The Gains to India From Population Control: Some Money Measures and Incentive Schemes
Author(s): Stephen EnkeSource: The Review of Economics and Statistics, Vol. 42, No. 2 (May, 1960), pp. 175-181Published by: The MIT PressStable URL: http://www.jstor.org/stable/1926536 .Accessed: 16/12/2014 02:40Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp .JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact support@jstor.org. .The MIT Press is collaborating with JSTOR to digitize, preserve and extend access to The Review ofEconomics and Statistics.http://www.jstor.org
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THE GAINS TO INDIA FROM POPULATION CONTROL:
SOME MONEY MEASURES AND INCENTIVE SCHEMES
Stephen Enke
RECENT surveys of population growth in
RIndia and the slow progress of the Second
Five Year Plan confirm the awful suspicion that
India's extra consumer-goods output will be needed for extra population. Some Indians accordingly wonder if the central government should not now institute a program of incentive payments to families that limit births. This would be a logical evolution of schemes already developed in India, where three states and one large private company already offer free vasectomies, sometimes with a bonus, to certain of their employees.
Such bonuses, if paid by the central government, could be large in terms of average family income, because the discrepancy between the average and marginal product of population is relatively very great in India. The discounted value to the economy of permanently preventing a birth is at least Rs 500-600, or about twice the value of per capita consumption. It is possible that two voluntary incentive programs one of vasectomies for husbands and another involving three examinations annually of wives for non-pregnancy - might reduce births by 24 million over ten years at a resource cost of Rs
I2 to i8 crores.' This reduction in births should reduce consumption during the ten years by Rs
750 crores with no loss of production. The possible resource return over ten years is hence about 50 to i. Resources so invested can perhaps raise per capita consumption several hundred times more effectively than if invested in conventional development projects.
In this paper a preliminary attempt is made to estimate the value of permanently preventing a birth, to outline one incentive scheme for husbands and another for wives to reduce births, and to assess the impact of these schemes on the economy's resources and the government's finances.
2
Threato f Populationt o IndianP rogress
Until lately the official belief was that the crude annual increase of the All-India population was under one and one-half per cent. However, there have been numerous indications that the death rate is continuing to fall, and very little evidence that families are having fewer children. Partly as the result of some National
Sample Surveys, the central government, at least for economic planning purposes, is now accepting a two per cent rate of increase.
Recent studies by Coale and Hoover paint a gloomy prospect.3 These authors believe that birth and fertility rates in India have not declined to any important degree in recent years.
They think that the over-all death rate, probably
3I per I,000 in I95I, had fallen to less than
26 by I956, and will be about 2I in I966, and
I5 by I975.4 Hence population will probably increase during the Second Five Year Plan from
384 million to 424 million and during the Third
Five Year Plan from 424 million to 473 million.
The Second Five Year Plan, ending in i96o-
6I, may not have increased the output of consumer goods relatively as fast as population growth. Because of the monsoon, the agricultural index for the second year of the Second
Plan was considerably lower than for the first year. And during this second year net national output was also lower than during the first year.
'A crore is io million rupees, and as most planning documents are in crores, this denomination will be used instead of millions: one crore Rs is about two million dollars.
2Although none of the following may agree with the views expressed here, the author would like to express his appreciation, not only for their time, but for the information and insights provided by them: Dr. J. J. Anjaria (Chief,
Economics Division, Finance and Planning Commission);
Tarlock Singh, I.C.S. (Additional Secretary, F&PC); Professor
P. C. Mahalanobis (Director, India Statistical Institute);
Mr. Pitambar Pant (Head, Perspective Planning
Division, F&PC); Dr. P. C. Lokanathan (Director General,
National Council for Applied Economic Research); Dr.
V. K. V. R. Rao (Vice-Chancellor, Delhi University); Dr.
Douglas Ensminger (Director, Ford Foundation Mission);
Mr. E. P. W. da Costa (Editor, Eastern Economist, Delhi);
Mr. J. Robert Fluker (Economics Officer, U.S. Embassy); and Pandit Jawarhalal Nehru (Chairman of the Planning
Commission, and Prime Minister of India).
'Ansley J. Coale and Edgar M. Hoover, Population
Growth and Economic Development in Low Income Countries:
A Case Study of India's Prospects (Princeton, 1958).
4Ibid., 43, 44.
[ I75 ]
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176 THE REVIEW OF ECONOMICS AND STATISTICS
Output during I958-59, taking the economy as a whole, may not significantly exceed that of
I956-57.'
It is not necessary to dwell here on the things that have gone wrong with the Second Plan.6
Even if national income rises to Rs I 2,500 crores by I960-6I,7 this will barely exceed the population increase of slightly over io per cent assumed by Coale and Hoover. Relative to I955-
56, this would be an increase in net national output at factor cost of I2.5 per cent (at current prices) or of 7.6 per cent (at I948-49 prices).8
Also, to the extent that the Second Plan is emphasizing heavy industrial investments, such as steel, increases in the current availability of food and other consumer goods will be smaller than these percentages suggest.
At the start of the Third Plan, per capita consumption may be about Rs 260.9 During the period of the Plan, and mainly because a declining death rate will increase population at all ages, the total population increase will be about
49 million. Thus, if per capita consumption is not to fall, the annual output of consumer goods at the end of the period must rise almost Rs
I,300 crores. The extra investment needed to provide this extra output for consumers -assuming a capital-output ratio of 4 - is at least
Rs 5,200 crores. This is probably over twothirds of what the Indian economy can realistically be expected to achieve during I96I-62 through I965-66.1"
The Economic Value of Preventing One Birth
In theory, if the long-run objective of the central government is to raise per capita consumption, resources devoted to increasing sumptuary output and reducing population should be adjusted to balance returns at the margin. And in India, where the marginal product of labor approaches zero, public expenditures to lessen population growth can earn very large economic dividends. Such population control must come from a reduction in births.11
Accordingly, should the central government ever seriously seek to reduce births, the value to the Indian economy of each birth less would be significant.
Undiscounted comparisons of average consumption and marginal product. The population of India, on the eve of the Third Five Year Plan, is estimated at about 425 million. What is the probable net product of a marginal million persons born in I96I ? Their total consumption, assuming a 30 year survival and per capita annual consumption at 250 Rs, would be 750 crores Rs, or 7,500 Rs per birth. But the marginal production eventually occasioned by this extra million of population will be far less. The marginal product of population -even more so than the marginal product of hourly labor 12 is in India almost certainly a fairly small fraction of the average product. Given existing capital and arts it may be one-fourth. If so, the undiscounted value of preventing a birth is almost
6,ooo Rs.
Discounted savings in consumption. In politics and economics one must give less weight to future than to present events. While the proper discount rate is debatable, it is likely to be high in an economy that needs capital urgently, and
5Output estimates given above for the first three years of the Second Plan result from private conversations with senior staff members of the Central Statistical Organization of the Cabinet Secretariat.
' Such as high prices due to deficit financing, the melting away of the sterling reserves, an at least temporary bulge in military expenditures, the inexorable rise in the cost and decline in efficiency of the growing bureaucracy, the inadequacy of small savings and loans from the public, the inability of some states to mobilize resources through taxation, and of course the failure of the monsoon to repeat some of its exceptionally fine performances during the First Plan.
'The base national income now commonly assumed in considering economic growth during the Third Plan.
8 See Estimates of National Income, Central Statistical
Organization, Cabinet Secretariat, Government of India,
Table I.
'Assuming a Rs II2.5 thousand crores net national income,
Io per cent devoted to investment goods, and a population of just under 425 million.
"0The probable "size" of the Third Plan goals, including
Rs i,ooo crores of external assistance but no deficit financing, is a public sector investment of Rs '6,700 crores (as compared with the "revised" figure of 4,500 for the Second Plan) and 3,300 for the private sector. The author, after several days of intensive work with well-informed officials and later weeks of study, is of the opinion that a combined public and private investment of about Rs 7,ooo crores is the most that can be assumed with any confidence at 1959 prices.
This estimate includes Rs 1,400 crores of external assistance to meet the "foreign exchange component" of the investment.
' Public policy can influence the death rate only downwards.
12 A distinction stressed by Viner. The marginal product of hourly labor in India does not approach zero. One sees paddy fields, for example, that could benefit from more weeding. But in the country an addition to the available labor force probably adds little to output. Lack of capital makes for the same outcome in the towns.
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THE GAINS TO INDIA FROM POPULATION CONTROL for a government required to raise mass consumption.
It is here assumed to be Io per cent.
In determining the present (discounted) value to the economy of a newly born person, the contribution to product, because it occurs fifteen or more years later, is of small consequence, and arguments regarding the exact size of the marginal product are rather academic. The value of preventing a birth is then measured approximately by the discounted value of the saved consumption, recognizing that infants consume less than older people, and that some will not long survive.3
In Table i an attempt has been made to estimate the value of permanently preventing a birth in terms of saved consumption. The table assumes i ,ooo live births and an infant mortality rate of 200. Column 2 shows the expected survivors at the middle of each age bracket.
Column 3 gives the expected number of secondgeneration children at the middle of each age bracket for the parent. Column 4 gives the assumed average annual cost to the economy by age group of each person for food, shelter, clothing, social services, etc."4 Column 5 shows the aggregate cost by age group of the survivors of the initial i,0o0, including, regardless of age, consumption of their children. Column 6 indicates, for each age group, the average discount factor for the bracket. The last column shows discounted present values of future consumption costs for the survivors and living progeny of the original I,000. This table could have been continued above 35 years of age, but estimated savings for later years would be discounted by .98 and more.
Similarly, it does not make much difference whether those males that survive to working age have a marginal product that is zero (as assumed in Table I ) or is, say, one-fourth of the average product of their co-workers. If this last is Rs I,000, S0 that the marginal product of these men is Rs 250 a year, the values in Column
5 for ages of 20 and above are about halved.
But, with discounting of over .9, this will make little absolute difference to the final column or to its sum.
The answer provided by Table i is noteworthy.
The present value of a permanently prevented birth appears to be approximately
Rs 690,15 although many babies live and thus consume only a few years, although children in their early years consume less than the average, and although the heavier consumption of later years is heavily discounted. A discount rate lower than io per cent or a lower death rate assumption for the future would increase this estimate. Even so, Rs 690 is over two and a half times the annual per capita consumption, and if available as a bonus might be a considerable
TABLE I. - ESTIMATED FUTURE CONSUMPTION
OF I ,ooo LivE BIRTHS
(Infant Mortality Rate 200/I,000) a
. . . _ _ .~ ~ ..
~~~~ , ~ o 0~~~ ~~0 -~~~ S
C
U21u
W
=0.o. u. U
0- I 900 0 25 RS 22,500 RS .050 2I14RS
I- 5 733 0 75 220,000 .27I I60.4
5-I0 652 0 125 407,000 .647 I43.6
IO-15 630 0 I75 562,000 .792 II6.9
I5-20 6io 0 250 782,000 .878 95.3
Sub-Total 537.6
20-25 583 2II 300 953,000 .928 68.6
25-30 55I 458 325 I,II4,000 .957 47.9
30-35 5I5 6I5 350 I,287,000 .975 32.2
Sub-Total I 48.7
Total 686.3 a Explanation of columns:
(2) From Coale and Hoover, op. cit., Table A-i; interpolated value at midpoint of age group.
(3) A deliberate underestimate, surviving children born to parents
15-20 years old not being shown until the next age group, and so on.
(4) Assumed by author as a rough average for widely differing households. (5) Column (2) x Column (4) x number of years in age group, except that the last three rows include, in order, 79, 217, and 386 thousand Rs, being the consumption of second-generation children shown in Column (3).
(6) Unity, minus .q compounded annually, for average age of group.
(7) Column (5) x [unity minus Column (6)], divided by number of live births.
' There is some discount rate - perhaps negative - that will equate the present value of the production and consumption streams to be expected from a newly-born person.
It has been argued by the author elsewhere that the optimum population size is that which gives a zero net present value to babies when a representative rate of return on capital is used as the discount factor. An economy should not "invest" in dependents unless they will earn a return equivalent to investments in traditional development projects.
'These assumed costs are not only collectively low, but especially so in the early years when discounting is slight, given the national average consumption of Rs 260.
`5Actually, if the table were continued to higher ages, so that third-generation effects began to be felt, the total present value would approach Rs 720, despite the heavy discounting.
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I78 THE REVIEW OF ECONOMICS AND STATISTICS inducement to many families to reduce their birth rate.16
Released resources for increased investment.
Still another way to exploit a slower population growth is to invest resources that are no longer needed to produce goods for the prevented population increase.
Table i (column 5) indicates the value of the consumption that might be saved per I,000 live births. If the equivalent resources thereby released were invested instead, and assuming a capital-output ratio of 4 over io years, the income stream thus earned has a discounted value at date of investment of 5.86/4.0 times its original cost.17 For ease of calculation it will be assumed that investment will occur at a date corresponding to midpoints in the age groups of Table i.18 Then, according to this approach, the value of permanently preventing a birth is
I.465 that given in Table i, if investments have a Io-year service life.'9 This gives a value of
Rs 788 if the consumption savings of only the first 20 years are considered, or Rs I,005 altogether.
Should investments have a service life of 20 years rather than io, the corresponding estimates are Rs i,o66 and Rs I,360.
Validity of approaches. The validity of each approach, and hence the selection of an estimate, depends primarily upon economic facts and government policy. In the abstract one might suppose that, with perfect economic records, planning, and control, less population would be associated with more investment, in which case the value of preventing a birth is very roughly from Rs 8oo to I,300. However, economic affairs are likely to be managed less precisely than this by any government, and so it is probably best to assume that investment is more or less independent of population growth for the next decade or so.
A rock-bottom estimate then of the value of a permanently prevented birth would seem to be Rs 500-600, as suggested by the upper half of Table i. This estimate is "conservative" and it is independent both of assumptions regarding the capital-output ratio and the marginal productivity of population. This means that, as aggregate output and price levels rise, the value of a prevented birth will remain at least twice the per capita consumption.
Fortunately, it does not matter much whether the incentive bonus, paid perhaps for a vasectomy, is calculated from an accurately estimated value of a prevented birth. This is because the bonus is a transfer payment and not an economic cost.20 The real criterion of whether a bonus is too high or too low is its effectiveness as an inducement.
AlternativeS chemesa nd BonusS cales
It is proposed that the central government of
India, or possibly some of the state governments acting independently, make payments to couples for not having babies they would otherwise be expected to have.
Expected family additions. In paying a husband or wife to have no more babies, consideration must be given to the number of children they might otherwise be expected to have, assuming neither of them is sterile. Unfortunately not a great deal is known about family formation in India by social strata, and so there is an urgent need for carefully devised and extensive
National Sample Surveys. A family's size is likely to differ according to its religion, education, occupation, income, and residence. Couples are likely to have more children if the husband
- but especially his wife - is young.
Vasectomies for men. In many respects bonuses for vasectomies provide a simple inducement scheme to reduce births. Some experience
16 Policy-makers whose time-horizon is no further distant than the next few general elections may choose to ignore any consumption drains 20 years or more ahead. In this case, in terms of Table i, the second-generation effect is discounted completely, and only the upper half of the table is relevant.
The present value of future consumption is then Rs
540, or twice the per capita consumption of India today.
7 Assuming io per cent discount a year compounded.
For example, for every i,ooo live births permanently prevented just before time zero, Rs 220,000 of resources, no longer needed for consumption during years i to 5, are supposedly invested at the end of the third year. The present value at year 3 of the io-year income stream is 5.86 times Rs 220,000/4.0. The present value at time zero of the income from this investment is .73 times this product.
19Because 1.465 iS .2'5 of 5.86.
20 The economic cost is limited to administrative expense, medical care, prophylactics required, etc.; in the case of a vasectomy the surgery expense is very small. Of course, other things equal, it is better if the bonus does not exceed the true value of the births prevented; then the rest of the economy is somewhat worse off. But equity has seldom been the decisive test of transfers between governments and subjects. This content downloaded from 210.212.230.198 on Tue, 16 Dec 2014 02:40:01 AM
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THE GAINS TO INDIA FROM POPULATION CONTROL I79 with such a program already exists. The operation is practically irreversible and can be performed within half an hour with a local anesthetic.
Initially the scheme might be limited to the husband who has had at least one child with his present wife. In establishing tables of bonuses for husbands, the expected number of future children and probable future dates of births are required, because of the discount factor. For instance, for a husband and wife of given age and class, what is needed is the number of children his wife is likely to have by him during the next three years, the following six years, etc.
Without adequate sample information only very rough magnitudes can be exemplified here.
About half of all married Indian couples who survive to age 35 finally have four or more babies. Thus a man of 25, with two children already, might be expected to have one child in the next three years and another in the following six years. Using the estimate of Rs 540 as the value of each prevented birth, and discounting from the mid-point of these two future time periods, the value of the vasectomy would be about Rs 700 from which the government might deduct Rs io for the cost of the operation.
Politically it is better that the bonus for a vasectomy decrease rather than increase over time. A rising bonus may embitter those who have already been operated upon. A falling bonus, if considered a trend, may encourage the hesitant. But it will take some time to convince the general public of the fact that sterilization will not impair sexual intercourse. And the family benefits to participants may only be appreciated slowly. Accordingly, assuming the government can establish adequate staffs and centers, quite high bonuses may be appropriate at the outset.21
Payments f or non-pregnancy. Many married couples will not want a vasectomy for the husband, but yet will be willing, if rewarded, to take greater care not to have more children.
The method they select is a matter for their own conscience and convenience. Although in many ways inferior to sterilization of the husband, alternative bonus schemes to encourage periodic abstention or prophylactic use deserve consideration. A typical Indian woman has had one live birth by the end of her 20th year. The following io years are her most productive. As Table 2 shows, from 20 to 25 years the annual average live birth rate is .270, and from 25 to 30 it is
.252; over the five years included in each group the total rates are therefore I.35 and I.26.
These high birth rates during the 20's, and to some extent the somewhat lower rates during the 30's, may be sufficient, when coupled with a Rs 540 value of preventing a birth, to render practical a non-pregnancy payment three times a year.
A married woman between 20 and 35, having had one child by a husband who has not had a vasectomy, would be eligible to register at a government clinic. There her age is determined.
Then at I 7-week intervals - i.e., three times a year -she presents herself for a superficial examination to indicate that she is not pregnant.
22 Each four-month examination producing negative results entitles the registrant to a bonus as shown in Table 2 .23
However, because there may be a later pregnancy, initial bonuses are not paid in cash but credited to a blocked account with the central government's small savings bank. A high rate of compound interest - perhaps 3 per cent each four months - is allowed but not paid out.
Not until a registrant has a "baby in the bank"
- that is, until she has accumulated a Rs 500 blocked account - are subsequent bonuses and interest paid on demand. Thus a woman in her early 2 OS can obtain unblocked bonuses amounting to about Rs 130 a year plus Rs 50 interest on the blocked balance - after three years and her tenth visit. This is more than
21 Some parents may wish to qualify for a bonus so they can better provide for their existing children. According to
Table i, Rs 700 is more than adequate to rear a young baby to working age if the unexpended balance is invested at Io per cent interest. Other husbands may be concerned over the health of their wives.
22 I am advised by a medical expert that a person of limited qualifications could diagnose pregnancy with absolute certainty after the 26th week of a normal 40-week gestation, with reasonable certainty after the 22nd week, and with much less certainty after the i8th week. A registrant would have to submit to an examination every i7th week. In doubtful cases a special or interim examination could be ordered.
2 Since the value of preventing a pregnancy is somewhat lower than for a live birth, because of the risks of miscarriage and still-birth, the multiplier used to obtain Column 3 is Rs 500 rather than Rs 540.
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The blocked account is released to the woman at age 45, or to her family should she die previously, unless cancelled.
If a registrant does not appear for examination on her scheduled week, or if the examination indicates pregnancy now or childbirth since the last examination, the blocked credit is cancelled.24 Undoubtedly many registrants, perhaps half, will lose their blocked accounts in this way.25 The resultant sense of loss may cause some couples to abandon the scheme. But others may be inclined to start again, taking greater care. In some cases the loss of the blocked account may induce the husband to obtain money by having a vasectomy instead.
SomeP racticaCl onsiderations
Schemes as radical as those proposed here would not be offered if the economic impact of prospective death-rate declines did not promise to be so staggering. Democratic government in
India may even be at stake. And while Gandhi only accepted birth control through abstinence, and Hindus are accustomed to making a virtue of fertility, attitudes are changing quite rapidlyy.
226
Possible program costs. How large should a positive program of birth control be, always supposing the bonuses evoke sufficient response?
If the goal were merely to counteract reductions in the death rate over the next fifteen years or so, anticipated at .ooos annually, it would suffice cumulatively to reduce births by roughly
225,000 each and every year. Or, if the aim were to halve the natural increase of 50 million, predicted during the Third Plan, births would have to be reduced by 25 millions over 5 years.
To hold the population constant for a decade after i965 would require over io million fewer births a year.
A program of one million vasectomies a year, performed on men having wives in their 20's, might reduce births by about 3.75 million during the first 5 years. During the next 5 years the sterilization of these men would mean about
4.5 million fewer children. Hence, if the program were continued during the second 5 years, the total reduction in births over io years would be about I2 million. Such a program, which would somewhat more than offset future deathrate declines, would involve maximum bonus payments of Rs 700 crores, plus or minus a third, during the first io years. The program would require about 300 medical practitioners able to perform this operation (but perhaps not much else), plus assistants and space. Presumably each "surgeon" would staff a separate clinic in order to obtain the greatest possible geographic distribution among the Indian population.
These 3oo-odd clinics could be run for between Rs 5 and io crores over io years, an insignificant sum compared to the bonus payments they would occasion. The maximum money cost during the Third Year Plan might be from Rs 240 to 480 crores - as against about
Rs 6,700 crores of investment planned for the
TABLE 2. - DETERMINATION OF NON-PREGNANCY
PAYMENTS TO REGISTERED WIVES a
Negative
value of Proposed No. negative
Assumed expected non-pregnancy examinations annual children payment each until cash
Age group birth rate born four months payments
(I) (2) (3) (4) (5)
I5-20 .J93 Rs 482.5 Rs 32.I6 I2
20-25 .270 675.0 45.00 IO
25-30 .252 630.0 42.00 II
30-35 .190 475.0 3I.66 I5
35-40 .J40 350.0 24-34 n.e.
40-45 .054 I3.5 9.00 n.e. aExplanation of columns:
Column (2): From Coale and Hoover, op. cit., Table A-2; based on survey in Ramanagaram, near Poona.
Column (3): Column (2) times 5 times Rs 500.
Column (4): Column (3) divided by I5.
Column (5): Assuming registration occurs at mid-life in the age group, and allowing 3 per cent on the accumulated balance every four months. n.e.: Not eligible to enter scheme at this age.
24Perhaps, when medically permissible, the government might then provide an abortion to registrants at the expense of the patient's family.
2 When the blocked account is lost, the expense to the government is limited to its administrative expense and perhaps interest paid out on the blocked account; but any postponement of birth is worth about Rs 50 to the economy for each year of deferment.
The Second Five Year Plan included Rs 4 crores for birth control clinics. The States of Madras, Kerala, and
Mysore are providing free vasectomies for some of their employees and the T.V.S. Company is, in addition, providing a month's pay as a bonus. A recent study by the "Survey of Public Opinion" suggests that, in the towns and cities, husbands are as interested as wives in birth control. Prime
Minister Nehru recently encouraged the delegates to the
Sixth International Conference on Planned Parenthood when they met in New Delhi.
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THE GAINS TO INDIA FROM POPULATION CONTROL 181
Public Sector -but the resources cost would be one-fiftieth of this sum.
It is much more difficult to estimate the cost of the semi-annual payments to registered nonpregnant women. If two million joined each year, and one million dropped out annually, maximum cash bonuses and interest paid out, over io years, might be Rs 400 crores, with an almost equivalent contingent liability. Administrative expense, with 150 examination offices and qualified midwives per million registrants, might be Rs 8 crores for the io years. During this same period the number of prevented births might be I 2 million.
For various reasons each of these two supplementary schemes27 may cost about the same in the end and reduce births by about the same number during the first io years. However, the vasectomy program eventually gives a higher return on funds expended because it continues somewhat to reduce births in future years, without additional disbursements. Non-pregnancy payments to women come after birth reductions and leave a contingent liability for the government.
Resource costs versus money costs. The advantages offered by these two birth control schemes are most obvious to those concerned about resource costs to the economy. This is because, over a period of io years and using the assumptions of Table i, the 24 million fewer births mean an unmitigated reduction of about
Rs 750 crores in consumption. The resource cost of making this saving is around Rs 12 to
I8 crores.28 In one sense the rate of return is
50 to one.
In comparison, the maximum cost to the government of these two schemes, over io years, is around Rs I,300 crores. But if the scheme ever became so popular, the scale of bonuses could almost certainly be reduced, and perhaps halved on an average. The gain to the economy is then shared between participants and the public at large. However, even in terms of money cost to government, bonuses are an attractive alternative to traditional investments if the object is to increase per capita consumption over IO years. An investment of Rs 65 crores each year, allowing for a gestation period of one year and a 4 to I capital-output ratio, will provide additional national output over io years valued at about Rs 750 crores, or an increase of perhaps
0.5 per cent. If the same sum of money could reduce the expected population increase by 24 million from I96I through 1970, if spent as bonuses, there would be a population effect of
5 per cent. Even in money terms, if per capita consumption is the criterion, government might find bonuses ten times as productive as conventional investments for development.
The fundamental economic "trade-off" is far more staggering, because this must be concerned not with money costs but resource costs, and the resource cost over iO years of reducing the estimated population by 24 million persons may be only about Rs 15 crores. Resources of this value, if conventionally invested over this period, would increase cumulative national output by about .oooi; devoted to family limitation they might cause a .05 slowing in population.
As regards per capita consumption, resources devoted to population control would then be 500 times as rewarding as resources of equivalent value invested in traditional development projects such as industry, transportation, or irrigation.29
7 Obviously women cannot receive a non-pregnancy bonus if married to a sterilized man, and vice versa.
' Incidentally, the few resources that are needed by these two birth control programs do not compete with those required by the Plans. There would 'be hardly any drain on foreign exchange, scarce material such as steel, or engineering talent. Except perhaps for some surgical instruments and electronic data processing equipment, the resources can all be Indian.
'Nor is this enormous apparent advantage of 500 particularly sensitive to the public's assumed response to the offered bonuses, for the resource cost is a related variable, even though it may not vary in strict proportionality. It is, however, som.ewhat affected by the time period selected.
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