economics of poverty.doc

7/27/2019 Economics of poverty.doc

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PPP refers to a method used to work out the money that would be needed to

purchase the same goods and services in two places. Across countries, thi s i s

used to calculate an impl ici t foreign exchange rate, the PPP rate, at which a

given amount of money has the same purchasing power in di fferent countries.

The 2004-05 Tendulkar poverty l ine was Rs.16, which in PPP terms, i s

equivalent to one U.S. dol lar per person per day. The new poverty estimates of Rs.

29 per person per day recently released by the Planning Commission are

equivalent, in PPP terms, to the new international ly accepted poverty l ine of

$1.25. The suggestion that somehow thi s much money i s enough for people

to survive in any conceivable form has given ri se to understandable publ ic

anger, much exacerbated by insensi tive suggestions by some members of the

rul ing party that even less could be enough. There could not be a more

ridiculous tragedy of errors on al l sides. Al l that the Planning Commi ssion has

done i s to use the most credible source of consumption data avai lable in the

country (the National Sample Survey Organi sation) to compute poverty

estimates that are both on pari ty wi th international standards and enable

compari sons wi thin India over time and across States. There i s no value

judgment being made about the adequacy of thi s amount of money for any

meaningful purpose. Al l that i s being done i s to provide an estimate (using

the very same methodology) that al lows one to compare the number of people

below a certain consumption level (aka poverty l ine) in 1993-94, 2004-05 and

2011-12. Nothing more, nothing less.

The data show that the rate of ri se of consumption expendi ture in the last

decade far exceeds the rate in the previous decade. Whi le those below thi s

consumption poverty l ine actual ly went up marginal ly between 1993-94 and

2004-05, they fel l dramatical ly from 41 crore in 2004-05 to 27 crore in 2011-12. Thi s huge decl ine in the number of people below thi s poverty l ine needs to

be taken very seriously. Ascertaining preci sely the contribution of the Central

government in thi s achievement i s not a straightforward matter, since i t i s

not government action alone that determines the course of an economy. And

State governments also play a crucial role. Thi s i s a matter of research and



more sati sfactory answers wi l l emerge only over time.However, there can be

no denying that Verdict 2004, in which the people of thi s country voted wi th

thei r feet to rej ect the slogan of India Shining, placed great publ ic pressure on

the new government at the Centre to move in the di rection of more inclusive

growth. And i t i s clear that since 2004, there has been an enormous and

unprecedented ri se in expendi ture by the Government of India on programmes

of social inclusion, such as MGNREGA. There i s also overwhelming evidence of a

ri se in wages of the poorest people in rural India. How much of thi s i s di

rectly or indi rectly attributable to MGNREGA i s another scholarly question, on

which divergent views have been expressed.

But no one di sagrees that MGNREGA certainly played a role here. Nor can i t be

denied that during thi s period India became one of the fastest growingeconomies in the world.

What i s even more important, however, i s to clari fy what the poverty l ine

does not signi fy. Contrary to popular mi sunderstanding, there i s no suggestion

whatsoever that the benefi ts of government programmes wi l l be restricted to

those below thi s poverty l ine. The aim i s not, as many canards make out, to

arti ficial ly or falsely reduce the poverty numbers in order to score pol i tical

brownie points or to bring down the al locations that have to be made on anti

-poverty programmes.Qui te to the contrary, the incontrovertibly clear

landmark contribution made by the UPA-II government i s that for the fi rst time

in the last 20 years, the poverty l ine has been del inked from enti tlements of

the people of India. Indeed, wi th the 12th Plan, thi s government has taken the

fi rst steps in acknowledging that poverty i s a mul ti –dimensional concept that

cannot be reduced to consumption expendi ture alone. To i l lustrate, ti l l now

i f you were to be regarded as

a beneficiary of the Indi ra Awaas Yojana (IAY) or the Total Sani tation Campaign,

you needed to possess a BPL card. The di stribution of these cards was plagued

by humungous errors of inclusion and exclusion, such that many of the real ly

poor would not be included but those wi th muscle power at the local level

managed to hustle BPL cards even i f they were not poor.



During the 12th Plan, al l thi s i s poi sed to change wi th the enshrining of the

principle — “programme-speci fic indicators for programme-speci fic enti

tlements.” Thi s i s a clear recogni tion that poverty has many dimensions, each

of which i s to be tackled by di fferent programmes and the benefi ts of each

programme wi l l ei ther be universal (as in MGNREGA, heal th, primary

education, sani tation, mid-day meals, etc.) or be based on data on speci fic

deprivations such as homelessness.

The Socio-Economic and Caste Census (SECC) conducted by the Government of

India, in partnership wi th al l State Governments, i s nearing completion. The

SECC data wi l l be presented in gram and ward sabhas across the country over

the next few months and thi s wi l l enable a kind of social audi t of thi s data

and foster ci ti zen awareness and participation in the process. The SECCcontains invaluable information on homelessness, manual scavenging, di sabi l i

ty and a host of other deprivations, al l of which are major consti tuents of poverty.

These wi l l be used to identi fy the people enti tled to speci fic benefi ts. Thus,

the homeless wi l l be the beneficiaries of IAY and the di sabled wi l l get di sabi l

i ty pensions, i rrespective of whether or not they have a BPL card. The food

securi ty legi slation wi l l cover 67 per cent Indians, which i s more than three

times the number of people l iving below the consumption poverty l ine (22 per

cent).

economics of poverty.doc

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