Context: Policymakers must break India’s cycle of poverty, and should turn away from supply-side measures and pursue demand-side policies to help the common man.

Factors behind the mass poverty in India 

• Lack of policy incentives: Policy thrust on Electric Vehicles and renewables resulting in huge opportunity cost.
• Economic issues: A slowing economy, with little to no demand-side policy measures.
• MSMEs have had a rough decade, being dislocated by demonetisation and hit by GST system. 
• Pandemic impact on personal and fiscal finances: Falling income, rising inflation and no direct benefit transfer. 
• Rise in personal debt even before pandemic: Between 2012 & 2018, number of Indian households with debt rose significantly, with an incidence of indebtedness in rural households (35%); in urban households (22.4%).
• Food system issues: Eg. High dependence on imports for palm oil having concomitant impact.
• Farm sector crisis – Decline in net-worth: Avg. farmer’s net worth declined by 33.8% between 2013 and 2019; 
• Credit accessibility gap: Poorest Indians at the worst conditions to get new loans. Such citizens are charged loans at 25-40% annual percentage rate and then chased by recovery agents. 

Way Forward: Steps towards reducing mass poverty

• Learning from Bangladesh: Develop competitive labour-intensive sectors like ready-made garment industry. 
• Incentives to informal sector and MSMEs to acquire scale can be provide, while pursuing trade deals with Europe, Canada and the US that unlocked access to such markets.
• Pursue demand-side measures, seeking to help the common man. Eg. Income transfer schemes.
• Reforms to support MSME sector: Opening finances, rationalise taxation regime etc.

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