Posted on | December 27, 2011 | 14 Comments
Shining India does not shine on the mirror of facts; it shines only in the fantasy world of Planning Commission statistics, planned election strategy of ruling Congress Party, Sonia Gandhi and her National Advisory Council’s sycophants. Prior to major national elections dole out programmes like Food Security Bill (Act) are announced ad nauseam by the government to garner vote. In 2005 it was NREGA, renamed MGNREGA. In 2011 it is Food Security Bill-food for all at subsidized rates.
Poverty is widespread in India, estimated to have a third of the world’s poor. According to a 2005 World Bank estimate, 26.1% of the total Indian population was below the international poverty line of US$ 1.25 a day, in nominal terms Rs 21.6 a day in urban areas and Rs 14.3 in rural areas. A recent report by the Oxford Poverty and Human Development Initiative states that 8 Indian states have more poor than 26 poorest African nations combined which totals to more than 410 million poor in the poorest African countries. According to UN Millennium Development Goals Report, as many as 320 million people in India and China are expected to come out of extreme poverty in the next four years, while India’s poverty rate is projected to drop to 22% in 2015. The report also indicates that in Southern Asia, however, only India, where the poverty rate is projected to fall from 51% in 1990 to about 22% in 2015, is on track to cut poverty in half by the 2015 target date.
The 2011 Global Hunger Index (GHI) Report ranked India 45th, amongst leading countries with hunger situation. It also places India amongst the three countries where the GHI between 1996 and 2011 went up from 22.9 to 23.7, while 78 out of the 81 developing countries studied, including Pakistan, Nepal, Bangladesh, Vietnam, Kenya, Nigeria, Myanmar, Uganda, Zimbabwe and Malawi, succeeded in improving hunger condition.
India stands at 41% to 60% nearly at par with some African and SE Asian countries in comparison to 4-20% in Pakistan and China. Despite claims of increased GDP and estimated 7-8% growth rate, present statistics indicate that in industrial sector growth rate has slowed down and turning to over -5% index. Several strange facts are not known to the common people, even the conscious middle class about socio-economic conditions of India. The following chart will offer a quick glimpse. These are official statistics. Real ground situation is more serious.
Number of people, in India, who are below poverty line (Real estimate 50 cr) : About 300 million (30 Cr.)
Number of people, in India, who work in the organized Public Sector, i.e. with the Central and State Government ( Nearly 2.5 cr) : About 19 million (1.9 Cr.)
Number of people, in India, who work in the organized Private Sector : About 8 million (0.8 Cr.)
Number of people, in India, who work in the unorganized Sector (nearly 40 cr) : About 320 million (32 Cr.)
Number of people, in India, who are unemployed approximately (Nearly 50 crore) : About 300 million (30 Cr.)
Number of JOBS which need to be created every year, to fulfill the aspirations of the people of India (Nearly 2 cr) : About 10 million/yr. (1 Cr.)
Number of people BORN every year in India (China is only 10 million per year. Population growth alarming. : About 27 million/yr. (2.7 Cr.)
There has been no uniform measure of poverty in India. The Planning Commission has accepted the Tendulkar Committee report which says that 37% of people in India live below the poverty line (BPL). In fact it is nearly 50%. The Arjun Sengupta Report (from National Commission for Enterprises in the Unorganized Sector) states that 77% of Indians live on less than Rs 20 a day (about $0.50 per day). The N.C. Saxena Committee report states that 50% of Indians live below the poverty line.
A study by the Oxford Poverty and Human Development Initiative using a Multi-dimensional Poverty Index (MPI) found that there were 645 million poor living under the MPI in India, 421 million of whom are concentrated in eight North and East Indian states of Bihar, Chattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal. This number is higher than the 410 million poor living in the 26 poorest African nations. The states are listed below in increasing order of poverty based on the Multi-dimensional Poverty Index.
Poverty alleviation in India progresses at slow rate. Presence of a massive parallel economy in the form of black (hidden) money stashed in overseas tax havens, black money hoarded inside the country and underutilization of foreign aid have also contributed to the slow pace of poverty alleviation in India. Although the Indian economy has made progress over the last two decades, its growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas. Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%), Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%), Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%). Poverty rates in rural Orissa (43%) and rural Bihar (41%) are among the world’s most extreme.
Despite claimed economic progress, one quarter of the nation’s population earns less than the government-specified poverty threshold of 32 rupees per day, approximately US$ 0.25.
According to a recently released World Bank report, India is on track to meet its poverty reduction goals. However by 2015, an estimated 53 million people will still live in extreme poverty and 23.6% of the population will still live under US$1.25 per day. This number is expected to reduce to 20.3% or 268 million people by 2020, in case job generation programmes progress evenly and growth in industrial and agricultural sectors keeps pace with the domestic and market expectations. However, at the same time, the effects of the worldwide recession in 2009 have plunged 100 million more Indians into poverty than there were in 2004, increasing the effective poverty rate from 27.5% to 37.2%. Between 1999 to 2011 this rate has marginally gone up because of devaluation of the Rupee, high inflation and abnormal price rise.
There is no doubt that during last three decades about 10-15 million people have crossed the BPL level and graduated to lower and upper middle class. But their elevation has been neutralized by devaluation of the Rupee and abnormal price rise. The definition of poverty in India has been called into question by the UN World Food Programme. In its report on global hunger index, it questioned the government of India’s definition of poverty saying: The fact that calorie deprivation is increasing during a period when the proportion of rural population below the poverty line is said to be declining rapidly, highlights the increasing disconnect between official poverty estimates and calorie deprivation.
While total overall poverty in India has declined, the extent of poverty reduction is often debated. While there is a consensus that there has not been increase in poverty between 1993–94 and 2004–05, the picture is not so clear if one considers other non-pecuniary dimensions such as health, shelter, education, crime and access to infrastructure. With the rapid economic growth that India is experiencing, it is likely that a significant fraction of the rural population will continue to migrate toward cities, making the issue of urban poverty more significant in the long run. Urban poverty is another scaring problem that may haunt the nation sooner than later.
Some, experts like P Sainath, hold the view that while absolute poverty may not have increased, India remains at an abysmal rank in the UN Human Development Index. India is positioned at 132ond place in the 2007-08 UN HDI index. It is the lowest rank for the country in over 10 years. In 1992, India was at 122ond place in the same index. It can even be argued that the situation has become worse on critical indicators of overall well-being such as the number of people who are undernourished. India has the highest number of malnourished people, at 230 million, and is 94th of 119 in the world hunger index, and the number of malnourished children; 43% of India’s children under 5 are underweight (BMI<18.5), the highest in the world as of 2008.
A 2007 report by the state-run National Commission for Enterprises in the Unorganized Sector (NCEUS) found that 77% of Indians, or 836 million people, lived on less than 20 rupees per day USD 0.50 nominal, USD 2.0 in PPP, with most working in “informal labor sector with no job or social security, living in abject poverty. However, a new report from the UN disputes this, finding that the number of people living on US$1.25 a day is expected to go down from 435 million or 51.3 percent in 1990 to 295 million or 23.6 percent by 2015 and 268 million or 20.3 percent by 2020.
Two important projects of the Government: MGNREGA and the latest Food Security Bill (Act likely soon) which aimed at poverty alleviation and economic sustainability of the poors and the BPL are considered as flagship programme of the government. The NREGA was introduced in 2005 with a view to provide minimum 100 days employment to the rural people at minimum daily wage rates. Dr. Jean Drèze, a Belgian born economist, at the Delhi School of Economics, has been a major influence on this project. A variety of people’s movements and organizations actively campaigned for this act. The act directs state governments to implement MGNREGA schemes. Under the MGNREGA the Central Government meets the cost towards the payment of wage, 3/4 of material cost and some percentage of administrative cost. State Governments meet the cost of unemployment allowance, 1/4 of material cost and administrative cost of State council. Since the State Governments pay the unemployment allowance, they are heavily incentivized to offer employment to workers. However, it is up to the State Government to decide the amount of unemployment allowance, subject to the stipulation that it not be less than 1/4 the minimum wage for the first 30 days, and not less than 1/2 the minimum wage thereafter. 100 days of employment (or unemployment allowance) per household must be provided to able and willing workers every financial year.
Several misuses and corrupt practices have haunted the programme. Though designed to provide some subsistence income to the rural poors this scheme is tied down in labyrinthine shackles of panchayet and bureaucratic systems. The MGNREGA is one of the largest initiatives of its kind in the world. The national budget for the financial year 2006-2007 was Rs 113 billion (about US$2.5bn and almost 0.3% of GDP) and now fully operational, it costs Rs. 391 billion in financial year 2009-2010. It was argued that funding would be possible through improved tax administration and reforms, yet the tax-GDP ratio has actually been falling. There are fears the programme will end up costing 5% of GDP. Can India afford such colossal expenditure in the name of giving employment, which do not create infrastructure, generate jobs, improve home and small industries, encourage artisans and turn the jobless people productive and national assets? NO. MNGREA is another name of making people dependent on beggary, through limited manual work.
Another important criticism is that the public works schemes’ completed product (e.g. water conservation, land development, afforestation, provision of irrigation systems, construction of roads, or flood control) is vulnerable to being taken by over wealthier sections of society. A monitoring study of NREGA in Madhya Pradesh showed the types of activities undertaken were more or less standardized across villages, suggesting little local consultation. Panchayet sharks, lower level officials cooked up the roster of attendance and misappropriated huge funds. Thousands of names were found to be fraud in Maharashtra, Uttar Pradesh and Bihar.
Further concerns include the fact that local government corruption leads to the exclusion of specific sections of society. Local governments have also been found to claim more people have received job cards than people who actually worked in order to generate more funds than needed, to be then embezzled by local officials. Bribes as high Rs 50 are paid in order to receive the job cards from the panchayets.
A multi-crore fraud has also been suspected where many people has been issued the NREGA card who is either employed with another Government Job and who are not even aware that they have a Job Card. The productivity of laborers involved under NREGA is considered to be lower because of the fact that laborers consider it as a better alternative to working under major projects. There is criticism from construction companies that NREGA has affected the availability of labor as laborers prefer to working under NREGA to working under construction projects. It is also widely criticized that NREGS has contributed to farm labor shortage. In July 2011, the government has advised the states to suspend the NREGA programme during peak farming periods. The National Advisory Committee (NAC) advocated the government for NREGA wages linkage with statutory minimum wages which is under Minimum wages act as NREGA workers get only Rs100 per day. Many observers have commented that the UPA government has been trying to create a bonded vote bank through huge state expenditure in a mammoth project, which has become ungovernable, ridden with corruption and giving an impression to the people that beggary is better than productivity. This is enlarging the pyramid base of paupers, poors and beggars in India, dependent on various kinds of doles.
The Food Security Bill, another brain child of Sonia Gandhi and her NAC (same Dr. Jean Drèze, a Belgian born economist, at the Delhi School of Economics and N. C. Saxena as seed propagators). This scheme proposes subsidized food grain, pulses etc supply to nearly 65% of the population with no end-date limit and no fixed budget provision. This new act will add immense burden on national resources and will nearly drain the treasury. “While the purpose of ensuring food security to the poor is laudable, the food security bill is not the right mechanism for it,” said Biswa Nath Bhattacharyay, lead professional, Asian Development Bank. Bhattacharyay said that with already high inflation and ballooning budget deficit because of the falling rupee, expenditures on nonproductive activities like this would further aggravate the economic problems of the country which is faltering in many areas. He said the government, facing a trust deficit in the market, does not have enough money. “Still it is planning to spend on nonproductive activities. It is not at all sustainable. I can understand if the government is investing on sectors like infrastructure. If you go on doing these activities which is very difficult to sustain and have pilferage and other problems, the confidence of India goes down,” He added the proposed legislation would lead to larger outflow and decreased inflow of money, creating money scarcity and free fall of rupee.
Very valid criticism of the FSB has come from R. Ranganathan, eminent journalist and economic analyst. According to him The Food Security Bill is not the way to ensure food security. Nothing could be further from the truth. Food security comes from ensuring three things: creating jobs and income, ensuring higher food output by raising productivity, and creating a safety net to feed those who can’t do so in distress situations. What the Food Security Bill does is to make the exception the rule: offering food subsidies to almost all people (65 percent of the population) without an end-date. This is irresponsible populism. A government that does nothing in its seven-year tenure so far to improve agricultural productivity and which fails to invest in research and infrastructure suddenly wants to end food insecurity with a bill two years before an election. If it genuinely cared for the poor, what stopped the government from helping them in phases every year from 2004? By now hunger could have been eliminated. The FSB is thus an attempt to fool the electorate before elections, with the bill being paid by all of us – either as taxes or higher inflation. The 2011 move is well calculated to garner vote by offering subsidized food; creating new class of beggars.
He feels government is afraid of withdrawing any subsidies to the better off for fear of offending them, and then claims that those opposing the FSB are anti-poor. Even a petrol price hike gets Congress party men worked up enough to get it withdrawn. Pranab Mukherjee is shrinking from imposing a tax on diesel cars. The UPA is willy-nilly subsidizing the rich – and unwilling to back off from this. The Congress exploits the middle class and small and marginal traders and manufacturers and gives tax holidays to the rich. The problem is politicians want to eat their growth cake and have it, too. The last budget (2011-12) put the total revenue forgone as a result of direct and indirect tax concessions at a stupendous Rs 5,11,630 crore. This sounds like an easy bank to raid to finance the ambitious FSB, but let’s look at what these tax-breaks include: Rs 88,263 crore in corporate taxes forgone for encouraging exports, etc, Rs 50,658 crore in individual tax breaks (two-thirds of it is the ubiquitous 80C deductions – PF, NSCs, LIC premium – which the middle class loves), and the balance (Rs 3, 72,709 crore) constitutes excise and customs concessions of various kinds.
These are the taxes forgone on the “rich” and on “business”. But are they really only that? Concessions to export houses create high-value jobs in the IT and other sectors (and prevent the rupee from crashing much more); concessions to companies to set up industries in backward areas and the north-east are the only way to create jobs there; concessions to middle-class salary earners are the only way to get them to save and buy insurance. And excise and customs cuts lower prices on all goods. Which “benefits” do we want to eliminate? The finance ministry has fought shy of withdrawing even the 2008 post-Lehman stimulus package, or raise customs duties on items like petroleum goods. The UPA can choose how it wants to tax the rich to feed the poor. It has ducked this choice – and this is why we are in a financial mess, unable to fund a legitimate food security measure.
The UPA’s self-serving answer is to keep throwing money at the problem and hope it gets solved. But the FSB is not India’s first crack at hunger. In the past we have had the food-for-work programme (a mix of NREGA-like work with payments being made in kind), the Antyodaya scheme (targeted at the ultra-poor), the mid-day meal scheme for children, and the anganwadi schemes for mother and child. Above it all, we have a leaky public distribution system (PDS) which works well in some states and badly in others.
The only logical way to tackle hunger is to try different methods in different states and see which one works best and extend the model nationally. This is how the mid-day meal scheme introduced in Tamil Nadu – and much derided by critics then – was adopted nationally. Like burning a candle at two ends, social security should either target the income-generating side of livelihood (which is what NREGA tries to do) or the consumption side (which is what the FSB tries to do). Ensuring that at least one works well will ensure the other. Both need to be backed with an efficient public distribution system – which need not be publicly owned.
However, what do we see now? NREGA is in the doldrums, since states and district administrations are unable to provide enough work for the poor. The scheme is riddled with massive corruption. Money is being spent carelessly, and the scheme is not achieving its basic goals – ensuring higher incomes, and the creation of assets in rural area that will ultimately improve agricultural productivity.
The right way to approach food security would have been to fix NREGA first – even by extending it to six or nine months a year – and then launching food security schemes in places where NREGA has not worked. By making both a creaky NREGA and FSB nearly universal, the UPA is actually saddling the country with huge costs without delivering worthwhile results. There is no enhancement of productivity, job generation, promotion of industry, promotion of cash-crop initiative, and utilizations of the vast human resources in nation building work. By vote-bank doling the Congress is pushing the vast segment of the populace to beggary. A subsidy makes a beggar out of the poor. It is demeaning. An income is what the poor need – though no one denies the need for direct food supply schemes when things are bad. Most farmers don’t find farming remunerative, so government gives them cheap electricity, cheap fertiliser, subsidized power and diesel and a minimum support price for their produce. Government does not tax the rural rich. Money flow from big industry to agri-sector is increasing rapidly. It is a ruse for tax evasion.
There are many economists who wonder how India will cough up the funds to finance the scheme which will see the country’s food subsidy bill climb to $19bn from $13bn. The government insists money will not be a problem. There are also questions about how beneficiaries will be identified and targeted in a transparent manner in a country where there are different official estimates of the poorest of the poor – from 37% to 77% of the people, depending on whom you believe.
India’s state-run cold storage and grain storage system is shambolic, so where is the guarantee that some 65m tones of food grains procured from farmers for distribution for the scheme – up from 55m tones presently – will not rot before reaching the beneficiary? How can the food grains be distributed through the leaky public distribution system shops without reforming them? So is India again putting the cart before the horse? Without reforming its laws and public institutions, welfare schemes with the best intentions run the risk of floundering. The FSB is likely to fatten the procurers, distributors and black marketers.
For the scheme to work, the government will need to target beneficiaries properly, rebuild the storing capability and revamp the distribution system. The public distribution system, for example, could be made accountable by issuing smart cards to beneficiaries to eliminate bogus cards and fraudulent withdrawal. If the food security scheme does not work, economists believe, India is doomed to remain a hungry republic. It is already one of the fast-growing economies with the hungriest people in the world. And it can get worse.
Sonia Gandhi’s election eve gamble is likely to drain out Indian resources to unproductive charity, a confused political perception which can at best turn 65% of Indians to perpetual beggars-unable to come out of the dungeon of poverty, unemployment and wastage of human resources. Sonia appears to be determined to turn India to a nation of beggars.