While welfare schemes are vital, managing inflation and unemployment is crucial for uplifting India’s poor and underprivileged.

Q.16 Besides the welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the underprivileged sections of the society. Discuss.

Model Answer:

Introduction

Inflation refers to the general increase in prices of goods and services over time, reducing the purchasing power of money. Unemployment is the condition where individuals who are capable and willing to work cannot find suitable employment. As of mid-2024, India faces moderate inflation with a Consumer Price Index (CPI) around 6%, and an unemployment rate hovering around 7.5%.

Body

Impact on the Poor and Underprivileged:

• Erosion of Purchasing Power: Inflation disproportionately affects the poor, as they spend a larger share of their income on essential goods. Rising prices of food, fuel, and healthcare can push them further into poverty.
• Job Insecurity: High unemployment rates lead to job scarcity, affecting the livelihood of the underprivileged who often lack the skills for high-paying jobs.
• Social Unrest: Persistent inflation and unemployment can lead to social unrest, increasing crime rates and reducing overall societal well-being.

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Reasons for Inflation and Unemployment:

• Supply Chain Disruptions: Global events like the COVID-19 pandemic and geopolitical tensions have disrupted supply chains, leading to inflation.
• Structural Issues: India's labour market faces structural issues such as skill mismatches and inadequate job creation in the formal sector.
• Monetary Policies: Loose monetary policies aimed at stimulating growth can sometimes lead to inflation.
• Agricultural Dependence: A significant portion of the population depends on agriculture, which is vulnerable to monsoon variability, affecting both employment and inflation.

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Government Measures:

• Monetary Policy: The Reserve Bank of India (RBI) uses tools like repo rate adjustments to control inflation.
• Fiscal Measures: Government schemes like MGNREGA provide employment and income support to the rural poor.
• Skill Development: Initiatives like Skill India aim to enhance employability by providing vocational training.
• Subsidies and Direct Transfers: Schemes like PM-KISAN and food subsidies help cushion the impact of inflation on the poor.

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Way Forward:

• Diversification of Employment: Promoting sectors like manufacturing and services can create more job opportunities.
• Inflation Targeting: Strengthening the inflation-targeting framework to keep inflation within the desired range.
• Education and Skill Development: Investing in education and skill development to reduce structural unemployment.
• Social Safety Nets: Expanding social safety nets to protect the most vulnerable sections from economic shocks.

Conclusion

Effective management of inflation and unemployment is crucial for the welfare of the poor and underprivileged. While welfare schemes provide immediate relief, long-term solutions lie in structural reforms, skill development, and robust economic policies. A balanced approach combining welfare measures with economic management can ensure sustainable development and social equity.

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