How India Is going beyond safety nets to economic empowerment


The evolution of welfare states from the Bismarckian model to contemporary iterations represents a broadening of perspectives on the state’s role in social welfare and economic dynamism. Initially, the Bismarckian welfare state was a tool of social insurance, designed to provide essential support in areas like health, accident protection, and pensions. This model was seen as a mechanism to reduce social unrest by providing basic security. Scholars like Esping-Andersen in “The Three Worlds of Welfare Capitalism” have categorized welfare regimes, highlighting that as economies evolved, so did their understanding of welfare.

Modern welfare states, while still focusing on providing for the vulnerable, have increasingly recognized the importance of fostering entrepreneurial spirit. This shift is not just about passive safety nets but also about enabling proactive economic empowerment. Scholars like Muhammad Yunus, who championed microfinance, have emphasized the transformative power of providing credit to small-scale entrepreneurs. Making credit accessible to small businesses and street vendors is crucial because it catalyzes grassroots economic activity, leading to a bottom-up approach to growth. As Yunus argues, such access not only alleviates poverty but also recognizes the entrepreneurial potential in every individual, no matter their socio-economic standing. In essence, the modern welfare state aims to be not just a protector but also an enabler of economic aspirations.

Article 38 of the Indian Constitution mandates that the nation should work towards ensuring a social order where justice – including social, economic, and political aspects – is at the forefront of all national institutions. India operates as a welfare state. Over the past ten years, the central government has reinforced this welfare approach. Regarding healthcare, those with limited financial means can now avail health insurance via PMJAY. The Ayushman Bharat PM-JAY initiative has effectively covered 5.7 crore hospitalizations worth over Rs. 70,000 crore, saving deprived families an expense of more than 1 lakh crore. Moreover, the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) has made affordable medications accessible to many.

The number of welfare programs initiated by this government is immense. From Poshan Abhiyaan to Ujjwala Yojana, the government has been dedicated to improving the lives of the Indian populace. Notably, the government’s approach is not just to provide immediate relief but also to empower individuals to be self-reliant. A prime example is PM SVANidhi. Recognized as one of the world’s premier urban micro-credit schemes, PM SVANidhi not only offers financial support to urban micro-businesses but also fosters inclusivity by integrating often sidelined groups into the mainstream. The scheme’s emphasis on female beneficiaries, with a 43% share, underscores the state’s commitment to fostering female entrepreneurship. The encouraging repayment ratios, especially the 75% progression from the second to the third loan, speak volumes about the beneficiaries’ entrepreneurial zeal and financial discipline.

Furthermore, the scheme’s focus on the younger demographic, with three-fourths of the beneficiaries aged between 18 and 45, signifies the state’s intention to harness the energy and innovation of its youth. In essence, PM SVANidhi encapsulates the modern welfare state’s dual goals of social protection and economic dynamism.

A recent report by SBI Research has pointed out how PMJDY has found that PM SVANidhi has effectively promoted social integration among previously informal urban micro-entrepreneurs from marginalized groups, breaking down barriers within certain communities. Remarkably, about 75% of those receiving loans belong to non-general categories, illustrating the potential of purposeful policy programs to initiate significant change. OBCs have received approximately 44% of the total funds, and SCs/STs around 22%.

The PM-Svanidhi scheme has not only been directly beneficial to its recipients but has also had cascading positive effects on the larger economy, primarily by stimulating private consumption. According to SBI Research, there’s a significant uptick in financial activities among PM SVANidhi beneficiaries. Specifically, average annual spending via debit cards by PM SVANidhi account holders witnessed a 50% surge, escalating to around Rs 80,000 in FY23 from figures seen in FY21. This translates to an impressive increase of approximately Rs 28,000 in annual spending within just two years, all the more notable given the relatively modest initial capital offered to these informal urban entrepreneurs.

Additionally, the scheme provides ample opportunity for growth. Street vendors who successfully repay their initial Rs 10,000 loan become eligible for a second-term loan of Rs 20,000, followed by a third-term loan of Rs 50,000. Importantly, the data reveals that this progressive loan system is fostering increased financial activity. Among those who availed of the second and third-term loans, there’s a notable 30% who transitioned into active spenders, further emphasizing the scheme’s success in both direct and indirect economic empowerment.

One often encounters stories of individuals rising against all odds, seizing opportunities to change not only their destinies but also those around them. One is reminded of a scene in the acclaimed movie “The Pursuit of Happyness,” where the protagonist, played by Will Smith, struggles against insurmountable challenges, only to emerge triumphant through sheer determination and by grabbing the right opportunities. This tale mirrors the philosophy of modern welfare states, which have evolved from merely offering a safety net to actively empowering individuals, fostering entrepreneurial spirit at the grassroots level.

The initiatives of the Indian government over the past decade, including the transformative PM SVANidhi scheme, exemplify this ethos. By focusing on economic upliftment and integration of marginalized urban entrepreneurs, the government has made a significant stride in not just providing passive security but proactively spurring economic dynamism. The impressive rise in average spending among PM SVANidhi beneficiaries and the high progression of loan repayments are testaments to the scheme’s dual achievement in both social protection and economic empowerment.

As we reflect on the government’s dedication to ensuring a social order filled with justice, one can’t help but feel a sense of optimism. Like the protagonist in “The Pursuit of Happyness,” countless individuals, given the right opportunities and support, have the potential to write their own success stories, ushering in a brighter future for the nation.


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