Fall in rural poverty needs to be showcased
Given that the current year is likely to be a much better agriculture year than the previous one, the government would do well to showcase the dramatic fall in rural poverty over the past few years. Indeed, the NSS data that has just been put out shows that, while overall poverty levels in India are down to 20.8-22.9%—depending on which method you use to calculate poverty—in FY12 as compared to 29.8% in FY10, the really dramatic change is that seen in rural India. And, as in the case of overall poverty levels, most of the change is driven by economic growth.
Between FY94 and FY05, when the economy grew by an average of 6.1%, poverty levels fell by an average of 0.74 percentage points each year. When growth picked up to 8.7% between FY05 and FY10, poverty levels fell by an annual average of 1.48 percentage points. While growth fell a bit, to an average of 7.7% per year between FY11 and FY12, poverty levels fell even sharper, by 3.43-4.51 percentage points. The reason for this is simple: while overall economic growth fell in this period, agricultural growth almost doubled thanks to the cotton revolution and that in other crops like maize using high-quality hybrids. As a result, while rural poverty fell 1.6 percentage points each year between FY05 and FY10, it fell by 4.2-4.7 percentage points during FY11 and FY12. While rural poverty fell faster than urban poverty during the first two years of this decade, the important thing to keep in mind is that with jobs growth picking up dramatically in FY11 and FY12—14 million jobs got created in this period—even urban poverty rates fell by almost double in comparison with those in the FY05 to FY10 period.
The moral of the story is a simple one: apart from tom-tomming the sharp fall in poverty during its tenure, the government has to concentrate on creating growth opportunities. In rural areas, for instance, instead of spending on increased subsidies like on the Food Security Bill, a lot more can be achieved by spending on creating irrigation facilities and rural roads—indeed, given the poverty levels in states like Bihar, increased farm subsidies will help lift production levels and therefore reduce poverty a lot faster than spending the same money in states like Punjab and Haryana. Greater use of hybrid seeds with higher productivity, similarly, will do a lot more to remove poverty. While one of the most heartening aspects of the latest NSS employment data is that the proportion of those employed in the primary sector is down to below 50% for the first time in India’s history—it was 60% in FY2000—the other important takeaway is the low share of manufacturing. If, on the other hand, India is able to make life easier for manufacturing jobs, and manufacturing’s share rises from 16% of GDP at present to 25% by 2025—this is what the NIMZ policy aims at—this will create 100 million jobs. In other words, the government must showcase Bharat Shining, but it would do well not to forget what made it shine.