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Right targeting of Social Protection Schemes goes a long way in reducing poverty

Subsidised crop insurance, food or cash transfers, cultivating a ‘savings’ mindset along with skilling utra-poor people in income-generating livelihoods will create sustainable livelihoods
 
In recent times, microcredit schemes have been presented as a panacea, attracting billions of rupees around the world. However, a series of trials have now shown that microcredit doesn’t do much good — often not even increasing average incomes, and schemes can bury the poor in debt. 
 
Subsidized crop insurance is another direct approach designed to help generate more income for the poorest of farmers by making agriculture less risky. But how useful is this approach? 
 
Munshi Sulaiman, Research Director of Save the Children International with Michael Murigi of the University of Sydney, analytically weigh up the costs and benefits of this along with other direct approaches to poverty. 
 
Pradhan Mantri Fasal Bima Yojana (PMFBY) is the most recent — and most comprehensive — crop insurance model, launched in 2016 and reaching some 39 million farmers. Typically, the insurance premium is almost entirely paid by the central and state governments. 
 
In Andhra Pradesh as an example, the researchers find that PMFBY, if expanded from 22% coverage today to 50% coverage in 2024, will cost around ₹2 lakh-crore. 
 
This expenditure generates a number of benefits, including the actual insurance pay-outs, and allows farmers to take higher risks on more valuable crops that rely on bigger levels of rainfall. The insurance safety net means fewer suicides and less malnutrition for farming families.
 
Crop insurance a boon for farmers
 
While protecting farmers from income shocks is an important outcome on its own, the benefit of insurance coverage on farmers risk-taking behaviour, investment decisions and impact on productivity are the major economic justification for subsidizing crop insurance. 
 
In the long run, two-thirds of the benefits come from the pay-out and one-quarter from higher profits. In total, every rupee spent on the policy achieves societal good worth about ₹1.40 rupees in Andhra Pradesh. 
 
In this case, the direct approach to alleviating poverty by subsidizing insurance does achieve more than it costs, but it can hardly be said that it has dramatic returns. 
 
Another approach is a direct response to poverty that combines very specific interventions in a way that has been shown to have an immediate and sustained impact on food consumption, in-come, savings as well as assets. 
 
Eliminating extreme poverty depends critically on creating sustainable livelihoods for the economically active ultra-poor: households who are landless and primarily rely on casual work for their livelihoods. 
 
The success of a “Graduation Approach” in a number of countries has made it a critical tool in social protection schemes. More than 40 countries are now implementing different versions of this model, at various scales. 
 
How Graduation Approach reduces poverty 
 
This approach was forged by the world’s largest non-govern-mental organization (NGO), BRAC, and is implemented at small scale by various NGOs in West Bengal, Andhra Pradesh, and Jharkhand. This model follows a strict set of targeting criteria to reach the ultra-poor and provides time-bound support that usually lasts between 18 and 24 months. 
 
First, food or money is given to the poor to ease the stress of daily survival; second, beneficiaries are encouraged to start savings. Third, they are provided with live-stock or other income-generating assets. 
 
Following this, there is training provided in both technical skills and life skills. Finally, beneficiaries are provided with health support. Each intervention costs more than ₹25,000, with half of this spent on the asset and food. Reaching 30% of poor households would cost ₹11.2 billion in Andhra Pradesh. 
 
Based on long-term studies from West Bengal, the increase in annual household consumption, savings and assets will mean every rupee spent will achieve at least ₹3.50 of social benefits and possibly even ₹5 — making it two or three-times more effective as farmer insurance subsidies. 

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