Indian PM Faces Welfare Reform Challenge

Prime Minister Narendra Modi has launched an ambitious plan to streamline a bloated and inefficient welfare system by paying for everything from cooking gas to university stipends via a bank account, in a bid to save billions of dollars a year.

To sell his idea, he has promised a bank account for every household – a mammoth and expensive task in a country where two in five people had lacked access to one.

But resistance among more than 800 million people entitled to subsidized food is high.

Years of double-digit inflation make them wary, the previous government’s pilot schemes floundered and, with so many people unfamiliar with basic banking, benefits like accident insurance offered under the scheme may not be fully utilized.

That may explain why Modi, in his biggest attempt at fiscal change since he swept to power in May, has been less bold than some would wish, steering clear of reforming the most sensitive and costly benefits – food and fertilizers.

“The new bank accounts will not be viable if they aren’t used for transfers,” said one participant at a meeting where senior officials spelled out their concerns to Modi.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza