UPSC Mains 2022 GS Paper 2 Q16: model answer

In late 2019 onion prices in some cities crossed ₹100 a kilo; for a poor household that spends nearly half its budget on food, that is a pay cut. A PM-KISAN instalment of ₹2,000 can be wiped out by one season of food inflation.

Why welfare schemes are not enough

• Transfers are fixed in rupees; prices are not.
• Schemes support consumption but do not create lasting income.
• The poor need stable prices and steady work more than occasional relief.

Inflation as a tax on the poor

• The poor spend a large share on food and fuel, where inflation is most volatile.
• They hold savings in cash and have no hedges.
• Informal wages adjust slowly.
• Inflation targeting (2016): the RBI's 4% ± 2% target, set by the Monetary Policy Committee, has made inflation more predictable; headline inflation fell below 2% in parts of 2025.
• But food inflation driven by weather and supply shocks needs supply-side tools: buffer stocks, open market sales, export curbs and storage.

Unemployment and underemployment

• PLFS shows low open unemployment but high disguised unemployment in agriculture and low-paid self-employment.
• Youth and educated unemployment is high.
• Women's labour participation, though rising, is still low.
• Most jobs are informal, without social security.

Deft management

• Monetary-fiscal coordination: keep inflation low without killing growth.
• Supply-side reforms: cold chains, crop diversification, Operation Greens (TOP crops).
• Labour-intensive growth: textiles, food processing, tourism, construction, MSME credit.
• Employment-linked incentives and the PM Internship Scheme.
• MGNREGA as an automatic stabiliser in rural distress, as in 2020.
• Skilling linked to jobs.
• Social security for gig workers under the Code on Social Security.

Conclusion

Welfare schemes catch the poor when they fall; stable prices and good jobs keep them from falling. The best poverty policy is a macroeconomy that works for the bottom half.