Economy Jul 24, 2013
As India's polity gears itself for the final stretch in the run up to next General Election, few would dispute that the incumbent UPA II is suffering from a crushing poverty of achievement. The faithful are in denial. The Government is desperate. How else would you explain the Planning Commission peddling poverty statistics that are borne out of a methodology that was rejected by the very same institution only last year. It is plain dishonest to claim that only 22 percent of India now lives below the poverty (compared to 39 percent in 2004) line, when the poverty line threshold of an approximate per capita daily consumption worth Rs 33 per day has been confined to the dustbin.
The Government's defence is two-fold. One, the poverty line (of Rs 33) is incidental. Poverty has declined at higher levels of consumption as well. Second, it has hinted that it would have preferred to use a new methodology but C Ranagarajan, the PM's Chief Economic Advisory, handed the task will not be ready with his output until the summer of 2014. That is will be a few months late. Achievements need to be properly showcased before voters cast their vote.
Despite the obvious statistical skullduggery, it can be no one's case that poverty has not declined in the nine years that the UPA has been in office. It has. But how much of it is because of the Government's interventionist policies like the NREGA? In an exhaustive analysis in today's Indian Express economist Surjit Bhalla argues that only a minor part of the fall in poverty can be attributed to the NREGA. Bhalla shows that between 2009-10 and 2011-12, the period in which (according to the NSS data) poverty declined fastest only 8 percent of the total decline is explained by NREGA. The rest is explained by economic growth. It would be equally sound to argue that much of the poverty decline in the tenure of UPA 1 was also because of economic growth - growth averaged well above 8 percent per annum between 2004 and 2009.
Bhalla's analysis is terrible news for UPA II. If it is growth, rather than redistribution, that powers the sharpest falls in poverty, the last two years of UPA II (2012-13 and 2013-14) - which are not captured by the NSS data -will see far smaller increases in consumption and therefore far slower declines in poverty. That is because growth would have shrunk by at least three percentage points from an average of 8 percent to just 5 percent.
The UPA, not shy of half-truths, will of course claim that it is NREGA and the proposed Food Security Ordinance, which are the slayers-in-chief of the poverty demon. That is the entire purpose of peddling statistics based on junked methodologies. But the ground reality is different.
For the poor, poverty is more than a number. It is felt, constantly. Those who spend more than Rs 33 per day on consumption may not be poor by the Government's standards. But just ask those who work as domestic help or drivers in urban areas or those who work full time as agricultural labour in rural areas (almost all earn and spend well above the official poverty line) if they feel they are anything but poor? Poverty is as much a relative phenomenon as an absolute one. India is slowly eliminating absolute poverty (defined by the minimal Government definition) but in relative terms far too many people are still poor.
UPA II has a particularly horrific record in promoting economic growth and quality job creation, the only real avenues of sustained poverty reduction, in both absolute and relative terms. The diminishing of absolute poverty has only raised the aspirations of the people. The relative prosperity of the high growth years has raised expectations that cannot be rolled back. Dole or minimal income and consumption is simply not enough. People want much more . Being above a random poverty line has no real meaning for the poverty they feel.
Curiously, the UPA loves to peddle the past without learning the right lessons from history. It was growth (and the improvement in livelihoods that followed) that delivered it such a decisive electoral victory in 2009. No amount of spin can cover up the utter failure of governance, its impact on choking growth, and the gradual impoverishment of millions, in the last three years of UPA II. It could yet doom the Congress and its allies to a poverty of numbers at the next General Election.
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