Income Transfers – is it the most effective solution.

Link to Businessline Article:

Just recently Congress has announced its promise of income transfer of Rs 72,000 for the poorest 5 cr families costing the Central Government Rs 360,000 cr., potentially becoming bigger than our Defence Budget.

One side of evaluation is the feasibility of mopping this amount without fiscal stress. But the other side to look at is whether this is the most optimal solution to bring about the desired impact on the target,  which is what we will focus on.

Inequalities of Income arise from three other forms of inequality (i) inequalities in human capital (levels of health, literacy, skills, etc.), (ii) Inequalities in Opportunities (in education, jobs, etc.), and (iii) inequalities in living conditions.

In the long term, these can be corrected only by better healthcare, education and skilling, creating sustainable jobs and the industrial competitiveness to create jobs, housing and medical infrastructure for poorer sections, etc.

But in the short to medium term (say 3-5 years) the inequalities can be more urgently addressed by ‘redistribution’ of wealth, income, reservations etc.

Thomas Piketty, the renowned French economist classifies the redistributions into two categories – Direct and Fiscal. Some examples of direct redistribution to labour are fixation of minimum wages more than required to compensate for inflation and gains in productivity, prescribing social contributions, ESIC, etc. This increases the cost of labour for employers who may shift to mechanization and thus has a negative fallout in terms of jobs created for the target.

Fiscal transfers tax the richer through income taxes or a wider cross section through indirect taxes like GST. This has the beneficial effect of not increasing direct cost of labour thus not decreasing demand for labour. The scheme in discussion falls in this category. Let’s see the demerits.

Firstly, this form of income transfer is addictive. The amount is too huge to be spent on short term measures without measures to set right the structural defects of human capital inequality. Once started the political system especially in India simply lacks the will to withdraw it even when the purpose is achieved. But more importantly the political system forgets its duty to address the long term issues feeling absolved with quick fixes. We have seen this in reservations, free electricity, etc. A scheme of this magnitude simply cannot ignore the need for balance between the short and the long term. The scheme should spend at least 60-70% in addressing inequality of human capital and the balance in income transfers.

Even if it is not able to take any steps for long term correction, it can make the 60-70% as conditional entitlements like attend adult education and dinner will be free, attend prenatal counselling and child delivery and all inoculations will be free, acquire a skill and one year’s apprenticeship is free, have and use toilets and get one gas refill free, etc. Unconditional entitlements are prone to Chakma Baboon syndrome – any sign of withdrawal can result in attack and even killing – in this case political suicide and hence no political party will dare withdraw.

Secondly in the words of Piketty, ‘the cost of substantial fiscal redistribution would be considerable, because it would decrease the return on investments (for individuals) in human capital and thus decrease the incentives for individuals to make such investments …’. Illustrating, if wages earned by a 8th std pass is Rs 60,000 on average and that of a 12th std pass Rs 90,000 per annum, his family will decide on sending their wards to school based on these incremental returns on investments. However, if Rs 72,000 is guaranteed, the incremental returns to investment upto 8th std and 12th std becomes Rs (-) 12,000 and Rs 18,000 per annum respectively.  If in the neighborhood it is not shameful to be uneducated, the family might conclude why educate anyone upto 8th std to earn Rs 60,000 when he can sit at home and get Rs 72,000. This will save them their investments. This outcome will seriously dent our ability to address the long term issues.

Thirdly, researches on the impact of neighborhood, family status and social settings have led to conclusions like, ’inequality of educational opportunity is reproduced from generation to generation’, ‘students from modest background are less motivated to pursue lengthy courses of study’, ‘(it is) the immediate social environment that inequality inevitably originates’. The surroundings have a huge inertial impact on perpetuation of inequalities and need far greater and immediate attention to get the basics right. Widespread initiatives like sending some bright students to different settings so that they have demonstrative impact, forcibly setting toilets in the poorest 10-15% of families in poor neighborhoods so that it creates peer pressure on others to follow suit, setting up model farms with improved agricultural practices, model houses in slums, etc. should be initiated to tackle this highly underappreciated impediment on equalizing inequality.

To give credit where due, given the labour market conditions (high levels of unemployment), fiscal transfers are a far more effective tool than increments in minimum wages and other mandated payments by employers. Given high possibilities of mechanization, minimum wages would have driven more enterprises away from labour and worsened the problem.

One way perhaps to strike a balance may be to issue equivalent value coupons eligible for exchange in areas we desire them to consume – education, purchase of food, clothing, building materials for housing, use in public toilets, buying medical services, payment of insurance premiums for crops, life, cattle etc.

A succession of poverty band aids starting with loan write offs, educational loan write offs, transfer of Rs 6000 per family and now this Rs 72,000 to the bottom 5 cr people is a clear sign and admission of failure of our reforms to address the concerns of the poorest sections of our society.

Income transfer looks not the most optimal solution at present. Even so, one wishes that if it gets implemented the information does percolate properly and every one of the families take due advantage of it to get out of poverty for sure, without leakages plaguing this initiative as well.

(The writer is author of Making Growth Happen in India)

Contrarian Ways to tackle Agrarian Crisis

Article link in Businessline 11 March 2019

Agrarian crisis is staring on our face and as usual a flood of familiar suggestions have resurfaced. The political responses have been on expected lines.

Fixing MSPs at 50% over costs is as disastrous as it can get. There is no inherent incentive for cutting down the bill on Government or the rest of society. It may be possible in Western societies where 2-10% farmers depend upon the rest 90% but not in India where 50% are in agriculture. The sinking water table without a care, due to free electricity even in the land of five rivers (Punjab) is an example of such a sink hole. On the contrary, when West Bengal used to charge farm electricity same as residential, it held its water table since the farmers used the expensive resource judiciously.

The basic problem is that our agri sector is producing more than the demand, even when its productivity is way below world standards. The Kcal value of just the top 8 food items produced is approx. 2250 just about what an average Indian requires. And we have compromised the soil health massively in the last 4 decades, so the costs are increasing way beyond productivity gains.

The main impediment in tackling the crisis is the wrong formulation of the problem. Instead of seeking to double the farmers ‘gross’ income, we should seek to raise his “net, net income” – net of costs but more importantly net of soil health loss and depreciation. Let’s see how this cab ne achieved.

First the wastes in our cultivation. Our flood irrigation system which has evolved to cut off oxygen to weeds and thus control their sprouting, has had adverse consequences on plant health also. The excess water washes nutrients, costly chemicals and fertilizers along with it, more than half of these never coming in contact with the plant or root aura. These unutilized chemicals have long term consequences on soil quality.

SRI (System of Rice Intensification) farmers who have consistently reported higher yields, have direct- planted or planted single seedlings with gaps of 20-25 cm (instead of clumps) and shunned flood irrigation for just retaining enough moisture and reported 80% savings in seeds besides saving 50% water.

Next the soil health. Excessive chemical application has killed the earthworms so necessary for aeration and microbes and fungus which break down vegetable matter and carbon into essential inputs for plant growth. These chemicals solidify soil causing easy run-offs. Stronger osmotic pressure of the chemical solution outside the root systems promote reverse osmosis causing the water to flow from roots to soil rather than the other way around causing withering and dryness in some crops.

We need to get a lot more humus into our soil to boost its water retention (without run offs) to achieve the above and enable stronger roots that can to go deeper and wider and sponge more nutrients besides being naturally more disease resistant.

We need to rotate the crops judiciously with nitrogen fixing legumes/plants, so that the artificial life support of chemicals get replaced with natural manures and supplements in a far more balanced way.

Sir Howard the author of the Indore experiment, had demonstrated that with just the organic material available within the village – the foliage, crop residues, and animal residues,  it is possible to generate all the humus and compost and within it all the chemical required in a more balanced manner at much lesser costs. It might require some reinventing the natural and traditional methods and some re-training.

Trapping more incomes within village ecosystem: The Indore experiment cited above reported that a pair of oxen can help generate 1350 cft of compost i.e approximately 27 tons of manure containing a balanced mixture of essential chemical ingredients. The market price of equivalent weight of Urea is about Rs 1.45 lac. Even if one were to offset the cost of animal keep and downscale the value, it would still leave a net Rs 30-40,000 of commercial value in the hands of the farmer and village community. Instead, villagers are driving away these to graze unyoked and spending a fortune in ‘importing’ costly fertilizers. A better balance should be attempted.

Rice production is reported to be contributing nearly 15% of world’s methane emission annually. Long term research should focus on harvesting this thinly spread greenhouse gas like we have done with Sunlight. It is also possible to sequester carbon by traditional methods as modern agriculture is one of the biggest contributory to carbon emission.

If these incomes are trapped within the village ecosystem it could lead to better secondary cycle of incomes and enable our villages to make more investments in housing, electricity, healthcare and education, the other social necessities.

Employment potential: Adoption of natural or semi traditional methods of farming like manual composting and weed control, controlled water charge, focused pest control, recharge of crop residues are reported by Joel Bourne in his book The End of Plenty to absorb 27% higher labour. That may be a huge boon by itself for India which desperately needs to create employment.

‘Open sourcing’ research: The current system of research excessively serves only certain sections or links to the compromise of overall health. It is focused on maximizing chemical or insecticide sales far beyond optimal levels. So much so that insecticide companies do not even train the applicators on optimal volumes or safe methods of application. Today, more people may be dying out of their harmful effects besides those who consume it as poison, than out of farm loan distress.

There is a compelling case for ‘open sourcing’ all agricultural and allied research even if necessary by Government setting up more facilities under its control as well as opening up trade at least in commodities where we have surplus.

In conclusion, it is possible to more than double the net farm incomes just with better seeds and package of farm practices, cutting down heavily on the artificial ‘boosters’ even while preserving or promoting soil health.

RCEP can spell RIP for domestic manufacturing jobs

No one can deny that overall there are net gains from free trade (FT). If the most efficient producers are provided access without artificial restrictions (political or geographical boundaries) obviously it would optimize the costs for a given level of consumption.

But how those gains are distributed is an unsettled question. We can have examples of countries losing out due to FT and others gaining at their expense. It is not even difficult to construct examples of just one country garnering all the gains and all the others losing.

Its also possible that the gainer(s) gain far more than the gains from free trade efficiencies at the expense of others (kind of loss imposition on losers). Unless one is careful about what to negotiate/avoid and does homework properly, one may be a heavy loser. Lets see an illustration.


The illustration seeks to break up the supply curve in the standard demand supply analysis of micro economics. The supplying units are arranged from the most efficient to least efficient from left to right. Efficiency is measured by how low the total variable cost is. The thick ridge line running over the top of various bars representing individual units comprises the supply curve. Those to the left of where the Demand curve meets the Supply curve gets to supply the market.  Those to the right will incur a cash loss since the market price is less than their variable cost.

The illustration studies the impact of removal of import duties after FTAs. After removal of import duties, the supply curve accommodates more overseas players to the left and push out some domestic suppliers to the right of equilibrium pricing and hence face closure.

The net impact (difference between before and after scenarios) in the illustration is as follows:

  • The Government has lost whatever Import duties it was getting from the Korean (for example) suppliers who were already competitive suppliers in the market. The entire amount would have accrued to the Korean suppliers,
  • The domestic consumers have benefitted from a price reduction of less than 1%. This is most likely from better efficiencies of the overseas suppliers.
  • There is a net loss in domestic employment (loss of 9% down from 139 to 127 in the illustration).This would have either resulted in better employment overseas or better capacity utilization for them.

This kind of relatively flat demand or supply curves prevail in commodity industries where consumers don’t pay much premiums for brand and supply efficiencies come from factor cost differences, scale economies, cheap labour, patents, etc.

Net loss in employment.

Larger and concentration of capacities enabled by FT does facilitate mechanization and result in net loss of employment as empirically observed. These net losses in employment have also to be distributed and one can end up with a disproportionate share of this unemployment as in the above case where the host country ends up with all the employment loss.

Ineffectiveness of Revealed Comparative Advantage

One of the methods oft-used by trade economists to identify industries with export or import competitiveness is the Revealed Comparative Advantage (RCA) and its variants. Essentially this method calculates the ratio of (i) % of a particular commodity in a country’s exports to (ii) the % of global exports of the commodity in world exports. If the ratio is more than 1, then the country is supposedly export competitive. Instead of global %, one may use specific country %s, regional %s, or host country’s %s, to identify export competitiveness or import vulnerabilities.

But it is terribly reliant on the past like using KL Rahul’s yesteryears averages to play him in todays matches. What is important is the current competitiveness in an ever dynamic world, where the steep price fluctuations in some key inputs like oil, metals, interest rates, etc. can vastly change the fates of several industry players’ competitiveness.

As can be seen from the illustration the units around the equilibrium price – may be 20-30% on either side would largely decide the gains or losses from trade. Units which are highly competitive (leftmost) or least competitive (rightmost ones) will hardly matter. For example, ASEAN units despite a duty reduction do not enter domestic market. There may not be much point in negotiating access in such a commodity if we are in a similar situation.

Likely effects of Regional Comprehensive Economic Partnership (RCEP)     

This kind of analysis should be done for both commodities where we have some basic strengths and where we would like to invite competition. Using elasticities alone may not suffice as so much depends on capacities of individual players around the equilibrium price. ASEAN FTA has not resulted in much gain or loss over the last 5 years it has been in full operation. But China is a different player altogether.

Many Chinese commodity players have huge capacities – in select cases a single unit or player have enough capacities to supply the entire Indian market. If an import facilitating measure or cut in duties make them competitive in domestic industry, then the whole domestic manufacturing can get wiped out resulting in loss of domestic employment.

India’s strength in its low cost labour, but largely untrained and low skilled. In most manufacturing units the wages account for 8-12% and dwindling by the day. Even a 30-40% cheaper labour translates to only a 3-5% overall advantage which is not even sufficient to counter our unreasonably high real interest rates. But where wages constitutes 40-50% like in many services, IT, research, design, etc. a 30-40% cheaper labour can give 10-20% overall advantage. These are also less capital and machine intensive and interest rates are less impactful.

India’s homework so far in negotiating trade agreements has not been stellar. Opening up our manufacturing without proper employment impact assessment might prove disastrous with RCEP. Even if services are negotiated well, it will open up opportunities for higher skilled but the low skilled and labour which are newly transferred from agriculture and rural areas may be left in the lurch.

Illustration:  Before and After FTA – impact of duty reduction

RCEP jpeg

In case the picture is not clear, you may kindly open XL file from the link below


Perils of Overtaking Investments

By V Kumaraswamy

There are severe risks attached to investments that are overtaking in nature, even while temptations to make them are high. This is an area that justifies market intervention by the government in the larger societal interest.

An easy-to-understand example is Jio’s launch, which does not introduce a new service or previously unknown product, but essentially an enhancement or more cost-effective solution to an existing demand. It is mostly a differentiated packaging of what was available through Airtel, Idea, Vodafone, etc.
The current wave of investments in retailing, some banking services, building airports in nearby areas, building parallel roadways or expressways are other examples. Jio’s financial engineering and data plans makes it more attractive for customers to switch. It is most likely commercially feasible: Perhaps by incorporating the lessons and piggybacking on other investments, it will generate better margins than previously seen by others—but these are for Reliance.

The problems with such investments are the wide divergence between private returns and net incremental returns at the societal level. Sure, it will attract new customers who couldn’t afford cellphones earlier and, to that extent, the incremental value-addition from investments will be equal at both private and societal levels.

But for customers who switch from other service providers, the two will vary vastly. Some customers may switch for better quality or range of service and, hopefully, their bills will also increase. In such a case, the net difference between their earlier bills and the current may count for net increase in value-addition at societal level (GDP increase). But for customers switching purely for better prices, even measurement becomes an issue.

In all the above cases, the private player will enjoy the full benefits of sales. However, the net value-addition for the sector as a whole after deducting the decrease in sales of other existing players is what the society gets as incremental value-addition. This will be significantly lower than new private player’s income depending upon the degree of substitution and customer switches. While the net value-addition is so constrained, in investments no such adjustments are possible. The returns on investments at the individual corporate level and at the societal level will differ, with the societal return on investments most likely to be far lower. While the former will be higher than the prevailing interest rates (otherwise the concerned corporate won’t be investing in the venture), it will be difficult to be ensure the same at the country level.

This subpar (at country level) investments will sure create problems for lending banks and equity investors. The key question is: Should the society’s savings be invested in such ventures?

If a different division of Airtel had come up with an exact replica of Reliance (even without Reliance coming out with its own), would its board approve it in the larger interest of customers and risk writing off huge standing assets on the ground? Doubtful.

And even where innovation was distinctly better; GE’s Edison fought tooth and nail for continuation of DC current over AC current supply systems being attempted by its competitors, largely to protect its standing investments rather than due to any conviction that DC was less risky for consumers. Many consumer products and durables also have such examples, but they do not create the same societal inefficiencies like in infrastructure or capital-intensive industries.

While consumers should have choice on at least cost, emerging economies can ill-afford such investments. There will be many investments into newer sectors that can deliver far superior returns at national level. We should ideally be pursuing those, rather than ‘overtaking investments’. It is easy for emerging economies to fall into the trap of investing in ventures that individually look attractive, but do not deliver much GDP, growth or employment on a net incremental basis since tested alternatives are readily available elsewhere.

Sure, in a free-market economy, there can’t be any legislations to bar private players from investing in such sectors. But those investments could be mandated to bring in equity to support such investments since the risk is higher due to uncertainties in market share capture, new investments being able to reach planned customer switches, etc. The lending banks could be mandated to insist on a far greater proportion of equity in such ventures. This could be based on net social returns calculations. Banks may also be empowered to require the existing players to bring in more equity on the advent of such investments into the related sector. This may, in some cases, force the existing ones to seek exit by selling out to the potential newcomer. The Insolvency and Bankruptcy Code at least makes exits faster and reduces idling investments.

A certain level of such investments is inevitable or perhaps even necessary for continuous upgrade of services. The sector regulator or banking regulator could perhaps prescribe minimum social return criteria for lending public money in such ventures. Alternatively, the proportion or quantum of funds that can stay invested in such ventures may also be specified.

Turning useless wastes to useful wastes

In Beverly Hills… they don’t throw their garbage away. They make it into television shows.” —Woody Allen.

Indian wastes are ‘useless wastes’. Our consumption habits may have leapfrogged, but our disposal habits are primitive. We mix up useful wastes with useless wastes, destroying the value in the former—you can’t compost paper and vegetable remains mixed with broken glass and plastic pet bottles, nor can you recycle paper mixed with food wastes and electronic remains.
If India has to successfully deal with its wastes, two paradigmatic changes are required in our thinking.
Unfortunately, it is the rag-pickers and the municipal authorities who are made to grapple with the messy problem, without either adequate incentives or resources. The problem has to be back-loaded on consumer product companies who created the non-destructive, non-biodegradable or unconsumed packaging or products and also benefited from it; and instead of trying to segregate mixed wastes, we should prevent it from getting mixed in the first place by appropriate incentives or punishments for compliant or errant behaviour, respectively, at the stage of the mix-up.
If this principle is accepted, (1) all packaging material should also go back to the packager—just like the truck goes back to the truck owner after the delivery of cargo—and they should be made to pay for the costs of such ‘back trace’, (2) what comes into the city and urban centres should go back from where it came, and (3) electronic hardware (which are potential future debris) and packaged food (which comes with non-biodegradable packaging) should be handled at the time of the original sale itself. Outlined below is a system of incentivising segregation at source and the benefits therefrom.

The suggested scheme
1. Every consumer and industrial manufacturer/marketer should be mandated to file their recycling plan or reclamation plan annually, or on a one-time basis. This can be enforced through fines or suspension of licence, till complied with.

2. They should be made to declare on the packaging (where it is multi-layered, on each of them) what value the marketers are prepared to give back to the consumer if he/she hands over the empty containers, cartons, plastics, corrugators, etc, to the point of sale. For example, water bottles may say: “Collect 40 paise against this bottle”. This would help create a ‘waste currency’.

3. Marketing companies should be mandated to collect at least 50% initially, and by the third year if at least 90% are not collected, their manufacturing licence should stand suspended (a similar procedure of disposal to source supplier exists in the Atomic Energy Regulatory Board regulations). The actual collection must be audited by independent entities.

4. To ensure compliance that marketers make efforts to collect back, few things can be done:
–   An upfront deposit with the government can be collected, say, at 3-4% (to be varied based on the biodegradability of leftovers) at the time of manufacture or entry into state or import into India, which can be refunded back based on the percentage collection.
–   Fines on the shortfall at twice the rate will enforce recollection of wastes.
–   Over a period of time, proper price discovery will happen if the enforcement is tight. If competing consumer marketing companies start offering different rates for recollection, it will be a signal to tighten enforcement on manufacturers who offer poorer rates.

5. Marketers may not deal with the wastes themselves. They will locate third-parties to reclaim, recycle, sell to re-users, or incinerators, energy companies, etc. Positive values will be reclaimed by recycling. Reusable material will be sold at commercial values. The rest may be sold to energy or incinerating companies.

6. The end-consumer may not find it worthwhile to go to a shop and exchange the waste currency. Rag-pickers may pick up wastes at the doorstep, and claim the waste currency at a discount and hand it over at sales counters. This will incentivise source-segregation. Rag-pickers should be trained to pick up all wastes and exchange the value of wastes, and dispose of the rest in designated ways.

7. Special shops will emerge that only concentrate on the collection of all wastes for a margin in every shopping mall, street corners, etc.

8. Heavy fines should be levied on selling companies for litters found in the open, which will induce some policing by them directly.
In addition, litter disposal should be made part of the Swachh Bharat Abhiyan.
Forward distribution is highly working capital intensive, requires expensive shelf space, advertising and product promotion, besides hefty retail margins. Wastes being reclaimed do not suffer from any of these. In fact, the total cost (net of recoveries, if any) involved may not be more than 1-2% of the selling price of base material, excluding the manpower involved.

Estimates of employment and benefits
The Indian retail market for FMCG and pharmaceuticals was estimated at $630 billion in 2015. In FMCG, packaging costs typically account for 3-4% of sales value—the costs incurred on packaging on sales of $630 billion (`42 lakh crore) is likely to be about `1.4 lakh crore.
If the fines for non-collection are kept at, say, 4% of the sales value, hopefully companies could be expected to spend at least 2% on recollection (including on wages, transportation, storage and dealing with wastes), i.e. Rs 84,000 crore.
If roughly one-third of this accrues to labour as wages, it is about Rs 28,000 crore. At minimum wage rates of around `300 on 240 working days, it comes out to be 35 lakh man-years, i.e. 0.3% of our population. This is not wayward compared to the reported 0.7% currently employed in South Africa in similar activities, compared to 0.1% in India currently.

Going forward, probably the government’s role would be minimal. It should create the enabling legislation and set-up a ‘waste police’ whose job will be to catch and fine sellers who are not marking waste currency value, people littering, recyclers not completing their jobs, supervisory audit of audits, ensuring manufacturers file their plans, certifying refunds, etc. This ‘waste police’ should be additional trained staff, and not as an adjunct to the existing police duties.
The government can use a portion of ‘funds in custody’ (through upfront deposits) or fines for training and certifying the people involved. It can train people as part of skill development programmes or get originating companies to train them (for automobiles, e-wastes, hazardous chemicals, etc).
Even if compliance starts with multinational corporations and organised sector companies, it could quickly reach 40-50%. It will have a demo effect and lead to others falling in line.

Dhan Foundation – The Republic of Goodness

The Mega Micro Inst – Dhan Foundation
For the last 15 years or so whenever i visit Madurai for Business or pilgrimage, i make it a point to visit the temple of Social action and entrepreneurship – the Dhan Foundation, founded by my classmate Vasimalai (with me in the photograph).

In the initial years i could see his energy, his vision, the founding principles. But the scale and breadth of his initiatives were still not totally manifest. Much like a Sachin Tendulkar after the first 3-4 matches for India. So every once in 3-4 years i was catching up or when he was in Delhi. A slightly late morning flight back to Delhi gave me 35-40 minutes time to catch up with Vasi and
the opportunity to refresh and update. But this time it was truly astounding in the meganess of what has been achieved. A few samplers:
i. Micro finance was their start point. It has spread to several to liberate them from the money lenders usurious nature by pooling resources. By now the SHGs have a corpus of over Rs 600 cr and levered funds from banks of over Rs 1100 cr. Supporting some 11-12 lac beneficiaries.
ii. I used to see some water bodies here and there as samplers but i dont think the numbers were in high 3 digits back then. Now the score is over 4000 water bodies and tanks revived. And work on several cascade of tanks, individual tanks and systems in progress.
iii. Community insurance which leverages some of government schemes together with self resources benefits some 17 lac people – mind boggling. It covers not just what the govt and insurance companies cover but old age life insurances beyond 50 and 60, funeral expenses (a dignified death is as important in our society as in several African communities), medical, crop, cashflow, etc. Members pool their resources and divide the risks and is an out and out community based initiative where the role of Dhan is capacity building and help in scaling up.
iv. They have several initiatives for removal of poverty on sustainable (perhaps irreversible) basis. A unique scheme where the target beneficiary him/herself have to come and declare that they are out of poverty – not based on some criteria determined and remotely declared. It has been running last 10 years and covers some 900,000 families and so far over 248,000 of them have declared themselves to be over the line. Initiatives differ from place to place and person to person and based again on individual capacity building. There is healthcare initiatives, orphanage, and sanitation too.
v. Starting from 2-3 districts, the foundation is working today in several states (14 if i recollect right) and 19 districts within Tamil Nadu and RBI which has assigned them 25 village for some finance related intervention. It has over 800 staff and over 3000 community workers. It has a university, training over 15 people per batch aiming to train them in social intervention initiatives. The effort started with Tata’s substantial contribution but is self sustaining now (guess anything else would have been against the spirit with which Dhan runs) and concentrates not just on skill building thru case studies (a la IIM Ahmd of which he is an alumni) and theories… ‘most of our efforts are aimed at bringing about mind set change and imbibing appropriate and functional attitudes’.
If only the Govt locates a few such foundations India will be very soon done with the business of poverty removal and the cottage, SME and Mega industries that thrive in their name on the oxygen of siphoned off funds which have to perpetuate the very thing they are trying to get rid of so that they stay relevant.
I must confess that what keeps taking me back again and again to Dhan is an incident in my first visit. He (Vasi) had despatched me to one of his SHG groups and me and a colleague had an interview with the leader + some members of local SHG from the dis-advantaged section (if things are not misunderstood, from ST community). It took all of 2 minute to get impressed with her confidence she exuded and the grip and depth on the subject. It was extra ordinary work by Dhan i thought and it has attracted me over and over again and each time something more happens to be impressed with has taken me there the next time.
What has enabled you to reach such extraordinary levels i dared to ask this time. In fact this time the scale was far too striking and hence almost compulsive in my ask. ‘We do not run anything. It is all community based initiatives by the beneficiaries themselves. And we insist they contribute financially also to the schemes. Our role is only capacity building and I believe we have acquired some expertise in scaling up’ was the rather humble reply from Vasi,of whose orgn 5 case studies have been put out incl one in Harvard’s website.
(Numbers are as recollected based on today’s conversation. You may want to check the website). Next time you are in Madurai, please make Dhan Foundation a part of your pilgrimage. I will assist you in whatever way. You will be better off for it.IMG-20181023-WA0008