Subsidies & poverty alleviation
Chandrabhan .
P&L, D2C, Channel & Product strategy, Growth Manager, Emerging Markets, Consumer goods, IOT, Sports, Behavioural Economist
People have a huge misconception about subsidies being largely a tool of developing or underdeveloped economies to support their poor. Reality is far from this fiction.
Subsidies are a widely used poverty-alleviating mechanism e.g.,
16% of the US military veteran families get food subsidies; and
12.5% of the US population as a whole (in both cases I mean the US food stamp program). {These numbers I looked up y'day}.
During COVID, the US had a child care tax credit -- a subsidy -- and it reduced childhood poverty by 30%. The point I'm making is that subsidies are part of what lift people out of poverty.
This "how can the poverty level be down when you're giving subsidies" ignores the fact that subsidies are a widely used poverty-alleviating mechanism.Added - in case the point wasn't clear --
These subsidies are also very much common in UK, Australia, Norway, Germany and almost every OECD country.
Travelled extensively across North & Central India through big/smaller cities and pilgrimage sites last few month. Marked reduction, almost total absence of begging on streets in most places visited. Even the poorest were trying to make a living, something is working damn right well now.
This alone made my heart fill with joy and made the trip worthwhile.Real economic activity and growth of Bharat is IMHO significantly underreported. Also, the entire urban landscape of Bharat is seeing huge construction activity. Everything from flyovers, metros, office buildings/parks, to high-rise "chicken coops". Air quality may suffer until the dust settles.
High growth and large decline in inequality have combined to eliminate poverty in India for the PPP$ 1.9 poverty line. (Here we use the PPP$ 1.9 line [2011 prices] rather than the PPP$ 2.15 line at 2017 prices because the former closely corresponds to the official India Tendulkar poverty line.) The Headcount Poverty Ratio (HCR) for the 2011 PPP$ 1.9 poverty line has declined from 12.2 per cent in 2011-12 to 2 per cent in 2022-23, equivalent to 0.93 percentage points (ppt) per year. Rural poverty stood at 2.5% while urban poverty was down to 1%. For the PPP$ 3.2 line, HCR declined from 53.6% to 20.8% (almost 3 ppt per year). Note that these estimates do not take into account the free food (wheat and rice) supplied by the government to approximately two-thirds of the population, nor utilization of public health and education.
The relatively higher consumption growth in rural areas should not come as a surprise given the strong policy thrust on redistribution through a wide variety of publicly funded programs. These include a national mission for construction of toilets and attempts to ensure universal access to electricity, modern cooking fuel, and more recently, piped water. As an example, rural access to piped water in India as of 15th August 2019 was 16.8% and at present it is 74.7%.
We are having a very wrong debate as part of the electioneering - Jobs & employment. Mostly it means govt job (people associate it with lifelong employment without much work & chances to earn bribes). The focus on job creation is not the solution for further poverty alleviation, it will never be never enough nor will it lead to prosperity. Entrepreneurship is.
Now that we have experimented with Mudra loans and it works, time to scale it up 10x, even 100x and monitor closely against misuse.Over the years this will reduce the burden of direct transfers and lead to sustained economic activity by self employment.
The current trajectory has two core foreign policy nightmares for India...
India needs more and more capital to push entrepreneurship and technology to improve TFP. Subsidies have made a whole lot of population stand on their feet, not bother about basics of food and housing, devote themselves to pursue entrepreneurship - even though small scale.
Startup spread in small towns is a proof.
Business Head - Consumer Products; P&L Management; Marketeer; Licensing; Start-Ups; Turnaround Expert; Consultant
5moIntersting perspective - agree on the subsidies part but not sure about Entrepreneurship as the core tool - job creation is critical (not only the gov jobs but private sector) - thoughts are primarily led by capitalism that may not be the best solution for our nation that has so high population on small land.