Suresh Lal , July 17 (IND Samachar) : We had a prime minister who ruled us for 10 years and had all the imaginable academic decorations and the international accolades one could wish for. Now, we have a prime minister who is challenged about his education credentials but who proudly announces his origin to a tea stall unabashedly. While Manmohan Singh has always talked volumes about financial inclusion, Modi had taken 3 Giant Steps in solving the problem of poverty while talking nothing about the nuances of economic theories.
One of the biggest challenges faced by India was the dubious distinction of being home to the largest number of poor in the world. The tag had been recently passed on to Nigeria without much fanfare. To say that this has been achieved due to increase in GDP alone and its accompanying trickle-down effect would be a farce and disservice to the tireless work of some of the faceless people who achieved this stupendous feat. In my opinion, this will be a watershed event than anything else like India surpassing UK and France in GDP or becoming superpower in services segment.
So, how did the Modi government actually achieve this feat?
For that we need to understand the lives of poor before appreciating the solution. The lower strata of the society are eternally chained to poverty by three major recurring events in their life. Understanding these three has helped in creating measures to alleviate their impact and bring them out of the vicious cycle.
First Chain: Dangerous Jobs. Most of the life threatening jobs are done by poor and lower middle class people. Jobs like construction, sewage works, driving, security, and even robbery and prostitution falls on their head. When these people lose their lives at a relatively young age at the peak of their earning career, it almost becomes impossible for the family to get out of the financial trap and forced to exist in the margins. Even the children are forced to labor for existence foregoing education. It takes another generation to be alive to guide their descendants to give a normal life.
Second Chain: Debt trap. Most of the poor or lower middle class do not have access to banking and hence low cost credit. Once in a while they borrow for family emergencies and they get into debt trap. The local money lenders who are usually thugs and connected to politicians and police lend them at usurious rates. Any default is met with stringent action. The interest rates vary between 5% and 10% per month, on a conservative estimate. For example if a person takes a loan of Rs. 50,000 he has to pay anything between Rs. 2,500 to Rs. 5,000 for the rest of his life. For people belonging to lower economic strata it is anywhere between a quarter to half of their income. This becomes a millstone around their neck that is too difficult to cast off.
Third Chain: Mortal Illness. The last words heard by anyone talked by his close blood relations is the plea to the doctors “Please save him, whatever be the cost”. Everyone tries to save their loved ones till every bit of possibility is exhausted. The families that avoid the first two traps will be strongly bound by this third trap. They not only exhaust all their financial nest eggs, they also get bound by second chain of debt trap. They not only lose all their fixed assets but also mortgage their financial future.
The third trap is especially vicious as it adds more poor people in its ranks.
But all these are obvious problems in hindsight. Let us see the 3 Giant Steps taken by Modi to tackle this menace and throw the poverty out of the country once and for all.
Before taking these steps Modi built a strong foundation to implement them mehodically. Jan Dhan Yojana was announced to create savings accounts for all households in the country and linked them to Aadhar.
First Giant Step: Life insurance coverage for all Indians. The insurance was applicable to all Indians and the amount was 2 lakhs for loss of life and 4 lakhs for accidental death which poor people suffer from. At the nominal cost of mere Rs. 342 per year. This leaves the family to live of life of dignity even if they lose a family member who was at the prime of earning career.
Second Giant Step: Mudra Loan. I am not going to challenge whether jobs or created or not. But what I know for sure is that many people have taken loans ranging from Rs. 20,000 to Rs. 50,000 and have repaid the loans taken from usurious money lenders. Crores have stepped into bank premises and have started demanding their right to financial freedom. By this simple step, they have doubled their take home pay and have started investing it in their next generation. Most who have repaid promptly have got a track record and have availed loans ranging from 50,000 to 1 lakh. As the government has underwritten for their default, the banks have started lending them without asking for collateral and hence brought about real financial inclusion.
Third Giant Step: Modi Care. Popularly known as Modi Care, the universal health insurance scheme targeting 10 crore households, or close to bottom half of Indian population, is still in pipeline and has not yet been implemented. Once this is done, the third deadly chain will be broken forever.
If we are able to see visible poverty reduction with the implementation of just two steps, the third will definitely result in eradication of poverty once and for all from the country.
After that, poverty becomes a personal choice of falling into vicious debt trap and the blame will not fall on the state.
I am sure the Three Step Formula of Modinomics will be copied by all the developing countries and India will take a concrete step into really becoming Vishwaguru.
Suresh Lal (the author has worked in energy, IT and banking sectors and retired at 35 from corporate life to pursue his goals)
The author can be followed in his Twitter id @sureshlal