Sunday, August 12, 2007

Beyond argument: Nearly eighty percent of Indians live on half a dollar a day

From the Times of India

" NEW DELHI: The number of people below the poverty line may have come down, but 79% of unorganised workers, 88% of SC/STs, 80% of the OBC population and 84% of Muslims belong to the "poor and vulnerable group"... "That includes 6.4% who live on less than Rs 9 per day or three-fourths the poverty line level, another 15.4% who are between this layer and the poverty line, 19% who earn at best 1.25 times the poverty line and 36% who earn between 1.25 and two times the official cut-off for poverty. It, therefore, cautions that while large numbers may have technically ceased to be included in the official poor, they remain vulnerable"
This according to a report by the National Commission for Enterprises in the Unorganized Sector (NCEUS). The report (says Reuters) shows that about 836 million people - 77 percent of Indians live on below 20 rupees (50 U.S. cents) per day.

As expected, there is lament all around as to how growth has not benefited most Indians. A real surprise, isn't it? Was it supposed be another way? A few days ago we had a post from RV Bhawani regarding the agrarian crisis. Reporting on the same issue P. Sainath has now won the 2007 Ramon Magsaysay award. Then there was the issue about malnutirition amongst India's children. Much ink was spilt by great economists such as Surjit Bhalla to suggest that poverty did not exist anymore in India. Then there was the debate about exactly how much poverty had fallen by. All along, we have had (fairly predictable) evidence as to what was happening to most of India.

Of course, fiscal redistribution is an immediate need, although its limits are well-known. I think there is little evidence in history which suggests that a nation can keep growing at 8,9,10 per cent with 77 percent of its populace in such condition. And, ironically, there is much evidence that redistributive growth has multiplier effects. But beyond that, there is the need to go beyond the game of fiscal redistribution; band-aids only go thus far and no further. Living off the crumbs of the back-office of the world cannot be a permanent solution for the 77 percent; in fact it is not even clear that it can serve too long as a solution for the 5-10-15% who are now gaining from it.


Anonymous said...

''Living off the crumbs of the back-office of the world cannot be a permanent solution for the 77 percent; in fact it is not even clear that it can serve too long as a solution for the 5-10-15? who are now gaining from it.''

Nice way to dismiss an entire industry.

Anyway, I am very curious to know, then what is the way?

Ananya Mukherjee Reed said...

Dear confused,
My intent was not to dismiss the industry but to dismiss - if you will - the position that one industry can "drive" an economy such as India's. As to what is the way, there are many answers to this. But I was referrring to historical evidence of redistributive growth. We can take perhaps the quintessential one - the US's 'golden age' that was one of the best periods of industrial expansion and redistribution. The East Asian cases are even more dramatic, with a different kind of redistributive ethos. In India, we seem to have come full circle in that it is fashionable to think that any redistributive commitment or increase in the state's regulatory role may be the root of all evil, it may stifle India's dynamism. I, like many others, disagree with this position. I think it is important for India or any other country for that matter to focus on strategies of development in which most of its population can participate, and not get left out. Despite all their problems, East Asians were very successful in doing just that: accordingly, East Asian countries chose particular industries, taught their people skills, sent them to school, etc. The big price was democracy. In India, we have that, but an element of that democracy also has to be susbtantive inclusion, and not just the right to vote.

ishani said...

It's not quite correct to say that BPO is driving Indian economy. There is an economic resurgence - as demonstrated by GDP that is a whisker away from 9%. The last couple of months have not been about the BPO industry - in fact India Inc is also coming to terms with the issues that the BPO sector faces including global competition. There have been big ticket mergers globally in sectors such as steel, liquor, aluminium and even FMCG (interestingly by IT biggie Wipro). The stock market is on a high (right now there's a correction, but overall) and that's not driven by the BPO sector for sure. Along with other global practices India Inc is also adopting corporate social responsibilty and environmental standards - so it's not all gloom and doom really!

Ananya Mukherjee Reed said...

Of course, it is not all gloom and doom, the growth is very real, as is the prosperity for some. Equally real is the absence of prosperity, or even well-being as Sen would say, for many, if not the most. True, BPO is not driving the economy, only one factor cannot drive an economy as diverse as India's. The issue, in my opinion, is that the policy emphasis on BPO (and a related set of measures) is misplaced.

ishani said...

Amartya Sen is a brilliant economist - however, a quote from him is not enough to prove that most people in India dont have a sense of well-being. In fact, empirical data does exist to show that the Indian middle class is growing. I do agree that the issue of poverty needs to be tackled above everything else - but I can't agree that nothing is being done to address this issue. India's last Budget is proof of a positive policy direction - of course implementation is another thing altogether! As for BPO, I dont see the government going all-out to do anything for that sector!!! In fact, recent policy has addresses infrastructure, retail & aviation! IT & ITeS have hardly received any largesse from the government. BPO is not that hot & happening in India anymore, and that's reality! I dont think anyone's expecting the BPO sector to drive Indian economy, not even the BPO companies themselves! said...

Dear Ishani,
"well-being" is not just a quote from Sen, if I undertsand Ananya correctly, well-being is measurable concept used by economists to measure the quality of life according to certain basic indicators. This is also a measurement used increasingly by corporations in shaping their approaches to corporate social responsibility. Perhaps Ananya should have explained this more. As a person who works in the BPO industry, I know that it is a reality (I don't know what 'hot and happening' means). But even many of us inside the industry are skeptical of where it is likely to take us. Its sustainability as an industry and a driver of growth (even sectoral) is suspect in many ways. But BPO is not just an industry, it symbolizes the general policy dependence on the growth of the service sector. I think from 1995-2002-3 there was an overemphasis on the service sector at the cost of the other sectors - the agrarian crisis is the worst sufferer of that. So even if the government redirects its largesses now, the effects of service sector dependency will still have to be dealt with. And ad-hoc and nice sounding measures of doing-good by companies will not take us there. There is a lot of thinking going on inside the industry as to how to create backward and forward linkages with other sectors, and how to stop the process of 'deskilling' our youngsters that the industry often brings about. The problem it uses up very valuable human resources without giving much back. Best wishes, anomynous in BPO-land

Anirban Chakravarty said...

Dear all, my job with a leading MNC regularly takes me to the rurals of India. And every time, during the long journeys, I ponder and contemplate on this one question which I state below.
At the rate at which industrialization is expanding, and at the rate at which labour is shifting from agriculture to trade and services, has anyone calculated the year when there will be no agrarian land or agrarian workers to cater to the hunger of all of us?
The shift is happening, because agriculture is condemned to give poor returns and profits. With increasing education and awareness levels, rural folks are undersanding that agriculture is not the way to become prosperous. We living in cities, dont see this on a daily basis, and can keep on commenting and debating to our heart's desire, but the only solution is to attract people to agriculture by making agriculture a profitable proposition to be in. The shift is happening......I shudder at the very thought of the grim future which is lying in store for our future generations