Reports are appearing about a budget focus on the “aam aadmi”. That’s understandable, since the Congress hand is for the “aam aadmi”. The Lok Sabha is the counterpart of the House of Commons. Therefore, the Lok Sabha should be interested in the common man. “The object of government in peace and in war is not the glory of rulers or of races, but the happiness of common man.” That’s a quote from William Henry Beveridge, who set up the welfare state in Britain and we are on our way to setting up our own welfare state. Beveridge may have been almost forgotten in Britain, but we need to resurrect him. After all, he was born in India (actually Rangpur, now in Bangladesh). With the Left out of the way, we should perhaps quote American presidents, not Fabian

socialists. Abraham Lincoln said, “God must love the common man, he made so many of them.” Herbert Hoover said, “When we are sick, we want an uncommon doctor; when we have a construction job to do, we want an uncommon engineer, and when we are at war, we want an uncommon general. It is only when we get into politics that we are satisfied with the common man.”

Why is the common man important? In Oxbridge, commoners are those who don’t get scholarships. In India, commoners are those who should get scholarships, that is, subsidies. There are subsidies and there are Centrally-sponsored (and Central sector) anti-poverty schemes. Within subsidies, there are explicit and implicit ones. Within explicit subsidies, at the Centre, the most important are food and fertiliser. Quantitatively less important are those on petroleum products and subsidies on interest. There have been studies ad nauseam, documenting leakage, corruption and high administrative costs of delivery in present subsidy schemes. For instance, for the most documented one, the PDS, then-Finance Minister P. Chidambaram told the National Development Council in December 2007 that the cost of transferring one rupee of benefit to the poor was Rs 3.65. Studies by assorted economists show that if subsidies are replaced by direct cash transfers, there shouldn’t be any BPL (below poverty line) households left, an argument that becomes stronger if all anti-poverty expenditure is included, not just subsidies. The transfers are revenue neutral. They are also efficient because they don’t distort market prices. Techno-logy now permits direct electronic transfers to bank accounts and all NREGA beneficiaries now have accounts with post offices or banks. This reduces administrative costs of delivery too, other than making subsidies transparent, more amendable to third-party and public scrutiny.

... contd.