Big numbers, small impact? Understanding the effect of the Centre’s $400 billion welfare spend on monthly consumption

$400 billion — this is how much Prime Minister Narendra Modi has said his government spent for the welfare of hundreds of millions of poor and lower middle-class Indians since coming to power in 2014. Since 2014, Modi’s government has put in motion what former chief economic advisor Arvind Subramanian has called “New Welfarism”, where the Indian state prioritised providing goods such as cooking gas, toilets, free grains, electricity, piped water and cash transfers over public services such as health and education. “Schemes like PM KISAN, MGNREGA, MGNREGA wage increase, Ujjwala Yojana, and PMGKAY are increasing the per person per month rural income by ₹437,” noted the SBI in its findings, PM KISAN is the government’s cash transfer scheme for landholding farmers; Ujjwala Yojana provides concessional LPG connections to families in rural India that are below the poverty line; Mahatma Gandhi National Rural Employment Guarantee provides guaranteed employment for 100 days every year; and the Pradhan Mantri Garib Kalyan Anna Yojana is the free food grain programme. “The HCES doesn't really capture the concept of New Welfarism.” One of the most popular government welfare schemes is the provision of free food grains to about 800 million poor households in the country — the PMGKAY. Se added that welfare schemes are more about the fulfilment of citizens’ rights in a democracy rather than being touted as gifts from the government, which she noted has been the case under the government’s “new welfarism.” Even after ten years and $400 billion worth of welfare spending, economists do not have plausible means to measure the economic impact of these schemes on millions of India’s poor households, an exercise which carries pressing urgency at a time when rural India is under the throes of an economic distress and income inequality in the country remains high.