India has undergone tremendous changes in the past three decades with its GDP growth, surge of foreign investment, and urbanisation. However, for millions, the stark and stubborn truth lies in inequality, poverty, and the urban-vulnerable nexus which continues to persist. The NITI Aayog’s multidimensional poverty index shows that although India has succeeded in ramping up its poverty alleviation efforts in the last few years, the deep-rooted social deprivation and inequity indicates that there is some structural flaw.
As to why policy failures, both in design and execution, have often imprisoned countless of people in the loops of dependency, underemployment, and exclusion, the answer lies in the paradox of India lacking the excessive amount of ant-poverty schemes, social and policy frameworks, yet poverty still quite literally survives and in fact, thrives.
Policy Intent vs. Policy Reality
The two primary approaches of combating poverty often relied upon in India are:
- Economic growth as the foundation for poverty alleviation
- Direct implementation of welfare schemes aimed at poverty mitigation
While both are essential, the intent and execution gap remain, and is quite gaping in fact.
Overlapping policies due to lack of collaboration: India implements numerous welfare programs, ranging from MGNREGA and PM Awas Yojana to food subsidies and skill development programs. Lack of integration, duplication, and overlap mean a single household might derive superficial benefits from multiple schemes rather than meaningful benefits from a few well-crafted ones.
Inefficiency and waste: While some forms of corruption have been reduced by Direct Benefit Transfers, a lack of banking infrastructure or low digital literacy in remote areas still pose a challenge. Last-mile connectivity challenges exist even in premium programs.
Lack of long-term empowerment focus: Programs that only income transfer focus on fail to tackle issues like low quality education, shoddy health services, lack of proper skill development infrastructure, and systemic neglect.
When nice policies turn paradoxical:
Some policies crafted with good intentions have a long history of misfiring and causing more harm than good
- Waiver of loans for farmers: While designed to give relief, it often damages credit culture and in turn, make market access, irrigation, and lending to small farmers difficult.
- Price control: While an effort to keep bare minimum essentials available, it often leads to shortages and black market.
- Subsidized water and electricity: While designed to support farmers, in major regions, it contributes to excessive consumption, leading to groundwater depletion, unsustainable water extraction, and irresponsible.
The Policy Failure Trap
A policy failure trap occurs when some policies are designed to address shortcomings of a prior program, creating a repetitive cycle of policies needing to be developed to address previously created policies. This repetitive cycle can be seen in:
Education → Skills Gap → Unemployment:
Poor-quality education over a long period of time results in a workforce of graduates who are unemployable, leading to the creation of new jobs. Governments, in response, initiate skill acquisition programs which are notoriously ineffective due to the lack of decent training and placement opportunities. This results in a further widening of the skills gap.
Poverty → Debt → Poverty:
The absence of reasonably priced credit opportunities drives the impoverished population towards exorbitantly priced loans from the unorganized sector. The government’s attempt to intervene through loan waivers breaks this cycle, but in reality, these policies end up damaging formal credit systems, further pushing these people towards informal debt.
Urbanization → Slums → Challenges in Slum Redevelopment:
Lack of comprehensive urban development plans leads to the segregation of rural migrants into slums. Later, the implemented policies attempt to transform slums into urban regions, but they often end up forcibly relocating the vulnerable population and fail to provide adequate post relocation livelihood opportunities.
India’s Poverty through the Numbers
Even as the World Bank and IMF project India to be one of the fastest growing major economies, inequality has deepened. The top 1% of Indians hold more than 40% of the nation’s wealth, while the bottom 50% hold a mere 3% of it. Brazil’s Oxfam India 2023 report paints a grave picture of disparity in wealth distribution. The bottom 50% of Indians hold a mere 3% of it. The lesson is clear — GDP growth alone cannot be the yardstick of progress.
Taking a more broad, global approach, we can learn a lot from the Sub-Saharan African experience. Without making direct comparisons, this serves as a warning: growth benefits, in the absence of equitable policy and governance, can totally bypass those who are most in need.
Moving to the governance side
Even the best policies designed are useless without:
- Monitoring systems — without oversight, corruption and inefficiency thrive in the fog of, and opaque systems.
- Schemes with clear lines of defined ownership and accountability — clear lines of defined ownership and accountability must be set to avoid a blame-game of pass-the-parcel.
- Bottom-up governance — Empowering lower levels, such as panchayats and municipal bodies, to execute the policy can enhance focus and make response timeliness better.
Policies must be updatable in real time based on credible information, not just on annual reports; changing policies based on real-time credible information is imperative to avoid static yearly reports.
What Can Be Done to Break the Cycle?
In order for poverty-fighting policies to be effective, India needs to:
- Integrate Schemes: Lessen fragmentation by combining programs that overlap into a small number of all-inclusive ones that concurrently address several needs.
- Put Quality First, Not Just Quantity: For instance, increasing school enrollment is pointless if kids are unable to read, write, or perform simple math.
- Connect Economic Opportunity with Welfare: Support for entrepreneurship, market access, and skill development ought to go hand in hand with cash transfers or subsidies.
- Strengthen Local Institutions: To properly implement and oversee programs, Panchayati Raj institutions and urban local bodies need resources, staff, and personnel.
- Put Human Capital First: Education and health care should be viewed as investments in long-term economic growth rather than as welfare expenditures.
Conclusion
India’s poverty is largely a result of the decisions we make about governance and is not inevitable. The poor suffer the most when policies are developed without a thorough understanding of the situation, when they are poorly implemented, and when political considerations take precedence over sound economic reasoning.
India’s problem is not a lack of resources or ideas, but rather a lack of political will to put what really matters first, a lack of execution discipline, and a lack of coherent policies. As an economist, I think the real question is, “How well can we translate growth into dignity, opportunity, and security for every Indian?” rather than, “How quickly can we grow GDP?”
Until we honestly respond to that question and take appropriate action, the poverty policy paradox will remain one of India’s most enduring failures.
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