TO Muttu Sami, an agricultural labourer in Tamil Nadu; Dukhi Ram, a marginal farmer in Bihar; and Rafiq Ahmed, a casual worker in a West Bengal tannery, who, along with more than a third of the Indian population live below the poverty line, the new observations of the World Bank should come as a little breather. According to a recent report by the bank—India: Achievements and Challenges in Reducing Poverty—the image of the country of being poor is on its way out. In less than a decade.
For this, India will have to reorient its anti-poverty strategies, do away with subsidies, continue with liberalisation, promote growth, direct more investment towards infrastructure, health and education. Most important, get rid of unnecessary bureaucracy. Coming down sharply on the country's uneven progress in poverty alleviation in the last few decades, the bank points at India's inward-looking, public-sector driven industrialisation as having achieved little success or made little sense to India's poor.
It hits the bureaucratic inefficiency by looking hard at this shocking statistic: to provide a Re 1 benefit to the poor, the government spends anything between Rs 2 and Rs 7. Ineffective targeting and the high cost of a bloated bureaucracy raises questions about the cost-effectiveness of poverty-reducing programmes. On the issue of subsidies, the report says that much of India's work in poverty reduction was being nullified by the unnecessary investment in subsidies, which was leading to major micro-economic distortions. During the 1980s, agricultural subsidies grew at over 7 per cent per annum, or three times the rate of expenditure. A recent government study revealed that subsidies on "non-merit" goods stood at 11 per cent of GDP, while the spending on health and education was less than 5 per cent.
According to the report, even at the current growth rates, poverty in India could come down drastically, if a new, more effective blueprint for poverty reduction is drawn. In effect, even if India only sustains its current growth rate of between 6 and 7 per cent over the next decade and merely redirects investment—while income distribution remains the same—its poverty could plummet from the current 35 per cent to 6.3 per cent by 2005. That is, from one in every three Indians, the poor will comprise slightly less than one in every 16.
At the same time, the report extols India's poverty-reduction policies over the last five decades. It says that poverty has been remarkably responsive to economic growth and has diminished faster than the increase in the country's growth. Says Zoubida Allaoua, senior economist in the World Bank and the main author of the report: "Economic growth has accounted for the lion's share of poverty reduction in India over the last 50 years." To achieve future success in poverty alleviation, India needs to re-examine its commitment to economic liberalisation, he says.
Poverty has been one of the main concerns of India since Independence. In the early '50s, more than half the Indian population was living below the poverty line. Since then, poverty has declined but at a slow rate. Today, even though the figure has fallen, just about the same percentage of Indians subsist on less than $1 a day, according to the World Development Report.
When compared with other Southeast Asian economies, the performance of India is truly inferior. The poverty level in Indonesia, for instance, fell from 58 per cent to 8 per cent between 1970 and 1993.
Says the report: "Neighbouring countries in Asia which have combined pro-growth development policies with investments in health and education of their people have seen economic growth and poverty reduction follow." The bank's prescription for India, therefore, is repeat the Asian experience. In a three-point programme, the bank advises India to:
While lauding India's efforts, the authors of the report also find fundamental faults in the existing anti-poverty strategies. According to them, India has relied on two basic approaches since Independence. The first one anticipates that the effects of aggregate rural growth would spread such that poverty reduction would be achieved along with economic growth; the second focuses on specific anti-poverty programmes. Neither of these worked according to expectations. The main obstacle: no Indian state effectively combined both policies to encourage growth and develop human resources and infrastructure.
Great prescription. But is there a political and bureaucratic will to implement such policies? Muttu Sami, Dukhi Ram and Rafiq Ahmed are only three among the 336 million Indian poor waiting for the answer.