J-PAL Urges State Fiscal Reforms for Accelerated Poverty Reduction

Iqbal Singh Dhaliwal, Global Executive Director of J-PAL at MIT, emphasizes that while the central government's fiscal deficit remains manageable, state governments in India face significant financial challenges due to the accumulation of outdated welfare schemes. He advocates for the rationalization and phasing out of schemes that have outlived their usefulness, comparing them to old electronics that need replacement. Dhaliwal suggests redirecting funds towards productive purposes such as supporting small businesses, improving public schools, and primary healthcare centers instead of direct cash handouts. The timing, method, and amount of welfare disbursements also require experimentation to enhance effectiveness. Additionally, he highlights the threat posed by artificial intelligence to low-skilled jobs in sectors like BPO and IT, urging upskilling and training to prepare vulnerable workers and advising educational institutions to raise awareness about job sector risks. Overall, Dhaliwal calls for strengthened state financial health and strategic investment in human capital to accelerate poverty reduction in India.