There is something terribly wrong with growth economics. After all, 18 years after India ushered in economic liberalisation, the promise of high growth to reduce poverty and hunger, has not worked. In fact, it has gone the other way around: the more the economic growth, the higher is the resulting poverty.
A report by an expert group headed by Suresh Tendulkar, formerly chairman of Prime Minister’s Economic Advisory Council, now estimates poverty at 37.2 per cent, an increase of roughly 10 per cent over the earlier estimates of 27.5 per cent in 2004-05. This means, an additional 110 million people have slipped below the poverty line in just four years.
The number of poor is multiplying at a time when the number of billionaires has also increased. Economic growth however does not reflect the widening economic disparities. For instance, the economic wealth of mere 30-odd rich families in India is equivalent to one third of the country’s growth. The more the wealth accumulating in the hands of these 30 families, the more will be country’s economic growth. A handful of rich therefore hide the ugly face of growing poverty
If these 30 families were to migrate to America and Europe, India’s GDP, which stands at 7.9 per cent at present, will slump to 6 per cent. And if you were to discount the economic growth resulting from the 6th pay commission, which is 1.9 per cent of the GDP, India’s actual economic growth will slump to 4 per cent.
Anyway, the complicated arithmetic hides more than what it reveals. Poverty estimates were earlier based on nutritional criteria, which means based on the monthly income required to purchase 2,100 calories in the urban areas and 2,400 calories in the rural areas. Over the years, this measure came in for sharp criticism, and finally the Planning Commission suggested a new estimation methodology based on a new basket of goods that is required to survive – includes food, fuel, light, clothing and footwear.
Accordingly, the Tendulkar committee has worked out that 41.8 per cent of the population or approximately 450 million people survive on a monthly per capita consumption expenditure of Rs 447. In other words, if you break it down to a daily expenditure, it comes to bare Rs 14.50 paise. I wonder how can the rural population earning more than Rs 14 and less than say even Rs 25 a day be expected to be over the poverty line. It is quite obvious therefore that the entire effort is still to hide the poverty under a veil of complicating figures.
India’s poverty line is actually a euphemism for a starvation line. The poverty line that is laid out actually becomes the upper limit the government must pledge to feed. People living below this line constitute the Below the Poverty Line (BPL) category, for which the government has to provide a legal guarantee to provide food. It therefore spells out the government subsidy that is required to distribute food among the poor. More the poverty line more is the food subsidy.
If the government accepts Tendulkar committee report, the food subsidy bill will swell to Rs 47,917.62-crore, a steep rise over the earlier subsidy of Rs 28,890.56-crore required to feed the BPL population with 25 kg of grains. This is primarily the reason why the government wants to keep the number of poor low. In other words, the poverty line reflects the number of people living in acute hunger. It should therefore be called as a starvation line.
I remember a few years back, a group of charitable organisations in England presented a list of demands to the government for helping the poor. Unlike India, where BPL category only receives food rations, and that too severely short the minimum nutritional requirement for a human body, the first demand of the UK charities was to provide the poor in England with washing machines.
India’s poverty estimates therefore are the most stringent in the world. I don’t know the economic justification of hiding the true figures, but politically it makes terrible sense. Each government therefore is happy to gloss over the starvation figures in the guise of poverty estimates. I wonder when India will include a basket of essential good like footwear, cycles, sewing machines, solar lamps, water purifiers etc for the poor. This is simple economics, and not political compulsion as the media will like us to believe.
Going back to the poverty line arithmetic, the 2007 Arjun Sengupta committee report (officially the report of the National Commission on Enterprise in Unorganised Sector), which had estimated that 77 per cent of the population or 836 million people, were unable to spend more than Rs 20 a day, is probably a correct reflection of the extent of prevailing poverty.
In addition to monthly income, poverty estimates must incorporate the human development index as prepared by the United Nations Development Programme. India should therefore have two ways to classify the poor. The Starvation line, needing direct cash transfers in addition to the basic requirement of food supplies. And a Poverty line, needing not only food (but in lesser quantities) but also other economic necessities like sewing machines, water-purifiers, pressure cookers etc
A smaller version of the article appeared in Deccan Herald Dec 22 2009