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In the words of Nobel laureate Amartya Sen, “Poverty is not just a lack of money; it is not having the capability to realise one’s full potential as a human being.” Poverty rips humans of their right to a dignified life. The living conditions of the impoverished have always been disturbing as misery is inseparable from poverty. Despite all economic progress, poverty continues to be a predicament in emerging economies and the developed world alike due to shortcomings in policy-making.

A bad quarter of an hour The first-ever Multidimensional Poverty Report released by the NITI Aayog in 2021 estimates that a quarter of the Indian Population is multidimensionally poor. It is claimed that at the root of failed anti-poverty programs, lies a lack of empathy within the bureaucracy. The decisions affecting the impoverished are taken by the high and mighty and their own perspective is not taken into consideration. India’s most ambitious and the most comprehensive poverty alleviation measure, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), offers at least one member of every household 100 days of paid employment. Despite a huge budgetary allocation, it has not been able to effectively solve the unemployment issue. A report by the Centre for Policy Research shows that the average days of work per household under MGNREGA were less than 50 with the number falling every subsequent year. Major causes include ridiculously low wage rates, payment delays, and lengthy administrative and banking formalities for getting wages and unemployment allowances. After all, how can daily wage workers spend their precious time moving from office to office, bank to bank for meager wages that may come months later?

Similarly, the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) aims to develop employable skills in the youth by analysing the skill requirements of the private sector. According to a report by Sharada Prasad Committee, the first phase of the scheme had a placement rate of less than 12%. Despite the failure in the first phase, further phases of the program have been implemented without addressing the reasons behind the fiasco.

The question now arises, how can policymakers improve?

Aid v/s Investment The major concern is not the adequacy of poverty eradication funds but their utilisation which is fundamentally flawed. You feed a million people today, what will they eat tomorrow? In the debate of aid v/s investment, the latter has historical precedents to support its effectiveness. The Marshall Plan of the United States, which aimed at rebuilding post-world war Europe and Japan, is considered to be one of the most successful international aid programs. The plan is a classic case cited by development economists to stress the importance of investment and infrastructure development as means to construct and reconstruct economies. Instead of emphasising upon short-term consumption requirements of the population, the plan focused on causing a boost in production and international trade. Consequently, the Gross National Product growth rate in war-torn West Germany, Austria and Italy skyrocketed to 33.5%. It illustrates that although aid for consumption needs may be an unsustainable solution, it is a sustainable one for industry and innovation. Moreover, according to Keynesian Theory, investment in emerging economies should have a much larger multiplier effect than in the developed ones due to their high marginal propensities to consume and low per capita incomes. The impoverished tend to consume more and spend less and consequently have higher marginal propensities to consume, which is directly proportional to the investment multiplier.

A better approach to policy-making Anti-poverty programmes are usually based on how the privileged view the poor. If education is free, the poor should willingly send their children to school. If the impoverished are given collateral-free loans, they should voluntarily undertake productive economic activities. Yet, this does not always happen. Nobel Laureates Esther Duflo and Abhijit Banerjee have devised a method to remove such assumptions and guesswork from policy-making through Randomized Controlled Trials. Under these trials, the impact of a single intervention to combat poverty is analysed by conducting experiments on small groups of people. A fascinating trial was conducted in Udaipur, Rajasthan on immunization. The result was that giving non-financial incentives such as a kilo of lentils to people for getting vaccinated led to an over 6 times increase in the immunization rate. Interestingly, despite the increase in variable costs due to the purchase of lentils, the cost per immunization turns out to be cheaper because of a significantly larger increase in the number of vaccinations per day. Similarly, the Mid-day Meal Scheme in India flourished because it provided a unique solution to increase enrolment in schools, giving food during working hours as incentives to the poor to send their children to school. These experiments show that the key to eradicating poverty is thinking from the perspective of the poor.

Conclusion A cost-benefit analysis of poverty alleviation programs evidently states that despite huge expenditure by the governments, poverty prevails. When millions are spent on programs without checking their effectiveness, precious resources of the State go down the drain without solving the issues significantly. Poverty eradication funds can pull millions out of penury only if they are invested in infrastructural development and anti-poverty programs that are carefully designed by pretesting using methods such as Randomized Controlled Trials. Extensive surveys should also be conducted to understand the perspective of the stakeholders. If the administrative lapses are removed from the programs to make them desirable for the poor and their opinions are valued, a poverty-free world might just become a reality.

By Aaliah Janeja




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