Tuesday, July 23, 2013

Poverty declines sharply during UPA rule

The newspapers are full of stories about how poverty in India has reduced drastically during the first 7 years of UPA rule. Annual declines have been 2.18% per year compared to just 0.74% during the previous 11 years. In my mind, there is nothing surprising about this data. The UPA government’s constant thrust has been on reviving the rural economy and providing some sort of a decent living to the people there. People like us in urban areas may complain about the government’s programs, but make no mistake. The rural folks are making the best of it all.

In fact, check the results of any FMCG company over the last several years and the rural firepower becomes evident. Companies like HUL have dramatically grown their rural presence and are reporting higher toplines and profits on the back of this rural might. HUL’s performance over the last few years has been so steller that its parent has decided to up its stake in the Indian subsidiary. It’s the same story with bike manufacturers who say that it’s the rural strength that continues to drive their success stories.

There is a strong political angle to poverty reduction. If there is one core difference between the BJP and Congress, it is this: The BJP is urban focused; the Congress rural. This explains why the BJP made much noise about the urban-centric Anna movement (even though it stabbed him in the back in the end), while the Congress was ham handed in its dealing. This also explains why the BJP throngs TV studios and its leaders give speeches only in the big metros (read my post of 7th July: http://blogs.timesofindia.indiatimes.com/the-real-truth/entry/the-metro-focused-narendra-modi), while the Congress focuses on the dirty village streets (Rahul Gandhi spends most of his time there, which is why he is not available for TV interviews). This also explains why the BJP opposed FDI in multi-brand retail, wanting to protect its urban baniya voter base, while the Congress wants it because it helps farmers cut on losses (rotting etc) and make more money (even though prices paid to them could come down). The BJP has no qualms in supporting the usurious baniyas – a TOI report showed that in Mumbai, fresh food retailers were extorting a profit of Rs 60 lacs per day per vegetable. For the Congress, intervening to break this grip and pushing retail vegetable prices back was a political opportunity, which Prithviraj Chavan has brilliantly exploited.

So make no mistake. The poverty reduction is a direct result of the UPA’s policies. There is no luck in this result. This is a result of the party’s core policies. Just look at the thrust of the Congress’s policies:

1)    Minimum Support Prices (MSPs): Just check the data available on http://tinyurl.com/kquru47. Analysis shows that during the NDA rule between 1998 and 2004, rice prices increased by a total of just 33% (average increase 5.5% per year). During the UPA rule post 2004, rice MSP has increased by a whopping 127% in about 9 years time (average 14% per annum). It’s the same with wheat (NDA: 4% per annum; Congress 13%), coarse grains (NDA: 7%, Congress 23%) and daal (Arhar)(NDA: 8.5%, Congress 22%). The Congress rewards the farmers three times better than the NDA did. One other thing. It’s not like “the times have changed” and that’s why the UPA is paying more. Even during Narasimha Rao’s tenure between 1991-96, the average annual hikes in MSP were 11.5% for rice, 13% for coarse grains, 14% for wheat and 13.5% for daal. It’s only during the NDA rule  that annual increases dipped.

2)    NREGA: The two states where poverty has declined the most are Odisha and Bihar. Now anyone who has been reading the papers knows that both these states have reported high GDP growth rates (better than Gujarat’s by the way!). That’s obviously reduced poverty quite strongly. But the center’s NREGA has played another vital role in poverty reduction. Consider this (source: www.nrega.nic.in), as many as 20 lac households in Bihar and 16 lacs in Odisha availed of NREGA benefits during 2012-13. That’s nearly a crore plus people affected by the program in each state. The total people-days generated were 9.24 crores and 5.5 crores respectively. This is huge. If you are a poor person in these states, you are sure that the central government will guarantee you 100 days of employment at a hugely respectable Rs 125+ per day. The central government spent upwards of Rs 40,000 crores in just the last one year. NREGA is the world’s largest employment guarantee program.
3)    Subsidies: The Congress government maybe panned for its high subsidies (and indeed when GDP growth slows, the burden of subsidies creates problems), but make no mistake. Subsidies are what makes life liveable for the poor. Urban people like us who joke about “Rs 32 per day” don’t realize that this translates to Rs 5000 per family per month. We also don’t realize that with subsidies, this effectively works out to at least Rs 20000 per family per month. That’s more than adequate to raise people over the poverty line. Likewise, the UPA’s Food Security Bill may be panned by the intelligentsia, but just go ask the poor. It’s their lifesaver!

So the UPA has every right to claim credit. Had the UPA’s PR machinery been just a fraction as effective as Modi’s, the papers would have been full of these stories! Talking about PR brings me to one last point. Narendra Modi claimed so much success for his Gujarat Tourism campaign. He was hailed as the visionary who saw the potential of this vital service industry. Well, the facts say otherwise (now what’s so unusual about that!). Gujarat got 24 million tourists in 2012; Andhra topped the list with 206 million. Gujarat is probably ranked 9th. All that Gujarat and Modi have to dole out is a lot of gas! Maybe, I will write a separate post on this subject one day!

The real truth is poverty reduction is tangible in the country. Rural areas are buying more goods, eating better food and traveling in better vehicles. Even the urban poor are benefiting from rising wages (just check out how much drivers and maids cost these days!). We may not travel to the rural places often, and our TV cameras certainly don’t, but that’s the reality. For a change, let’s not be cynical. Let’s applaud the good work done. UPA – take a bow!

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