Sunday, April 27, 2014

The Myth of Poverty Alleviation

The Myth of Poverty Alleviation
When the General Elections to clearly the biggest democracy in the world are on cards with the participation of over 83million voters all eyes will be on the agenda of the contesting political parties. One item, for sure, is poverty alleviation. The UPA during its decade rule has been trumpeting on taking the growth trajectory northwards and as a consequence reduction of poverty. Claims and actual achievements apart, is it possible to eliminate poverty in any part of the world? Has economic growth contributed to its elimination in any part of the World ever since the end of Second World War?


Poverty alleviation has been on the global agenda for the last seven and half decades. The World Bank, Asian Development Bank, United Nations, several developing nations and Developed Nations have made it as an important agenda. But the US, Japan, Germany and even China that registered consistent high growth during the last two decades could not be free of the poor. Asian Development Bank that has been spending billions on the agenda of poverty alleviation has poverty dancing right in front of its huge mansion in Manila. It could not show case even a small nation rid of poverty. Poverty can at best be reduced and not eliminated – this is one lesson that the economic history teaches us.

All the conferences on poverty alleviation throughout the World are held in Five Star or Seven Star Hotels and in Air-conditioned Conference Halls for hours and days together. Intellectuals gather to discuss their poverty and other’s poverty. Goals in one name or other and common agenda across the nations – e.g., Millennium Development Goals – are discussed and settled. Several researchers, bureaucrats, government and non-government organizations, donor institutions etc., decide to spend billions of dollars on the agenda. So much is the scope for employment provided by the poor across the world. Poor are the biggest employers in the world.

There will always be some gravitational forces that would contribute to reduction of poverty as a natural phenomenon. How much of it effort intensive and how much is gravitational needs to be established through detailed micro studies and there are quite a few. . Then why so many trumpets blow around it?
Coming to India, six decades ago poverty rate was put at 47% of the population. By 2011-12 it came down to 30%. The nearly 350mn poor equals population of Africa. In fact the population of rich in the country has been estimated to the population of UK. The whole world is eying Indian markets because of the growing emergence of the middle class population.

Ministries of Rural Development, Agriculture, Social Welfare, PDS etc have introduced over 150 schemes targeting the poor and spent billions of rupees in the direction of poverty alleviation. Subsidies and Grants, soft loans and even distribution of assets adorned the wage employment, self-employment, rural infrastructure, social security and food security schemes. The expenditure in administering these schemes has been around 30-40 percent of the budget outlays year after year. There were intense debates on measurement criteria for poverty – starting from calorific consumption, 2100cal in rural to 2400 urban; $1 a day per person – now moved to $2 a day; Rs.26 per day per person in rural to Rs.32 per day in urban areas; Tendulkar Committee, Planning Commission, NSSO, CSO, independent surveys have their own criteria. Most schemes around poverty alleviation were set at the baseline studies that were always faultily done. The lists of persons were most times disputed although pursued. The claims of reduction of poverty across the States are varied. Most Advanced States have the bottom of the pyramid growing.

Requirements of the poor have vastly changed. It is not belly hunger. It is information hunger that has overtaken the persons. From scavenger earning a daily wage of no less than Rs.50 to a daily wage earner under MNREGS holds at least one mobile if not two. He finds the money for the chip and regular updates and even pays Rs.30 for a favourite tune on his mobile. But he/she is not prepared to spend for healthy food and safe drinking water or health insurance. The tastes in villages have also vastly changed. Those using soap nuts for head bath in villages today use a small shampoo satchet costing Rs.2 to serve for wife and husband once a week. Primordial needs have vastly changed. These changes should be recognized while drafting schemes for the poor.

The Human Development Index measured in terms of high literacy rates, low infant mortality rates, low school drop-out rates, availability of safe drinking water, good health and hygiene in terms of easy accessibility of medical and paramedical services has been high in certain low growth States and vice versa in high growth States. The traditionally poverty-stricken States characterized as Bihar, Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh have even after bifurcation into smaller States and economic development are still showing up high poverty rates. Each Scheme floated by the Government – State or Centre – has grown to be an empire ruled by self-centered politicians. The scheme is implemented independent of other schemes. Schemes like Rajiv Awas Yojana, Rajiv Grameen Vidudikaran Yojana, Provision of Latrines, Sanitation scheme do not get delivered to the same beneficiary although the target group of each scheme is the same poor.

Financial Inclusion – a major initiative with commercial banks in the forefront since 2005 – moved only a shade better in 2012 according to Inclusix – an index developed by CRISIL. Branch penetration, deposit and credit penetration have been brought under one metric in Inclusix. This index clocked 42.8 on a scale of 100. But the disparities stare at us: Southern States accounted for 58% of the credit accounts. The bottom 52% of districts has merely 2% of bank branches. The Bank Correspondents (BCs) have a long way to go in taking the poor closer to the Banks’ door steps. There are unresolved issues between the BCs and Banks. The instrument is not robust enough to go near the goals of financial inclusion. Commercial banks proved that their pie does not lie in these efforts and they preferred to go slow. The Mor Committee recommendations tended to be more academic.

But are we desperate? Certainly not. Every problem has solution if we search for the solution in the area of the problem. Centralised schemes and existing delivery instruments have to be modified. While the poor live in rural areas and urban slums the schemes and resources originate from the Central Government and State Governments. But the very identification of the poor – visible in villages – have to be identified in villages and the lists of such persons should be displayed with their requirements – housing, safe drinking water, sanitation, education, electricity, health and insurance duly tabulated. Against these requirements the concerned officers should mention when and how these needs would be met and the government releases would be reaching their bank accounts. Against each name the bank account number has also to be mentioned. Various existing Schemes should all be combined into no more than twenty schemes and should be directed at the remedying poverty irrespective of caste or creed. The Budget for such schemes should be released timely online to the Villages for implementation within a month after the approval of the budget by the Parliament/Legislature. If the identified poor does not have a bank account, the nearest BC/Bank branch shall open a savings bank account and a Rupiya Card with a limit of Rs.50000 shall be issued within a fortnight after the list is cleared by the Gram Panchayat.

At the Village level social audit of each such scheme should be done once in 3months by an independent agency. The Audit results shall be thereafter put on the website of the State Government as is done for some schemes even now. There must be a Lok Pal type agency recognized as equivalent to a quasi judicial body to enquire into the errands of the officials for the release of grants or subsidies or loans under various announced government schemes and punishment awarded at the village level within one month and no enquiry into the lapses should take beyond two weeks. Lok Pals’ verdict should be made beyond appeal when alone justice will be delivered fast. Necessary legal jurisprudence should be put in place. It is possible to distance poverty but certainly not possible to eliminate it. Efforts and sincerity should not be found wanting.


This article has been published in the Business Advisor issue dated 10th April 2014.