Poverty Alleviation In India

India is a land of paradox! On the one hand we have a thriving economy labeled as the fastest growing in the world and on the other hand still 21.2% of total India population reside below poverty line. India has done a tremendous job in pulling out a substantial population out of poverty in last decade. Yet the challenge remains big. But the monumental efforts envisaged by the Government are poised to provide good living standards to a large population in coming times.

Dr. Shashi Tharoor who gave the famous Oxford speech said, “The fact is that, before 200 years, the British came to one of the richest countries in the world- a country which had 23 per cent of global GDP… a country where poverty was unknown.”  He further adds “A country that was the world leader in at least three industries- textiles, steel and ship building. A country that had everything. And after 200 years of exploitation, expropriation and clean outright looting, this country was reduced to one of the poorest countries in the world by 1947.” More than half the population was below poverty line practicing subsistence agriculture.

The challenge before the Nehru Government was monumental and they started with Soviet style socialist planning which failed to provide the necessary trickle down effect. Hence post 1970s, the Government led by Mrs. Indira Gandhi with Twenty Point Programme tried to reduce poverty. The Governments thereafter targeted both poverty alleviation and employment generation under one umbrella and started with initiatives like Integrated Rural Development, Swarna Jayanti Rojgar Yojna, Indira Awas Yojana, etc. But the important and successful schemes were Pradhan Mantri Grameen Sadak Yojana and MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) which proved to be very effective and efficient. PMGSY provided the necessary connectivity for the development of rural areas and pulled a substantial population out of poverty due to employment generation via roads. Whereas the path- breaking MGNREGS provided rural masses with minimum 100 days of guaranteed job with no pre required skill sets. After 10 successful years of MGNREGS, it is established that this single scheme has proved to be panacea to reduce poverty at high rates. The transmission effect of MGNREGS on poverty is appreciated by the present Government too which has made whooping Rs. 48,000 crore allocations in this year’s budget to this scheme.

Although we have miles to go to eliminate poverty as India has the highest number of people residing below poverty line but the efforts of Government in past decades must be applauded. Even the rural population today is well connected with telephone and internet and their nutritional habits are also changing keeping in view the refining trends of consumption due to increased power of purchasing. This paints a bright picture for the coming times of rural India where they can also use digital modes not only to transact but to get information and sell their produce at reasonable rates. The India of today is changing at rapid scale with the given level of technological penetration coupled with globalization effects. India has in the past leapfrogged adoption of landline phones and gone directly to usage to mobile phones. With the rapidly reducing poverty in rural India, history is poised to repeat itself, this time in the financial sector. We will delve deeper into the subject in a subsequent blog post.

As the Tendulkar Committee on Poverty found out that we still have a large population below poverty line, the present efforts by the Government to skill the rural masses will go a long way to reduce poverty line below 10%. Even the policies to boost agriculture and bring food processing industries into limelight can fetch good earning to rural poor. If the loopholes and leakages of poverty alleviation and employment generation programmes are reduced and made effective, then in near future Poverty will be truly just a state of mind!

Abhishek Ranjan is a Research and Policy Analyst to Members of Parliament (MPs) Mr. Ninong Ering and Mr. Dilip Tirkey. He is also working as a Consultant to DTSRDF and University of Chicago’s Delhi Center for Anubhav Lecture Series, and is a Policy Consultant for FinTech startup Credy. Earlier, he was a LAMP Fellow and graduated in Engineering from Manipal Institute of Technology.


Digital Payments : The future of transactions in India

When demonetization was announced last year in November, suddenly the debate shifted to ability of India to adopt cashless economy. Many of experts raised concerns against the Government’s promotion of “Digital India” being too urban-centric and narrow in approach. But the Government adhered to its vision and took many steps to facilitate digital payments.

Digital payments are methods to transact between parties electronically which are fast and secure. Banking cards, USSD, AEPS, UPI, Mobile wallets, PoS, Bank Pre-paid cards, Internet Banking, Mobile Banking, Micro ATMs, etc. are few means of digital payments which are easily available and accessible. Hence these modes are being given preference over cash system. The Government also plans to tackle the menace of corruption, black money and terrorism through such steps. The key question remains : that will the rural India or interiors adapt to such a leap in technology?

It is no secret that the tech-savvy class in metro cities has more or less been running on digital payments mode for some time now, be it for paying a cab ride, food ordering or for recharge of their mobile numbers. These means started penetrating to other smaller cities like Jodhpur, Patna, Allahabad, etc. over last few years. However post demonetization, there was a rapid jump in the digital payments and many service provider companies multiplied their customer base. There was steep rise in the download of apps like Paytm, Phonepe, SBI Buddy etc. Both customers and sellers adopted digital payments. Even the street vendors started using digital means to accept payments.

Presently there is a real rural-urban divide in digital payments adoption and usage. But looking at the brighter picture, almost 100 million rural Indians will have smartphones by end of this year who can use it for payments mode. Rural India will greatly benefit from JAM Trinity (Jan Dhan-Adhar-Mobile) strategy of the Government and now direct transfer benefits will become a reality. Schemes like MGNREGS are already using direct transfer to beneficiaries avoiding leakages, and if these people can use their smartphones then the dream of cashless and digital India is not very far.

The Government has been working on a war footing to promote a digital and cashless economy. These include –

  • Approval of the Pradhan Mantri Digital Saksharta Abhiyaan (PMGDISHA) to make 6 crore rural households digitally literate.
  • Organizing scores of Digi Dhan Melas to create awareness among people to use digital means for payments
  • Initiation from NITI Aayog for schemes such as Lucky Grahak Yojna and Digidhan vyapar yojana to use BHIM (Bharat Interface for Money) app for digital payments.
  • Many ministers of the Union Government have themselves taken the lead to promote it and urged people to go digital.

Such positive steps by the Government are laudable and present a strong case for India’s effort at going digital.

According to Indian Council for Research on International Economic Relations (ICRIER) Survey, if mobile penetration increases by 10% then GDP would increase by 1.2%. If broadband connection increases by 10% then GDP would rise by 2.7%. If all the Government services are provided through mobile phones then the GDP would increase by 3.2%.

The case for a digital India and it’s long term benefits are strong. The future of digital payments is very bright, and the numbers support it. India is experiencing a remarkable growth in digital payments. In 2015-16, a total of Rs. 4018 billion transacted through mobile banking as compared to Rs. 60 billion in 2012-13. The percentage of the digital payments through other modes is also increasing at a significant speed. We will surely witness a “digipay revolution” very soon as India has more than 100 crore active mobile connections and more than 22 crore smartphone users as of March 2016.

Abhishek Ranjan is a Research and Policy Analyst to Members of Parliament (MPs) Mr. Ninong Ering and Mr. Dilip Tirkey. He is also working as a Consultant to University of Chicago’s Delhi Center for Anubhav Lecture Series, and is a Policy Consultant for FinTech startup Credy. Earlier, he was a LAMP Fellow and graduated in Engineering from Manipal Institute of Technology.

India Budget 2017

The Finance Minister of India, Arun Jaitley, gave his annual Budget speech for 2017-18 today.

The Government is thinking seriously about pushing the economy into a “digital direction”. Here are some interesting announcements and observations related to digital payments –

  • Cash transactions above 3 lakh Rupees will become an offense
  • Target of 20 lakh Aadhaar based swipe machines by 2020
  • Demonetization will lower borrowing costs and increase access to credit
  • 125 lakh people downloaded BHIM app of the Government
  • Aadhaar Pay system to be launched soon
  • Service charge on e-tickets booked through IRCTC will be withdrawn.
  • Duty exempted on various POS machines and iris readers to encourage digital payments.
  • Proposal of creation of a six-member Payments Regulatory Board in the RBI.

Also, check out Budget highlights from The Hindu here.