Wednesday, July 31, 2013

India's Poverty Industry

Sriram, who lives in the US, commented on my poverty blog

Ignorance is bliss! Here in the suburbs, we don't get to see it directly, but it is very much there in the background.  People who were donating earlier are now in need of social services themselves.  

This morning I was at the  palace grounds, a maidan, where a golfer goes to hit some balls for practice. I suppose the numbers of golfers in India is very minuscule, but that does not make me one of the dirty rich! Anyway that is another subject. 

 When I take the help of a swing coach, I find that more people are gradually involved in the process. An able bodied person will place a ball for you to hit. Another older man who sells you the you the balls for a fee, brings small bucket of water and offers to clean the clubs. I do not need them but they are there to help and they are happy with a small tip! I can accept the older man doing this, but an younger man performing this useless, unnecessary job disturbs me!

Similarly it is a common sight that if one person is working, be it the telephone, electrical or the water works and so on, there will be another four or five around him. One to supervise, another talking to someone in the dept on his cellphone, two more waiting to take turns on a job which can be entrusted to one. The list is endless. 

With these thoughts in my mind I saw that today's TOI has an article on the subject.
 India’s Poverty Industry

Why we carp at rather than celebrate falling numbers of poor in the country

B G Verghese 

India remains a poor country. No doubt about that. Its human development indices are a shame. We know that. How do we measure poverty? Opinions vary, but there is agreement that the bar was set too low at Rs 32 per day per capita, adjusted for inflation, under the old Tendulkar formula. The revised Rangarajan formula remains work-in-progress and has yet to be announced. The question, however, remains – has poverty declined? 
    The latest National Sample Survey report says that poverty levels in India declined .... 
(This is hotly contested as seen in my earlier blog !) This is a commendable achievement, but still leaves some 270 million poor and millions just hovering above that line and likely to fall below it in a year of severe flood, drought or other calamity. 
    There is therefore no cause for celebration, but rather for greater effort. Yet there is reason for comfort, especially as the decline in poverty levels has been manifest in some of the more backward states such as Bihar, Odisha, Rajasthan and Madhya Pradesh. (I understand many  Biharis who were working in Bangalore are missing. They have gone back!)

    However, political critics have damned the NSS report ........
 Measuring a trend is a necessary and worthwhile exercise. To cavil at that is to betray poverty of thought and political pettiness. 

    The problem is that all too many critics trade emotionally and ideologically in poverty. They fear that if poverty goes down or if the “oppressed masses” are liberated they might be out of business and face a sharp fall in their political and social stock. So a perverse sur
vival instinct drives them to exaggerate poverty in order to stay in business. Such poverty of thought is manifest in many fields and poses a public danger as such attitudes constitute a national depressor, affecting both morale and endeavour.  

(We know that this is true! It is obvious that the netas do not want their chelas to get out of this dependency! Many netas are known to go to temples to pray. I suspect as they offer money they pray for an opportunity to help the poor. While it is noble, there is a belief that this will also assure them a place in heaven! If gods grant them their wishes and create more poor, it is a win-win situation! They would now have a large band of followers on earth and later go to heaven!
Why blame only the netas, even the well-heeled do not care about solving this problem of poverty.
Where will they get their drivers and maids! Unless of course as Sachi  calls it, the 'Tsunami of the Jobless' hits their well protected gated communities some day!)

    As usual, the discussion on the NSS report produced its own crop of absurdities. Three Congress-UPA stalwarts argued that a man could have a filling meal in Delhi and Mumbai at Rs 5 and Re 1, respectively. The debate then goes overboard instead of being caricatured and dismissed for the nonsense it is. (Need one comment on these sick people!)

    The discourse on poverty has another dimension. This revolves around whether falling poverty levels have been brought about by greater growth or by rights based, pro-poor state-funded programmes such as food subsidies, MGNREGA and RTE. Here the argument is between the 
growth-first and welfare-first schools, now elevated to a global level by the Amartya Sen-Jagdish Bhagwati debate. The truth most likely lies between the two extremes and is not an altogether either-or choice. As in most things, balance is important. .......................

    Meanwhile, word came of tribal children in Attapady in Palghat district dying of malnutrition in a state like Kerala which boasts the highest HDI in India, standing comparison with the best in the world. Likewise in the adjacent Silent Valley, home to other tribal communities.    .......... Sadly, the entire tribal question has been placed outside and beyond the poverty framework. Poverty of thinking on this issue is staggering. Real issues remain un-debated while trivia and electoral politics reign. .....

Then I find this on the same day in the same TOI paper!
CAG finds holes in enforcing MNREGA

Sunitha Rao R TNN 

Bangalore: The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), no longer attractive in rural Karnataka. A CAG report on the scheme’s performance during 2007-12 says the demand for jobs dipped by nearly 20 lakh between 2009 and 2012. ....
    Besides, the report says, the scheme focused on taking 
up more new works rather than completing ones already taken up. The number of works completed fell from 63% in 2010-11 to 14% in 2011-12. 
    The report also points out errors in the scheme’s management information system. 

Brought smiles too For 
its flaws has all helped  many, MNREGA rural poor. The impact assessment audit says the family income of 63% of the labourers went up. About 60% felt relief from hunger; 51% could send their children to school. For 35% of the labourers, debt payment became possible. The healthcare needs of 37% were met.
 CAG Report Says Funds Were Misused 
Over 3.49 lakh job cards and the names of 8.23 lakh workers were deleted from MNREGA records due to wrong entries. But by then, the government had already spent over Rs 25 crore towards wages for deleted job cards and individuals. Maintenance of basic records and erroneous entries led to misuse of funds, observes the CAG report. 
     .. An audit scrutiny of the muster rolls showed that names of 40,859 workers in the registers did not correspond with the names in the job cards. 
. According to MNREGA data, 15,377 workers in 29 districts were marked present in more than one muster roll on the same day in 4,672 cases. A payment of Rs 2.83 crore was made to them. The data in these cases is fraudulent. 
    ..There were also instances of cutting and overwriting in 127 muster rolls. .. hinting at misappropriation of funds, the report says. It was tabled in the assembly on Tuesday. 

ABOUT MNREGA The Mahatma Gandhi National Rural Employment Guarantee Act was notified and enacted in 2005 with the objective of enhancing livelihood and employment security for unskilled rural labourers. As per the act, the government should provide 100 days of guaranteed wage employment in a year to every registered household whose adult members volunteer to take up manual work. In Karnataka, it began in five districts in 2005 and in 2008 was extended to all districts.

Then there is this article about Food Security Bill smartly juxtaposed with an ad for a super car!
I agree with the article, let us not starve our children! Whatever the leakage in the scheme!

This bill won’t eat your money


The expenditure on providing food security will add minimally to India’s public spending which is less than what even lower middle income Asian countries spend on social protection

In recent media coverage, critics often argue that the cost of the National Food Security Bill (NFSB) is excessive. The Economic Times referred to the NFSB as a “money guzzling measure” and according to CNBC-TV18, Rahul Bajaj, chair of Bajaj Auto, said that “all such give-aways are populist measures.” The New York Times’ India blog cited Ashutosh Varshney of Brown University as arguing that the NFSB “is very consistent with the overall thrust of the government to become the welfare party of India.” And Yashwant Sinha, former Union Finance Minister, emphatically branded it as “senseless welfarism.” But what would constitute even a minimally adequate response to food insecurity in India?
A recent UNICEF report on child malnutrition finds that India is home to 61 million stunted children under five — the most of any country — and 38 per cent of all stunted children in the world. ...
... At present, India spends about 0.9 per cent of GDP on food subsidies, and after the NFSB that will rise to a little less than 1.25 per cent.
The Financial Times cited Gurcharan Das, the author of India Grows at Night as saying: “India just cannot afford this colossal spending… This new spending will increase India’s fiscal deficit and could well lead to a downgrade of the country’s sovereign rating to junk status.” The “money-guzzling”Economic Times article warned that the NFSB endangered the fiscal deficit target, and Vinay Khattar warned that it “could partly hurt the ongoing recovery.” CNBC-TV18 covered B. Muthuramam, the non-executive director of Tata Steel, as arguing, “Food security is important but the government needs to be able to generate enough wealth in the country to be able to afford food security.” The Indian Express cited the Confederation of Indian Industry (CII) statement, which read: “Under the present economic situation, the government can hardly afford to allow the fiscal deficit roadmap to be compromised in any way.” These dire warnings seem to overlook the fact that additional expenditures can be offset by cuts elsewhere. It is, as always, a question of priorities.
A comparison
So how do India’s fiscal priorities compare with others’? The Asia Development Bank has just released a report on Social Protection in Asia covering 35 countries. It compares India with the other 18 lower middle income countries in Asia. In lower middle income countries, relevant expenditures (on social insurance, social assistance, and labour market programmes) are, on average, 3.4 per cent of GDP. India’s is a mere half of that at 1.7 per cent. Even that low level is reached largely because of MGNREGA, not existing food security costs. Among low income countries, the Kyrgyz Republic (whose GDP per capita is only $871 (2009)), invests eight per cent of GDP in social protection. Upper middle income countries spend four per cent of GDP on average, and high income countries spend 10.2 per cent. Japan spends a massive 19.2 per cent of GDP on social protection and China 5.4 per cent. Even Singapore — which can hardly be called populist — still spends more than twice as much as India, at 3.5 per cent of GDP.
..... Perhaps parties of many stripes recognise that healthy workers with strong bodies and brains are essential for sustained economic growth — as well as human development.
Naturally, there are many legitimate concerns regarding the NFSB — ranging from democratic engagement to corruption to targeting to household allocations — and these must be addressed. But discussions of the size of the budget envelope should debate what an adequate response would be. India has a higher proportion of stunted children than nearly any other country on earth, yet spends half the proportion of GDP that lower middle income Asian countries spend on social protection and less than one-fifth of what high income countries in Asia spend. The costs of NFSB are not the making of a nanny state.
(Sabina Alkire is director of the Oxford Poverty and Human Development Initiative at Oxford University.)
Then Sachi sent me a link to his article for The Tribune Chandigarh. He called it the Tsunami of the Jobless!  I have just given you a summary of his article. 

Job creation has not kept pace with the rising population. The UPA has been absorbed in furthering a broader sharing of the national cake through subsidies. It has neither had the time nor inclination to increase the size of the cake.

Now how do we increase the size of the cake?  Now we import products and are just happy exporting minerals! There a whole lot of issues, which need to be addressed! If west found it cheaper to import, it made sense. But India finding it cheaper to import? How did this happen?

Add to that our genius to employ more people when less could do,  as I saw in the palace grounds, what does one do?  Obviously lowering productivity is not the solution! Where do we go from here?

Figures talk
In the ’90s, employment and labour productivity grew at similar rates, whereas between 2004-05 and 2009-10, total employment grew by only 0.1 per cent whereas labour productivity grew by 34 per cent. The employment intensity — the number of employed persons per Rs 1 lakh of real GDP — declined from 1.71 in 2005 to 1.05 in 2010. This trend will continue as more and more mechanisation, automation and computerisation is brought in into all sectors of the economy to maintain global competitiveness.
  • 550 million under the age of 25
  • GDP rate below 5%
  • Net addition to employment up by only 2.7 million between 2004-05 and 2009-10
Areas of concern
  • Investment by corporate sector down from 17.3% of the GDP in 2007-08 to 10.6% in 2011-12
  • Sharp fall in corporate investment. About 256 major projects involving a cost of Rs 7.5 lakh crore has to be taken up by the Cabinet Committee on Investment for expediting clearances, even then there is no guarantee the projects will start as many are mired in land acquisition problems and resistance by activists.
  • Labour law reforms not initiated
  • "Casualisation" of employment generation is not a healthy sign since income levels of this segment are too low to generate spending surplus needed to drive high rate of growth.
So what happened to talks of encouraging people to have less children?  One way of having a bigger slice of cake. Is it all given up? Or we still harping on the demographic dividend?

Tuesday, July 30, 2013

From epics with their myths and fantasies, getting down to reality! But what is it?

What does one make of all this:

The Hindu

You are among the top 5% if you live in a village and spend Rs. 3,000 a month

The National Sample Survey Organisation’s newest set of consumption expenditure data for 2011-12 gives an insight into how those across the spectrum, from the poorest to the richest, live in different parts of India.
For one it’s clear that we are not talking about a rich country. An individual who spends over Rs. 2,886 per month in a rural area or Rs. 6,383 per month in an urban area is in the top 5% of the country (and this is using the modified mixed reference period, which gives the most generous expenditure estimates). ....
(Who then are buying the enormous amounts of GOLD imported? Who is choking the roads with cars and scooters? Is it just the top 5%?)
Moreover, even though poverty rates are converging, massive inter-State differences remain. ......
Then there is the question of what the rich and poor are spending their money on; absolute spending on food rises as one climbs the income ladder in both rural and urban India, even as its proportion in total expenditure falls.
There is one more article from The Hindu: 
The dishonesty in counting the poor
The Planning Commission’s spurious method shows a decline in poverty because it has continuously lowered the measuring standard
The Planning Commission (It was an icon in my younger days!)  has once again embarrassed us with its claims of decline in poverty by 2011-12 to grossly unrealistic levels of 13.7 per cent of population in urban areas and 25.7 per cent in rural areas, using monthly poverty lines of Rs. 1000 and Rs. 816 respectively, or Rs. 33.3 and Rs. 27.2 per day. .. The poverty decline claimed is huge,.... never mind that these two years saw the aftermath of drought, poor employment growth and exceptionally rapid food price rise. The logically incorrect estimation method that the Commission continues to use makes it an absolute certainty that in another four years, when the 2014-15 survey results become available, it will claim that urban poverty is near zero and rural poverty only around 12 per cent. This will be the case regardless of any rise in actual deprivation and intensification of actual poverty.
Substantial rise
All official claims of low poverty level and poverty decline are quite spurious, solely the result of mistaken method. In reality, poverty is high and rising. By 2009-10, after meeting all essential non-food expenses (manufactured necessities, utilities, rent, transport, health, education), 75.5 per cent of rural persons could not consume enough food to give 2200 calories per day, while 73 per cent of all urban persons could not access 2100 calories per day. The comparable percentages for 2004-5 were 69.5 rural and 64.5 urban, so there has been a substantial poverty rise. Once the NSS releases its nutritional intake data for 2011-12 we can see the change up to that year, but given the high rate of inflation and sluggish job growth, the situation is likely to be as bad, if not worse. Our figures are obtained by applying the Planning Commission’s own original definition of poverty line. Given the rapidly rising cost of privatised health care, education and utilities (electricity, petrol, gas), combined with high food price inflation and exclusion of the majority of the actually poor from affordable PDS grain, it is hardly surprising that the bulk of the population is getting more impoverished, and its nutritional level is declining faster than before. (This I can believe!)
What is the basic problem with the Planning Commission’s method which produces its low and necessarily declining estimates, regardless of ground reality? The Commission in practice gave up its own definition of the poverty line which was applied only once — to get the 1973-74 estimate. After that, it has never looked over the next 40 years even once for deriving poverty lines at the actual current spending level, which will allow the population to maintain the same standard of living in terms of nutrition after meeting all non-food costs — even though these data have been available in every five-yearly NSS survey.
The Commission instead simply applied price indices to bring forward the base year monthly poverty lines of Rs 49 rural and Rs.56 urban in 1973-74. The Tendulkar committee did not change this aspect; it merely altered the specific index.
Price indexation does not capture the actual rise in the cost of living over long periods. Those doing the poverty estimates would be the first to protest if their own salaries were indexed only through dearness allowance. A fairly high level government employee getting Rs.1,000 a month in 1973-74 would get Rs.18,000 a month today if the salary was only indexed. The fact that indexing does not capture the actual rise in the cost of living is recognised by the government itself by appointing decadal Pay Commissions which push up the entire structure of salaries — an employee in the same position today gets not Rs.18,000 but a four times higher salary of over Rs.70,000. Yet those doing poverty estimates continue to maintain the fiction that the same standard of living can be accessed by the poor by merely indexing the original poverty line, and they never mention the severely lowered nutritional access at their poverty lines which, by now, are destitution lines.
Worsening deprivation
The fact is that official poverty lines give command over time to a lower and lower standard of living. With a steadily lowered standard, the poverty figures will always show apparent improvement even when actual deprivation is worsening. .....
........ the poverty lines have been lowered continuously below the standard over a very long period of 40 years. ‘Poverty’ so measured is bound to disappear from India even though in reality it may be very high and worsening over time. The Commission’s monthly poverty line for urban Delhi state in 2009-10 is Rs.1040 — but a consumer spending this much could afford food that gave only 1400 calories a day after meeting all other fast rising expenses. The correct poverty line is Rs.5,000 for accessing 2100 calories, and a staggering 90 per cent of people have been pushed below this, compared to 57 per cent below the correct poverty line of Rs.1150 in 2004-05. Given the very high rate of food price inflation plus the rising cost of privatised medical care and utilities, it is not surprising that people are being forced to cut back on food, and the average calorie intake in urban Delhi has fallen to an all-time low of 1756. While a high-visibility minority of households with stable incomes is able to hire-purchase multiple cars per household and enjoy other durable goods, the vast working underclass which is invisible to the rich is struggling to survive. Fifty five per cent of the urban population cannot access even 1800 calories today, compared to less than a quarter in that position a mere five years earlier.
Why, it may be asked, do the highly trained economists in the Commission ignore reality and continue with their incorrect method? Surely they can see as we do, that their Rs.1040 poverty line gives access to a bare-survival 1400 calories. Part of the answer is that the ramifications of using the wrong method extend globally, for the World Bank economists have, for decades, based their poverty estimates on the local currency official poverty lines of developing countries, including India.
The World Bank claim of poverty decline in Asia is equally spurious. In reality, under the regime of poor employment growth and high food price inflation, poverty has been rising. To admit this would mean that the entire imposing-looking global poverty estimation structure, employing hundreds of economists busy churning out wrong figures, would come crashing down like a rotten termite-eaten house. The rest of the answer is that since the method automatically produces numbers showing spurious poverty decline, it is convenient for arguing that globalisation and neo-liberal policies are beneficial for people. Truth will always out, however.
(Utsa Patnaik is Professor Emeritus, Jawaharlal Nehru University)


The National Sample Survey on household consumer expenditure provides the data for the Planning Commission to estimate poverty in the country. The 68th round of this survey was conducted in July 2011 - June 2012, and throws up some interesting results.

Those were just the numbers.
Let's look at what they show of rural India.
ChhattisgarhKeralaKarnatakaMaharashtraGujaratBiharUttar PradeshTamil NaduMadhya PradeshWest BengalP5P10P20P30P40P50P60P70P80P90P956000500040003000200010000
Kerala being on the top was a surprise!

What about urban India?

ChhattisgarhKeralaKarnatakaMaharashtraGujaratBiharUttar PradeshTamil NaduMadhya PradeshWest BengalP5P10P20P30P40P50P60P70P80P90P959000800070006000500040003000200010000
The clear differences seen in rural spending disappear, to be replaced by a continuous move (apart from a jump between the P50 and P60 spending in Bihar).

While urban Kerala still takes the top honours, urban Tamil Nadu is beaten by Karnataka and Maharashtra.