Everyone loves a good poverty business

It is bad form to see the farcical side of an issue as grave and distressing as India’s poverty line: the grim Jacobins of the National Advisory Council would promptly call for the tumbril. Yet, there are two inescapable conclusions from last week’s angry debate over the Planning Commission’s affidavit identifying the poverty line as a spending capacity of Rs 26 and Rs 32 for rural and urban India respectively.

The first, which is likely to be seen as absolutely heretical for a country that has become the world’s foremost supplier of economists, should be obvious: managing the economy is too serious a matter to be left to economists.

It certainly didn’t need a familiarity with complex econometric models and either Keynes or Hayek to realise that the Planning Commission’s extrapolation from the Suresh Tendulkar method of poverty measurement was just another example of economists living in a make-believe wonderland. The wise men of Yojana Bhavan had once again demonstrated to the public’s satisfaction that after lies and damned lies comes statistics.

The second conclusion is one that should, ironically, give enormous satisfaction to the beleaguered Montek Singh Ahluwalia who has been charged by irate NAC members with harbouring notions of the infallibility of World Bank economics. Why, it needs to be asked, does India need a Planning Commission? The question is not necessarily related to the obvious redundancy of an institution that was empowered to implement India’s transition from colonial backwardness to a ‘socialistic’ pattern of society. This becomes more relevant in the context of tell-tale evidence that the empirical basis of planning is horribly flawed.

Many years ago, Professor Jagdish Bhagwati—a refugee from the stifling left-wing consensus in the economics departments of Indian universities—had argued that “any elementary mistake in economics can be turned into a profound truth by ingenuously making the right assumptions to deduce what you want.” India, he went on to suggest, “suffered the tyranny of anticipated consequences from the wrong premises.”  In plain English this meant that India was practising voodoo economics.  

Those with long memories may recall the curious debate that preceded the introduction of colour TV to coincide with the 1982 Asian Games. The Planning Commission questioned the wisdom of apportioning Rs 300 crore to a “low priority” scheme. The scepticism was based on the assumption that the initial demand for colour TV sets would not exceed 10,000. However, Yojana Bhavan underestimated the initial demand by more than 1,000 per cent—a testimony of its understanding of popular aspirations.  

What the country has been witnessing over the past week is an elaborate ideological game aimed at putting brakes on the growth of a market economy. Never mind the patent absurdity of the Planning Commission’s poverty line, what is equally unseemly is the competitive poverty hunt involving economists, NGOs and politicians. Concern for India, it would seem, is being measured by a grotesque head count of the “poor and vulnerable”. The more you count, the better for the soul.

Subscribing to the Planning Commission’s 26-32 measure is, of course, the ultimate proof of heartlessness, since it assumes that poverty has actually been declining, from 48 per cent in 1990 to 32 per cent in 2011. At the midway point of the index of radicalism is the estimate by a committee headed by NAC member N.C. Saxena that suggests 50 per cent of India lives below the poverty line. Finally, for those completely unreconciled to the dismantling of the pre-1991 regime of controls, there is the report by the late Arjun Sengupta, a Congress econocrat of the socialist variety, that damns the retreat from the licence-permit raj by putting the numbers of the “poor and vulnerable” at a whopping 77 per cent.

It is a commentary on the claims of economics to be a “social science” that estimates of the poor in India range from 32 per cent to 77 per cent. The scale of inexactitude isn’t surprising and can be explained by the social entrepreneurship potential of the poverty business. It is soul destroying to be poor but it is criminal to keep people in poverty because it suits the permanently aggrieved. 


Sunday Times of India, October 9, 2011