Poverty eradication in India: Successes and shortcomings of social protection

While social protection programmes in India have helped reduce poverty significantly, they are not without their problems. COVID-19 reversed the gains and has plunged millions into further poverty, disrupting the informal economy, and hitting migrant labourers the hardest. Schemes like MGNREGA are being sought out by the government and desperate citizens to tackle unemployment.

After the implementation of the 1991 economic reforms, India emerged as a success story of globalisation. While on the one hand, India is able to sustain its rapid economic growth, on the other, India is struggling to provide basic services and infrastructures to its population. Recent estimates show that there is a rapid decline in poverty in India. The Indian government’s Planning Commission (currently NITI Aayog) estimated that the annual average decline in poverty was 2.2% between 2004-05 and 2011-12 – from a poverty headcount ratio of 37.2% to 21.9% (Planning Commission 2013). As per the UNDP Global Multidimensional Poverty Index 2020, in 2005-06, over 640 million people across India were in multidimensional poverty; with the successful implementation of social protection policies, 273 million people moved out of multidimensional poverty over a 10-year-period (Oxford Poverty and Human Development Initiative 2020).

Role played by social protection schemes in poverty reduction

During the last two decades, India has implemented several social protection programmes with the aim to improve living standards, and these have helped the Indian government in poverty reduction. Existing evidence suggests that there is a strong correlation between urban economic growth and poverty reduction (Datt et al. 2016); implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) since 2006 has significantly increased household consumption and accumulated more nonfinancial assets (Deininger and Liu 2019). Furthermore, the Public Distribution Systems (PDS) and other Centrally Sponsored Schemes (CSS) of the Indian government (Sen and Himanshu 2013), and increased labour earnings (Balcázar et. al 2016) have played significant roles in poverty reduction. In addition, the Prime Minister Jan Dhan Yojana and biometric identity cards under Aadhar have also transformed the anti-poverty programmes by replacing the current cumbersome and leaky distribution of benefits under various schemes using the Direct Benefit Transfers (DBT) programme (NITI Aayog 2016). This evidence suggests that poverty reduction is shaped mainly by structural transformation and increased spending on social protection programmes.

Problems with social protection programmes

From a critical lens, certainly, each social protection programme and CSS suffers from an array of difficulties – such as rigidity, non-adaptability to local conditions, late disbursement of funds, reallocation of funds to unrelated recurring expenditure, and wide-ranging rent-seeking practices. In many cases, the proportion of funds reaching the intended beneficiaries is well under 50%. As against the guarantee of 100 days of wage employment to one person in each rural household annually, MGNREGA’s average achievement has been less than 55 days (NITI Aayog 2016). As mentioned earlier, with the introduction of the DBT in MGNREGA and other social protection programmes, things have begun to move rapidly. Though the objective was to enhance the transparency and faster transmission of transfers to beneficiaries, the DBT has been criticised by well-known economists and social scientists. While the case was contested in the Supreme Court of India, the verdict in September 2018 proclaimed that Aadhar-linked DBT is necessary for MGNREGA and many other government schemes in India.

Effects of COVID-19, informal economy, and unemployment

The ongoing COVID-19 pandemic as a public health catastrophe has affected all ways of life. In this situation, protecting people’s lives, as well as the frontline facilities, is now the current priority for both the Central and State governments. Both have rolled up their sleeves for getting into action to tackle this pandemic which has also led to the imposition of a nation-wide lockdown from 24 March – 31 May 2020, which disrupted the informal economy and created an unprecedented reverse migration of workers. The effects of the COVID-19 crisis on low-skilled migrant labourers and informal workers have been overwhelming. Early evidence suggests that there has been a massive increase in unemployment and an equally dramatic fall in earnings. Almost 8 in 10 are eating less food than before; more than 6 in 10 respondents in urban areas did not have enough money for a weeks’ worth of essentials (Azim Premji University 2020).

Table: Key findings of COVID-19 Livelihoods Survey

During the lockdown period in the current pandemic, many labourers lost their jobs and due to lack of social security nets and formal benefits, travelled back to their home without any guarantee of returning (D’Souza and Ratho 2020). As per the International Labour Organisation (ILO) “ILO Monitor April”, 400 million workers from India’s informal sector is likely to be pushed deeper into poverty due to COVID-19. With millions of migrant workers having returned to their home in rural areas, and the pandemic continuing to bring heavy tolls on the Indian economy and jobs (particularly those in the informal sector), schemes like MGNREGA are being sought out by governments and desperate citizens as an immediate measure to tackle employment and poverty. Compared to last year, the rise in person-days allocated as per the MGNREGA scheme has seen a sharp rise this year. Additionally, to reduce the hardship of these migrant workers and for giving relief to the informal economy, the Indian government has recently launched Garib Kalyan Rozgar Abhiyan (GKRA). GKRA was launched this year on 20 June 2020 and is aimed at providing employment benefits of 125 days to return migrants across 116 districts in six states of India. This is a coordinated effort between 12 different Ministries and Departments to implement 25 public infrastructure works and works related to livelihood opportunities. However, among these 25 types of work, 11 of them are already listed under MGNREGA. An analysis of the implementation of GKRA shows that the success of this scheme would depend on the past performance of MNREGA (Afridi et. al 2020).

Going forward the implementation capacity of States, particularly across the poorest districts, will play a crucial role in determining the success of MNREGA and GKRA schemes. Furthermore, India needs to ramp up MGNREGA, introduce a guaranteed urban employment scheme, and boost further cash transfers to poor households. There is no dispute that poverty in the country will worsen, but the question is, by how much?