What it takes to build a stronger social protection regime in a developing world

One of the first things I learnt in Social Policy class at Harvard Kennedy School is that even though citizens in poor countries need social protection more than those in rich countries, the latter spend a lot more on social protection programs. This fact was amplified against the backdrop of covid, as the US expanded its social protection to historical levels while India, my home country, could not provide a decent social protection to its citizens despite some efforts at increasing the budgets. It also makes sense because generally, social assistance, public works and other programs are financed by the government’s income tax, while social insurance is financed by contributions from employers and employees in a robust formal sector. Both—tax revenues (along with the ability to borrow) and size of the formal sector—are low/small for developing countries.

Developing countries have their own set of challenges that precludes their ability to build a strong social protection regime. The World Bank’s Social Protection and Jobs practice that I interned with thus focuses on innovations that cater to the ‘missed’ populations against the fiscal and administrative constraints of emerging economies. For example, any intervention in an emerging economy must work to address the large informal sector that does not rely on traditional employer-employee relationships, must focus on building strong social registries or ID systems that captures data of the large informal economy of emerging economies, and must account for the fact that the poor, often unbanked, have lower savings and higher exposure to risks, making access to short-term liquidity very important.

The social protection policy implementation is also realizing the importance of leveraging behavioral science principles to increase uptake. Behavioral nudges that are created after a careful study of the needs of the population of the developing world have shown success. Conditional cash transfers offer one such solution, where funds are only transferred to a beneficiary’s account if the condition, often related to human development, is fulfilled.

While it is relatively easy to understand the nature of the developing world and contextualize policies to address its needs, it is extremely difficult to build the political will in the countries to reform their social protection policies. Social assistance like cash transfers have become a political tool in many countries that is used as a vote-bank during elections. What are termed as ‘freebies’ are also not fully supported by the middle-class and the rich. These schemes have often also been termed as unproductive because of their inability to generate productive outputs. For example, the National Rural Employment Guarantee Program (NREGA) in India is said to waste people’s productive capacities by making them do tasks like digging a hole and filling it back up. To add to these, such programs are privy to high corruption and leakages across all levels of delivery chains, from disbursement of funds to distribution, which leads to the poor getting no amount or very small amount of what they were due.

Building political will as well as feasibility to implement social protection programs is critical for building a capacity to absorb economic shocks among the poor.