The poverty of poverty-line

Our poverty alleviation policies have only managed to make the poor poorer

Kamal Nayan Kabra Delhi

The per capita income in India at current prices has increased from Rs 255 in 1950-51 to Rs 25,716 in 2005-06 — an increase of over a 100 times. In 1973-74, the year in which the poverty line was first determined at the official level, it was Rs 964. It is true that owing to different price levels, the two income levels at current prices are not comparable. But for purposes of comparing the periodic revision of the poverty- line expressed in current prices, one has to refer to per capita income at different comparable points of time in current prices.

This comparison is significant. Contrary to the claims of the Planning Commission, the National Commission for the Unorganised Sector has come out with a grim finding that 77 per cent of Indians have to subsist on a daily income of less than Rs 20 and that 86 per cent of farmers (small and marginal) are not able to earn enough to meet their expenditure and remain perpetually indebted. This has raised many questions about the claims of reduction, albeit small, in the incidence of poverty and about the way the poverty question and policies are dealt with. 

The poverty line for rural India, where most of the poor live, was fixed in 1973-74 at about Rs 1.40 per day. For the urban poor, it was about Rs 2. Over time, as prices increased, without a lot more money it was just not possible to buy the food that provided the minimum calorie intake considered a defining element for moving out of poverty. Hence, in 2005-06, the rural poverty-line was fixed at a little below Rs 12 a day and for urban India at a little less than Rs 18. An eight to nine times increase in poverty line against 27 times increase in per capita income tells a story of its own.

At the very least, it shows that resource constraint, the size of the cake, could not have been the real villain of the piece, as current income levels did reach very high levels out of which a disproportionately small part was sought to be made available for the poor.

The relative decline of the poverty line, in the face of the abstract level commitment to work with absolute level of poverty, only points to a conscious design in keeping the poor worse off and yet claim positive achievements against poverty!

Official estimates about the number of people (head count) and their proportion in the total population (head count ratio) in these poverty-lines often tend to generate intense debates about the correctness and comparability of these estimates. Notwithstanding the controversies, the absolute number of the poor is large enough to put a serious question mark on the effectiveness of the policies tried so far. Not much is heard about the appropriateness and the short and long-run implications of the poverty-line. It seems that there is either no alternative concept or quantification of the poverty-line or that the level at which the poverty-line is fixed is inconsequential. There is little evidence of interrogating, at least in mainstream writing, the very concept of poverty-line and the determination of its level and show their far-reaching implications.

The poverty-line is a critical variable, an indicator of well-being, social values and a critical objective of development. It is the target level of income that the government wants the poor to reach in order to escape poverty. It has to bear a close relationship with the country's capacity to produce so that enough goods and services are available to ensure what the poverty-line stipulates is actually available. Obviously, the government has to intervene to ensure that over a given period the poor are able to reach the poverty-line level of income.

In India, it was maintained, that we have to increase the size of the cake before we can go about giving enough to every one to have a non-poor existence. A number of garibi hatao programmes were initiated. In absolute terms, huge amounts were spent, although the effectiveness of this spending did not carry conviction even with the leaders of the government.

At the end of the day, what have we achieved for the poor? In 1973-74, the rural poverty-line was a little below 62 per cent of the per capita income and urban poverty-line was about 71 per cent of the national per capita income. It may be noted that the poverty line has all along been lower than the official minimum wages. The revised poverty line (fixed in absolute terms) for 2005-6 has declined to 17 per cent of the national average income for rural areas and about 25 per cent for urban areas.

The distressing truth is that even with such a low and relatively declining poverty-line (not enough to enable an officially declared non-poor to buy one kilogram of wheat flour), the number of people officially treated as poor  was 32.13 crore in 1973-74 and the strongly disputed number of poor in 2005-06 is still around almost 30 crore!

It is on account of the low level of poverty income that a large proportion of the77 per cent of Indians living on a daily income of under Rs 20 are not considered poor. The massive, over a 100 times increase in current price per capita income, has completely bypassed those who are treated as non-poor, besides being unequal to the task of daily energy replacement as originally envisaged.  Over these years, billions of rupees have been spent on poverty alleviation. For accelerating the rate of growth of the economy — a highly applauded recipe for poverty eradication — cumulatively, trillions of rupees have been spent.

The incomes of the organised sector participants have gone up steeply, not to speak of the marathon northwards movement of property incomes of all kinds. Thus, some narrow segments of the economy have reached great heights of prosperity. Some 36 billionaires of India own wealth equal to 25 per cent of the gross domestic product (GDP).

Even the concept of poverty-line has been impoverished to a level unfit for human survival. A continuously declining share of per capita income is treated as the official poverty-line. It is clear that 'growth fundamentalists' are not prepared to share any part of their growing incomes with the poor. They speak of inclusive development, but this inclusion seems to be of the kind Amartya Sen has called “unfavourable inclusion”.

The official Indian theories on poverty reduction was to first increase the size of the cake and then go about permitting the left-outs to come and have a share. Six decades have gone by. The planners in India have set their sights so low as not to grant to the poor any share in the fast rising national income. They have kept the poverty-line fixed in 'real' terms even when the size of the cake has grown sizably. The lands, forests and water resources of the poor have been usurped. Those who have toiled on the projects contributing to growth of the economy in the most difficult conditions have not even been entitled to a share in the increasing pie; hence, there can hardly be any question of their obtaining a basic human needs-based standard of living.

Employment generation has been a very low and indirect priority and provision of elements of social consumption for the poor has been so niggardly that one is unable to see any effective mechanism for really fighting the mass endemic poverty that is the persistent problem of the country. In fact, the bulk of public spending has been for the non-poor. A recent estimate shows that the public spending on all anti-poverty and rural development programmes that was over 3.6 per cent of the GDP during the Sixth Plan period has in the early years of the present decade plummeted to just 2.7 per cent of the GDP. 

Today, the excuse of paucity of resources has lost meaning. Over one million Indians have net worth that is more than Rs four crore each. In 1950, none of them had wealth that could have been counted in more than two digits and many were simply a part of the nameless, faceless India. The political and bureaucratic classes have granted to themselves a level of remuneration that is thousand times larger than the poverty line.

The process of their periodic increase has been institutionalised. These are examples of what one may call perverse redistribution (that is, feeding and fattening the horses on green oats and asking the birds to depend on the droppings, to borrow a metaphor used by economist John Kenneth Galbraith). We now talk of inclusive growth, without stating, inclusion on what terms? Is this the real face of the now-articulated objective of inclusive growth?

The theory is clear: Every one has to be made better-off but without making anyone worse-off! Obviously, those who are at the top of the social pyramid have to be not only left untouched but unless their wealth goes up steadily they cry that they are being made worse off.

By leaving everything to market forces and the state liberally supporting them even with direct transfers, such as by means of the special economic zone (SEZs) packages, the top echelons would continue to become better-off. With the kind of abject poverty-line and anti-poverty policy, there is no question of the poor ever becoming better-off.  The market and ideology of 'growth fundamentalism' works only for the betterment of the richer sections. Even the middle strata have to satisfy themselves with the crumbs falling from the high table of the super rich. But as far as the poor masses steeped in endemic poverty go, there is no redistribution from growth for them; this is because for them the sights have been fixed by those commanding the economy and polity in the form of the poverty-line at a sub-human level.

This ensures that even the success of the political class to reduce poverty the way they choose to understand it would be a resounding failure for the poor masses. This is because what they would get would be a sub-human and uncertain level of livelihood and that too as dependents on the vagaries of allocations for the anti-poverty programmes and their top-down, generally tardy implementation.

The writer is an eminent economist and commentator