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The latest estimates of poverty reduction in the country, put out by the National Sample Survey (NSS), are unique in that they have not been welcomed by anyone.
While the UPA types have either kept quiet or have said the reduction in poverty is not good enough, Vijay Kumar Malhotra of the BJP is on record saying "the poverty figures reflect the present government's policies of the last three years," and borrowing a few things from his friends in the Left, he added, "the rich are getting richer, while the poor (are getting poorer) . . . the so-called reforms are not paying off."
Ironic, isn't it? The 2004-05 numbers really reflect the change brought about during the BJP's tenure and are a vindication of what the party kept saying about India Shining and negates the Congress claim about India not shining for everyone, and yet the BJP has made the kind of statement it has.
Makes me feel a bit guilty about voting for Malhotra when he stood against Manmohan Singh for the south Delhi Lok Sabha seat in 1999, except that Singh has done an even bigger U-turn on his professed position on economic reforms in the early 1990s.
The fact is the rate of poverty decline has increased significantly in the post-reforms period, and more so in the last five years, when economic growth picked up considerably. Most commentators and politicians have chosen to concentrate upon the point that post-reforms poverty reduction has actually declined, by the Uniform Recall Period method.
It fell by 0.9 percentage points per annum between 1983 and 1993-94 versus a lower 0.8 percentage points per year between 1993-94 and 2004-05, while, by the Mixed Recall Period method, it fell from 1.1 percentage points to 0.8 percentage points.
This, however, is missing the wood for the trees since it is not the absolute values of the change that matter, but the rate of the change--reducing 10 from 100 is not the same as reducing 10 from 50, isn't it? Once you correct for this, you find that, in the case of the Mixed Recall Period method, the rate of decline in poverty, which was 2.9 per cent per annum in the pre-reforms 1983 to 1993-94 period, rose to 3.1 per cent in the post-reforms 1993-94 to 2004-05 period, and further to 3.6 per cent in the last few high-growth years of 1999-2000 to 2004-05.
Sadly, since the 1999-2000 NSS survey did not collect information for the Uniform Recall Period method, there are no comparable data.
It's important to keep in mind that all this happened when organised sector employment, where wages are much higher, hardly rose--this, in turn, is a result of labour policies that discourage units from getting bigger, but that's probably the subject of another article.
Suffice it to say that had employment in the organised sector risen faster, as you'd expect with higher industrial growth, the reduction in poverty would have been far higher.
Of course, the other point worth keeping in mind is that the National Sample Survey (NSS) results of 2004-05 don't capture even half the country's consumption that is reflected in the overall GDP numbers. The 1999-2000 NSS round captured 55 per cent of the overall consumption while the 2004-05 round captured just 48 per cent. So, what is the impact of this 13 per cent "lost" consumption?
A sensible thing to do is to just distribute this in the same proportion that consumption takes place at present--basically keep the income distribution curve the same but shift it outwards. Do this, and the poverty rate under the Uniform Recall Period falls from 27.5 per cent in 2004-05 to around 19 per cent; and from 21.8 per cent to 13 per cent under the Mixed Recall Period method. Surely that's a huge change in poverty numbers?
The other criticism made is that the numbers are clearly incorrect since they show rural poverty falling by a faster rate than urban poverty, and given that the last few years especially have seen poor growth in agriculture, this is just not possible. Especially since there is no sign of dramatically increased rural migration during this period. Well, for one, rural India is not just agriculture, as Omkar Goswami and Rama Bijapurkar argued so convincingly. (July 16, 2005).
They pointed out that, in 2000-01, agriculture accounted for just 46 per cent of rural Net Domestic Product (GDP minus depreciation), industry another 21 per cent and services contributed 33 per cent--during 1993-94 and 2000-01, as a result, rural NDP rose by an average of 6.2 per cent per year even though agriculture grew by just around 2 per cent or so.
Second, the rate of change depends upon the shape of the income curve--if there are more people near the poverty line in rural India as compared to urban India (as Surjit Bhalla has shown in his last book), it is obvious the same level of change in income will reduce poverty faster in rural areas in comparison with urban areas.
Indeed, even in 1983-93, rural poverty reduced at a much faster pace than urban poverty. What a pity then, that no one wishes to celebrate this success.
