The Hindu Business Line : On growth, poverty and opportunity

"While India's growth performance has improved there are concerns about whether this is doing enough for the poor and excluded groups. For, a basic and long-standing concern pertains to whether the growth strategy has bypassed the poor and if the traditionally poor and the weaker sections are getting equal opportunity?" — MR MONTEK SINGH AHLUWALIA, DEPUTY CHAIRMAN, PLANNING COMMISSION

The euphoria generated by the country's average Gross Domestic Product growth rate of 8 per cent during the last three years beginning 2003-04 apart, the United Progressive Alliance Government's economic policy lays much emphasis on conferring benefits to the aam admi. The Approach to the Eleventh Five Year Plan, commencing from fiscal 2007, also underscores the importance of adopting an inclusive growth strategy that considers the aspirations of the rural and urban poor for a decent standard of living.

A recent development policy review by the World Bank titled Inclusive Growth and Service Delivery: Building on India's Success rightly draws attention to the disconcerting reality of the growing gap in economic progress and service delivery for the best and worst segments.

"India is an emerging global superpower, joining the elite club of acknowledged nuclear powers; and India has child malnutrition rates among the highest in the world," it rues.

The contrasts

"The headcount poverty rate in rural Orissa (43 per cent) and rural Bihar (41 per cent) is higher than similarly measured poverty rates of African countries such as Malawi or Ghana. While parts of the country are competing successfully not just in low-skill services such as call centres but in high-skill areas of consulting, software engineering and biomedical research, over half the labour force works in agriculture, often in appalling conditions... ," goes the review.

In a recent independent evaluation of learning achievement in Rural India, the World Bank found that in the bottom five States half the Standard V students surveyed could not read at Standard II level while more than two-thirds could not do simple division.

All these issues were raised by the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, in the Dashrathmal Singhvi Memorial Lecture on "Growth and Poverty Reduction: Is the Glass Half-full or Half-Empty?", in New Delhi on August 18.

Thereafter, Mr Ahluwalia spoke to Business Line on issues of poverty and economic growth.

Ambitious proposition

"Historically the approach to reducing poverty relied heavily on achieving rapid growth. Pandit Jawaharlal Nehru, who was Chairman of the National Planning Committee set up by the Indian National Congress, recalled the aim of the Committee as getting rid of the appalling poverty of the people for which it thought a five or six times increase in wealth was necessary. Deeming this as too ambitious, it concluded that doubling or trebling of national income in 10 years was a more practical proposition. This involved a growth rate of 7-11 per cent per year. In 1944, there was the Bombay Plan, which was more modest and spoke of trebling national income in 15 years, which involved a growth rate of 7 per cent.

"In the early 1960s Ram Manohar Lohia questioned whether the poor were benefiting and compared India with China. The Perspective Planning Division of the Plan panel came out with a paper, "Perspective of Development 1960-61 to 1975-76," with the aim of achieving minimum standard for all in 15 years. It concluded that this required 6.5 per cent growth with special programmes for marginal groups. The actual trend in the 1960s and the 1970s showed that we did not achieve our growth targets. GDP growth was 3.5 per cent, instead of the target of 5 per cent. So, unsurprisingly, not much happened to poverty in the 1960s and the 1970s.

"These led critics to contend that we should not focus only on the elusive growth front but on programmes that would really help the poor. The 1970s therefore saw a raft of targeted anti-poverty programmes, while the Green Revolution raised farm production. The 1980s saw the beginning of policy change aimed at accelerating growth and the growth rate did improve to 5.4 per cent in the 1980s, which got further accelerated to 6.3 per cent in 1992-2005. The last three years have seen 8 per cent GDP growth while the Eleventh Plan growth target could be even higher and close to 9 per cent.

No uniform growth

"While our growth performance has improved there are concerns about whether this is doing enough for the poor and excluded groups. There are several reasons for this. First, growth acceleration is not uniform across all States. Gujarat , Uttaranchal, Tamil Nadu, West Bengal, Karnataka and Andhra Pradesh are doing well, while Uttar Pradesh, Madhya Pradesh and Orissa have done poorly in the past ten years or so. Even in States that are doing well, some of the regions within them may be worse off than others as in the case of Maharashtra, Andhra Pradesh and Karnataka. Hence, the challenge to ensure that the growth in all parts of the country is as close as possible to the average.

"A basic and long-standing concern pertains to whether the growth strategy has bypassed the poor, excluding them from the benefits of growth. There is no doubt that the proportion of people below the poverty line has declined over time but not fast enough. The official figures for poverty in 1999-2000 showed that the percentage of the population below the poverty line had declined from 36 per cent in 1993-94 to 26 per cent in 1999-2000. The comparability of the two figures was questioned and concern was voiced that the pace of reduction in poverty is over-stated.

Poverty on a decline

"Preliminary estimates from the latest NSS thick sample conducted in 2004-05 now provide data that are fully comparable to 1993-94. This comparison shows that the percentage of population below the poverty line in 2004-05, which is comparable to the 1993-94 figure of 36 per cent, was about 28 per cent. This is higher than the official figure of 26 per cent for 1999-2000, but if the 2004-05 data comparable to 1999-2000 are used then the poverty estimate is 22 per cent. In short, adjusting for comparability there is a continuous decline in poverty of around 0.8 percentage points per year.

"It must be recognised however that this is at best a modest rate of decline. One reason for this is that agricultural growth has only just kept pace with population growth during the last decade. There is a need to accelerate farm sector growth and also shift from agriculture to non-farm operations. But labour- absorbing manufacturing growth at the levels contemplated requires labour reform — not a hire-and-fire policy but flexibility in employing labour through skill-building and vocational education. Organised sector employment is low, causing real concern, and low quality employment does not get the country out of poverty.

"Poverty measured in terms of consumption is only one of its dimensions. It is necessary to focus on the broader issue of lack of access to basic public services such as health and education, which should be provided to all. Viewed from this point the extent of deprivation is much larger. Half the children drop out before completing primary school. Malnutrition of children in 1998 was as high as 47 per cent.

Issue of opportunity

"There is also the issue of equality of opportunity. There is no doubt that in the post-reform era the population in the middle segments is moving upwards. What is not clear is if people who are traditionally poor and from the weaker sections are getting equal opportunity? I give you an instance. In most rural schools, they don't teach mathematics. If the name of the game in the knowledge economy is science and technology and if the rural child is not getting an opportunity to enter these areas, we are not creating equality of opportunity. Non-equality of opportunity and concept of fairness must be addressed squarely."