More than the poverty line, what matters is the solution for poverty removal -- and growth offers the only way out
Each time estimates of poverty are put out, you find the usual suspects—Opposition leaders and the nice gentile civil society types—pointing to how fictitious they are. If even a dozen bananas of indifferent quality cost over R50 in tony Gulmohar Park in south Delhi where I live, the argument goes, how can the poor even live—given the Tendulkar poverty line is R33 a day for urban areas and R27 for rural ones, what do the poor spend on rent, on medicine, on clothes…? It is another matter that the poverty estimates themselves look overdone as the NSS typically understates consumption—in even 2004-05, 7.6% of the bottom quintile owned two-wheeler. But leave that aside for the moment and concentrate on the arguments made by those saying the government’s poverty lines are spurious.
This time around, they’ve been joined by worthies like the suave legal eagle Kapil Sibal who, after having held jobs like the country’s science minister is now in charge of telecom and IT. The poverty line used by the government, from BJP’s former finance minister Yashwant Sinha to Kapil Sibal, they say is false, fake, untrue. While Sibal’s trashing of the poverty line is aimed at perhaps justifying his leader’s ultra-expensive Food Security Bill, Sinha is suggesting the government has kept a lower poverty line to jazz up its record in poverty reduction.
It is unfortunate Sinha forgets his government used even lower poverty lines to show how poverty reduction had increased in its tenure—BJP’s lower poverty line showed 27.5% of people to be poor in FY05 and this was later hiked to 37.2% when the Tendulkar poverty lines were introduced by the UPA. In any case, with over 90% of the country’s 270 million poor living in rural areas, what bananas cost in Gulmohar Park, or Jor Bagh for that matter, is immaterial—also, about 40% of the poor’s cereals come from vastly subsidised PDS shops. What is equally shocking is that few have bothered to keep in mind that India’s poverty line is the same as that used by agencies such as the World Bank—at $1.25 PPP dollars a day, this is the same as Tendulkar’s.
Equally worrying is that none are concerned about the fact that, if the Tendulkar poverty line is R872 per month, India needs government subsidies of R2,80,000 crore per year to have zero poverty—assuming, incorrectly, that the poor earn absolutely nothing—yet we have 270 million poor persons? Maybe the spending isn’t doing much to remove poverty since we spent R2,30,000 crore on subsidies in FY14, and the amount has been growing, from 1.2% of GDP in FY01 to 2.6% in FY13.
The question gets even more evocative when we increase the poverty line to take into account, say, the cost of bananas in Gulmohar Park. In any case, there can be no doubt, just measuring poverty in terms of what food people can eat is outdated. Poverty levels need to be measured in terms of access to education, to health facilities, to drinking water…
Let’s say we double the poverty line to R21,000 per year, so where do we get the money to help them not be poor? Presumably the government can’t afford to double its annual spend to R5,65,000 crore—the levels of theft in the system haven’t really improved—so what do we do?
How does someone get R21,000 per year or R1,05,000 for a family of 5? Short of more jobs—and between FY10 and FY12, NSS data suggests 14 million new jobs got created—there is no other solution, not even better targeting of subsidies. An interesting proposal, in this context, is that of the textiles industry which, thanks to rigid labour laws, remains in the unorganised sector and so loses out on global market share to countries like Bangladesh as big buyers prefer to deal with large organised sector suppliers. Textiles and readymade garments is a seasonal industry and so cannot afford to keep workers on its rolls the full year, something the law requires for the organised sector. So, the industry proposed a double MGNREGA—a minimum of 200 days of employment each year and at R200 per day—which the government turned down. Had this been done, each family would have ended up earning R80,000 per year assuming 2 persons were employed, or 8 times the current Tendulkar poverty line! Keep in mind while evaluating the proposal that while MGNREGA produces just 1% of all jobs in the country, textiles contributes to around 8-9% and could very easily increase this further with the required flexibility.
The growth versus dole debate gets even more sterile when you look at the essential characteristics of the poor. According to analysis by Institute for Human Development’s visiting professor Rajesh Shukla, India’s foremost expert on income demographics, just 2% of the poorest 20% are salaried while 63% are labourers—the figures are 46% and 4% for the richest fifth of the population. The cure, then, is to get more people to graduate from being labourers to being salaried—that means more industrialisation, more services. Just 7% of the poor are graduates as compared to 53% for the richest fifth—that means more education is required, not more food security. Just 3% of the poor are employed in the modern services sector as compared to 35% for the rich—once again, this means more education and ways to increase the spread of the services sector. Slice it any way you like, the only thing that can help remove poverty is more jobs.