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RE: NIT (supplemental income) Project outline



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Dear Sanjeev

Since you are now contemplating putting a pilot scheme in place (in
Meghalaya) where real people are going to be subjected to the NIT plan, I
feel compelled to make a few observations.

Even a superficial consideration of the economic incentive structures of the
proposed beneficiaries would reveal two major problems with the proposed
NIT:

1. Since this is essentially a dole-out, based on low incomes, what is to
prevent beneficiaries to ensure their status remains below the cut-off?
Remember the small-scale industries in the 1970s and 1980s which, on being
given substantial subsidies for being small, refused to grow. In the absence
of all-round development which provides employment and income-generating
opportunities, the NIT could seriously curtail the incentive of dire need -
which usually prompts all out searches for alternative means of earning
livelihoods.

2. Since the non-poor essentially subsidize the poor, it will not be long
before some sort of perception of injustice (or 'swell of discontent')
begins among the elite (the volatile ground of 'political' implications
where even Friedman feared to tread). When this group realizes that they
cannot reverse the scheme, they may well begin to reduce their income tax
declarations and payments (which any reasonable CA can help them do). What
happens to the scheme when the 'surplus' for redistribution decreases?

I sincerely hope that you have well-thought out ways to tackle these
possibilities. Otherwise, it will be another instance in a long historical
line of civil servants trying to test pet theories in the real world. (Two
young and ambitious British civil servants who tried to enforce Marshallian
rent theory in the Bombay Presidency in the 19th century nearly started a
full-scale peasant revolution, and were subsequently sent back to England to
cool their heels.)

Please re-assure me that I am mistaken in my apprehensions for the
(apparently substantial number of) poor in the Mylliem block of Meghalaya.



******************
Dr. A. J. James

B 9 FF, South Extension Part 2
New Delhi 110 049, India

(+91 11) 651 2901 (Home Telefax)
(+91 11) 652 0223 (Home Telephone)
(+91 11) 939 7531 (Voicemail for messages only)

 -----Original Message-----
From: 	owner-india_policy@cinenet.net
[mailto:owner-india_policy@cinenet.net]  On Behalf Of Dr. Sanjeev Sabhlok
Sent:	Saturday, June 24, 2000 9:08 AM
To:	debate@indiapolicy.org
Subject:	NIT (supplemental income) Project outline

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Please help make the Manifesto better, or accept it, and propagate it!
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Friends,

One block has been shortlisted in principle for consideration for the
Experimental project on NIT. As this is still at the conceptual stage,
discussion on IPI is acceptable. Kindly furnish views which will be taken
into account in the project preparation. SS

          Elimination of Poverty in ..... Block: Project Outline

1. 	Introduction
	Based on the paper entitled "India Need not live with Poverty", the
following project outline is being prepared for implementation of the
Project of poverty elimination in one block of Meghalaya, on an
experimental basis. If the project is successful, it could be extended in
phases to the rest of the country.

2. 	Steps involved
(1) 	Formation of a Project Guidance Committee
	Officials of the Planning Commission, CBDT, State Government, Banks, NIC,
experts from NEHU, etc., would constitute a Project Guidance Committee
headed by Chief Secretary, Meghalaya, to be notified by the Planning
Commission.

(2)	Conduct of a base line survey
	In order to evaluate the success of the project, a bench-mark survey of
those below the poverty line has to be carried out in the Block. The C & RD
Department has already carried out a survey to determine those below the
poverty line. Unfortunately, the size of the population below the poverty
line in this survey is extremely high, being in the range of upto 87%.
Therefore, a  sample survey  needs to be carried out under the supervision
of experts such as faculty from NEHU.

(3)	Econometric model
	Due to the extreme difficulty of directly determining the incomes of the
poor, an econometric model which predicts the income of the respondent
based on proxies such as occupation, land ownership, asset ownership,
electrification of household, etc., would have to be approved. Experts
working in the area would have to agree upon a reasonable model which will
be incorporated in an appropriate computer software to be designed for this
purpose.

(4)	Design of survey
	The survey questionnaire would be printed out with the names of persons
found in the voters lists, and empty cells (comprising about three rows on
a 132-column width paper), containing all relevant questions, in brief. It
would be appropriate to use local language in the survey questionnaire as
well as to print the questionnaire on a heavy duty laser printer for
legibility.

(5)	Implementation of survey
(a)	Training
On the pattern of the Census operation, training would have to be imparted
to village level functionaries of various concerned departments.
(b)	Departments for implementation
>From the Government of Meghalaya, the C & RD Department would act as the
nodal Department, to be assisted by officials of various departments as
deemed fit by the Deputy Commissioner concerned. From the Government of
India, Income Tax Department and the Planning Commission would be involved
at each stage.

(6)	Data entry
	After administering the survey, data would be entered in an approved
software at the Block level. Since the Mylliem Block has already got a
Community Information Centre from the Ministry of Information Technology it
would be relatively easy for this to be done there. However, all 32 blocks
are to get CICs within two years.

(7)	Cross verification
 Print-outs of the data so entered would be sent to the Deputy Commissioner
and BDO (two copies). The Deputy Commissioner would cause a cross-check of
the data at 1% of the sample size through his Executive Magistrates.
Thereafter, a Gram Sabha meeting would be held in which further
cross-checking of this data would be carried out.

(8)	Estimation of amount payable
	After correcting the data, based on the field cross-verification, the
computer would print out a statement containing the details of payments to
be made. The amount required would then be sanctioned by the Income Tax
Department.

(9)	Transfer of funds
The approved statement along with funds would then be sent to relevant
Banks at Shillong. These would then issue the amounts to the concerned
banks at the village level. The Branch Manager concerned would assist the
beneficiaries to open the bank account and then transfer the money to the
concerned account. At the time of opening the account, three different
photographs of the beneficiaries would be taken, apart from
thumb-impression, to prevent unauthorized access to the bank account. A
photo ID would also be issued to the beneficiary.

(10)	Disbursal to beneficiaries
	The beneficiaries, at the time of opening their account, would be
explained the procedures for withdrawal of this money. They would then be
free to draw the money as in the case of a regular saving bank account.

(11)	Evaluation
	At intervals of 3, 6, 9, and 12 months after disbursal, a Sample Ssurvey
would be carried out to determine the behavior of the poor with respect to
the money disbursed to them, as well as to evaluate the effect of this
disbursal on their income level and quality of life.

3.	Costs

(a)	The administrative costs including that of evaluation would be in the
range of Rs.10 lakhs, to be worked out in detail.
(b)	The amount needed to lift the poor of .... Block above the poverty line
needs to be calculated, but should be in the range of Rs. 1.5 crores at
most.

4.	Conclusion
	Based on the experience gained, either the Project can be improved for
further testing in Pilot Projects across the country, where subsidy
phase-outs would simultaneously take place, or disbanded.


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This is the National Debate on System Reform.       debate@indiapolicy.org
Rules, Procedures, Archives:            http://www.indiapolicy.org/debate/
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