Former Governor of the Reserve Bank of India, Raghuram Rajan, emphasised the criticality of targeted government cash transfers to uplift the poorest households during an interview with India Today. Rajan outlined that while welfare schemes often face criticism as "freebies," when accurately directed towards the neediest segments, they empower families to make better choices for their children, such as accessing improved nutrition and education. He cautioned against indiscriminate and excessive cash transfer programs, cautioning that these could strain government finances and detract from essential investments in sectors like healthcare and education.
Speaking on the pitfalls of poorly targeted schemes, Rajan cited the example of reverting from new to old pension schemes, expressing concerns about the potential financial strain on the government. He specifically highlighted the Congress government in Himachal Pradesh implementing an old pension scheme, terming it as poorly directed, as it targeted a sector already relatively stable economically.
"But where it is well targeted, some is okay. But you have to be careful because you don't want to extend it to a point where everybody thinks that's the way forward, and you're under-investing in schools, health care, nutrition - all those good things that we talked about," Rajan said.
Furthermore, Rajan addressed the issue of pre-election promises, citing instances where parties pledged substantial loan waivers before elections and later struggled to execute them, prompting the need for independent institutions to assess the feasibility of such promises before implementation.
Economist Rohit Lamba echoed Rajan's sentiments, stressing the necessity for a more informed discourse on government handouts. Lamba expressed disappointment in the limited conversation around government jobs and welfare policies, urging for a broader spectrum of discussions and a more proactive approach towards policy-making.
Discussing the dynamics between economists and politicians, Rajan emphasised the role of public debate in shaping policy decisions. He advocated for politicians to take ownership of proposed ideas, adapting and implementing them, ultimately fostering a forward-thinking approach if accompanied by a willingness to assume calculated risks.
Rajan concluded by asserting the necessity for a multifaceted approach, combining the will to effect change with a willingness to relinquish excessive power, suggesting this balance is crucial for effective governance and checks against potential deviations from the intended path of progress.