Government needs to loosen the purse strings to properly help the poor: Abhijit Banerjee

Nobel laureate Abhijit Banerjee said India needs to completely revamp its social welfare system given that the pandemic has exposed the gaps in the current system and the government was using the National Rural Employment Guarantee Act (NREGA) as a short term emergency response tool.

“NAREGA is not designed for anything on an emergency response...So we need to also rethink the entire welfare system and I think in that context we also need to take into account the urbanisation of poverty and how we find something commensurate for the urban population,” he said on Wednesday.

The economist was speaking during an online panel discussion on how the shutdown has exposed gaps in the country’s social safety net, hosted by the National Council of Applied Economic Research (NCAER).


Speaking on the government’s one nation, one ration card initiative, Banerjee said it should be implemented without asking questions of who is entitled to what. “I like the idea for the medium run for one nation, one ration card. In the very short run I worry that the implementation will lead to lots of exclusion about are you a citizen, are you entitled to it,” he said, adding, “I think trust in the system is very important at this point. And I would say keeping that in mind, it's very important that we do not get into the qualities of who is entitled to what. That will further undermine trust in the system.”

Public Distribution System
Expenditure secretary, TV Somanathan, who was part of the discussion praised the public distribution system (PDS) for enabling the government to transfer food to those most in need during the lockdown rather than a food voucher system since “you cannot eat a food voucher”.

“The fact that we had a physical public distribution system with all its inefficiencies actually proved extremely useful in the last four months because you cannot eat a voucher,” Somanathan said, adding, “So this enormous physical distribution system that India has maintained for decades and the very large buffer stocks...Paradoxically, they turned out to be a lifeline in this crisis.”