Trickling down effect

There are various ways to view poverty. The poor, “the real poverty experts” have a perspective very different from the middle class.

For instance, a poor woman in Moldava, told a World Bank researcher  for a publication, Voices of the Poor, “Poverty is pain; it feels like a disease. It attacks a  person not only materially but also morally.

It eats away one’s dignity and drives one into total despair.”
Millions of such experiences and stories make up the narrative of poverty. It is also seen by governments as a denial of material needs. A person deprived of nutritious food, safe drinking water, educational opportunity, health care or employment choices is poor.

Yet for governments there is another  narrative, one of statistics and figures so  that measures can be taken to improve the  lot of the poor and reduce its impact.

These aren’t very encouraging. A new report by a committee headed by Suresh Tendulkar  submitted to the Planning Commission  recently has used a different methodology  to show that 37.2 per cent of Indian lived  below the poverty line in 2004-05, compared to 28 per cent as officially estimated earlier. 41.8 percent per cent in rural India and 27.5 per cent in urban areas now fall below the poverty line, compared to the 28.3 and 27.5 per cent stated earlier. 

The revision followed protests in the planning commission, among academics and NGOS that the official estimate of poverty for rural India did not reflect reality on the ground and were a gross underestimate.

Though the committee also revised the  1993-94 estimates for poverty from the earlier 36 to 45.3 per cent, its report has once again opened the debate on the effectiveness of  the reforms in reducing poverty.

This has been  reduced by just 8 per cent over 12 years at  a time when economic growth was in full swing at over 7 per cent a year. Clearly  government policies did not do enough to  improve living standards for the poorest in the country.

The ‘trickle down’ effect was insufficient and economic policies mainly benefited the better off.  India’s performance in reducing poverty compares poorly with China.

In that society the poverty level was much higher than India till the 1970s but has fallen rapidly since then from 73 per cent in 1981 to 38 per cent in 1993 to just 8 per cent in 2005. High growth rates of over 10 per cent for three decades have largely been responsible for this.

Surprisingly the levels of inequality, or the differences in income and assets owned, have increased at a much faster rate in China than India. This indicates that the middle classes are the prime beneficiaries of rapid growth, which only ‘trickles down’ to the poor.

While inequality in China is growing faster, the inequalities of wealth, especially land, are worse in India as are inequalities in opportunities for education.

The measurement of poverty itself is contentious, the number of poor being dependent on the criteria used. In the US a family of four is considered poor if the daily expenditure per person is less than $15 a day. For Germany the poverty line is Euro 16 a day. In middle income countries the World Bank sets the level at $2 per person per day.

In still developing countries like India  or China it is $1.25 a day, not at the official  exchange rate but at ‘purchasing power  parity’, a measure of how much of a local  currency is needed to get the same amount  of goods and services as a dollar in the US. 

In India this works out to be Rs15 for $1.25  instead of the exchange rate of around Rs50. At this defined poverty level, 42 per cent of the Indian population is poor according to the World Bank, higher even than the revised  Indian figure. 

Others have painted an even more pessimistic picture. A rural development ministry panel estimated that 50 per cent of Indians were poor if the criterion was food calorie intake.

Planning Commission member Abhijit Sen recently argued that a calorie intake of 2,400 for rural areas and 2,100 for urban areas (the criterion used till the 1970s) would take 80 per cent of rural India and 64 per cent of urban India below the poverty line.

The rich have fared better under the new economic dispensation. The latest Forbes list of dollar billionaires has 52 Indians, eight of them among the 100 richest people in the world, and two among the 10 richest. In 1992, the year economic reforms began there were no Indians in the list. 

Despite all rhetoric of a ‘shining India’ and ‘aam aadmi’, it should be clear who have been the main beneficiaries of the new economic policies.

The writer is a commentator on socio-political affairs