Is "giving away" money to the poor the only lethal weapon to
eradicate poverty?

Rodoshee Das

2nd September, 2020

As our Indian economy is dipping at a faster rate after demonetization, followed up by the lockdown situation right now due to the pandemic, various policies are being ushered in by our government as well as RBI (Reserve Bank of India). Different people from different fields are suggesting various ideas and theories let the poor and the middle-class people get rid of the perils of surviving in an economy that is hogged by high prices in markets and minimum supply. In this light, Abhijit V. Banerjee (Nobel Prize winner 2019 for his research in the field of Economics) suggested that money should be given to the poor people using various policies especially microfinance companies. This has been regarded as a viable solution by many economists, opposition parties as well as the government itself. But as wonderful as it seems, will it be possible to realize this in a country like India, where people don’t know how to use money?

Economics is a field where science meshes with human psychology. So when it comes to understanding the poverty of a section of the society, the theories and models do take a backseat in front of their psychology and their needs as an economic entity. Poverty is not a plight to be pitied but rather a challenge that should be solved by taking up a case one by one. Most of the people in this world are swirling in a cycle, in economics which we call a poverty trap, a situation from where a person’s economic situation doesn’t improve and just goes on getting repeated in a whirlpool of saving, consuming and investing.

** “There will be a poverty trap whenever the scope of growing income or wealth at a very fast rate is limited for those who have too little to invest but expands dramatically for those who can invest a bit more. On the other hand, if the potential for fast growth is high among the poor, and then tapers off as one gets richer, there is no poverty trap.”**

But what goes unacknowledged mostly in this problem is how to make poverty-stricken people educated or rather conscious enough on how to use the money they are given if we assume the fact that the government starts lending money to the poor via various policies?

We all know about various educational schemes like “Sarva Shiksha Abhiyan” and “Beti Bachao, Beti Padhao Yojana”. The government provides free education and a mid-day meal for the former one and monetary help to afford educational costs for the latter. But did anyone take a reality check on what happens to these resources? Most of the time, the young girls are just a showcase for the family to get a monthly allowance at the cost of her education. Sometimes the mid-day meal is the only reason they send their children to school. Here we can raise a few questions, is the science behind these policies wrong? Does the implementation by the government lack credibility? The answer would be mostly no.

If we carefully go through the first case, we can observe that the girl does need education; but for her as well as for her family, survival is the dominant need, where hunger and decent living clouds the need for education. Same for the next case, where feeding the child is the utmost need as most of the time an average poor family in India doesn’t even get regular nourishment. Every year people, especially children, die of malnutrition in our country as well as other highly populated and poor countries. In India itself, more than 50 million school-going children cannot read a very simple text. 

We are aware of the 100-day job given by the government which involves getting paid in exchange for labor. This is mainly targeted towards those who have seasonal employment. But after 100 days and even after seasonal income, they can’t provide for their family and themselves. This is partially due to a lack of money but mostly due to the lack of knowledge. One of the greatest examples here is the dhakis of West Bengal. Other than the autumn season and 100 day’s job, they don’t have any income. By knowledge, I not only mean the lack of information to use the money left with them but also the lack of skills outside their stipulated profession; which most of the time disqualifies them out of these schemes.

If we go into the darker sides, we will see that having more than two children in one family, wasting money on liquor and other illegal drugs, domestic violence on women are also some of the factors that rule out all the possibilities of giving away money to the poor without educating them about its wise usage. 

This is happening just like that trap, even the policies cannot come to rescue as the major problem starts from lack of education. In this case, I am not discussing degree education, but education about how to earn a living and save it, which needs are important, where can I get economic, social and healthcare benefits, etc. What people living in poor and remote areas don’t have is information; they don’t even have the information that they have rights to information. That is the irony our economy is posing.


Microfinance companies are proving to be helpful these days as they reach out to the remote areas and encourage people to open bank accounts to keep small amounts with a high interest rate and flexible repayment time period, depending on the income slab. The government is also collaborating and funding huge amounts in these initiatives. Economists are also working on policies to give free monetary help to the poor so that they can have money to provide for their families or start a job. But will the science of economic policies, thousands of equations, theories, graphs, and models come to the rescue for those who don’t know “What are my rights”?  


** Abhijit Vinayak Banerjee and Esther Duflo, “Poor Economics”, Penguin Books, 2011


About the Author

Rodoshee is a student, completing her Economics honours at Jadavpur University, Kolkata.

A bookworm and a debater, she also takes interest in philosophy, world history and current affairs.