Besides the welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the underprivileged…

Welfare interventions like PM Garib Kalyan Anna Yojana (PMGKAY), MGNREGA, and PM-KISAN provide vital safety nets and consumption support. However, they mitigate the symptoms rather than the structural causes of deprivation, which remain intensely tied to macroeconomic variables like inflation and unemployment.

Inflation as a Regressive Tax Inflation disproportionately hurts the poor, who allocate over 45% of their expenditure to essential food items. High Consumer Price Index (CPI) food inflation erodes real household purchasing power, neutralises cash transfers, and forces cutbacks on nutrition, health, and education, thereby deepening multidimensional poverty.

Structural Unemployment and Underemployment Periodic Labour Force Survey (PLFS) trends highlight persistent challenges: high youth unemployment, low female labour force participation, and widespread disguised unemployment in agriculture. The phenomenon of jobless growth limits structural transformation. While public works like MGNREGA act as social shock-absorbers, they cannot substitute for sustainable, productive, and formal employment generation.

The Macroeconomic Nexus and Welfare Limits Welfare primarily provides consumption smoothing, whereas inflation and unemployment management enhance production and real income. In developing economies like India, structural rigidities often limit the classic Phillips Curve trade-off, creating risks of stagflation where elevated cost-push inflation coexists with underemployment. Unchecked price pressures risk triggering wage-price spirals and fiscal stress, ultimately constraining the state’s welfare expenditure capacity.

Way Forward Serving the underprivileged requires synchronising welfare with deft macroeconomic stewardship. The Monetary Policy Committee (MPC) must anchor inflation expectations through flexible inflation targeting, complemented by supply-side food logistics management. Simultaneously, industrial policy through Production Linked Incentive (PLI) schemes, MSME support, and Skill India must drive labour-intensive manufacturing, transitioning vulnerable households from welfare dependence to sustainable economic mobility.