”

exercise, but to have institutional coordination

mechanisms in place which explore program

duplication and exploit synergies.

* Giving states a more flexible hand in use of central

SP resources will be a challenging transformation

both for central administrators (whose past

tendency has been to define the parameters for

use of central funds quite tightly) and politicians

(who not unexpectedly seek political attribution

for centrally-financed schemes implemented by

states). The first of these challenges in perhaps

easier to address through development of more

outcome-based monitoring systems. The second

is more difficult in a democracy.

* In a number of programs, there are presently

significant rent-seeking opportunities for a range

of actors. Such opportunities are facilitated by the

current complexity of the SP program mix, but

also by the number of intermediaries who often

are involved in the interactions of poor people

with the SP system. The generic identity of such

official intermediaries and unofficial middlemen

is generally well-understood, but minimizing the

potential avenues for their continued roles has only

recently become a more explicit goal of SP policy

design. While it is too early to say, even apparently

naïve blanket bans on certain actors in legislation

and/or guidelines (such as the ban on contractors

under MGNREGA) do appear to help. However, a

more comprehensive approach will require a more

thorough modernization of SP business processes.

Examples where such approaches already appear

to be making headway include greater reliance on

direct transfers to beneficiaries through banking

and postal systems, and innovations in use of ICT

in SP program delivery.

* A more recent and fluid development in the political

economy of SP (and much other) service delivery is

how increased decentralization of responsibilities

to panchayats – in particular GPs – generates

different patterns of contention, cooperation

and collusion between newly elected panchayat

officials and traditional loci of influence among

administrators and higher level politicians such as

MLAs and MPs. An essential first step in promoting

decentralization of SP service delivery as a tool for

contestability and hence accountability will be

getting a better empirical understanding of the

diversity and evolution of experience. This would

include how the gradual increase in the role of

panchayats is proceeding (and what factors –

such as limited control of resources and very low

capacity), and the extent to which panchayats

effectively promote accountability in SP service

delivery or are captured by local social, political

and administrative elites.

* A more nascent, but powerful, element in the

political economy of SP reform is the policy shift

towards a rights based approach. Government

of India is increasingly operationalizing such an

approach in a number of areas through legislation

and specific policies and programs. For instance,

the Right to Information Act was passed in 2005

and mandates the government to release timely

information demanded by citizens. It has been

widely hailed as one of the most important

drivers of governance reform and transparency

in India. The Right to Food and Right to

Livelihood movements are led by civil society,

but have managed to influence government so

that the National Rural Employment Guarantee

Act, (now renamed the Mahatma Gandhi Rural

Employment Guarantee Act) was passed in

2005. Other similar Acts include the Right to

Education Act (2009), the Scheduled Tribes and

Other Traditional Forest Dwellers (Recognition of

Forest Rights) Act (often called simply the “Tribal

Rights Act”, 2006) while legislations such as for

food security are on the anvil.

* A consequence of the above is the increasingly

prominent role of communities and civil society

in promoting more effective poverty reduction

outcomes from spending. In this respect, the

strengthening of the “authorizing environment”

for communities in SP service delivery in recent

years is encouraging. This is both cross-cutting,

through reforms such as the Right to Information

Act, and program specific, such as the anticipated

role of social audits in MGNREGA, and new roles

for community groups such as SHGs in delivery of

some SP services (e.g., running Fair Price Shops).

However, there is no guarantee of “trickle down”

to citizens in terms of awareness of their emerging

entitlements. The role of NGOs, media and other

actors in this respect cannot be under-stated,

as various political and administrative actors

at local level may not have strong incentives

to promote such citizen-based accountability

mechanisms. Notable examples such as MKSS in

Rajasthan demonstrate the potential impacts of

such partnerships.

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