Besides the welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the underprivileged sections of the society. Discuss.(UPSC CSE Mains 2022 - General Studies Paper 2)
India has leading demographic dividend, fifth largest economy by nominal GDP and third largest by purchasing power parity. But on another side, the current inflation projection is around 6.7 percent. CMIE report says that India’s overall unemployment rate is 6.8 percent. Despite of large share of welfare funding in various scheme like PM AWAS YOJANA, AYUSHMAN BHARAT, MUDRA YOJANA etc, India’s considerable population live under poverty.
Limitations
- Exclusion errors: Exclusion of ‘eligible’ individuals from welfare schemes may force them to turn towards market to access the particular service/benefits, subjecting them to inflationary pressures.
- Besides the welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the under
- DBT: Increased prevalence of DBT to beneficiaries, provides them cash instead of services. As a result, individuals are subjected to market vulnerabilities. E.g., LPG subsidies.
- Wage payments: Wage payments to beneficiaries of welfare schemes are not inflation adjusted. E.g., Poor wages of MGNREGA workers.
- Capacity building: Welfare schemes lack capacity-building approach with mere focus on supportive care/incentives but are devoid of skill-development needed for sustainable employment.
- Informal Employment: Due to lack of informal employment, large population of India is outside the purview of social security, which makes them perpetually dependent on welfare schemes.
- Decreased social-sector spending: To improve fiscal health, government resorts to measures like cutting down the expenditure in welfare schemes, which results in increased out-of-pocket expenditure on essential services.
Looking ahead
RBI should control consumer inflation through effective policy instruments. Wages, DBTs and other welfare payments should be indexed to Inflation. Focus on capacity-building measures like skill development to provide sustainable employment. Increasing formalisation of economy through tax incentives to bring informal employees under the net of social security. Incentivise infant MSMEs instead of dwarf firms to enable them to expand in size and create employment. Including “Informal labour” under priority sector lending category for financial inclusion.
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