Friday, August 2, 2013

After initial criticism, consensus on massive poverty reduction during UPA rule….

When the NSS (National Sample Survey) report indicated that poverty had reduced sharply during the UPA rule since 2004-5 (@2.18 % per annum), the usual happened. The opposition scorned the Congress for putting out such lies just before the elections. The activists cried that the data was all wrong and poverty was actually worse now. Even the intellectuals (the economists) tore apart (once again) the Tendulkar poverty line of Rs 32 (or is it 33?) per capita per day. All of this took the shine off the Congress’s claims. And even made it doubt its own achievements. So much so that even the well-regarded Montek Singh Ahluwalia agreed that Rs 32 was too low.

But now, as the froth settles, the truth is starting to emerge (why don’t we have a law in this country that we will not express any opinions for at least one month after something happens!). And the truth is that a) the poverty cut-off of Rs 32 is indeed correct, and in line with a global reference point articulated by the World Bank, which is $1.25 per capita per day on PPP (purchasing power parity) basis. Why is Rs 32 the same as $1.25? Because of a much lower cost of living in India. And why is that so? Because of the massive subsidies that the GoI gives to its poor. But for sensation-seeking media anchors, PPP is too fine a point to appreciate b) poverty has dramatically reduced because of rapid growth. The estimate of poverty is accurate since it is based on the respondent’s own “recall” of weekly, monthly and annual expenditures. Surjit Bhalla explains this beautifully in his 20th July piece in the Indian Express. He also explains why the “sudden and dramatic” fall of 9.4% in just the last two years – between 2009-10 and 2011-12 – is so credible.

Even noted columnist Swaminathan S Anklesaria Aiyar said the same thin in the TOI on 28th July (“Why no applause for 138 million exiting poverty?”): When China reduced people in poverty by 220 million between 1978 and 2004, the world applauded this as the greatest poverty reduction in history.India has just reduced its number of poor from 407 million to 269 million, a fall of 138 million in seven years between 2004-05 and 2011-12. This is faster than China’s poverty reduction rate at a comparable stage of development, though for a much shorter period. Are the China-cheerers hailing India for doing even better?

What economists – or at least those belonging to one particular ideology – still don’t like to give credit to the Congress for is for the party’s “direct” poverty alleviation programs – such as the NREGA and the Food Security Ordinance . They believe that the poverty reduction is entirely because of growth. They believe in the “trickle down” impact of growth. But there are others – like the much attacked Amartya Sen – who believe that while a capitalistic model can deliver growth, it also simultaneously delivers inequality. It’s obvious. A Mukesh Ambani can help hasten industrial growth, but at the same time, he helps himself to a much bigger reward as well. It is because Ambani can profit so much, grow his wealth so fast, that acts as his incentive. Something the communist, state driven model of governance can never deliver. Somehow, none of us likes to admit to this obvious truth. If this is true – that capitalism creates inequality – then there has to be an automatic justification for “redistribution” of wealth.

No one can deny that poverty has come down. And the Congress must rightfully claim full credit for it. No only can also deny that growth is one of the major factors for this reduction. We today forget this fact, but as recently as in 2010-11, India grew at 10.2% per annum. It’s only in the last two years that we have floundered. But even now, we are the 2nd fastest growing major economy in the world. The fall in growth in unfortunate, but is hardly an Indian problem alone.

The primary architect of the economic progress is no doubt the PM. His actions in 1991 opened up the economy. That is when India’s growth started to skyrocket. The only time when the growth rate slowed down was during the BJP’s six years of rule. Growth was faster before, and after, the BJP rule. Surely, there were some local factors that led to this, but the real reason for this was that the BJP was more focused on its identity priorities (defending Narendra Modi on Godhra, promoting Hindu mumbo-jumbo in schools) than on anything remotely economic (save and except for starting the Highways program, bulk of which the UPA finished). Aakar Patel has argued convincingly that for a Brahmin (the core of the BJP/RSS), protecting his identity (religion) is most important, while for a baniya party (not a party for baniyas!) like Congress, “doing business” was most important. Since 2004, Manmohan Singh’s government was doing the right thing when it continued with 2G “subsidized” license fees, but the lunatic  CAG made a big fuss out of it. It did the right thing in bringing in coal auctions, but the same lunatic CAG again put the blame for the previous policy (pursued since 1993) on the same PM’s neck. How ironic. The man who changed a corrupt system stood accused of allowing corruption. It is such politically motivated, completely destructive pronouncements of the CAG that have hurt India in the last two years. Any government would go into paralysis. Fortunately, it has now regained its wits. And policy paralysis is quickly morphing into policy activism. Hopefully, growth will resume. And poverty reduction will start again in right earnest. In the meantime it would help if our pseudo intellectuals, and unintelligent media anchors refrained from commenting on things they don’t understand.

The real truth is that no matter what BJP supporters think, the fact is that growth has been highest during UPA rule, and poverty reduction as well. The experts are saying so, and forcefully. This is a moment for us to feel proud, not play politics….

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