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Who are the Beneficiaries of the

Poverty Alleviation Programs in


Rural India?
A Preliminary Analysis on the
Consequences of the Decentralization
in the 1990s

Takahiro Sato (Osaka City University)


1
Outline
• Section 1: Introduction
• Section 2: The institutional background of the
73rd Constitutional Amendment and poverty
alleviation programs.
• Section 3: Implications of the decentralization by
referring to the earlier studies. (But, today I skip
this section)
• Section 4 : Empirical investigation of the
allocation of the poverty alleviation programs
before-and-after the decentralization.
• Section 5: Concluding remarks.
2
1 Introduction
• Does greater decentralization improve
the living condition of the poor, the
women, or the minority groups in rural
India?
• The 73rd Constitutional Amendment
in 1993 →The elected Panchayats
determine the beneficiary selection for
the poverty alleviation programs
3
Advantage and disadvantage of
decentralization
• Advantage:
• →Enhanced accountability
• →Information advantage

• Disadvantage:
• →Capture by local elite
4
From the fields (1)
• “Decentralisation in Karnataka
yielded paradoxical results. The
number of people involved in
corrupt acts increased
significantly. But the overall
amount of money stolen almost
certainly decreased - at least
modestly” (Richard and Manor 5

1998: 61)
From the fields (2)
• “A further step in democratization seems
to have taken place with the reformation
of gram panchayat in 1993 with the 73rd
Amendment to the Constitution ・・・ The
reformation of panchayat system in 1993,
together with the decline of factional
politics after liberalization policy, made
the gram panchayat meeting a more
democratic place in terms of
representation and functioning.” (Tanabe
2004) 6
This paper’s approach

• To use (1) household survey data


from the National Sample Survey
Organization (NSS), and
• (2) regionally aggregated election
data from the Election Commission
of India (ECI).
7
This paper’s approach
• To focus on those who were the
beneficiaries of the poverty
alleviation programs in rural India
before-and-after decentralization.
• Difference-in-Difference Approach.

8
Section 2 Institutional Context

• 2.1: Features of the 73rd


Constitutional Amendment in
1993 aiming at the
decentralization
• 2.2: Nature of poverty alleviation
programs in rural area.
9
2.1 The 73rd Constitutional
Amendment
• Three-tier “Panchyati Raj” (local self-
governance) system.
• →“Zilla Parishad” at district level,
“Panchayat Samiti” at block level, and
“Gram Panchayat” at village level.
• Persons selected by direct election fill
all of the seats in a Panchayat.
10
2.1 The 73rd Constitutional
Amendment (Continued)
• Elections of Panchayats are held
regularly every five years.
• Political reservation for ST/SC and
women.
• The Eleventh Schedule in the
Constitution.
• →Poverty alleviation programme as
one of responsibilities of Panchayats. 11
2.2 Poverty Alleviation Programs
• Integrated Rural Development
Programme (IRDP):
• →aiming at generating sufficient
income to enable the rural poor to cross
the poverty line.
• →providing the government subsidy
and bank credit to the poor for
encouraging the self-employment
activity.
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2.2 Poverty Alleviation Programs
(Continued)
• Public works programs:
• →National Rural Employment
Programme (NREP), Rural Landless
Employment Guarantee Programme
(RLEGP), Minimum Needs Programme
(MNP), and other schemes
• →aiming at providing wage
employment to the poor.
13
Section 4 Statistical Analysis
• Data:
• →Main unit of observation: household
• →National Sample Survey (NSS)'s 50th round
(1993-94), and 55th round (1999-2000)
• →including detailed socioeconomic
information on approximately seventy
thousand rural households
• In addition,
 → election data from the Election
Commission of India’s Statistical Report on
General Elections 14
Table 1 Descriptive Statistics of the Main Variables

1993 1999
variable NOB Average SD Min Max NOB Average SD Min Max
irdpdmy: IRDP=1 68923 0.05 0.21 0.00 1.00 71252 0.06 0.23 0.00 1.00
pwdummy: public works=1 69301 0.04 0.19 0.00 1.00 71099 0.03 0.18 0.00 1.00
pwirdp: poverty alleviation programs(IRDP or
public works)=1 69301 0.09 0.28 0.00 1.00 70959 0.08 0.28 0.00 1.00
illiteracy: illiterate=1 69219 0.48 0.50 0.00 1.00 71413 0.46 0.50 0.00 1.00
hohsex2: female headed household=1 69225 0.09 0.29 0.00 1.00 71466 0.10 0.30 0.00 1.00
anyownld1: landed=1 69230 0.95 0.23 0.00 1.00 71146 0.93 0.25 0.00 1.00
religion2: Muslim=1 69230 0.09 0.28 0.00 1.00 71392 0.11 0.31 0.00 1.00
sgrp1: ST=1 69230 0.13 0.34 0.00 1.00 71349 0.14 0.35 0.00 1.00
sgrp2: SC=1 69230 0.18 0.38 0.00 1.00 71349 0.18 0.38 0.00 1.00
hhtype2: agricultural labour household=1 69230 0.24 0.43 0.00 1.00 71327 0.26 0.44 0.00 1.00
hhtype4: agricultural self employment
household=1 69230 0.43 0.50 0.00 1.00 71327 0.38 0.49 0.00 1.00
agehoh: age of the head of household 69230 44.59 13.72 0.00 99.00 71461 45.27 13.91 0.00 99.00
numbadu: number of adult person per household 69230 3.28 1.76 0.00 45.00 71466 3.37 1.83 1.00 39.00
pcgini: Gini coefficient of own land 68773 0.69 0.08 0.41 0.95 70968 0.71 0.09 0.41 0.93
voter turnout: voter turnout ratio 67952 0.57 0.12 0.22 0.85 70968 0.61 0.09 0.34 0.82
effnphd2: two party competitiveness index 67952 1.52 2.16 0.00 9.05 70968 0.87 1.52 0.00 15.98
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4.2 Estimation strategy (1)
• To find the characteristics of the
beneficiaries and to examine the influences
of the socio political environments.
• →estimating the Probit model for 1993 as
before decentralization and 1999 as after
decentralization.
• →investigating the estimated coefficients.
• →comparing the results of 1993 and 1999.

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Estimation Equation

17
Table 2 Basic Probit Model

dependent variable IRDP


year=1993 year=1999
NOB=67642 NOB=70252
Wald chi2(30)=1389.14 Wald chi2(31)=802.74
Prob>chi2=0 Prob>chi2=0
Log pseudolikelihood=- 12551 Log pseudolikelihood=- 14794
Pseudo R2=0.0555 Pseudo R2=0.0262
variable coefficient t- value p- value coefficient t- value p- value
effnphd2 - 0.12 - 15.07 0.0% 0.01 1.62 10.6%
voterturn - 0.80 - 4.60 0.0% - 0.32 - 1.78 7.6%
pcgini - 0.46 - 3.10 0.2% - 0.15 - 0.94 34.8%
illitercy 0.03 1.74 8.1% 0.03 1.71 8.8%
hohsex2 - 0.25 - 7.02 0.0% - 0.05 - 1.74 8.1%
anyownld1 0.40 7.83 0.0% 0.10 2.74 0.6%
religion2 - 0.06 - 1.74 8.2% 0.00 0.06 94.9%
sgrp1 0.24 8.78 0.0% 0.24 9.91 0.0%
sgrp2 0.31 13.76 0.0% 0.14 6.34 0.0%
hhtype2 0.11 4.28 0.0% 0.01 0.42 67.6%
hhtype4 0.03 1.52 12.8% 0.03 1.45 14.7%
agehoh 0.00 - 1.50 13.5% 0.00 - 1.13 25.8%
numbadu 0.03 6.88 0.0% 0.01 1.08 28.0%
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Table 2 Basic Probit Model

dependent variable public works


year=1993 year=1999
NOB=67938 NOB=70105
Wald chi2(30)=1739.56 Wald chi2(31)=911.07
Prob>chi2=0 Prob>chi2=0
Log pseudolikelihood=- 9833 Log pseudolikelihood=- 9645
Pseudo R2=0.0915 Pseudo R2=0.0502
variable coefficient t- value p- value coefficient t- value p- value
effnphd2 - 0.05 - 6.60 0.0% - 0.03 - 3.28 0.1%
voterturn - 1.67 - 8.38 0.0% - 0.09 - 0.40 68.8%
pcgini 1.07 6.46 0.0% - 0.82 - 4.26 0.0%
illitercy 0.17 7.89 0.0% 0.00 0.02 98.6%
hohsex2 - 0.13 - 3.65 0.0% - 0.16 - 4.32 0.0%
anyownld1 0.13 2.86 0.4% 0.05 1.15 24.9%
religion2 0.05 1.40 16.3% 0.01 0.31 75.8%
sgrp1 0.10 3.55 0.0% 0.28 9.88 0.0%
sgrp2 0.10 3.96 0.0% 0.04 1.61 10.7%
hhtype2 0.08 3.03 0.2% 0.09 3.45 0.1%
hhtype4 - 0.20 - 8.33 0.0% - 0.22 - 8.99 0.0%
agehoh 0.00 - 4.60 0.0% 0.00 - 2.62 0.9%
numbadu 0.03 4.57 0.0% 0.02 3.55 0.0%
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Table 2 Basic Probit Model

dependent variable poverty alleviation programs(IRDP or public works)


year=1993 year=1999
NOB=67938 NOB=69972
Wald chi2(30)=2028.98 Wald chi2(31)=1165.84
Prob>chi2=0 Prob>chi2=0
Log pseudolikelihood=- 18709 Log pseudolikelihood=- 19267
Pseudo R2=0.0534 Pseudo R2=0.0293
variable coefficient t- value p- value coefficient t- value p- value
effnphd2 - 0.09 - 15.59 0.0% 0.00 - 0.37 71.4%
voterturn - 1.22 - 8.57 0.0% - 0.30 - 1.84 6.6%
pcgini - 0.19 - 1.59 11.2% - 0.60 - 4.19 0.0%
illitercy 0.11 6.90 0.0% 0.01 0.53 59.8%
hohsex2 - 0.20 - 7.00 0.0% - 0.09 - 3.43 0.1%
anyownld1 0.25 6.88 0.0% 0.09 2.84 0.4%
religion2 - 0.01 - 0.37 70.9% 0.00 - 0.13 89.6%
sgrp1 0.17 7.23 0.0% 0.30 14.00 0.0%
sgrp2 0.24 12.21 0.0% 0.12 5.96 0.0%
hhtype2 0.09 4.35 0.0% 0.04 1.84 6.6%
hhtype4 - 0.09 - 5.24 0.0% - 0.08 - 4.33 0.0%
agehoh 0.00 - 4.49 0.0% 0.00 - 2.10 3.6%
numbadu 0.04 9.03 0.0% 0.01 2.48 1.3%
20
Summary of the Main Results
• (1) Regional socio political environment is likely to affect
the allocation of the poverty alleviation programs: Greater
inequality and less political competition, less the provision
of the poverty alleviation programs.
• (2) The disadvantaged groups were not necessarily likely to
be the primary beneficiaries of the poverty alleviation
programs over others. The female headed household and the
landless group remained in a disadvantaged position in
participating such programs throughout the entire period.
• (3) But, SC, ST, and agricultural labour household have
been in advantaged position to get the programs.
21
4.3 Estimation strategy (2)

• Difference-in-Difference Approach
• Madhya Pradesh as ’treatment  
group.’
• Karnataka, Kerala, and West Bengal
as ’control group.’
22
Why is MP treatment group?
• ’Article 243 G of the Constitution empowered
the state legislatures to give panchayats so
much power as to make them the institutions
of self-government with powers to prepare
plans for economic development and social
justice including the subjects listed in the 11th
Schedule of the Constitution. But, with some
exceptions in Kerala, Madhya Pradesh,Tripura
and West Bengal nothing worthwhile has been
devolved to the panchayats’ (Pal 2001) .

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Why is MP treatment group?
• Before the Amendment, no serious decentralization in
MP. → The 73rd Constitutional Amendment treats MP.
• Chief Minister of MP, Digvijay Singh’s political will.
• The first state to conduct the Panchayats election in
1994 under the provision of the 73rd Constitutional
Amendment.
• Vacancy rate of the representatives of the Panchayats is
quite low.
• Only state to introduce of right to recall the member of
Gram Panchayats.
• The advanced state in preparing the District Planning
Committee and the right to information.
• See the Table 3.
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Table 3 Progress of the Decentralization at the State Level

progress of devolution to the District


Panchayats under the Eleventh Planning
Schedule of the Constitution Committee
financial
State resource functions staff
AP 17% 45% 7% No
Arunachal Pradesh 0% 0% 0% No
Assam 0% 0% 0% No
Bihar 0% 0% 0% No
J harkhand 0% 0% 0% NA
Goa 0% 0% 0% No
Gujarat 0% 0% 0% No
Haryana 0% 55% 0% Yes
HP 7% 79% 24% No
Karnataka 100% 100% 100% Yes
Kerala 52% 100% 52% Yes
MP 34% 79% 31% Yes
Chhattisgarh 34% 79% 31% NA
Maharashtra 62% 62% 62% No
Manipur 0% 76% 14% Yes
Orissa 17% 86% 10% Yes
Punjab 0% 24% 0% No
Rajasthan 0% 100% 0% Yes
Sikkim 100% 100% 100% Yes
Tami Nadu 0% 100% 0% Yes
Tripura 0% 41% 0% Yes
UP 41% 45% 31% Yes
Uttarakhand 41% 45% 31% NA
West Bengal 41% 100% 41% Yes
A & N Island 0% 0% 0% Yes
Chandigarh 0% 0% 0% No
D & N Haveli 0% 10% 10% Yes
Daman & Diu 0% 100% 0% No
Delhi 0% 0% 0% No
Lakshwdeep 0% 21% 0% Yes
Pondicherry 0% 0% 0% No
JK NA NA NA No
Meghalaya NA NA NA No 25
Mizoram NA NA NA No
Nagaland NA NA NA No
Why is Karnataka, Kerala and West
Bengal control group?
• Commitment to the decentralization before the
73rd Constitution Amendment.
• Good practice case of the decentralization in
India since in these states the Panchayats have
worked very well.
• The decentralization of Karnataka is regarded as
a model case in preparing the 73rd Constitutional
Amendments.
• Implementing decentralization both before and
after the 73rd Constitution Amendment.
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Estimation strategy
Treatment Group Control Group
1993 MP Karnataka, Kerala, West Bengal
1999 MP Karnataka, Kerala, West Bengal

• Pooling the sample restricted to


Karnataka, Kerala, West Bengal, and
MP in both reference years.
• Estimating Probit model by
employing difference-in-difference
approach. 27
Estimation Equation

28
Table 4 Probit Model of the difference- in- difference approach

dependent variable IRDP publc works poverty alleviation programs


NOB=29847 NOB=29846 NOB=29929
Wald chi2(40)=230.35 Wald chi2(39)=184.94 Wald chi2(40)=248.36
Prob>chi2=0 Prob>chi2=0 Prob>chi2=0
Log pseudolikelihood=- 5867 Log pseudolikelihood=- 2822 Log pseudolikelihood=- 7661
Pseudo R2=0.0198 Pseudo R2=0.032 Pseudo R2=0.0165
variable coefficient t-value p- value coefficient t- value p-value coefficient t- value p-value
effnphd2 0.00 0.01 99.5% 0.01 0.16 87.2% 0.01 0.23 81.7%
voterturnout - 0.16 - 0.67 50.3% 0.94 2.54 1.1% 0.27 1.21 22.8%
pcgini - 1.07 - 4.21 0.0% - 0.67 -1.83 6.7% - 0.95 -4.10 0.0%
MPT
illitercy × D 0.18 1.58 11.4% - 0.01 -0.04 96.6% 0.09 0.91 36.2%
MPT
hohsex2 × D 0.00 - 0.01 99.0% 0.09 0.31 76.0% 0.01 0.06 94.9%
MPT
anyownld1 × D 0.26 1.07 28.4% 0.34 1.25 21.2% 0.31 1.55 12.2%
MPT
religion2 × D 0.28 0.91 36.2% 0.24 0.83 40.6%
MPT
sgrp1 × D 0.26 1.62 10.5% - 0.15 -0.65 51.4% 0.23 1.55 12.1%
MPT
sgrp2 × D 0.25 1.78 7.6% - 0.25 -1.25 21.2% 0.17 1.38 16.8%
MPT
hhtype2 × D - 0.32 - 2.13 3.3% - 0.01 -0.04 96.7% - 0.19 -1.41 15.8%
MPT
hhtype4 × D - 0.21 - 1.46 14.5% 0.05 0.23 81.6% - 0.14 -1.10 27.1%
MPT
D - 0.42 - 1.66 9.7% - 0.37 -1.30 19.3% - 0.44 -2.11 3.5%
29
Note: See Table 4 in my paper for checking the results of the other variables.
Summary of the Main Results
(1) The provision of the poverty alleviation program is
depressed by the decentralization.
(2) The decentralization allocates less IRDP to the
agricultural labour households. The absolute poor in
India are mainly from the agricultural labour
households. This suggests that there is likely to be the
local capture. The decentralization does not necessarily
contribute the improvement of the welfare of the social
disadvantaged group.
(3) However, the decentralization allocate more IRDP to
SC. This may indicate the effect on the political
reservation of the Panchayats for SC.
(4) There is no influence of the decentralization on the
provision of the public works. In general, the public
works contain the self-targeting mechanism. There may
less discretionary manipulation of the public works by
the local elite. 30
Section 5 Concluding Remarks
• (1)The disadvantaged groups were not necessarily likely to
be the primary beneficiaries over others. →The female
headed household and the landless group remained in a
disadvantaged position throughout the entire period.
(Section 4.2)
• (2) The possibility of local capture by the decentralization.
But, public works are likely to be free from local capture.
(Section 4.3)
• (3) The political reservation for the disadvantaged group
may have the positive effect on the allocation of the
program in favor of that group. (Section 4.3)
• (3) Regional socio political environment affects the
allocation of the poverty alleviation programs.→ Greater
inequality, lesser the provision of the poverty alleviation
programs. (Section 4.2 and 4.3) 31
Thank you.

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