Agriculture growth at the heart of the change
While close to a third of rural India continues to remain poor—the first national Socio Economic Caste Census (SECC) puts the number at 31.26% for 2013—there are several pieces of good news coming out from this and associated data as well. For one, unlike in the past where poverty numbers were estimates based on the
National Sample Survey data, leaving each state to come out with its list, the SECC is a lot more rigorous and is based, as the name suggests, on a census, not a sample. It has been subject to rigorous cross-checking with the data put out in the public to invite objections from those in each locality, for instance. Second, with the states agreeing to the lists, this means there is now a national list of poor people for 2012-13. With this list now final—it will be made public next month—it can be matched against the Aadhaar database and, at a later date, linked to bank as well as post office accounts. None of this is a simple task. The Aadhaar database, for instance, has more or less been cleaned up but the quality of the Jan-Dhan accounts is suspect in the sense that this has not been matched against the Aadhaar database, nor has it been linked to the SECC database. That exercise will now have to be done, and could take anywhere up to a year. But, should the government decide, it will be physically possible to give out cash subsidies within a year’s time.
The other piece of good news comes from comparing NCAER’s NSHIE survey of 2004-05 with the 2013-14 ICE survey conducted by Rajesh Shukla, the driving force behind NCAER’s NSHIE surveys. While NSHIE shows an income Gini coefficient of 0.466, ICE shows a Gini of 0.386, which means a substantial fall in inequality. The reason for this, in statistical terms, is that the share of the bottom quintile in India’s income has risen from 5.2% to 6.6% while that of the top quintile has fallen from 52.7% to 46.1%. The reason for this is simple: the last decade has been one of high agriculture growth, so the poor benefited a lot. Between FY03 and FY12—the data series changed after that—for instance, annual agriculture growth averaged 4.3%. More important, agriculture growth was very high in states with high levels of poverty—in other words, a double-pronged attack on poverty. Madhya Pradesh which has a 31.6% poverty ratio had an annual agriculture growth of 10.2% over the past decade while Jharkhand which has 37% poor people witnessed a 9.2% growth. Also, across the country, there was a large shift towards non-farm labour as well—the proportion of households who were engaged in only agriculture was 56% of total rural households a decade ago based on the NSHIE data and is 36% based on the ICE data—which has also resulted in income share of the bottom quintile rising. This shift is also intuitively obvious when you look at the sharp rise in rural wages over the past few years. While it is true rural India is not the same as agriculture—according to ICE, 60% of rural income comes from non-agriculture—the catch here is that with agriculture growth slowing to the 1.7% it has over the last three years, a large part of the falling-inequality miracle will fade away.