Saturday, July 26, 2014

'Amma' Economics

A few days back as I was scavenging my way through the thrash piled up on the information super highway I came across a beautiful story; a story of hope and brotherly love witnessed by the writer in one of the newly opened amma canteens in the city. The writer dwelled on how two boys, orphaned at a very young age, were able to fend for themselves, treating themselves to hot sambar rice from the meagre change they had on them. The story was heart rendering and eye opening to the fact that there are downtrodden people who would require a helping hand for their very survival. No wonder this scheme is being studied by many countries around the globe for replication.
 
On the same day I heard from another friend on how one of the stalls set up to distribute amma drinking water bottles gets a consignment of just 30 bottles a day. This would roughly translate to 300 bucks as revenue from sales per day and 9000 bucks in a month. The astute businessman’s son he was wondered aloud, how this will be sustainable by the government when it had to pay the employee in the stall somewhere around 12000 bucks as salary. While the math may not do justice given the fact that there are other stalls that might be eking out a profit, it is also a fact that all these services are subsidized by the state government.
 
Now should the government be doing this has been the question of many debates by eminent economists and Nobel laureates, the relatively recent one between Jagdish Bhagwati and Amartya Sen prior to the elections, what could be the alternative is the one in which our country’s best minds should be spending their time in.
 
One alternative is to spend the money on setting up regulators who could regulate prices of the food, water, medicines, salt, etc for those in the weaker section. Rather than adopting a collision course with the entrepreneurial class in the state, the government can take them along by giving them tax breaks and foregoing its revenues by offering other perks for every woman they employ, every self help group they embrace by buying their products and every common man they serve. This would open the gates to many new entrepreneurs as well. By competing with the entrepreneurs the government is only alienating them further, discouraging them from paying taxes and adding unnecessary weight to the government machinery.