DAW 16th December 2025, Mains Answer Writting 2026

DAW 16th December 2025, Mains Answer Writting 2026

Question

Besides welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the underprivileged. Discuss. (250 Words, 15 Marks).

Model Answer

Approach:

Introduction:

  • Briefly acknowledge India’s extensive welfare architecture for the poor.

  • Establish the core argument: welfare schemes alone are inadequate without effective management of inflation and unemployment, which determine real incomes, purchasing power, and livelihood security.

Body:

  • Explain the role of Welfare Schemes (Safety Net).

  • Why India needs deft management of inflation and unemployment to serve the poor and the underprivileged?

  • Way forward.

Conclusion:

  • Reiterate that welfare schemes are necessary but not sufficient.

  • Conclude with the need for macroeconomic stability, productive employment, and coordinated fiscal–monetary action.

Introduction:

  • India has implemented an extensive welfare architecture to support the poor and underprivileged. However, welfare schemes alone cannot ensure durable poverty alleviation unless accompanied by effective management of inflation and unemployment, which directly determine real incomes, purchasing power, and livelihood security.

Body: Role of Welfare Schemes (Safety Net):

  • Purpose: Provide immediate relief and basic security to vulnerable sections.

  • Example:

  • PMGKAY provided free food grains to ~80 crore people during COVID-19, preventing hunger.

  • Ayushman Bharat covers hospital expenses up to ₹5 lakh per family, reducing catastrophic health expenditure.

  • Limitation: Welfare support loses effectiveness if prices rise or jobs are unavailable.

Why India needs deft management of inflation and unemployment to serve the poor and the underprivileged:

  • Inflation Erodes Welfare Gains:

  • Issue: High inflation reduces purchasing power of cash transfers and wages.

  • Example: Despite CPI inflation easing to ~4.3% (Jan 2025), vegetable prices rose month-on-month, hurting poor households whose food share is high.

  • Implication: Benefits from DBT schemes (e.g., LPG subsidy) get diluted when market prices surge.

  • Unemployment Deepens Poverty:

  • Issue: Lack of jobs leads to income insecurity and dependence on welfare.

  • Example:

  • Urban unemployment peaked at 20.9% during COVID-19 (PLFS 2020), pushing migrants and informal workers into distress.

  • Implication: Welfare becomes compensatory rather than transformative.

  • Wage Inadequacy in Welfare Schemes:

  • Issue: Welfare wages are often not inflation-indexed.

  • Example: MGNREGA wages have lagged behind rising rural inflation, reducing real earnings.

  • Implication: Employment guarantee provides work but not adequate livelihood security.

  • DBT and Market Vulnerability:

  • Issue: Cash transfers expose beneficiaries to price volatility.

  • Example: PAHAL (LPG DBT): Cash subsidy fails to protect households when LPG prices rise sharply.

  • Implication: Without price control, DBT alone is insufficient.

  • Informality and Social Security Gaps:

  • Issue: Large informal workforce lacks job security and benefits.

  • Example: Over 90% of India’s workforce is informal, outside EPFO/ESIC coverage.

  • Implication: Informal workers remain dependent on welfare during shocks.

  • Fiscal Stress and Reduced Social Spending:

  • Issue: High inflation increases subsidy burden, constraining fiscal space.

  • Example: Fertiliser subsidy rose to ~₹1.95 lakh crore (FY24), limiting scope for expanded welfare.

  • Implication: Poor face higher out-of-pocket expenses when spending is curtailed.

Way Forward:

  • Credible monetary policy by RBI to anchor inflation expectations.

  • Example: RBI increased the repo rate to 6.5% (2023–24) to control inflation and signal commitment to price stability, helping contain food and core inflation expectations.

  • Indexing wages and DBTs to inflation to protect real incomes.  Example: MGNREGA wages could be automatically linked to CPI-Rural, similar to Dearness Allowance (DA) indexation for government employees.

  • Shifting focus to skill development and capacity building for sustainable employment.

  • Example: Pradhan Mantri Kaushal Vikas Yojana (PMKVY) provides industry-aligned vocational training to enhance employability of youth.

  • Formalisation of the economy through tax incentives and social security expansion.

  • Example: GST input tax credit and lower corporate tax for new manufacturing units encourage formalisation, while e-Shram portal extends social security coverage to informal workers.

  • Supporting infant MSMEs to scale up and generate jobs, rather than sustaining low-productivity firms.

  • Example: Credit Guarantee Scheme for MSMEs and Production Linked Incentive (PLI) support scalable enterprises to expand capacity and employment.

  • Expanding priority sector lending to include informal labour

  • Example: Extending priority sector status to loans for street vendors and gig workers, building on initiatives like PM SVANidhi, improves access to affordable credit.

Conclusion:

  • Welfare schemes are necessary but not sufficient for addressing structural poverty. Sustainable poverty reduction requires macroeconomic stability, achieved through low and stable inflation and productive employment generation. A coordinated fiscal–monetary strategy, combined with skill-led growth and formalisation of the economy, is essential to ensure that welfare interventions translate into durable socio-economic upliftment for India’s poor and underprivileged sections.