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Sunil Jain: India whining

RATIONAL EXPECTATIONS

Sunil Jain  |  New Delhi 

Two reports released last week, one by the Asian Development Bank and another by the National Commission for Enterprises in the Unorganised Sector (NCEUS), essentially make the same point""there is great inequality in the current growth process, and governments need to do something about it. The ADB argues that inequality is resulting in a lower level of poverty reduction and is hindering growth, while the NCEUS paints a picture of Indians wilting and dying, and recommends various measures including an elaborate safety net. Both pictures are evocative, both are weak on fact.
The ADB report (see BS edit, "Wrong end of the stick," Aug 10), for instance, concedes that much of the increased inequality is between countries, not within them""largely a result of China's explosive growth""and is unable to make a case showing how this has retarded growth. It points to poor human development indicators in countries like India, but countries with both better and worse inequality levels have better human development indicators""so, inequality in itself does not lead to worsening indicators.
A full critique of the NCEUS report will require much more space than this column affords, and the impossibility of setting up a National Security Scheme for all unorganised workers has been dealt with elsewhere (see "Vote Manmohan," May 29, 2006)""the scheme envisages keeping track of 300 million people every day of the year, as they migrate from one place to another, and collecting one rupee from each of them! It's interesting to note that the first time the scheme was mooted, during the NDA tenure, a pilot was run in 50 districts""while 3,500 people enrolled under it, just two (yes, two) persons contributed every day till the scheme was wound up.
When the NCEUS put out its latest report last week, not surprisingly, given its findings, the reportage was extensive. One leading daily ran the findings of the reports as a flyer on page one""to quote the report, "At the end of 2004-05, about 836 million or 77 per cent of the population were living below Rs 20 per day". While we all know that 22 per cent of India's population are poor and earn below Rs 12 a day (that's Rs 1,980 per month per family), the 77 per cent number is really frightening, for it shows those above poverty line aren't doing much better, either. Certainly, the numbers don't jell with estimates by others""the NCAER, for instance, forecast that 35 per cent of Indians would earn over Rs 50 per day in 2005-06. Invest India's all-India survey indicates that around 32 per cent of Indians have an income of below Rs 20 per day""admittedly the data are for 2007-08 and for income, not consumption, but when you're earning Rs 20 a day, income and consumption are probably the same thing.
So has the NCEUS got its data wrong? Since the unit records of the 2004-05 round of the National Sample Survey (NSS) were made available to the NCEUS, the chances of it having read the data wrong are low. The problem lies in the increasingly unrepresentative nature of the NSS data. If you look at India's GDP numbers, which are released by the National Accounts Statistics (NAS), you get one consumption figure. But if you look at the consumption figure thrown up by the NSS, it is usually smaller; sadly, over the years, it is getting even smaller. So, in 1993-94, the NSS consumption was 61.9 per cent that of the NAS. In 2004-05, however, this ratio fell to a mere 47.5 per cent.

(WHY NSS DATA ARE IRRELEVANT)
Annual Consumption
(In Rs)

1993-94

2004-05

National Accounts Statistics (NAS) 100

142*

National Sample Survey (NSS) 61.9 68.3
Lost Consumption (in per cent) 38.1 51.9
* Based on 3.24 per cent compound annual growth
To use numbers, assume India's consumption was Rs 100 in 1993-94""using the growth thrown up by the NAS, this means 2004-05 consumption was Rs 142. According to the NSS, however, while 1993-94 consumption was only Rs 61.9, it rose to just 68.3 in 2004-05!
Naturally, to get a realistic picture, the missing consumption needs to be added back. How you should do this""add all of it only to the rich, or evenly, and so on""is a matter of debate. But if you add it evenly, and several experts accept this as kosher, you get a number very different from that suggested by the NSS/NCEUS. This exercise suggests the number of individuals spending below Rs 20 a day make up 43 per cent of the population.
So, before rushing out to announce yet another welfare scheme, take a look at the data""not just on poverty, but on the employment and income growth that is being generated without the government's assistance (see "Jobless Growth, ha'ah," November 20, 2006).

First Published: Mon, August 13 2007. 00:00 IST
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