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Lack of Opportunities : Main Reason for Poverty

Bibek Debroy
Member, NITI Aayog

Poverty remains one of the most pressing challenges facing the country today. But why are the people poor? Why are able-bodied working age group people poor? Old people, disabled people, that’s different.

Let me first clarify, people aren’t voluntarily poor. People are poor because they don’t have opportunities. Those opportunities may be in the form of physical infrastructure, may be in the form of social infrastructure, may be in the form of technology or may be in the form of markets. So, the best way of addressing poverty is to remove these distortions.

Several of those have to be delivered in the form of public expenditure. One can distinguish between public expenditure and public financing. The second question that arises is a question of gazing the efficacy of various schemes of public expenditure that we have got.

Entrepreneurship requires an ability to take risk. Risk taking does not always succeed. So to ensure success in some sense you must also make sure that there are provisions for failure. We still don’t have satisfactory exit provisions for the MSME sector.

If you need to subsidise, you need to identify people who are poor and are the beneficiary of subsidies. Since 1991, we have been going round and round in circle trying to figure out who is ‘poor’. This can’t be done through something like the National Sample Survey (NSS), which is not a Census.

Several states have undertaken surveys of Below Poverty Line (BPL). Several socio-economic surveys have also been done in the rural areas. This is not based on just calories intake etc. These are based on, amongst other things, ownership of various durable assets.

We have a fantastic figure now of people who have bank accounts. What we don’t have is enough financial products to persuade those people to use those bank accounts.

We also have mounting figures of people who have got Aadhaar numbers. Though initial hiccups, but now apart from the legal issues of whether Aadhaar should be mandatory or not, it is doing very well. A large number of people are being added every day. Matching subsidies of whatever form with Aadhaar and transferring it into bank accounts through Direct Benefit Transfers (DBT), leakages can be eliminated. Although, it’s also true that in many of the programmes, Aadhaar numbers are not embedded yet.

MSME

Entrepreneurship requires an ability to take risk. Risk taking does not always succeed. So to ensure success in some sense you must also make sure that there are provisions for failure. We still don’t have satisfactory exit provisions for the MSME sector. We do have it for the corporate sector. But we don’t have it for the MSME sector.

Consequently, there is no differentiation, between corporate sector, entrepreneurs and enterprise. An enterprise fails and if that means you punish the entrepreneur we will never be able to ensure entrepreneurship.

Bibek Debroy

Bibek Debroy is an economist and was educated in Ramakrishna Mission School, Narendrapur; Presidency College, Kolkata; Delhi School of Economics and Trinity College, Cambridge. Presently, he is Chairman, Economic Advisory Council to the Prime Minister, Government of India. He has worked in Presidency College, Kolkata (1979-83), Gokhale Institute of Politics and Economics, Pune (1983-87); Indian Institute of Foreign Trade, Delhi (1987-93); as the Director of a Ministry of Finance/UNDP project on legal reforms (1993-98); Department of Economic Affairs (1994-95); National Council of Applied Economic Research (1995-96); Rajiv Gandhi Institute for Contemporary Studies (1997-2005); PHD Chamber of Commerce and Industry (2005-06); and Centre for Policy Research (2007-2015). Dr. Debroy was also Member, NITI Aayog up to 5th June 2019. He has authored/edited several books, papers and popular articles and has also been a Consulting/Contributing Editor with several newspapers.
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