ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Reforming Social Protection for Economic Transformation

India is a low middle-income economy with a development policy that aims to promote it to a high middle-income economy, which requires both economic growth and structural transformation. This article turns the spotlight on some aspects of structural transformation, such as the movement to higher productivity jobs, the formalisation of the vast informal sector, and the promotion of women as economic agents. The experience of other economies shows there is room for a higher share of social protection expenditure in India, but bringing that about would depend on increasing tax revenue and reducing subsidies that are not for the poor.

India is now a low middle-income economy and the aim of development policy is to promote its passage to a high middle-income economy, which requires both economic growth and structural transformation. Attention is concentrated here on a few aspects of structural transformation, such as the movement to higher productivity jobs, the formalisation of the vast informal sector, and the promotion of women as economic agents. Emphasising the role of social protection in aiding economic transformation and growth does not mean neglecting its usually accepted objectives of increasing the well-being of households and individuals below an acceptable minimum standard, and of it being an income and consumption stabiliser during economic downturns. Social protection is here taken to be a combination of non-contributory social assistance, and labour programmes, such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Setting the Scene

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