Fact of the Week: Increased Government IT Usage Reduced India’s Workfare Costs by Nearly 20 Percent

Luke Dascoli January 3, 2022
January 3, 2022

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Source: Banerjee, et al., “E-governance, Accountability, and Leakage in Public Programs: Experimental Evidence from a Financial Management Reform in India,” American Economic Journal: Applied Economics, October 2020.

Commentary: It can be expensive to administer public programs and reach eligible recipients. But with greater use of information technology (IT)—and increasing digitalization in general—administrators can more affordably manage nationwide information covering residences, payment accounts, and eligibility requirements. IT not only reduces the per-recipient cost of administering social programs, but also reduces waste in funding due to inaccurate targeting. In a recent study, Indian economist Abhijit Banerjee, et al., found econometric evidence supporting a strong link between e-government and efficiency in public programming. They found that India’s national scale-up of IT usage in governance helped reduce corruption, euphemistically known as a problem of “leaking” funds in the process of running the country’s national workfare program.

Analyzing district-level data on expenditures in workfare program funding against number of recipients and payment of program officials, they found that since the national rollout of an electronic program-management platform called the Central Planning Scheme Monitoring System (CPSMS), expenditures fell by 24 percent. Further, this drop in program expenditure did not coincide with any statistically significant loss in the number of workdays or workers hired. In fact, employment increased slightly due to increased participation. Meanwhile, program officials’ wealth dropped by around 10 percent, indicating that India’s IT expansion was effective in reducing corruption from administrators stealing funds.

These added efficiencies reduced the overall cost of running India’s workfare programs by nearly 20 percent. India’s success in the CPSMS shows that governments have just as much to gain as businesses by investing in IT and digitalizing operations.