India: Is the giant winning the battle against poverty?
How successful is India in its struggle against poverty? If one believes the statistics published by the national Planning Commission on 23 July 2013, the country is making rapid progress. The number of officially ‘poor’ in the fiscal year 2011–2012 has apparently declined by a record 22% of the population as against the figure in 2004–05. Furthermore, despite the sharp economic downturn, over 130 million people were lifted out of poverty during this period. In official terms, therefore, ‘only’ around 270 million people are poor today.
This would, indeed, mean that India has made great strides. If the effort to combat poverty continued to be as concerted in the future, in just a few decades, no Indian citizen would have to be poor. Economic growth from which the people increasingly benefit, coupled with an efficient social welfare system, would be persuasive success factors. And with these figures, the Indian state would have made a substantial contribution towards achieving the UN’s Millennium Development Goals. If the findings are accurate, the coalition government led by the Congress party could pat itself proudly on the shoulder in the run-up to the parliamentary election in 2014, for this would have substantiated the success of its social and economic policies.
A controversial method of measuring poverty
Nevertheless, the latest poverty figures have triggered a debate over the credibility of the findings. That there has been a steady decline in poverty in India is not the focus of the debate. The subject of dispute is more about the definition of poverty that the government takes as a basis for determining the poverty line. In official terms, a person with consumption expenditure of up to Rs 32 (around EUR 0.39 according to the current exchange rate) per day would be considered poor in urban areas. The per capita consumption limit in rural areas has been fixed at Rs 27 (around EUR 0.32) per day. In comparison to the figures released by the World Bank, which defines poverty worldwide by the purchasing power parity of USD 1.25 per day, 32.7% of the population lives below this poverty line. If purchasing power parity is raised to USD 2 per day, then it is assumed that 68.8% of the population lives below this level.
The national poverty line has been set too low, say the critics, as it does not allow enough money for sustaining a living and is a callous definition of poverty in a country that prides itself on being a rising economic power. The new figures are far removed from reality, writes Utsa Patnaik, a leftist professor of economics, in The Hindu, and goes on to describe the poverty line as a destitution line.
Like most other countries, India, too, lays down a poverty line as a benchmark for the government’s social welfare schemes. In contrast to most industrialised countries where the definition of poverty is relative to the average income, India, until recently, used a different method that was developed in the 1970s and that is oriented to the minimum calorie intake per person per day. Over the years, it has only been corrected for inflation. However, this method came in for increasing criticism because it was not in line with modern consumer behaviour or with developments in living standards, and neither did it acknowledge that poverty was not only about nutrition but included other aspects as well. Consequently, a committee was appointed by India’s Planning Commission to modify the estimation method. Last year, the Tendulkar Committee submitted a proposal recommending that multiple dimensions of poverty should be taken into account instead of nutritional intake. The Indian Government under the Congress party has thus made the first important concession with regard to the definition of poverty. However, whether the criteria for determining poverty will suffice and whether they are premised on the assumption of adequate standards of living continue to be hotly debated.
The poverty line is highly significant, as most welfare schemes still require an individual to produce a Below Poverty Line (BPL) card to receive government benefits. Many people who should be entitled are not issued the BPL card, while others obtain it only through corruption. Furthermore, the not inconsequential percentage of the population that is just above the poverty line is denied several forms of government support. This is where an unacceptable discrimination sets in between ‘extremely poor’ and ‘very poor’, a wafer-thin distinction. It is, after all, about more than just the material requirements for survival – it is about the right to live with dignity.
A question of living standards
As long as a poverty line set so abysmally low serves as the benchmark for establishing who is entitled to the benefits of public welfare schemes, the government will have to face the demands of the critics. Their concern is a definition of poverty that takes into account the ground reality and grants citizens at least a basic quality of life. Critics such as the poverty expert Harsh Mander call for an honest debate on the living standards that one would wish for India in the 21st century. He appeals directly to the government to bear greater responsibility for the many disadvantaged citizens whose lives are far removed from the country’s economic success. After all, according to the official data from the last national census in 2011, 53% of the population lacks adequate access to sanitation facilities and 42% of all children under the age of five are considered chronically undernourished.
In recent years, India has, it is true, supplemented the welfare budget and paved the way for comprehensive, innovative programmes that go beyond subsidies for the poorest of the poor. For instance, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), a national mega project, is credited with playing a major role in ensuring employment and income security in rural areas. The Midday Meal Scheme, which benefits 120 million children per day, is another example of a universally accessible, strategically oriented welfare scheme; children in primary school are given lunch every day, which, in addition to addressing the aspect of nutrition, is also intended to encourage children, particularly from disadvantaged sections of society, to attend school. Unfortunately, the reputation of the programme was seriously damaged recently when, in July, more than 20 children in a school in the state of Bihar died from eating school food that had been contaminated with pesticide – only one indicator of the serious shortcomings in the implementation of the programme.
In September 2013, the bill for the world’s largest food security programme was signed into law in India. The Food Security Bill entitles two thirds of India’s population of 1.2 billion people to highly subsidised basic foodstuffs such as rice, wheat, and millet. Yet the programme was not without controversy: Members of the opposition accused Manmohan Singh’s government of wanting to mobilise votes for the Congress party by offering subsidies a few months before the elections. The Bill was also criticised as uneconomical and the distribution of food through the existing Public Distribution System as inefficient.
Combating poverty – a question of the economic model?
The latest poverty figures have been published at a time when GDP growth has fallen below 5% and the Indian rupee is on a steep decline. These disturbing developments have fuelled a discussion on the efficacy of the Indian business model. The central figures in this debate, who hold opposing views, are two of the country’s best-known economists – Amartya Sen, the Nobel Prize winner and Harvard University professor, and Jagdish Bhagwati, professor at Columbia University, New York. Bhagwati, a vociferous advocate of globalisation, represents the group of economists who see market promotion as central to resolving India’s wealth problems. According to him, it is not the state welfare schemes that constitute fair and just re-distribution – only a flourishing economy could benefit the people in the long run. ‘Give the people jobs and money and they will invest in their own health and education,’ he is supposed to have said.
Sen, on the other hand, argues that India – in contrast to other rising economic powers in Asia – has neglected to invest in the health and welfare of its citizens, in the wake of liberalisation and the economic upturn since the early 1990s. In the last 10 years, the Indian economy grew at an annual average rate of 8% and raised the income of millions who today represent the middle class and who recently took to the streets in protest against government corruption and against rape. The growing expectations of the middle class, says Sen, is invariably a potent political issue in India. ‘If we, the Indian citizens with our voices and votes, thunder in support of subsidising electricity for those who have it (one-third of Indians have no electric connections), for subsidising diesel or cooking gas for those who have implements to make use of them (most Indians do not have such implements), while remaining silent on medical deprivation, educational backwardness, or the lack of toilets at home, then we must share the blame for being “cavalier”,’ said Sen in an interview with the magazine Tehelka. Sen believes that the Indian Government has failed to translate the country’s economic success into better living conditions for a substantial part of the population. He believes that the welfare schemes are under-financed by the current government. Instead of investing in improvements to the welfare system, he is of the opinion that the government’s financial policy is focused blindly on achieving economic success.
Poverty statistics as ammunition in the election campaign
There is no doubt that the recently published poverty figures, despite all the criticism, will be advantageous for the Congress, which has been taking a beating. In the current tenure, the Congress party is being held responsible for the weak economy, the high inflation, the current account deficit, and the deep-rooted corruption in the state welfare schemes. The party therefore needs a shot in the arm for the elections in 2014, and it comes as no surprise that the optimistic poverty statistics have been published right now instead of in 2016, under the scheduled five-year cycle. In every parliamentary election, poverty reduction is a central issue in the campaign because it addresses the concerns of the masses. This will be no different in 2014. The two major parties, the Congress and the BJP, are already fighting over which of them has been able to lift more people out of poverty while in power.
However, in its struggle for power, the political class is still failing to recognise the widespread poverty in the country for what it is. According to the most recent statistics, 22% of the population is still officially poor. Yet, in the context of the Food Security Bill, it is conceded that 67% of the population cannot afford adequate and proper nutrition without the support of the state. Should the 45% in between then not be considered poor? There is apparently still a long way to go before the country can conquer poverty. Only if the political class is honest about facing the challenge, can the battle