How the beggar economy promotes growth

You come out of a restaurant and there is a miserable-looking girl who asks for money. You feel guilty about having just had a good time inside and do not mind passing on some coins. You emerge from a place of worship and in the name of the Lord give alms to the beggar.

After praying to the Almighty you cannot possibly refuse a beggar considering that your chauffeur has just opened the door of your car. You are on the train and a sweet-looking four-year-old carrying an infant comes up to you.

Out of pity you part with a few coins. Or more likely, you are at the crossroads and the eunuch scares the daylights out of you and with fear and revulsion you hand over Rs 5 and seventy five paise (to the uninitiated this is the sum they typically demand which is taken also from an old Hindi film song).

This is the world of beggars which is not just about misery and appalling conditions. It is an economy in itself. Just read on to digest what this means.

In Mumbai, there are estimated to be 100,000 beggars. This population grows because every couple breeds at least six children because that really means eight workers on the road.

The smaller the child the merrier it is for the parents because there is a better chance of a two-year-old being given money than an adult.

There is also a definite preference for girls as their presence evokes a more sympathetic response from the public.

Now, it has been estimated that a beggar could earn anything between Rs 50 to Rs 100 a day.

Let us call this an exaggeration since there are contractors or intermediaries here who probably give these people not more than Rs 20.

And mind you, today beggars have stopped accepting anything less than a rupee and you often have to pay two rupees to the beggar who wipes a dirty cloth over your car.

At Rs 20 a day, they rake in Rs 20 lakh (Rs 2 million) all put together, which means Rs 6 crore (Rs 60 million) a month or Rs 72 crore (Rs 7.2 million) a year.

To this you should add the material in kind which they receive left over food, which can easily be another 50 per cent of this amount being valued at Rs 10 a day.

Here we can exclude the old clothes and other odds and ends, which also has a resale value in the junk bazaar.

So we are really talking of a Rs 100 crore (Rs 1 billion) of an economy just in Mumbai.

And if we sum it across the rest of the country, the amount will top at least Rs 1,000 crore (Rs 10 billion). This is money is completely tax-free and almost always transacted in one rupee coins.

We are excluding the rag pickers and people in the charity homes and orphanages which are more organised. We are also excluding the trading of these coins by these beggars in areas where there are shortages.

Now, the Rs 1,000 crore (Rs 10 billion) is always spent and never saved. It is also spent only on food and would go mainly in the ubiquitous wada-pav if you are in Mumbai, tea from the roadside stalls and so on.

Hence, it has strong backward linkages, since it supports the petty retailer and provides a steady income to 150,000 to 200,000 retailers (assuming an income of Rs 5,000 a month for a vendor) in the form of tea stalls, small eateries, fruit vendors and so on. And this is spread across the country.

The beggar economy hence forges links with the informal sector of the economy and promotes growth and above all employment.

Beggars are a vital part of the economy which is not supported by the government and has society indirectly funding their existence.

In fact, quite curiously, if we do go along with the estimated figure of Rs 50 a day collected by a beggar, then the total amount of transfer payments made to this class by society would be around Rs 2,000 crore (Rs 20 billion) at the national level, which is around 5 per cent of the total central government subsidy bill.

Therefore, as the value of poverty in our country has ironically gone up, it needs less government support and sustains employment of several others.

It does what the government is unable to do on its own as it always crying over the fiscal deficit. Surely, there is a lot to think over when you part with those coins the next time.

The writer is an economist with Larsen and Toubro Limited