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The thin end of the trickle

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ET reported:

In 2013, only 22 per cent Indians below poverty line: Planning Commission

The number of India’s poor fell to less than a quarter of its population in 2011-12, according to a Planning Commission estimate, giving the government a reason to cheer amid the recent raft of disappointing macro economic data.

The commission said on Tuesday the number of those below the poverty line declined to 21.9% of the population in 2011-12, from 29.8% in 2009-10 and 37.2% in 2004-05.

The estimate, based on a survey of household consumer expenditure, showed rural poverty declined to 25.7% from 41.8% in 2004-05, while in urban areas it fell to 13.7% from 25.7%.

The sharp drop was attributed to the high real growth in recent years, which raised the consumption capacity.

The data showed that nearly 2 crore people were pulled out of poverty every year from 2004-05 onwards, which resulted in a sharp drop in those below the Tendulkar poverty line to 27 crore in 2011-12 from 40.7 crore in 2004-05.

This definition of the poverty line has been under challenge. However, the government has been claiming to use this definition consistently. An article in the Hindu pointed out that the government’s poverty line is not a measure of poverty, rather of destitution. The BJP has now woken up to it, as NDTV reports:

“We challenge Congress leaders to live in 34 rupees a day in urban and 28 rupees in rural areas for just a day,” [BJP spokesperson Prakash Javdekar] said.

It is a worthy challenge, and should not be dismissed in a line as NDTV does:

The BJP’s opposition to the latest figures could stem from results showing Congress states like Rajasthan beating Narendra Modi’s Gujarat in poverty alleviation. The plan panel has listed Bihar, Orissa, Madhya Pradesh, Rajasthan and Chhattisgarh as better performing states on alleviation of poverty.

Exactly because this challenge is on everyone’s minds, it is useful to look deeper into the report in ET where it says:

The release showed there would still be a decline in the poverty rates from 2004-05 levels even if a method other than the Tendulkar methodology was used to determine the poverty line.

This is believable. It would indeed require miraculous economic and administrative planning to raise the incomes of 200 million people from below Rs. 22 a day to exactly Rs. 23 a day, and not raise incomes of other people at all. If our experience of corruption is anything to go by, then an increase of income of Rs. 1 for the destitute comes at the expense of a much higher increase in income of people above them in the feeding hierarchy.

Later in the same report, there is a quote from the prime minister:

“The percentage of population below the poverty line declined at 0.75 percentage points per year before our government came to office in 2004-05. It has fallen more than 2 percentage points per year between 2004-05 and 2011-12,” Singh said at an industry association function last week.

So according to the government, the number of poor have declined by about 24 million people per year. That is also a major achievement, if true. It can only have come about through employment generation. Is this what the MNREGA and other income guarantee schemes have managed to achieve? Livemint summarizes the questions:

The numbers themselves may be debatable but they are reflective of a broader trend.
One theory is that this is the outcome of the trickle-down impact of the record growth witnessed in the first decade of the new millennium.

This growth, though, has not been accompanied by a commensurate rise in employment, implying that its benefits have not really trickled down. Still, the growth did result in higher tax revenue, enabling the government to fund a large social sector spending programme.

This programme, which included schemes such as the rural job guarantee one, played a significant part in reducing India’s poverty levels, an alternative theory says.

A wonderful infographic accompanies Livemint’s article.
Poverty decline: infographic from Livemint

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Written by Arhopala Bazaloides

July 24, 2013 at 8:10 am

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