Problem with income based affirmative actions: Case of Maharashtra Government announcement on 13th October 2016

         Maharashtra government recently (13^th October 2016) declared that EBC (Economically backward class) benefits limit will now cover incomes up to 6 lakhs and students from all castes will get fee reimbursement. (news here) (Government resolution, in real terse Marathi, is here) These benefits are not really comparable to caste based affirmative actions, though there is some comparable element. The main argument that I want to make here is: ‘if it is easy to show lower income to claim benefits, then income based affirmative actions will generate large proportion of wrongful beneficiaries.’ I understand that this is a very common-sense claim. And, that’s what makes Maharashtra government’s decision a real curious one. Either it is complete naivety (which I think is less likely) or systematic disregard of efficiency motivated by political calculations (common tool among ruling politician’s armoury).

I do not have any systematic evidence on how easy it is to show certain desired income levels as one’s own, though few personal experiences suggest that it is not at all difficult to get affidavits (the typical proof one needs to submit to claim income based benefits in educational institution) to avail income based benefits. In fact, it is very likely that ease with which one can get such affidavit is an increasing function of one’s position in socio-economic hierarchy which in return a function of caste. If this is true, then this income based benefits are implicit caste targeted benefits!

I am not aware of mechanism at the level of educational institute or government that examines randomly chosen set of individuals who have claimed for such benefits. In the absence of proper verification and punishment if caught, it is very likely that many individuals can claim income based benefits even when they are not really entitled for it.

              On the other hand, very few individuals can fudge their caste identification. The first natural check is surname. Surnames often reveal the castes and hence applicant is likely to arouse suspicion if any person who is part of bureaucracy or institutional administration suspects fudging. Also, individuals are less likely to claim false castes than false incomes. Using completely wrong nomenclature of ‘upper’ and lower’, an upper caste individual is very less likely to claim caste which is seen as ‘lower’ from his or her perspective. At the same time, likelihood of person with higher income making false claim of lower income is higher. 

              The next part, slightly technical, is an attempt to put above made claim on proper footing. I am still thinking about this issue and most likely, I will update/revise/reject the claims that I try to establish here.

In the design, caste based benefits, with or without creamy-layer clause, generate certain proportion of erroneous entitlements. Here ‘rightful’ means who has deserving or erroneous entitlement. Income based benefits, by design, are exactly mapping deserving to entitlements. Yet, in practice, the actual fraction of deserving candidates availing benefits under caste based benefits can turn out to be much lower than what is possible by design. Even then, under lax verification of income, income based benefits match or cross this proportion of erroneous entitlements.

Income based benefits hinge crucially on accurate income verification, scrutiny and punishment of offenders. It can be thought that India have the IT infrastructure in place to generate such pre-conditions. Yet, the political will-power and vision required to get such income verification-monitoring-scrutiny mechanism off its feet is tremendous. I hope Maharashtra government has thought about it. Otherwise, it is an open invitation to abuse the exchequer. It might buy votes and sustained power, but only at the cost of tremendous damage to small farmers and farm workers, informal sector labourers, malnourished children and children attending second-third tear schools with faint hopes of life of material happiness. If you didn’t see them in the discussion above, we can ponder more about where this a₁ is lost. 

I don’t want to be a doomsayer. But there is room to say that government has not shown enough consideration for the possible abuse. In the government resolution published on 13^th October 2016, mentions following features pertaining to monitoring of this scheme:

-          Online application process

-          Verification of parental income from the government officer of or above the rank of Tehsildar

-          ADHAAR card linking

-          Online availability of information regarding students and institutions which are part of this scheme (It does not include deemed universities and autonomous universities(?)) (Government resolution contains words खाजगी अभिमत विद्यापीठ and स्वयं-अर्थ सहाय्य विद्यापीठ)

There is no mention of scrutiny of applicants unless it is assumed that government officers will be able to conduct sufficient and efficient scrutiny at the stage of verification. The stage has been set for natural experiment for RTI enabled team of researchers.

The revised limit of 6 lakhs is itself worrisome. According to Economic Survey 2015-16, taxpayers are only 5.8% of total income distribution. Among them, only 2% can be said to have income above 6 lakhs. This is a statistic for whole India. Maharashtra is one of the better-off state and parental income distribution of aspirants of higher education will have higher proportion of higher income individuals than underlying income distribution of population. Since we do not have data about proportion of current EBC applicants in total students, we cannot have any reliable anchor to develop estimates.

6 lakhs seem ridiculous limit for EBC since parents earning 6 lakhs or nearby are most likely to have better pool of savings, less number of children, better health and better social network. It is difficult to tag a number which will divide deserving beneficiaries from those who actually do not need them. But 6 lakhs is not that threshold. One can think of indicators which signal the family’s transition from financially insecure one to the secured one, like buying a house or plot for residential development. Such indicators can be integrated using IT in developing scores for Economic position, which can be used like credit scores. Income based incentives are welcome, but then challenge of minimizing the abuse must be addressed. Otherwise, it will be like a small dose of pain-killers used in the absence of any cure.