Poverty in India – 600 Million!


I recently saw the documentary 13th and it was stunning.  The revelations were startling.  President Abraham Lincoln abolished slavery in the United States of America on January 31, 1865, through the 13th Amendment.  It freed about 4 million Black slaves.  However, successive US Presidents successfully maneuvered Government Polices and continued to keep a large percentage of Blacks in abject slavery.  The US prison population was 327,000 in 1970 and this jumped to 2,220,300 (more than 2 million!) in 2013.  Blacks make up 13% of the US population, but account for 40% of the prison population, which is about 900,000, say close to a million.  It is shocking, but true.

How is this related to Poverty in India?

There is a connection and it is political.  Poverty has been a political cancer since 1947.  Every elected Government, since Independence, has made polices that have perpetuated poverty – some intentional and some not.

There are many definitions for poverty and it can be confusing for anyone.  I’ll trust the World Bank’s definition of international poverty line, which was revised in 2015 to US $1.9/day (Rs. 122/day) per person, based on the concept of PPP (purchasing power parity).

Take a look at how the Government of India defines poverty.  In June 2014 it was defined as a person earning Rs. 32/day in rural areas and Rs. 47/day in urban areas.  A Reserve Bank of India (RBI) report in 2012 computes that 270 million people (22% of population) are below the poverty line of Rs. 33/day.  This is consistent with the World Bank’s published data.

At a US $1 to Rs. 64 exchange rate, Rs. 33/day is about $0.52/day per person.  The accepted 2015 poverty line of $1.9/day adjusted to 2012 figures is about $1.74/day.  How do we reconcile a definition of $0.52/day by the Indian Government to $1.74/day by the World Bank, which is a difference of 235%?  It’s apparent that the Indian Government is deliberately under-reporting the % of Indian population below the poverty line.

If we assume linearity in income and % population data, at $1.74/day (Rs. 111/day) the % of population is 74%.  At low income levels, linearity is a reasonable assumption.

The truth is somewhere in-between.  The % of Indian population below the poverty line is between 22% (Rs. 33/day) and 74% (Rs. 111/day).  I’ll mid-point it out at about 48%, for 2012.  This translates to about 600 million people in India below the poverty line!

If politicians say that the % of population below the poverty line is less that 22% in 2018, then we know it is not true!  It just can’t come down from 48% to 22% in 6 years, which would be a reduction of 54%!  There is no way they can justify it, since the Ministry of Statistics and Program Implementation (MOSPI) of the Indian Government does not have any data till date to support a counter claim.

Why is the Indian Government pegging the poverty line to Rs. 33/day per person?  It’s simple – because 22% poverty level sounds politically great.  If it were taken at Rs.122/day (US $1.9/day), as per the international norm, the % levels would be much higher and this does not sound great to any political party.

I want to further substantiate that the present Indian Government’s definition for poverty of Rs. 33/day is absurd.  I spoke to a few of the people I work with, who have come from villages to the city to seek employment.  Well, they are from South India and they love rice and sambar, a type of lentil based spicy soup, in their daily diet.  They tell me that in the villages, the consumption per person would be about 400g/day of rice and about 200 grams/day of lentil in the form of sambar.  Rice is about Rs.50/Kg and lentils (dal) about Rs. 90/Kg.  Add to this about 250 grams/day of vegetables at Rs. 25/Kg.  This works out to Rs. 44.25/day just on food.  What about other things.  Let’s take just rent and electricity.  In villages, rent may be about Rs.900/month (Rs. 30/day) and electricity Rs.15/day.  The basics works out to be about Rs. 89.25/day.  One also needs clothes and health care.  So, the World Bank estimate of Rs. 122/day seems more realistic than Rs. 33/day of the Indian Government.  I don’t have any doubts about it, do you?

The folks I spoke to would be proud to pay for their daily sustenance without doles from the Government.  They just want jobs that pay well.  They don’t want a hand out of subsidized food supply (Government Ration Schemes or Coupons).  Their pride to earn and live well is more valuable to them.

But, poverty is real.  The Government is coming up with all sorts of schemes to dole out goodies to the poor and keep them poor.  For example, in Tamil Nadu there is the Amma Scheme and in Karnataka there are Indira Canteens, and so on in other states.  Such schemes just keep their hunger at bay, but provides no tools for them to progress out of poverty.

The poverty data has always been inconsistently reported and explained since 1947.  In the 1950’s about 65% (215 million) of the population was below the poverty line, defined as Rs. 0.6/day per person.  In the 1960’s it was 70% (289 million) below Rs. 0.6/day per person.  In the 1970-1980’s the figure is reported at 50% and the poverty line was defined at Rs. 1.63/day per person.  In the 1990’s poverty was reported at 77%, based on Rs.20/day per person.  In the 2000’s, the estimate in 2012 pegs the poverty at 22% based on Rs.33/day per person.  Look at the pattern from 1947 – 65%, 70%, 50%, 77% and then 22%.  Somebody did some magic in 2012 – political mathematical chicanery!?

I think I have made the case for a poverty estimate of about 48% to 50% at the present time (2018), affecting 600 million people.  Of course, I am not an economist or a political analyst or a statistician.  So, if anyone disagrees and provides data, I’ll be happy to correct any errors in my analysis.

To pull people of India out of poverty, I think that the Government should re-invest its free doles into more permanent things.  In layman’s terms, one way that I see is to create more jobs.  For creating more jobs, the new generation must have better skills through education.  For jobs that pay better, Companies should be incentivized to do so.  If self employed, let the Government re-route the existing free doles to enable people to invest them in working assets, so that it can generate revenue for them.

For salaried and self employed people to earn more, the present 2018 Government of India, should be humble and make practical policies.  Their demonetization and GST initiatives have a basic premise – businesses and people are corrupt.

The demonetization policy was a failure.  RBI has stated that 99% (Rs. 15.28 trillion or US $239 billion) of the pre-demonetization money (Rs. 15.44 trillion or US $241 billion) in circulation came back to the banks!

I’m a supporter of GST, but the implementation is pathetic.  The IT technology behind it is ancient and makes life hell for filers.  It’s a system that should grant credit for all purchases, but it does not.  Further, even though the businesses have legal invoices and receipts for purchases, they cannot claim credit for all of it, since the GST body wants the seller to upload the sale to the GST site.  Why – since the Government thinks we will cheat!

Finally, the officers in the Central Government are still corrupt.  Businesses still pay a bribe to get things done in the departments.  This nasty practice must stop.  So, with honest and practical reforms in GST and the way the Government works, businesses can no doubt create more jobs and also better paying ones.  Self employed citizens will thrive.  It’s the only way out of poverty, other than being socialistic.  India is democratic and it has too large a population for socialism to work.  The private sector can do what the Government just cannot.

I think that a little honesty from the Government is needed.  It must think real hard and solve the poverty problem.  It should stop making policies that keep the poor in poverty.  The equation of poverty to votes must end now and forever.






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