Lack Of Growth Trickles Down

Last week I showed that data from the National Sample Survey (NSS), suggesting no progress in poverty alleviation in the 1990s, were not credible since other indicators suggested a continuing fall in poverty. The old Left has seized on the NSS data to claim that fast growth does not trickle down to the poor. In fact the data show the very opposite: Lack of growth trickles down and means lack of poverty reduction.

The impact of economic reform has varied widely from state to state. Some, like Gujarat, Maharashtra and Tamil Nadu have soared by taking advantage of the opportunities created by liberalisation. But in states like Bihar and Uttar Pradesh, where the administration has broken down, law and order have deteriorated, and corruption reigns high, liberalisation alone cannot create new economic opportunities. Anybody who thinks Bihar and UP have become a paradise for investment because of liberalisation is plain cuckoo. Criminalisation and maladminstration hamstring both the private and public sector.

NSS data show that poverty trends in the 1990s worsened in Bihar and UP but improved significantly in West Bengal, Maharashtra, Gujarat, Tamil Nadu. The NSS samples for most years are too thin to be reliable at the state level, so some economists have agglomerated the data to improve reliability. Prof TN Srinivasan has looked at two groups of states. The first consists of the five poorest states in 1980-81: Bihar, UP, Orissa, Rajasthan and Madhya Pradesh. The second group of richer states includes Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra, Tamil Nadu, West Bengal and Punjab.

Poverty trends in the first group worsened after 1990, with Bihar and UP erasing gains made by Rajasthan and Madhya Pradesh. Bihar and UP had grown much faster in the 1980s, and reduced poverty in that decade. Their lack of growth in the 1990s meant a lack of poverty reduction.

The fastest-growing states experienced falling poverty in both periods. So clearly a major problem of the 1990s has been the lack of growth in key states like UP and Bihar. These account for a quarter of the population and over one-third of the poor. Their bad performance has dragged down the national average, in growth as well as poverty alleviation.

The worst performers are also those with the lowest literacy, highest infant mortality, and sub-standard infrastructure. Improving these will reduce poverty.

But the link is not automatic–poverty declined in these states in the 1980s, when literacy levels were even lower. Other factors are at work in the 1990s, notably administrative collapse and political loot.

At the other end of the spectrum, Gujarat (8.6 per cent) and Maharashtra (7.4) per cent) have experienced tiger-like increases in per capita income in the 1990s, and have reduced poverty too. Clearly, liberalisation in conducive conditions accelerates growth and reduces poverty.

However, rapid growth is by no means everything. The quality of growth matters too. Corruption and administrative collapse adversely affect poverty alleviation. Strong social indicators improve the impact of growth on poverty (Kerala is the best example of this). West Bengal has fared badly in industrial growth, but its green revolution (which combined land reform with capitalist farming) has made it the national champion in poverty reduction. No wonder the Left Front government has won five elections in a row. Dynamic agriculture is vital for reducing poverty, since three-quarters of the poor are rural. The plateauing of grain yields in other states, for want of new, better high-yielding varieties, has adversely affected poverty alleviation in the 1990s.

Why, despite the availability of these details, are so many people claiming that liberalisation has worsened poverty? Some may be ignorant, but many others have a private agenda: having predicted that liberalisation will worsen poverty, they are selectively picking up only those data which verify their thesis. They ignore poverty reduction suggested by the NCAER, wage data or CSO data. They focus on the NSS. Or rather, on parts of NSS data they find convenient. In effect they say, “We believe the NSS is telling a pack of lies about the consumption of the rich stagnating and income inequalities remaining unchanged. But we believe those parts of its data which show poverty is not falling.” Hilarious.

Anyway, who says the main factor affecting outcomes in the 1990s was economic reform? A comprehensive CSDS survey of citizens asked whether they had noticed any change whatsoever in economic policies. Four-fifths said no. So limited and urban-oriented is our economic reform that it is invisible to the rural masses. But the masses are fully aware of growing corruption, criminalisation and maladministration.

The 1990s should not be seen mainly as the decade of liberalisation. They should be seen mainly as the decade of criminalisation and sectarianism. That will the theme of next week’s column.

What do you think?