DBT has helped reduce poverty, but real cure is in growth

The good thing about the recent findings about poverty by the National Council of Applied Economic Research (NCAER) is that politicians of all hues are likely to accept them. The premier think tank estimated that poverty declined to 8.5 per cent in 2022-24 from 21.2 per cent in 2011-12, despite the challenges posed by the pandemic.Since this period overlaps the regimes under both the Congress and the Bharatiya Janata Party, the coalitions under both parties can claim credit for the good tidings. To be sure, they deserve the credit too. A critical factor contributing to reduction in poverty has been the execution of direct benefit transfer (DBT) schemes.

They have not only enhanced the efficiency and efficacy of welfare programs by targeting beneficiaries more accurately but also minimized leakages and checked the burden on the public exchequer. In a way, this is also against conventional wisdom, which emphasized higher expenditure to combat poverty. The paper said that economic growth and fall in poverty create a dynamic climate that requires nimble social protection programmes. Traditional strategies designed to address chronic poverty in a large segment of society may be less effective as accidents of birth become less important than accidents of life, it said, adding that accidents of life may have a transitory effect on moving in and out of poverty.

Policy and decision makers should not lose sight of the fact that welfare schemes are palliatives at best; they are the cure. Further, they are not quite capable of taking care of the accidents of life associated with natural disasters, illness, death, etc. The cure is in inclusive growth. Economic expansion does not just create jobs; it triggers a chain reaction stemming from the earnings. At present, a major problem our economy faces is that of the rising numbers of the jobless, for which several factors are responsible.

First, there is a lack of skilled manpower. There is a gulf between the skills that businesses need and those that are available. This is tragic, as there are millions of youngsters who are capable and willing to work hard; they couldn’t be employed just because they have been unable to acquire the requisite skills. Evidently, our businesses, government, and educational institutions have been working in silos, not interacting with each other—or not interacting as much as they should be. This has to change.

One wonders what the Ministry of Skill Development and Entrepreneurship has done in the last 10 years. Then there are the old woes like labour market rigidity and MSMEs’ inadequate access to finance. Complex labour laws, rules and regulations, crafted in the socialist era, continue to discourage the generation of formal employment, resulting in the plethora of informal or contractual employment arrangements, especially for those with low skillsets. Misery at the bottom of the pyramid persists, as they rarely get job security and social safety nets.

The need of the hour is inclusive growth, which can happen only by fostering an environment that supports skill enhancement, offers flexible labour laws and provides better financial access to MSMEs. They are difficult but not impossible to achieve. The government must ensure that measures to promote inclusive growth and eliminate poverty are continuously evaluated and fine-tuned.