Nobel Laureate Dr Esther Duflo Recommends Implementation of Direct Cash Transfers to Avoid “Society-wide Poverty Trap”

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Mumbai, May 12, 2020: Dr Esther Duflo, 2019 Nobel Laureate, Massachusetts Institute of Technology (MIT) Professor, and Director – J. Abdul Latif Poverty Action Lab (J-PAL), said that it is essential for government, business, and NGO stakeholders to focus on cash transfers to economically vulnerable populations to avoid entering into a “society-wide poverty trap” in India. Dr Duflo said, “this is something business should be keenly interested in and very much behind it, not just because it’s the right thing to do morally, but also because I think it is the most responsible thing to do economically…self-interested business should be very much lobbying for this cash transfer.”

Dr Duflo made her remarks in the first session of a three-part webinar series titled, ‘Leaders with Purpose’, co-hosted by Samhita Social Ventures and IDFC Institute, on Monday – May 11, to discuss how to balance human, health, and economic factors when formulating responses to the COVID-19 pandemic. (The full recording of the webinar is available at https://bit.ly/SAMHITA).

The panel comprised of Dr Duflo along with a number of Corporate and civil society leaders. Panellists included Hindustan Unilever (HUL) Chairman and Managing Director – Sanjiv Mehta, Godrej Consumer Products Chairperson – Nisaba Godrej, Self-Employed Women’s Association (SEWA) National Coordinator Renana Jhabvala, and Pratham CEO – Dr Rukmini Banerji. The panel was moderated by Dr Nachiket Mor, who is currently serving as a Visiting Scientist at the Banyan Academy for Leadership in Mental Health and is the former India Country Director of the Bill & Melinda Gates Foundation, and Priya Naik – Founder & CEO, Samhita.

“We have – both Abhijit Banerjee and I – really insisted on the need for the government to act quickly and swiftly to prevent a lot of people who are not ultra-poor but merely poor, or maybe not even poor…to avoid those people to completely collapse back in a situation where it would be much harder to get out,” Dr Duflo said of her own and fellow Nobel laureate’s views. “That in a sense is something that would affect them personally – an individual poverty trap – but can also create society-wide poverty traps.”

Samhita Social Ventures has facilitated and launched two alliances – the India Workers Alliance (IWA) and India Protectors Alliance (IPA) – to support migrant and informal sector workers who have been economically-affected by the COVID-19 crisis, as well as frontline workers such as health workers and law enforcement. The alliances are collective CSR funds, which came to life working in tandem with corporates, social enterprises, non-profits and government agencies to deliver the right support to the right person quickly. The solutions, including direct cash transfers, insurance and social security, and capacity building and upskilling support, have been developed in partnership with experts, corporate and civil society leaders, and the government. The alliances have reached upwards of 35,000 people thus far, and are continuing to expand reach.

Monday’s webinar session saw all panellists collectively stressing the importance of effective multi-stakeholder collaboration and cooperation to ensure last-mile service delivery to those most at risk. Nisaba Godrej and Sanjiv Mehta remarked on the importance of business leaders considering the safety and security of workers in manufacturing and distribution networks and working in tandem with NGOs to identify and deliver support to the most vulnerable communities. Renana Jhabvala reiterated Dr Duflo’s recommendation of direct cash transfers as an effective way to promote well-being and resilience in low-income communities and remarked on the importance of strengthening the systems through which the funds can be accessed. Some relevant measures included expanding the coverage of banking correspondents, who work with the bank to reach out to the most rural and remote areas of the country and addressing the high failure rates of digital payments across the country.

Dr Duflo commented on the opportunity the pandemic has presented to rethink and transform India’s education system, and the importance of not rushing back to pick up the curriculum where it was left off. Dr Rukmini Banerji echoed this, saying “there should be no rush…into the curriculum; we need to spend this time to really build our foundations again…most Indian children needed this building of the basic reading, basic arithmetic – and let’s take our time to do that.” She also stressed that though schools have been closed, children have been learning a lot about how to manage crises and scarcity by watching their families and communities’ reactions to the COVID-19 pandemic and that adults should “need to spend time in learning from children what they have learned so that we can then build on that.”

There are two webinars in the “Leaders With Purpose” series to follow this week:

  • 15:30 – 18:30 IST, Wednesday, May 13: A panel discussion with Dr Nachiket Mor, Dr Shamika Ravi, Dr Krishna Reddy, Dilip Jose and Siddharth Shah to explore why corporate India should invest in strengthening India’s healthcare ecosystem and how some companies are leveraging their core competencies to respond effectively to the Covid-19 crisis.
  • 15:30 – 18:30 IST, Friday, May 15: A discussion with Dr Reuben Abraham, Dr Rajiv Lall, Abhiraj Bhal, Punit Lalbhai and Rahil Rangwala will highlight state capacity gaps in providing support to India’s labour force at this critical time, and how companies, amidst turbulent externalities, can collectively plug them in order to protect their most important asset — human capital.