Deshpande, Rajeshwari, K. Kailash, and Louise Tillin. "States as Laboratories: The politics of social welfare policies in India". India Review, Vol.16, No.1 (2017): 85-105.

Deshpande, Rajeshwari, K. Kailash, and Louise Tillin. "States as Laboratories: The politics of social welfare policies in India". India Review, Vol.16, No.1 (2017): 85-105.

• In the mid-2000s, the Congress government implemented a number of new social welfare schemes, including giving health insurgence for workers in the informal shadow economy, a massive rural employment program, and subsidized food prices for poor households (85-86).
• These major expansions of the Indian welfare state came after over a decade of state retreat and major spending cuts after the initiation of liberalization in 1991 (85). New revenue streams from economic expansion during this period have been critical to funding new welfare programs (88).
• These new social welfare systems have introduced some major changes in preexisting systems. The biggest change has been the shift of responsibility for social security and pensions from employers to the government (86).
• Some scholars, like Charles Tiebout, have assumed that the public finance policies of sub-national administrations would be determined by competition between these bodies to drive down tax rates to attract capital, creating a race to the bottom. This has not happened in the case of India, prevented by the centralized finance system and the prominence of indirect taxation (88).
• The federal system in India envisions strong central government powers to create legislation, but places responsibility for implementing these policies with state governments, and often by local government beneath them. The vast majority of funding for social welfare programs, therefore, comes from state budgets, especially in healthcare and education (89-90).
• States are given approximately a quarter of their budgets from the central government and collect the rest in state-level taxation. Both state tax revenues and central government contributions to state budgets have increased over the course of the 2000s (91).
• The Congress government that came to power in 2004 greatly increased the use of central government-directed and funded development schemes. These schemes are directly under central government agencies and bypass state and local governments (91). Due to criticism of this practice by states, their funding was largely transferred to states in 2014 by Prime Minister Modi (91-92).
• India politicians recognize that social welfare is popular and that promising to expand welfare programs is a good way to win votes (92-93).
• India has endorsed public health care insurance as its preferred way to provide healthcare, with the state partially paying for coverage, while encouraging the use of private healthcare institutions (94).
• Andhra Pradesh was the first Indian state to implement a public health insurance system, in 2007. The state government pays the insurance premiums for all citizens below the poverty line, allowing them to get treatment at private hospitals and clinics (95).
• The central government launched its own public health insurance system in 2008, specifically expanding the system to include informal and unregistered workers. Three-quarters of the funding comes from the central government, with state governments covering the remaining quarter. States are responsible for implementing the program (95).
• Tamil Nadu choose to ignore this program and created its own public health insurance system funded entirely by the state government (95). This program had higher premium costs than the national scheme, and reserved some services for state-run clinics, to secure the economic interests of public sector health workers (96).
• Kerela implemented the national health insurance system in all districts and also expanded coverage beyond impoverished groups to include anyone willing to pay the premium. The cheap rates of reimbursement under this program have meant that treatment has mostly occurred at public hospitals and clinics (95-96).
• India created a public social security system for informal and unregistered workers in 2008, making state governments responsible for providing pensions to this population. It removed all requirements that employers or trade unions provide social security programs (99).
• This legislation does not demand that either state governments nor the central government spend a certain amount of these new social security programs. This has resulted in massive underfunding of these programs. Shortage of funding only increases competition for social security and distribution of social security has been increasingly used as political patronage as a result (100-101).
• Prior to 2008, informal workers in Maharashtra were dependent on welfare programs organized within their particular sectors. Different types of laborers had different welfare bodies and pensions or injury funds, usually funded by political or business figures in return for the political loyalty of that group of informal laborers (100).
• Maharashtra tried to continue working with these existing quasi-trade union bodies, attempting to distribute funds and establish pensions for the national social security programs through these patronage systems. This has resulted in constant squabbling over funds between the different sectoral groups (100).
• West Bengal already had some types of social security for informal workers prior to 2008, but it was usually up to local governments -- controlled by the ruling Communist Party -- to determine an individual's eligibility for social security benefits (100).
• West Bengal has consistently had leftist governments and a strong historical legacy of social welfare support (98). Despite Communist control of government and limited liberalization, however, labor laws are not particularly strong and trade unions are largely gagged by the larger Communist Party (99).
• Maharashtra, Karnataka, and Gujarat have all historically been states with strong business interests and little support of welfare programs (98). Maharashtra initiated intense liberalization in the 1980s, resulting in rapid economic growth supported by low wages and large numbers of rural immigrants in informal or irregular work (99).