Why we should never abolish poverty: it makes us all rich

There's nothing like poverty to ensure a hearty meal for Delhi's resident army of experts and jholawallas. So the fact that C Rangarajan, Chairman of the PM's Economic Advisory Council, has been asked to head yet another committee to define poverty last week should have come as no surprise.

Ever since the country worked itself into a lather over the Rs 32 urban poverty line (Rs 26 for rural areas) announced by Planning Commission deputy chairman Montek Singh Ahluwalia last year, everyone should have realised that we love poverty.

The rich and poor parameter. AFP

Ahluwalia is obviously a slow learner. For in March this year, the Planning Commission released another set of figures that were even lower. It said that anyone with a daily consumption expenditure of Rs 28.35 in urban areas and Rs 22.42 in rural areas was not really poor.

To compound matters, the commission even had the temerity to claim that poverty had fallen by a spectacular 7.3 percent between 2004-05 and 2009-10 from 37.2 percent to 29.9 percent.

This drew huge howls of protest from the NGO lobby, even though much of it is commonsense. It would have been strange if the economy's high growth of 8-9 percent during the period and UPA's enormous spends in rural areas had not reduced poverty significantly.

But this is where Ahluwalia and his ilk need lessons in political economy: in India, poverty has no business going down. As long as it is rising and everybody feels suitably contrite about it, there is no political cost to pay. Say it's gone down, and you are going to put hundreds of experts, social activists, and bureaucrats out of work.

And we know how wedded we are to protect every job going.

India's political economy-at one level-is very simple. Elections need poverty as justification for making expensive promises of freebies. This is why the Congress won in 2004 and 2009. It hopes to do so again in 2014, by promising a profligate Food Security Bill and a universal health service. The NDA rued its India Shining campaign. Now it sticks to saying that poverty is worse under UPA due to inflation, political mismanagement, et al.

Moreover, experts on poverty cannot earn their keep if poverty is down. Bureaucrats cannot get huge allocations to spend (and make money from graft) if poverty is waning. NGOs cannot get funding if poverty is going down. And the media cannot make a fuss if poverty is vanishing. Even business cannot benefit from poverty being removed - or else how can they make money from the government's huge rural spends, which has driven up rural demand for everything from FMCG goods to mobiles?

Poverty going down is simply bad for business. Big government and big money spends needs big poverty-real or unreal-to justify it.

As TN Ninan wrote in Business Standard some time ago: "Since politicians and civil society leaders do not like being told that poverty is declining, we must assure them that the poor will always be with us. How? By making poverty a relative and not an absolute definition; you are poor if your family gets less than 60 per cent of the income of a median family - is the European definition. This means two things. One, there will always be a large number of poor people, so no one need be afraid that poverty is disappearing. Two, the number of poor will always be less than 50 per cent of the population, since the median family is the yardstick."

However, even Ninan could have missed one issue. If a poverty line is so simple to draw, it leaves out a whole host of bureaucrats and experts with nothing to do. Unless you make the poverty line a complicated affair, it does not look serious enough.

So, this is what makes a Rangarajan committee on poverty inevitable. It gives everybody seven to nine months of nirvana debating poverty instead of fighting what's left of it.

Planning Minister Ashwani Kumar said while announcing the committee that we need to revisit the "methodology for estimation of poverty and identification of the poor". Huh? "People's perspective about poverty has changed. Therefore, we need to take a fresh look into the methodology for estimation of poverty in the country."

And how has the perspective changed? Said Kumar: "We don't send a letter through a 20 paisa post card these days; rather we call from our mobile phones to communicate. Everybody wears Reebok shoes and people ride scooters instead of cycles."

Ah, now we know. It's not about roti, kapda and makaan anymore. It's about Reeboks. And committees.

Updated Date: Dec 20, 2014 10:24 AM

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