Washington: World Bank president David Malpass has said that India’s support in the form of targeted transfer to the poor and needy during the Covid-19 pandemic crisis has been remarkable and that other nations must adopt the same model instead of offering broad subsidies.
“Cash transfers also have a larger impact on income growth than subsidies,” Malpass wrote in the forward to a study – Poverty and Shared Prosperity Report – released by the World Bank Wednesday.
Malpass said that targeted cash transfers are a far more effective mechanism for supporting poor and vulnerable groups: more than 60 percent of spending on cash transfers goes to the bottom 40 percent. “Choose targeted cash transfers instead of broad subsidies. Half of all spending on energy subsidies in low- and middle-income economies went to the richest 20 percent of the population, who also happen to consume more energy,” he wrote.
In the foreword to the report, Malpass said the rise in poverty in poorer countries reflects economies that are more informal, social protection systems that are weaker, and financial systems that are less developed. Yet several developing economies like India achieved notable successes during Covid-19. “Helped by digital cash transfers, India managed to provide food or cash support to a remarkable 85 percent of rural households and 69 percent of urban households,” Malpass said.
The report stated that Covid-19 has underlined how progress achieved over decades can vanish suddenly. High-return investments in education, research and development, and infrastructure projects should be made now. Governments need to improve their preparation for the next crisis.
“Mobilize tax revenues without hurting the poor. This can be done by introducing property taxes, broadening the base of personal and corporate income taxes, and reducing regressive tax exemptions,” it says.
WB also suggested the governments of the world to improve the efficiency of their spending. Better procurement processes and incentives for public sector managers can boost both the quality and efficiency of government spending, the report noted.
“If indirect taxes need to be raised, their design should minimize economic distortions and negative distributional impacts, and they should be accompanied by targeted cash transfers, protecting the incomes of the most vulnerable households,” Malpass said.