Stop the looting of grants, education and health services – what India’s poor need

A latest United Nations report has predicted that India will overtake China as the most populous country in the world in 2023. This will lead to an alarming situation on several fronts.

One of the biggest challenges could be India’s grant system, probably the largest by volume and number of beneficiaries (80 crore) globally. In a difficult economic situation, it will be difficult for India to balance growth and maintain such a system of subsidies. The key to food, farms and various other subsidies for the needy is to end theft, which can lead to tax savings that can be used to strengthen education, health systems and other amenities. base.


The total amount of grants spent by the Center and the States has rapidly increased from Rs 5.6 lakh crore in FY19-20 to a high of Rs 8.86 lakh crore in FY 21-22, from a tax kitty of Rs 27.07 lakh crore. The amount spent on grants represents 33% of the country’s total tax collection and 6% of GDP, which is clearly a significant portion.

Subsidies increased from 3% in FY19-20 to 6% of GDP in FY21-22. Subsidies per capita increased by 15% CAGR over the same period for over 70% of the population receiving subsidies.

The Centre’s food grant has more than doubled over the past three years from Rs 1.09 lakh crore in FY19-20 to Rs 2.87 lakh crore in FY21-22 and the fertilizer subsidy from Rs 81,000 crore to 1,40,000 crore in the same period. Pradhan Mantri Garib Kalyan Yojana (PMGKY) grant increased from Rs 6,033 crore in FY19-20 to Rs 8,456 crore in FY21-22.


Subsidy reforms and the encouragement of Direct Transfer to Beneficiaries (DBT) emerged as a high government priority. DBT continues to provide much-needed relief to recipients, even as it reduces duplication and fraud. The DBT framework has saved Rs 2.50 lakh crore since its inception in 2013.

Yet, in various cases, the grants fail to reach their end goal due to leaks in the system which have become heavy with many intervening layers leading to major loss and waste. The taxpayer-funded subsidy system needs to be made more efficient through artificial intelligence and other technology-driven platforms.

Leaks and corruption reduce the effectiveness of subsidies. According to the Standing Parliamentary Committee on the Public Distribution System (PDS), leakage was around 40-50%. Food subsidies can be rationalized by direct cash transfers replacing the PDS.

In six decades, subsidies and even debt forgiveness have not led 86.2% of small marginal farmers (cultivating less than two hectares) to sustainable agriculture. Subsidizing does not guarantee that it reaches the needy. In fact, the definition of farmer is not clear. If subsidizing the cost of inputs is an ultimate help for farmers, then why are they still in the plight of low income, one of the main causes that drives them to suicide.

The tragedy of the agricultural subsidy is that much of the benefits intended for farmers are diverted for non-agricultural purposes. For example, in Punjab, free electricity for farmer subsidy weighs Rs 7,000 crore per year on the state treasury as there is no metering system on 15 lakh tube wells benefiting from free electricity. There are no precise figures to determine the exact consumption for irrigation purposes. Even politicians, civil servants and NRIs, with multiple sources of income, are among the beneficiaries of free power; on the contrary, they earn much more than a poor small farmer.

Free energy and subsidized fertilizers lead to overuse. In 131 of the 148 blocks of Punjab, water has been overexploited. A farmer uses 3.5 times more fertilizer and pesticides than in 1970 to achieve the same yield. Although Punjab is only 1.5% of the land area of ​​India, it uses about 23% of the total pesticides used in the country, which causes serious environmental problems and health problems.


Free energy and subsidized fertilizers must be transferred to the metering-monitoring system to avoid groundwater depletion and overuse of fertilizers. It is essential to plug the leaks in the system of subsidizing interest on agricultural loans, because agribusinesses benefit from it.

The government must undertake a massive exercise to identify deserving recipients, withdraw those who receive multiple grants, and transfer the majority of grant payments, including for food, to DBT to reduce inefficiencies.

The grant monitoring system needs an AI platform that automatically weeds out current grantees who get jobs with the government or private sector offering ESI or EPF benefits.

Reducing the amount of grants by ensuring that only the deserving receive them will free up significant capital to invest in health, education and improving basic amenities.


Grants should be treated as temporary measures to help the needy until they can stand on their feet. Even as we celebrate the 75th anniversary of independence, ‘Azadi ka Amrit Mahotsav’, health infrastructure is still insufficient in the country. Each district needs a medical college attached to a multi-specialty hospital and each block needs a primary health care centre. The poor, who are not covered by health insurance, need free intermediary health services from the government.

Education and skills are tools to fight unemployment and poverty. Young people need to be provided with quality education and skills centers in schools, so that they are not on the list of grant recipients like their parents.

Plugging the looting of taxpayers’ hard money into grants will give the government a cushion to use the money saved on empowering the needy with high quality education and health services. It will then be “Har Ghar Tiranga” in the proper sense.

The author is Vice Chairman, Sonalika Group and former Vice Chairman, Punjab Planning Board, Chairman, ASSOCHAM Northern Region Development Council. The views expressed in this article are those of the author and do not represent the position of this publication.​

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