Today's Editorial

19 November 2016

Grave implications



Source: By P S M Rao: Deccan Herald



Close to 30% of the world's poor live in India as per a World Bank's recent report, 'Poverty and Shared Prosperity 2016'. India alone housed 224 million of the world's 767 m poor as of 2013. The report once again brings to focus India's dubious distinction of being the world's number one country in this respect, its disputable criterion to count the poor notwithstanding. The World Bank's poverty threshold is $1.90 a day per person. That is not at market exchange rate, which would translate to Rs 117.45 in 2013 at Rs 61.82 per dollar, but is at Purchasing Power Parity (PPP) which equals Rs 31.77 (at Rs 16.72 a dollar).


The PPP compares the values of currencies in relation to their purchasing power. For instance, just to explain it in simplest possible terms, if a cup of tea costs Rs 10 in India and $1 in the US, the value of one dollar equals Rs 10 whereas today's market exchange rate is much higher, at Rs 66.77 a dollar. So, the World Bank's poverty line threshold is no better than the much criticised Tendulkar norm. The Suresh Tendulkar Committee which submitted its report in 2009 fixed a daily spending per person of Rs 27.2 in rural areas and Rs 33.3 in urban to be the poverty line, resulting in 270 million poor.


Subsequently, the Rangarajan committee slightly revised these limits to Rs 32 and Rs 47, respectively, with the number increasing to 363 million. The Niti Aayog which is still undecided on the criterion is understood to have decided to set up a panel to again define the poverty. The World Bank's threshold definitely is not beyond a serious criticism and rebuttal. But it should be noted that any increase in the threshold, to correct the wrong, will surely increase the number of poor all over the world including India. That means India's number one position will remain unchanged. The country in the second position - Nigeria - has 86 million poor. Though it is a big number to that country, it is equal to just about 38% of India's numbers!


Besides the number of the poor, there are several other crucial presages that India can ill afford to ignore. The most disheartening thing is that the children under 18 accounted for half the global poor and the share of younger children, in the age group 0-14, is much more than their share in the world's population. Similar to its overall share in poverty, India is home for 30% of the world's poorest children. Another worrisome fact is that child poverty is heavily concentrated in rural areas with four out of five children in extreme poverty living there.


A United Nations Children's Fund (UNICEF) report adds that more number of children, 45%, are poor even at higher threshold $3.10 a day. Equally dreadful, India had the highest number of under-five deaths - as many as 1.4 million - in 2012 as per the UN Millennium Development Goal report 2014. The children's plight - their poverty, ill health and illiteracy - mirrors the future state of the country. Equally shocking is that the poverty is more among the farmers, the food givers to the society. While 80% of the world's poor live in rural areas 64% work in agriculture.


Another distressing thing, rather the cause for the persistent poverty, is the high inequality in the country. The income of top 1% of Indians is found to be increasing similar to what happening in some other countries like the Republic of Korea, South Africa, Taiwan, China and the United States. At another level, India is being projected to be not lagging much behind the world's rich. It is among the top 10 wealthiest countries. Its rank is seventh with $5,600 billion individual wealth (private wealth held by all the individuals, all their assets minus liabilities).


As per the report of the New World Wealth, India is ahead of even Canada ($4,700 billion), Australia ($4,500 billion) and Italy ($4,400 billion). Its GDP was $2.07 trillion in 2015, in PPP terms, $7.9 trillion. But this is a misleading hype because of its over 130 billion population. India ranks 170 with $1,590 per capita income in 2015; even in PPP $6,020 per capita it ranks 151.


Dubious distinction


Furthermore, the income distributed is highly unequal. The Gini index of India (which indicates inequality - higher the index value, more would be the inequality) has gone up from 45.18 in 1990 to 51.36 in 2013 - worse than Latin America's 43.69 - as per a recent International Monetary Fund (IMF) report. In fact, India has also earned further dubious distinction of being among the top rankers in inequality.


Although India has reduced the number of poor over years as per the official statistics, the other countries, for instance, China, Vietnam and Indonesia all started with higher poverty levels than India in 1990 and have been able to do better than India. While there is no marked improvement in the lives of the poor, the rich are undoubtedly becoming richer.

The income of high net worth individuals in India, numbering 1, 98,000, with incomes more than $1 million aggregates to $785 billion according to world wealth report 2015. According to Credit Suisse's report, the top 1% of India's population own 53% of the country's wealth; the top 5% own 68.6% and the top 10% own 76.3% whereas the bottom 50% of the people apportion only 4.1% of the wealth. So, the latest reports from World Bank and other sources should make the Indian government take the danger signals seriously and rework its plans to halt this deplorable course, before things move from bad to worse.