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November 1, 2007

The second step forward

Rethinking the design of poverty eradication programmes

Gulzar Natarajan

Poverty alleviation programs can be divided into two broad categories – mitigation and eradication. The first consists of basic social welfare functions like primary education and health care, social safety programs, and the basic minimum of civic services and infrastructure. The second, consists of more specific poverty eradication assistance like self- and wage-employment schemes, different categories of subsidies, soft loans and so on, which are aimed at assisting deprived households increase their incomes. This second category of poverty programs is the subject of this article. At the macro-level, economic development is a continuous process of movement up the income ladder, as manifested by the rising per capita income. In the real world, at the level of each economically handicapped person (EHP), this movement will have a substantive effect only if it is a discrete jump and not a continuum crawl. Put differently, an individual is meaningfully benefited by a government poverty elimination program only if the assistance catapults him to a higher trajectory of livelihood or growth.

Spreading ourselves thin in an effort to cover as many people as possible, we give too little help for anybody to actually achieve our objective. The beneficiary will continue to keep returning the following year demanding more assistance. We do little else but take one step forward and two steps backwards. In contrast, if we focus our resources on those at the margins, we utilise our resources more efficiently. It helps achieve our desired outcomes, and lift the beneficiaries to a higher level of economic opportunity and growth. That will be two definitive steps forward.


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