Thursday, Dec 18, 2014

1960s thinking on poverty, only in India

Written by Surjit S Bhalla | Posted: July 18, 2014 12:10 am

The newly formed Expenditure Commission would do well to comprehensively reject ancient Indian methods of poverty measurement, alleviation.

There was a lot of expectation that specific reforms would be announced in Budget 2014-15 regarding the operation of subsidies in India. There were none — indeed, the budget has been criticised by many for lacking any reforms on expenditure policy. Pointedly, many analysts have concluded that Budget 2014-15 is just another UPA-Chidambaram budget.

However, what was announced in the budget is that the government will create a commission to look into the entire nature of our expenditures, with specific emphasis on poverty elimination. And the biggest such item is the operation of the Public Distribution System (PDS) of foodgrains to the poor.

In a recent India Policy Forum lecture (“India: Changing Mindsets, Accelerating Growth, and Reduced Inequality”) I made the simple point that the mindset that has produced policies like the food security act, or FSA (which mandates that two-thirds of the Indian population are deserving of food subsidies), and NREGA — a jobs entitlement programme for all of rural India — needs to be junked before India can look forward to meeting its destiny of an 8 per cent growth economy and a major emerging power on the world stage.

The Sonia Gandhi-led UPA mindset was inconsistent with the belief that India can be anything but a poor country, not much different from the nightmare concocted by Swedish Nobel winner Gunnar Myrdal in the late 1960s (the 1968 three-volume Asian Drama, in which his contention was that Asia was doomed to be poor for ever). Myrdal can be forgiven for speaking too early, and being wrong, but what do you say about politicians and policymakers and their intellectual advisors who still believe in 2014 that Myrdal was right and that India is a forever-poor country?

In 1968, India’s per capita income was around $100 per person per year. When the food security act was passed last year, India’s per capita GDP was 15 times higher. Yet our mindset was to pursue the same policies as 50 years earlier — indeed, to expand them. The PDS system has been in operation since 1942, when it was introduced to counter famine conditions in Bengal.

It was expanded over the years and became a full-fledged all-India operation around the time of Myrdal’s book. The food/ cash-for-work programme was first introduced in 1973 in Maharashtra, and introduced primarily to provide incomes to very poor people during conditions of drought. In 2005, Sonia Gandhi’s government introduced an act of Parliament to make it a right of every individual to have 100 days of work. The effectiveness of this programme (NREGA) in achieving its noble objective of providing incomes to the poor will be explored in a subsequent article.

A good documentation of our ancient mindset is provided by the Indian discussion on poverty and its alleviation. A new report on measurement of poverty, commissioned by the UPA a year ago, has just been released (the Rangarajan, “Report of the Expert Group to continued…

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