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October 14, 2015

Development Strategy|Social Justice

Are Poverty Percentages Useful

By Nitin Desai


A recent report prepared for this year's annual Fund-Bank meeting gave a much lower figure for the incidence of poverty in India than what is commonly cited-12.4% in 2011-12 rather than the official figure of 21.1%. The Bank's poverty line works out to roughly Rs 32 thousand per capita per year which is a thousand to two thousand times Dadabhoy Naoroji's 150-year old estimate of Rs16 to Rs.35 per capita per year based on the diet of "emigrant coolies during their voyage living in a state of quietude."  The flourishing academic industry of poverty estimation has produced many estimates of the poverty line and the poverty percentage in between these two. This year's economics Nobel going to Angus Deaton, who made major contributions to this debate, will undoubtedly inspire a fresh round of researchers on this measurement issue.

Is this poverty percentage really useful? If a painstaking survey establishes that village ’x’ has a poverty incidence of 30% and village ’y’ of 20% will it make any difference to the development actions in these villages? Do we identify poor households by trying to find out what their consumption level was in money terms or do we use more directly observed criteria as is the case 13 criteria used for BPL identification in government schemes which require it? Has it ever been used for monitoring the impact of specific anti-poverty schemes? Frankly the only practical use that has been made of these numbers, outside the sphere of academic intercourse, is for propaganda by political parties when the number shows a significant drop during their period in office.

This obsession with poverty estimation does reflect a major concern for public policy. Our constitution made the bold move to have universal suffrage in a poor, largely illiterate, culturally diverse and profoundly hierararchical society. The repeated exercise of this universal suffrage and the spread of mass communication has empowered the poor and the disadvantaged. It has compelled all governments  to  recognise the need to address the exclusion from the growth process (poverty), from new work opportunities (unemployment), from the mainstream of politics (marginalisation), from social intercourse (discrimination) and from safety nets (vulnerability).

However the outcome of public policy in terms of inclusion is disappointing because investment for growth and expenditures for poverty reduction have proceeded on parallel tracks that never met. We need to recognise that growth is a necessary but not a sufficient condition for addressing poverty and unemployment. Trickle down is slow and the scale of the required increase in income in lower income groups is such that relying on trickle down without redistribution would involve a large increase in higher incomes and widen disparities between rich and poor households and, more dangebetween rich and poor regions. We need development interventions and political engagement that address all the dimensions of exclusion more directly.

A recent report on chronic poverty contains  a  longitudinal analysis of poverty based on panel data for the socialist seventies and for the next two decades that saw a clear transition to free market capitalism. In both periods about 25% of the panel households remained in poverty and around 40% were not poor either at the beginning or the end. The remaining households had either gotten out or slipped into poverty over this period. The interesting part is that in the seventies this third group that crossed the poverty line consisted of one-third who had slipped into poverty and two-third who got out. The split in the more capitalist eighties and nineties was less favourable in that a  more than half the crossover group, more precisely 20% of all households,  had slipped into poverty.

Public policy to help poor households must focus not just on BPL households but also on those who run he risk of slipping into poverty if they are hit by some major crisis.  The support must be organised on three tracks - widening income and employment options for poor households and stagnating regions, investing in quality public services, particularly for health,education, skill development and environmental services and providing a security net for the vulnerable households.

About 80% of the households counted as poor are socially disadvantaged SC/ST, have little or no asset base and few skills. Opportunity for them and their children means occupational mobility and migration that allows them to tap into employment opportunities thrown up by the growth process. This will not happen without public policies to provide skill development, financial inclusion and other measures that will facilitate occupational and geographical mobility. Nor will it happen if the current tolerance of violence against outsiders, dissenters and minorities continues.

Delivering assistance to households and individuals is not enough. The provision of quality public services, (and the key word here is ’quality’) for education, health, water supply and health is as important.  Inequalities in the access to these are far worse than income inequalities.  As for vulnerability the State must provide safety nets for poor and near poor households facing a sudden  burden say of health expenditure or an unexpected loss of income because of a drought or market turbulence.

All this is well known and anti poverty goals and programmes have figured in all plans, but more as add-on palliatives except briefly in the seventies. As the prime concern of policy shifts towards the Ease of Doing Business, Make in India and attracting FDI the subsidiarity of anti poverty strategies to other goals will be even more pronounced.

This is where a rights based approach can help  Some of the development centred rights are enshrined in specific legislation and some are protected by the generous interpretation of the right to life by the Supreme Court. Today the only available path to social democracy is the combination of civil society organisations championing the rights of disadvantaged individuals and communities and an activist judiciary enforcing them.  Hopefully we will in time get what we really need-a social democratic party rooted in mass movements of the under privileged.

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