Poverty Management in India Some Lessons for China

India’s Economic Survey 2014-15 stated that “Sixty-eight years after Independence, poverty remains one of India’s largest and most pressing problems. No nation can become great when the life chances of so many of its citizens are benighted by poor nutrition, limited by poor learning opportunities, and shrivelled by gender discrimination.” Despite the economic growth rate of 6-7 percent in the last few years, nearly half of India’s children under three are malnourished, i.e., the largest number in the world, and a situation where the rate of malnutrition is worse than that in Africa on average.

The nature of poverty is characterized by symptoms of socio-economic deprivation, politico-cultural alienation, and inaccessibility to state resources and technology and particular type of spatial distribution.

Though most estimates do indicate that there has been a steady decline in the national and provincial, and urban and rural poverty ratio, the variations in these estimates are quite remarkable. A significant decline in the number of people below the poverty line from 45.3 percent in 1993-1994 to 21.9 percent by 2011-2012 has been recorded. Despite this, over 270 million people are still living in abject poverty.

MNREGA as a Future Pivot

Several macro and micro level interventions have been made in the last several decades to alleviate poverty and bring down inequality. This varies from subsidies extended through the Public Distribution System (PDS) on essential consumption items like food, sugar, edible oil, kerosene, and LP gas to providing employment that generates income among the poverty-stricken; and, from providing easy and compulsory access to education to building homes and health facilities.

The Indian government has mostly used four broad instruments in addressing poverty and food security. PDS, a guardian of food security, and the most widely used has largely helped in addressing transient food insecurity. Along with the procurement policy of food, it translates macro-level self-sufficiency in food grains to the micro-level availability by ensuring access to food and other essential items to poor families. The other three are related to wage employment schemes, often linked to grain for work programs, credit-based self-employment programs like Mahatma Gandhi National Rural Em­ployment Guarantee Scheme (MGNREGS) and the more specific nutrition-oriented pro­grams like Integrated Child Development Ser­vices (ICDS).

Government has also been providing subsidies in electricity, fertiliser, water, and in procuring food like wheat and rice from the farmers by giving them minimum support prices. This is part of the estimated direct fiscal costs of these select subsidies of Rs 3,780 billion or about 4.2 percent of Gross Domestic Product (GDP). Table I shows some major policies that are targeted towards poverty alleviations.

MNREGA, popularly known as “100 days programme”, is now a household name in India and is an innovative yet largely successful programme. It has reached the lowest echelons and is taken advantage of by poor households in plain lands, coastal areas, deserts, hills and Himalayan regions. For more details, see Case Study.

The National Food Security Act(2013) is the latest initiative that provides subsidized food grains to approximately two thirds of the population. Launched with a lot of political conviction, it attracted a range of sustainability questions. Though a number of states are yet to implement, this Act provides the beneficiaries 5 kilograms of food like rice at Rs 3 (4.4¢ US) per kilogram; wheat at Rs 2 (3.0¢ US) per kilogram and coarse grains at Rs 1 (1.5¢ US) per kilogram.

Direct Benefits Transfer

Three direct benefit transfer schemes linked through Jan Dhan (bank deposits), Aadhaar cards (unique identity number given to individuals) and mobile phones (JAM) have been recently launched to take these subsidies to the individual level and to reduce the heavy leakages that have characterised all these schemes. The resources thus saved could even generate a part of public investment. For instance, India’s Economic Survey forthrightly states that the kerosene subsidy extended through PDS was Rs 204.15 billion in 2011-12 out of which 41 percent is lost as leakage, and only 46 percent of the remainder is consumed by poor households. Similarly, out of the subsidies allocated under different heads in the PDS system, 15 percent of rice, 54 percent of wheat and 48 percent of sugar are lost as leakages. Most water subsidies are allocated to private taps, whereas 60 percent of poor households get their water from public taps. In other words, subsidies have been usurped by those sections which are relatively powerful and have access to political authority.

The JAM trinity makes seamless transfer to individual bank accounts and opens up the potential for expanding the set of welfare and anti-poverty measures and “could boost household consumption and asset ownership and reduce food security problems”. This will drastically cut the cumbersome bureaucratic practices that the poor households are subject to. It is estimated that there are about 125.5 million Jan Dhan bank accounts, 757 million Aadhaar numbers, and approximately 904 million mobile phones.

Organising the Farmers

One of the biggest replicable success stories in poverty eradication has been the organisation of farmers all across the country as milk cooperatives at the village level. Following the Anand Milk Union Limited (AMUL) model, a cooperative of farmers located in Anand in Gujarat, the National Dairy Development Board launched Operation Flood (OF, or White Revolution) in 1970. It is this farmers’ movement which has made India the largest milk-producing country in the world (142 million tonnes in 2014-2015 as against 17 million tonnes in 1951), and per capita availability is currently over 300 grams per day as against 130 grams in 1951. India is a net exporter today, having advanced from a situation of serious deficit and import dependence. The Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF) alone procures approx 14.85 million litres of milk per day from 18,536 village milk cooperative societies, 17 member unions covering 31 districts, and 3.37 million milk producer-members located in Gujarat. It has recorded a sales turnover of US $ 3.4 billion.

The strength of this program initiated by an engineer turned management expert Verghese Kurien lies in its focus on: (i) price policy being made adequately remunerative to the milk producing farmers, (ii) availability of hygienic milk to the urban consumers at an economical price, and (iii) intensive and extensive participation of the farmers in the decision-making process. This movement provided income and employment to millions of farmers on a daily basis. Today, there are 198 district cooperative milk unions, covering about 0.16 million villages, reaching out to 15.4 million milk producers of which 4.4 million are women members.

Given the huge dairy market, Chinese farmers may find this experiment worth emulating.

Micro-level Interventions

Over the years several grassroots actions have been undertaken to ensure alternative routes and sustainable means of food security and poverty eradication. These initiatives have mostly come from non-governmental organisations. Ralegaon Sidhi in Maharashtra led by famous Gandhian community leader Anna Hazare; Pani (water) Panchayats of Village Mahur; Bio-Village in Pondicherry; Samridha Krishak Yojana of Assam; TANWA Women’s Agriculture Project of Tamil Nadu are some examples of these micro-level interventions. Their operational features are critically driven by i) their own community and geography-centric orientations; ii) strong and reliable local leadership; iii) use of local resources and knowledge; iv) application of appropriate yet friendly technology, and v) regular and visible impact assessment by the communities themselves. All these grassroots actions have taken forward human security programs and practices to a high level.

Despite the onslaught of second-generation reform and talk of third-generation reform and steadily joining the club of top economic actors at the global level, it is a long way to go for India in terms of alleviation of poverty and reduction of inequality.

The author, a noted development economist, is Professor of South Asian Economies, School of International Studies in Jawaharlal Nehru University, New Delhi. He was the Founding Vice-Chancellor of Sikkim Central University, Gangtok and Pro Vice-Chancellor of Indira Gandhi National Open University (IGNOU). He also served as Chief Economic Adviser in the Government of Sikkim with the rank of a Cabinet Minister.

Published in the ISSUE 3 of CHINA-INDIA DIALOGUE