The current economic slowdown will soon pass and the country will bounce back to be a growing economy of the world. But for that to happen, new natural resources like oil and minerals have to be discovered, investments must happen in infrastructure, labour must turn more productive, human capital must value add, use of technology must be contemporary and the laws must be enabling. Wealth creation or accumulation of assets whether by government or by its people needs a long gestation period.
In 2011, 268 million people were surviving on less than $1.90 a day. World data lab, a leading public and non-profit research institution, using data models and web tools to inform public policy and monitor achievements of Sustainable Development Goals, on the basis of household consumption data, predicted that less than 50 million Indians may be living on less than $1.90 a day in 2019. An achievement that forces one to look at the nuts and bolts.
Other recent reports show, more than a quarter of the population living in rural areas of India is below the poverty line. Out of the total population living in rural India, 25.7% is living below the poverty line whereas in the urban areas, the situation is a little better with 13.7% living below the poverty line.
To estimate poverty in the country, both income-based and consumption-based poverty statistics are used. The World Bank and the United Nations use purchasing power parity (PPP), as well as nominal relative basis to estimate poverty. These differences in definitions yield a complex and conflicting picture of poverty in India, both internally and when compared to other developing countries of the world. Whatever the story may be, poverty is real and needs to be addressed if we are to be counted, a five trillion-dollar economy by 2024. A chasm that widens the poor-rich divide cannot be wished away.
An interesting but a very challenging fact of poverty is that people who make ends meet would be in and out of poverty threshold. Should we give credence to the World Poverty Clock, a Vienna based think tank that estimates close to 44 Indians escaping extreme poverty every minute when 93% of economy is informal and no proper records exist on what is earned and what is spent?
Is economic growth sufficient to end poverty or to benefit all people? Tackling vulnerability and promoting resilience is paramount in poverty alleviation models. Risks at different stages of people’s life-cycle and in various situations, tend to move people in and out of poverty. Poverty alleviation methods hence prove ineffective when those emerging from poverty fall back into it and when those who have been above the selected income threshold, become impoverished and or experience deprivations in many non-income dimensions.
It is in this context that the research work of Abhijit Banerjee the Indian-born American economist, a Ford Foundation International Professor of Economics at MIT, becomes important. Sharing the Nobel Memorial Prize in Economic Sciences with Esther Duflo, indeed gave the world a new research methodology to measure the effectiveness of actions, such as government programmes, in improving people’s lives. For this, they used randomized controlled trials (RCT), similar to clinical trials in medical research. For example, although polio vaccination is freely available in India, many mothers were not bringing their children for the vaccination drives. Banerjee and Prof. Esther Duflo, tried an experiment in Rajasthan, where they gifted a bag of pulses to mothers who vaccinated their children. Soon, the immunisation rate went up in the region. In another experiment, they found that school students learned better when teaching assistants were appointed to help them, giving rise to several new possibilities. In a digital age, technology enhanced RCT could give results that would converge better.
The Nobel committee said their work has led to improvements in the lives of many poor people, noting that as a direct result of one study, five million Indian children have benefited from remedial teaching in their schools, while a number of countries have increased their spending on preventive health care. If poverty can be alleviated and quality of life improved by incentivising the recipients of extreme poverty, then they call for a larger debate.
People experience multiple deprivations since poverty is multidimensional in nature. Poverty has an income and non-income dimension as well, to it as noted by the Global Forum on Development and the report of the OECD Development Co-operation 2013. Will Poverty end if a certain minimum income is ensured? Highly unlikely. Since overlapping deprivations are many faced by poor people that include malnutrition, poor sanitation, and lack of electricity or ramshackle schools.
It is possible that the economists analysing the data may not be very grounded in the realities of the phenomenon they’re studying because of which, the government may be justified in not accepting the criticism of not doing enough. But an open mind to new methodologies have never harmed any.
These days, looking for better-paying work, farmers and others are moving out of rural areas to urban centres. The realities of a changing society must be factored in any alleviation program. Accelerating industrialization and urbanization in a country of over one billion people must transform a large number of labours in the countryside into urban employment. Equal distribution of land will enable the bottom poor to proportionally benefit not only from development and reform in agriculture but also from the transfer payments the state provides to support agricultural development. Universal compulsory education up to grade 10, rural medical cooperative system, social pension system for rural residents, and a minimum living allowance must all happen. Targeted poverty reduction programs covering broad areas, from physical infrastructure, social development, to industrial development and income generation to assist poor households and poor areas and improve their ability to share the benefits of national growth and generate more income by themselves must all be realised. However, data models that successfully segregate those in need, must be developed. A large informal economy However, makes this task onerous.
In order to ensure political economic equilibrium, the Indian political, policy and administrative systems have to adjust to the new realities of the transition to a middle-income country, in which poverty does not mean living at the edge of hunger but, rather, lack of income to take advantage of the opportunities thrown up by a growing economy.