MacroScan - Much More Needed to Help the Poor

Today is the ''International Day for the Eradication of Poverty'', so it an appropriate day to note how necessary it still is to emphasise this concern among Indian policy makers.

Sadly, lack of official awareness is evident in all sorts of recent policy measures, for example in the cynicism of increasing oil prices that feed into all other prices with cascading effects, even when inflation has already imposed huge burdens on living conditions of people especially the poor. But it is also evident in the medium term strategy of the Union government, as expressed in the Planning Commission's Approach to the Twelfth Plan. Consider the complacency of this: ''The pace of poverty reduction has accelerated, though it may still be short of the target. India is well poised to meet the MDG (Millennium Development Goals) target of 50 percent reduction of poverty between 1990 and 2015.'' This assessment comes, of course, from a mechanistic and disturbing reliance on a unidimensional measure of income poverty, defined on the basis of a poverty line that has already come in for much public flak.

While some measure of what is surely extreme destitution (which is really what the official poverty line has described over the decades) may be useful simply from the point of view of tracking a long term trend, it is really a shockingly poor guide to policy. That is why the Planning Commission's affidavit to the Supreme Court declaring that the amounts of Rs. 26 per person per day in rural areas and Rs. 34 per person per day in urban India are ''adequate'' for basic conditions of life created so much outcry. As a result, the government stands accused of not only corruption but also Marie Antoinette-style insensitivity. The public furore can only be a good thing, because indeed the current official attempts to measure poverty are not just arcane but riddled with contradictions.

Any sensible government today would adopt a multidimensional definition of poverty, because it is now widely accepted that poverty relates not just to lack of monetary income, but also lack of food and nutrition; lack of decent employment opportunities: poor housing, sanitation and living conditions; inadequate access to basic services of health and education; time poverty because of an excessive combination of paid and unpaid work; and so on. In terms of these criteria, the persistence of widespread poverty in India is a critical challenge. But it can hardly be treated as such if it is not even recognised!

Perhaps the most glaring example of this is in terms of hunger. Interestingly, there is no mention of the word ''hunger'' in the entire Approach Paper. Maybe this silence is because in this dimension there has been no progress, but actual regression. In 2004-05, the proportion of population accessing less than 2200 calories per person per day in rural areas and 2100 calories per person per day in urban areas (which incidentally still constitute the official benchmarks for determining the estimates of poverty) were 69% and 64.5%. In 2009-10, the proportions increased to 76% and 68%.

Surely a concern with poverty reduction must encompass the reduction of hunger, as the first Millennium Development Goal also specifies. Unfortunately, this is not explicitly addressed – and the only indirect reference is to promoting agricultural growth, where too the strategy is inadequately developed. Indeed, the government's negative and niggardly approach to the proposed food security legislation, insisting on targeting the provision of subsidised food to a group specified by these irrational poverty lines, does not give rise to much optimism.

The other critical aspect of poverty reduction is obviously employment (which is also recognised in MDG 1). The Approach to the 12th Plan accepts this: ''For growth to be inclusive it must create adequate livelihood opportunities and add to quality employment commensurate with the expectations of a growing labour force.'' (page 9) Even so, the government does not really seem to have an employment strategy at all. So there is no chapter in the Approach Paper on employment, and the macroeconomic discussion barely allows this ''soft'' consideration to intrude into its macho obsession with GDP growth rates. Indeed, despite all evidence to the contrary, the underlying assumption seems to be that output growth in itself will generate the required employment.

Worse, in terms of improving rural poverty, the entire policy seems to be on the National Rural Livelihoods Mission (NRLM). This misguided strategy seeks to impose a pilot with limited success on the entire country, based on the linkage of women's Self-Help Groups with commercial banks. ''The real power of the SBL model lies in the economies of scale created by Self Help Group (SHG) Federations (comprising 150-200 SHGs each). SBL and livelihood programmes are complementary to each other and their simultaneous implementation is the key to poverty alleviation.'' (page 81).

It is extraordinary that the difficulties of the SBL model, including the high rates of mortality of many SHGs, have been noted – but the opposite lesson has been drawn from them! It is not as if the notion that these must be tied up with livelihood programmes did not exist, in fact this has very much been tried – the problem is that the livelihoods turned out in most cases of failure, to have been unsustainable! This is the real problem that needs to be addressed, and it ties up with the problems faced by petty producers in general, even when they are federated into what are effectively co-operatives. Without adequate consideration of the particular competitive and macroeconomic environment faced by SHGs in the proposed NRLM, this effort too is likely to end in tears. It is strange that the overall economic environment is given a lot of attention when it is an issue of corporate profitability, but seems to be completely absent when poor rural women are being considered as producers.

Further, the significance of certain kinds of public expenditure in reducing multidimensional poverty is ignored in the Approach Paper. Where is the focus on providing a minimally decent home with functioning toilet and adequate water for sanitation to all citizens? This issue is particularly important for women, and even threatens physical security, yet it is still not a priority area.

Overall, then, the Approach Paper is disappointing, even disturbing, in its attitude to poverty reduction. The macroeconomic processes that generate poverty are ignored and policy interventions proposed are pathetic. We should expect much more from a government that must increasingly fight for its political survival in a country in which poverty is still so widespread.

* This article was originally published in the Mint on October 17, 2011 and is available at http://www.livemint.com/2011/10/17003356/Much-more-needed-to-help-the-p.html