Poverty of thought
Source: By Surjit Bhalla: The Financial Express
Let me say it bluntly—I have never been more embarrassed as a professional than with the shameful debate that has occurred in India ever since the UPA released “record breaking” poverty data.
These data have caused considerable heartburn and political soul-searching within the Congress party. My educated guess would be that Ms Sonia Gandhi hastily called a meeting of the National Advisory Council and her closest political advisers (the PM, Dr Manmohan Singh, was pointedly not invited!) and asked:
“What should we do? We have just promulgated an ordinance on food security which rather explicitly believes, and states, that two-thirds of the Indian population is severely malnourished and in need of our help. We also have an election coming up and my Congress party is known for its commitment to the poor. Now how can we justify expanding PDS to 67% of the population when my own Planning Commission tells me that only 22% of the population is poor. This is unacceptable—now go forth and multiply my wisdom and concern.”
How do you discredit your own government and your own performance? What should have been a matter of celebration, i.e. record decline in poverty, turned out to be in Congress’s case an existential despair moment, a moment of soul searching, and a moment of truth.
The truth had to change. In disciplined Goebellian fashion, the followers went about discrediting the poverty decline by discrediting the poverty line. Card carrying NAC member Mr NC Saxena took upon himself the task of “proving” that the poverty line was too low. The proof was “easy”—the poverty line was the same value as in 1973-74! “Civil society is not happy with the low poverty cut-off line of R27 per capita per day for rural areas and R33 for urban areas at 2011-12 prices, as it is difficult to meet one’s basic expenses and survive on such an inadequate income. Economists are questioning the need for subsidised food for 67% of the population if poverty levels are really so low. Estimating the scale of poverty with respect to a fixed poverty line—which was R1.63/1.90 per capita per day for rural/urban populations in 1973-74—and since then has remained unchanged after adjusting it for inflation.” (Business Standard, A poor debate on poverty in India, July 25, 2013, emphasis added).
It is strange, and shocking, that somebody as distinguished as Mr Saxena should make this simple conceptual (and ideological) error. As is well known, the Tendulkar committee raised the original 1973-74 rural poverty line by 25.9% and the urban line by 6.4%.
How did Mr Saxena feel that he could get away with a plain big-time lie? One explanation is that the media does not play its check and balancing role, and neither do most of the ideologically-biased and well-funded civil society. The ethos in upper upper class India is not to question any of the ideological left, i.e. the Sonia Gandhi-led Congress, primarily because they are so comfortable applauding it. Otherwise how else do you explain the following lie by no less an intellectual godfather like Amartya Sen who stated that “every week that the Food Security Bill was not passed was causing 1,000 deaths.” He expanded on this lie in a CNN-IBN interview: “There’s no way applying an exact estimation of that but I would have thought that an order of that magnitude of that kind may be relevant”!
There are several misconceptions in the Sen falsehood. Just who is dying if the Food Bill is not passed? Does Prof Sen know that the government’s own claim is that the Food Security Bill will only cost R25,000 crore more (it is another story that the government’s claims are just not credible). So an expenditure of R25,000 crore will save 52,000 deaths, or R50 lakh expenditure to save one life. It does not get much sillier than this.
Kapil Sibal, the Union law minister, had this to say about the poverty line: “If the Plan panel said those who live above R5,000 a month are not at poverty line, obviously there is something wrong with the definition of poverty in this country. How can anybody live at R5,000?” Hence, poverty is very high in India and we obviously need the populist Food Security Bill.
The debate about food security and the poverty line centres around starvation, hunger, survival. The left intelligentsia, TV and print media, and most Congress politicians as well as many from the me-to BJP have been having a field day discussing survival and the food necessary for survival. Many of their examples centre around restaurant meals, and these so-called intellectuals cannot comprehend that in a poor country like India restaurant meals are a luxury—a reflection of the poverty of the poor is that they cannot afford dhaba, let alone restaurant meals.
Can a person survive on R30 a day? The table shows the food expenditure pattern for different households in India in 2011-12 (NSS survey from where the poverty estimates are obtained). The top 10% of rural Indians spend on an average R30.5 a day on basic food while the marginal poor (between the 20th and 25th percentile) spend only R12 a day. Middle rural India spends only R4 per day more on basic food than poor India. (Basic food is total food expenditure minus discretionary food expenditure consisting of beverages, packaged and restaurant food).
Even the richest urbanites, where Sibal, Jean Dreze, Sen, and TV reporters and anchors live, spend only R40 per person per day on basic food, or in terms of rural prices (22% lower) R33. This is nearly the same as the richest ruralites. The poor are surviving, and necessary food expenditure is not what separates the poor from the urban elite. Hence, hallucinating about expensive meals for the poor is not going to either help the poor, or offer any solutions to the poverty problem. And neither does the Food Security Bill have much economic content, either for the urban elite or the rural poor. Whether it has the proposed political content we will know next year.
One additional point to note regarding the low poverty line in India. The NSS surveys capture less than half (46%) of total expenditures recorded in the national accounts. The likely reality is that the poor have a per capita monthly expenditure about 80% more than stated in the NSS survey, i.e. R50 a day or about R7,500 a month for a family of five. Does that make sense, TV anchors and Mr Sibal?
Silliness, or lies, for a good cause must be eminently excusable—some philosopher must have said that. Sen’s co-author and another NAC member Jean Dreze had this to say regarding the ongoing Food Security Bill debate: “Statistical hocus-pocus has been deployed with abandon to produce wildly exaggerated “estimates” of the financial costs of the bill … The fact that the food bill could bring some relief in the lives of millions of people who live in conditions of terrifying insecurity seems to count for very little.”
I have provided evidence as to who is actually practising statistical voodoo. Surjit S Bhalla is chairman of Oxus Investments, an emerging market advisory firm, and a senior advisor to Blufin, a leading financial information company.
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