Poverty Reduction and Postal Network in India

 - Anurag Priyadarshee*

Poverty is a complex phenomenon and depends on various economic, social and environmental variables in a multi-dimensional space. It is an extremely significant issue for Indian society with some estimates suggesting that upto 75% of the Indian population may be poor and deprived of basic necessities to sustain a normally healthy life.

 

Literature investigating the causes of poverty in India can be categorized in three broad streams, while allowing for some overlaps. The structuralists attribute prevalence of poverty to unequal distribution of factors of production, mainly, land and capital. As the poor have a very limited supply of the factors of production, they are unable to participate in the process of economic growth. They are also unable to adequately access the health and educational infrastructure due to their assetlessness and thus most often fail to build up their capabilities. The situation is compounded due to continued social exclusion and discrimination. Others view the prevalence of poverty as a manifestation of inequitable economic growth across different geographic areas and various social groups. The situation, according to them, can be corrected by developing and nurturing institutions, and deepening and widening the markets so that they can effectively reach the marginalized. They believe that better outreach of institutions and markets, supported by appropriate technology would facilitate the economic growth to trickle down to the poor. Some others however believe that the absence of social protection measures and safety nets for the poor and vulnerable perpetuates poverty among them. According to them, the availability of social protection measures may help in correcting the poverty situation to a large extent.

It may not be feasible to address the inequality of distribution of factors of production in the prevailing politico-economic conditions in India. The efforts to reduce the poverty may therefore need to be focused on creating and developing appropriate institutions, and widening and deepening the markets. Microfinance can play a major role in developing such instruments to fight against poverty. At another level, strategy to combat poverty may involve initiating and expanding various social protection measures. These considerations explain the current emphasis on social protection and financial inclusion instruments to fight poverty not only in India but also in several other low-income countries. Both strategies however suffer from significant service delivery constraints causing exclusion of a large majority of poor households from access to microfinance, and inclusion and exclusion errors and elite capture of social protection programmes in almost all low-income countries. Such constraints are caused by the fact that such countries lack infrastructure capable of efficient delivery of microfinance and social protection.

India is differently placed in this regard as it has an extensive postal network that has the potential to efficiently deliver microfinancial services as well as social protection particularly in rural areas. In fact, India Post is the only agency suitably located to deliver such services due to its close proximity to the rural population, and its personnel being known to and trusted by the local communities. India Post network also has a long and rich experience of delivering financial services. It is the largest financial service delivery network in the country and has already contributed significantly towards financial inclusion in the country. Currently it has more than 250 million deposit accounts and more than 14 million clients of its life insurance business in addition to covering a sizeable population of the country through its remittance services and pension payments. It may however be important for India Post and the poor households of this country that it ventures into full-fledged microfinance and expand its outreach to also cover the very poor segment of the society.

 

Being a government department, India Post is in a better position than similarly placed agencies such as banks and NGOs, to coordinate with other government departments offering social protection. Moreover, it possesses valuable information-capital on the households that can be leveraged to efficiently identify the prospective recipients of the social protection programmes. India Post is currently disbursing about 50% of the wages under MGNREGS through its 47 million wage accounts. Additionally, it is also making pension payments to widows, disabled and old people located below the poverty line under various social protection schemes. Here again much still needs to be done to fully exploit the potential of India Post towards delivery of social protection.

India Post, being a part of the government of India, carries responsibility to further the mandate of the government and thus needs to more deeply engage with the government policies towards poverty reduction. This engagement is also likely to enhance India Post’s revenues while simultaneously serving the unserved, and thus reducing their economic isolation and improving their social and economic conditions.

This will, however, require India Post to rework its priorities and refocus on its strengths. It will need to engage more deeply with the state governments to design and offer more comprehensive financial service packages built around delivery of social protection programmes. Rural postal personnel will need to be adequately trained to enable them to manage relatively more complex financial transactions. India Post will need to review and overhaul the financing arrangements of rural post offices and institutionalize incentive structures for the staff for generating and carrying out additional work.

* Director (Rural Business), India Post.

The views expressed are personal.