Note: Leaky bucket concept was first postulated by Arthur Okun in 1970's to highlight the efficiency loss in economy. The concept received global attention when India's erstwhile Prime Minister stated in one of the public meeting held at KBK clusters that out of one rupees allocated for people only 15 paise reaches to the target. It means 85 paisa get lost from the bucket of 100 paisa, from the disbursal point to destination point. (Candidates are advised to read the above note and conceptualise the "leaky bucket" theory and imagine from their own experience as to whether such incidents really hapenning or not.) Now armed with above, please answer the following. I. What are the ways for Government to fill the bucket? Ii. How Government transfers the resources from better off to worst off people? Iii. What are the major sources of leakage and efficiency loss both from Government's perspective and beneficiary perspective? Iv. Is it true to say that major emergencies like covid, super cyclone or famine largely exposes the leakages in the system? V. From your own experience kindly suggest the possible ways to fill the leakage. Expectation: Original and innovative thoughts from the candidates.
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Most of you have written elaborate answer with lots of details, which is very well appreciated. At this stage everyone should keep on collecting facts from books, internet and from all possible sources. Most of the questions expect the candidates to write about 200 to 300 words and there will be 20 to 25 questions. So total words allocation for 20-25 questions would be around 5000 words. The candidates have to answer all questions within 3 hours. Start writing practice from very early stage of preparation with a target of 7 minutes for each questions. 7 minutes and 200-300 words. This should be practice speed and therefore, candidates should focus on writing very well answers within this much resources. Answer to the question: 1. Bucket stands for the Government exchequer to which, taxes, profits and gains from government business flows. Government has sovereign function to collect taxes which is enshrined in Constitution. Tax can't be collected without authorization of Parliamnet and must be within state or central list. Apart from taxes, the two other sources to fill up the bucket are "user fees" that citizens pay for using government services and profits from government owned PSUs. 2. Government transfers the resources from better off to worst off people through direct benefit transfer, business specific subsidy. Worst of people get in-cash as well as in-kind transfers from Government through banks, supply departments and PDS centres. 3. Leakages can happen only through two possible means, i- inherent government inefficiency, called transaction loss and ii- wrong identification of beneficiaries. Transactional loss also covers the corruption and corrupt practices followed by public officials. Beneficiary problem arises due to self identification problem. It is human tendency to get free benefits. High income people looses the motivation to work and over the times become less efficient/ lazy and low income people pretends to be poor. 4. Major emergencies exposes the system in a large way. Emergencies poses supply side constraints as well as large demands. Existing mechanism of Government allocation fails to cope up with demand and demand balloons because it quickly erases the needy and not so needy margin. 5. All over the world grappling this leaky bucket problem. Most of the country follow the poverty line approach to identify the needy. Since people self declares themselves as needy the leakage become very large. To tackle this challenge, government has come up with unbiased and thematic identification of real needy. Family with single parents, people having no job, inherent medical disability and widow heading family are few parameters through which auto selection of real needy happens. Then government prefers more on in-kind transfers. Cash in hand has more utility elasticity as compared to goods in hand. People who are not so needy uses cash for other enjoyments, liquor, betting etc. Real needy people spends cash on basic needs. Since people don't value the things that they freely get, government uses this as a nudge tool and provides food coupon, food stamps, low cost houses etc as in kind transfers. The basic principle for this kind allocation is that, make the goods little crappier, so that only needy will accept it. 30sqm house, house in a slum will.bot be preferred by the people in margin. Efficiency loss during distribution is minimised by using ITC tools. India's JAM Trinity has helped to mitigate the distribution losses to greater extent, yet it has not completed eradicated the corruption practices within system. Behavioral changes, stricter anti corruption systems, fear to law, public shaming of corrupt people and RTI act are the way forward to block the leakage. 1 dollar paid by a tax payer must reach to a needy people who also needs 1 dollar for his survival.
The bucket refers to the budget allocated for welfare measures especially the subsidies.
1- Sources: Budgetary allocation (Direct Tax, Indirect Tax, Dividend/Profits from PSU, Grants received from countries), Fund raised from market, Loans from World Bank/IMF etc.
2- Government transfers the resources from better off to worst-off people by using the following ways:
i. Progressive Direct Tax System,
ii. Providing Direct or Indirect Subsidy (Agricultural Subsidy, LPG subsidy, PDS, Concessional Loans, PM KISAN etc.),
iii. GST on daily use items used by people especially the lower strata like Fresh Milk, Poultry, Agricultural tools, Fruits are either low or Nil,
iv. Nudging well off middle class to give up subsidies. Eg: Give up LPG campaign.
3- Major Sources of Leakage & Efficiency loss:
Government's Perspective: Excessive Bureaucratization leading to corruption, corrupt middleman, inefficient use of technology, the poor beneficiary identification leading to exclusion/inclusion errors, lack of co-operation between different ministries, the apathy of officials involved in fieldwork.
Beneficiary's perspective: Lack of awareness, Deliberate ignorance of things going around so as to avoid any scuffle with authorities, ineffective use of justice system etc.
4- Leakage in the system is inevitable sometimes due to the governance structure and its ill effects are visible all the time but during emergencies like COVID, Super cyclones etc. this visibility is all the way amplified. Eg: The food issues faced by many migrants due to unavailability of ration cards etc.
5- The possible ways to reduce these leakages are:
i. Efficient use of technology. For example- Geo tagging food grain packing bags so that any siphoning off during PDS is caught, geo-tagging MGNREGA works etc.
ii. E-Governance in every department so that resource distribution is well accounted for and would lead to better coordination.
iii. Gram Panchayats should be empowered as they are at the grassroots and are in real contact with the people. Effective power devolution is a must. Eg: Kudumbashree model of Kerala,
iv. School students/Undergraduates could be given short term training on beneficiary identification and authorities could take help from them for proper identification free from any errors.
v .JAM Trinity & Social auditing,
vi. The real power lies with the people, they shouldn't be ignorant and awareness campaign is the need of the hour. Example: Swach Bharat Abhiyaan was successful because it nudged people to take responsibility for cleanliness.
Good
You are writing lengthy sentences. Keep it short. May exceed the word limit.
Ok sir. Will keep in mind next time
Writing off and loan waivers are different. What u are talking about is waiver. Writing off is only for account keeping.
Resource- capital receipts sd also be mentioned. Patching- geo tagging, pfms, e governance example of best models, dbt, more importantly awareness generation abt rti, whistleblowing, citizen charter etc.