A Nation of Beggars

Lessons from the neighbourhood
By INDIA TODAY Assistant Editor, Rohit Saran.

Riding along the 6-lane Motorway from Lahore to Islamabad, it is
difficult to believe that you are in a country that is supposed to
be falling apart. Connecting Pakistan`s capital with the nation`s
largest industrial city, the 357-kilometer highway -- called M2 --
is as good and as efficient as the expressways in the US and
turnpikes in Europe.

The average driving speed is 100 kilometers an hour and you stop
only once in your journey -- to pay Rs 200 toll (170 Indian
Rupees). Its 74 bridges ensure that there are no road crossings. A
dividing wall, between up and down-stream traffic, rules out
eventualities of head-on traffic, and barbed fencing all along the
M2 prevents any sideways movement. But dare not turn into a
speed freaks. Toyota-borne highway patrols keep an agile eye on
over-speeding.

The $1.16 billion (approximately 50,000 crore Indian Rupees)
highway is Pakistan`s testimony that a Third World country can
build -- and maintain -- a First World infrastructure. India`s
Delhi-Agra highway, constructed after, doesn`t come close to the
Lahore-Islamabad Motorway, either in construction or in
maintenance.

India`s ``collapsing`` neighbour is ahead in other infrastructure too.
It has surplus power, runs more efficient telephone services and
the cities of Islamabad and Lahore are better kept than most
Indian metropolitan cities. Dial the local telephone enquiry in
Islamabad and the response will be quick and accurate -- a rarity
with Delhi`s MTNL telephone enquiry. Lahore`s street`s are
better-lit and road instructions are more accurate than one would
find in any Indian city. The canal that surrounds Lahore and most
of its suburbs is many times cleaner than the Yamuna in Delhi.

Pakistanis enjoy better infrastructure because they pay a better
price for it. A middle-class family spends anything between a third
to a fourth of its monthly income on the three basic utilities of
power, gas and telephone. Consequently, in 1999-2000 Pakistan
spent just 0.4 per cent of its national income on subsidies, down
from 1.1 per cent in 1990-91. During the same period, India`s
subsidy bill has hovered around 3.1 per cent of its national
income.

Interestingly -- and instructively for the Indian policy makers --
most of the subsidy cuts in Pakistan have happened in the past
ten years when democratic governments were in power. A weaker
democracy has produced bolder pricing reforms. One may argue
that raising prices has been easier in Pakistan because poverty is
not as acute there as it is in India. Pakistanis claim with pride
that nobody dies of starvation in their country. While that is an
exaggeration, the poorest of the poor in Pakistan are better off
than the poorest of the poor in India -- partly because Muslim
society does not have the kind of caste system Hindu society is
ridden with.

But lower poverty is not the only reason that made the task of
subsidy cuts easier in Pakistan. Some of the critical lobbies in
Pakistan are, somehow, not as unreasonable as they are in India.
For instance, the agriculture lobby in Pakistan does not fight for
low input prices (subsidised seeds, fertilisers, water). It fights
for
higher output (crop) prices. In India the farm lobby bleeds the
government both ways, demanding -- and getting -- subsidised
inputs as well as a remunerative price for output.

But Pakistan`s economic virtues begin and end with successful
subsidy reduction and a relatively efficient infrastructure
management. The country holds out many more lessons in
economic mismanagement. Read all about them next week in
`Warnings from the neighbourhood`.

Wow ! I`m amazed by the responses to the article.

Let me see -- first, about the begging bowl. Yes, begging is acceptable in India, and that is a fault of the culture. But begging from the IMF, World Bank, etc. -- I suppose as long as it is seen to be without strings it is OK. Otherwise, I seem to recall the gloom-and-doom and negative fallout for the political party that runs the borrowing government in India when IMF loans are sought.

Second, improving the country to impress NRIs should be the LAST of the government`s or society`s priorities. Improving the country to improve the lot of people who live there is far more important. Thus, a new water supply or a new school may be more important than removing beggars from the street.

Third -- hiding wealth from extortionist rulers. Well, the facts about the wealth of Somnath has submerged into myth; but we do know that Mahmud of Ghazni estimated that it would take two hundred years and untold wealth to build a city of the grandeur of Mathura (before he razed it). Several hundred years later, Babar reports in Babarnama, that in his first two or three years of campaigning in India (by 1530 AD), he amassed 56 crores -- multiply that by a factor of 1000 or more to convert to modern money. And I don`t think he even scratched the economy. The shells of the buildings that remain from that time (whether Islamic or Hindu ) are indicative -- in no time or era when Indians had wealth did they hesitate to show it off. That a Mahatma Gandhi and a socialist government should have changed that is incredible. Certainly, no circumstance, no govt., no leader has weaned Indians from their love affair with gold and silver.

More likely is the conclusion that there is not that much wealth around, or else it is being spent solely in the new gilded temples and minarets springing up over the countryside.

Fourth -- as my earlier posts have shown, NOBODY knows for sure whether poverty in India has decreased greatly or decreased a little. The statistics are simply too inconsistent. New research is required.

Nevertheless, ``not poor`` does not mean well-off. Not-poor Indians are mostly poor even by the standards of Malaysia or Singapore, not to mention Europe or the US.

Fifth -- the poverty myth feeding into barriers to removing poverty. The fact is that the nineteenth century was a disaster for India economically -- I think there were a hundred years (under the British ) of essentially zero growth in GNP. The first half of the twentieth century were not much better. India at independence was very different from India of today. The real problem is that Nehruvian policies were appropriate for the 1950s and 60s but not thereafter. Unfortunately, they became virtually unchangeable thereafter.

I will repeat -- clearing of slums, removing beggars from the street may be the last priority of the people of the area. Any or all of water supply, regular electricity, schools, primary health-care, sewers may be more important. As an NRI, I would not presume to know that. I would want the decision-making authority to reside in the hands of the people who live there. Command development by NRIs is as evil as command development by native socialists.

Sixth -- yes, the license-permit Raj has taken away the incentive to keep the work ethic strong. This has to be fixed. Nevertheless, the work ethic even within a particular family (here in the US, or in India) varies greatly among individuals, in my observation, and it is not just government policy that can do something about this.

Seventh -- India was doing quite well in relation to the world till around 1800, when I believe it enjoyed 15-20% of the total world trade (now it is 1% or so).

Summary : the author is correct that a socialist-license-permit-bureaucratic set-up has squelched India`s ability to climb out of poverty. I disagree that ostentatious display of wealth is the answer. I disagree that the country should be run to make NRIs happy or to impress foreigners. I think that people in an area should decide what gets done first in that area, and beautification may be last on the list. I disagree with some of the facts and many of the interpretations that the author presents.

And I am surprised that so many people agree with the author. I think then, that it is best that NRI remain NRI -- India will be really screwed if any significant number return.

-arun gupta

India among nations having maximum female illiteracy

New Delhi, May 23

FOUR countries from Indian subcontinent- Bangladesh, India, Pakistan and Nepal - account for the largest number of out-of-school girls and illiterate women. This fact was brought to light here by UNESCO`s representative in India, Prof. Moegiadi, today.

Addressing a national workshop on ``State Policies on Incentive Schemes in Primary Schools and their Contribution to Girls` Participation``, jointly organised by NCERT and UNESCO, he said, ``Though progress has been made, we are all aware that according to the 1991 census of India, we have 50.2 per cent literacy, and now, according to the latest information we have, 64 per cent literacy rate. It is estimated that in near future, it can be 70-80 percent.``

He said it is a worldwide trend to invest more resources to educate children, at least till basic education and primary and elementary education levels. That is why many countries in the world give education top priority and give special attention in the national development plan as part of the overall national strategy. He said some researches had revealed that educating girls and women brings a lot of benefits, increase family income and result in late marriages.

Early marriages disturb the school environment and also disturb retention of children in school, he said. Prof. Moegiadi said that after a discussion with NCERT, UNESCO has agreed to give at least four incentives - mid-day meals, free uniform, free testbooks and attendance scholarship - for girls, and see the impact of these independent variables on enrolments, not only to attract girls but also to retain them in schools till they reach the graduation stage.

The girl`s participation at the primary stage is known to be low and has been of concern of the policy makers and educational administrators, who have been always looking forward for related information so that the same is utilized to help in resolving the stated problems.

One reason why we see so much beggary/slums in urban areas is due to the development of just one city/cosmopolitan center at the expense of the rest of the cities in any given state. Bangalore (my home town) is a victim of this short-sighted policy. I have always felt that Karnataka should have developed three urban/industrial centers - Hubli, Mangalore and Bangalore, roughly equally. This would have reduced rural flight to Bangalore in search of jobs and a better living. A good four lane highway between the three, dotted with smaller industrial centers with easy access to it would have further reduced urban pressure and provided for better growth. The same is true for Calcutta, Bombay et. al.. But this would have meant upsetting all the sacred cows Murad talks about.

Meanwhile Karnataka legislators, true to form, are busy vandalizing Cubbon Park, one of the few lung spaces left in Bangalore, for lebensraum. Old habits die hard.

BEGGING:

Begging on the streets is part of a business in India and Pakistan. A retired gentleman sitting on an armchair in his veranda near a railway crossing one day counted a beggars daily take. He claims that the beggar made over 150 rupees in a day. They are usually part of gangs in cities and get pick and drop service and pay policemen for rights to choice locations.

Fundamentally these are cultural problems and there is no shame attached to this kind of behavior. Extortion and blackmail by state functionaries is another cultural problem. And the funny thing is that inherited wealth and circumstance do not preclude open bribery and extortion. Take the case of Pakistani banks out to collect defaulted loans. The new managements in the nationalised banks, usually executives from foreign banks with degrees from European and North American Universties have exhibited enormous personal greed and wanton disregard for the client and his business. Some of these individuals are from supposedly good families with enormous independent means. The outrageous personal greed and moral dysfunction pales in the face of a persist beggar in front of cigarette shop.

Murad,

Excellent article. You articulate the frustrations of many NRI`s including myself. India, for the last 50+ years, has set the bar far too low and consistently pats itself on the back for achieving next to nothing. And the arrogance with which India has gone about maintaining their poverty and filth is obscene. As others have pointed out, there is a left wing mentality among India`s masses that wealth is evil and anyone with it must be bad for the nation. Now in the year 2000, as India gets a lot of press for its booming software industry and the economic gains resulting from the openning of our markets in `91, the nation will again rest on its laurels and maintain the status quo. As long as they are a step ahead of their pathetic neighbors to the northwest, then thats good enough for underachieving India.

Regards,

Harish

The author may be right on a `macro-level` about the mindset of Indian planners. But I think one should distinguish between socialist-style government-throttled economic activity on one hand and on the other hand policymakers` recognition of the widespread existence of poverty, and making a central focus of it.

As Narasimha Rao said once as Indian PM, multinational corporations will not set up Primary Health Centres or primary schools. The best solution in my opinion is to have both the multinationals and unrelenting emphasis on government efforts for poverty allieviation. But the work-ethic, yes, I agree with the author, its better to provide opportunity for a person to work than to provide handouts.

About the culture of wealth and ostentation, well, that leftist rag, NYTimes, reported the contrasts between the $15,000 to $20,000 Christmas gifts a lot of Manhattan children were bought when just 5 miles away, the local public school roofs were leaking and lacked proper facilities for lack of funds. The NY mayor and city authorities obviously prioritize according to where the campaign funding comes from. I think `gareebi hataoo` slogans are more appropriate for the current Indian situation than `campaign funds badhaao`.

In India, the lack of livelihood options in rural areas seems a big cause of poverty. And there seems no doubt corruption eats up a lot of Jawahar Rozgar Yojana and other IRDP money. My favourite anecdote about Jawahar Rozgar Yojana was from a Kerala newspaper which reported policemen destroying marijuana plantations in remote Idukki valleys which were grown by some young men who had taken a government loan under the JRY scheme!

Sadhana

Well said!!

One of the greatest reason I left India in 81 was because I was sick & tired of its socialist policies. In retrospect, the Nehru/Gandhi dynasty was the worst thing that ever happened to India.

It seems to me that the basic Indian philosophy is that it is virtuous to be poor. Somehow, a rich person is always looked upon as inherently corrupt or evil--otherwise he wouldnt be rich. Besides, if a rich person wants to have a lavish lifestyle, he is made to feel guilty because ``there are so many poor people``.

In movies, the villan is usually a super rich smuggler or an industrialist. The hero is usually a common man who fights for the virtuosity of the poor. Ironic because usually the standard of living that heros live isnt really all that bad (by Indian standards).In real life, film stars are fabulously wealthy as compared to the common man.

The problem started with Mahatma Gandhi. He made a big show of how he lived the simple life of a peasant. Kudos to Sarojini Naidu, who told him that ``it costs the Congress party a lot of money to keep you in poverty!``

A great article! It is difficult not to agree word by word. Congrats Murad! May all Indians think as you do. `Ameeri Badhao`

Box 8.1 from the World Bank report :

Box 8.1 : The Need to Improve India’s Data

India has a long tradition of good statistics and statisticians. India was one of the first developing countries to undertake regular household surveys, beginning in 1951, in order to track poverty reduction and household living standards.

Recently, India has begun to publish much more economic and social data with a much shorter lag. For example, much of RBI and Commerce data are available on the Internet (although there is a longer lag on RBI data on trade, and this needs to be improved, see below) , the WPI is available with a minimal lag, and the various RBI reports show banking developments, including non-performing assets, in much greater detail.

India is compliant with the Special Data Dissemination Standards of the IMF, and has begun publishing quarterly GDP estimates, as well as monthly fiscal accounts for the Central Government.

Over time, however, the usefulness of India statistics for policy-making has declined. The economy’s increased complexity and liberalization have complicated data collection, as has occurred in many countries.

In many cases, however, India’s data problems also reflect limited use of new methods and lack of efforts to achieve consistency between different data collecting agencies. The resulting data problems also complicate policy-making.

For example, in the area of poverty, the consumption (and food-grains consumption) estimates in the NSSO sample surveys and the National Accounts have increasingly diverged (See Chapter 1), and consumption in the National Accounts may itself be underestimated (see below), making it hard to say whether poverty has declined or stagnated.

It is difficult to say how well programs to improve school enrollments are proceeding, when official figures for gross enrollment ratio are higher than the NSS figures for gross attendance ratio, especially for classes I-V, where the difference is about 20% (GOI 1998b).

Similarly, unofficial sample surveys suggest much less participation in employment schemes than official data relating to employment generated by such schemes.

Anti-poverty and anti-inflation policies are complicated by the lack of a good indicator of inflation. The CPI is based on outdated weights, including those for some food items that have declined in the household’s market basket (simply shifting to more up-to-date weights makes a major difference in estimates of poverty changes, see Dubey and Gangopadhyay).

The WPI includes a large number of goods that have shown no increase in prices for some time. Not surprisingly, there are substantial differences in inflation estimates from year to year. Some of the problems are sought to be addressed in the revised, 1993-94 base, WPI.

A CPI revision exercise has also begun.

The National Accounts have been updated and re based recently for the years 1993-94 onward. Such re-basing is appropriate to take into account the economy’s changed structure and India does it every ten years or so. The new National Accounts appropriately reflect new types of agricultural production, rises in owner-occupied housing and trade (See footnote 1).

The State National Accounts now need to be re-based as well. The old National Accounts series was well coordinated between estimates of state GDP and national GDP - national GDP has remained a fairly constant 15% larger than the sum of state GDP estimates for the 14 largest states, but until the State Accounts are re-based, that link will be broken.

The re-basing of the state data is particularly important given the major difference between the old and the new estimates of agricultural production, which is important in most states.

Second, the pre-1993-94 GDP data need to be “officially” re-based. As part of that re-basing it may be possible to resolve the increasing “residual” in the old National Accounts estimates between production and expenditure estimates of GDP (6.5% of GDP in 1995-96).

The direct estimates of investment by type and sector were about 2% of GDP less than the estimates derived from the equality with saving (this divergence is part of the divergence between production and expenditure based estimates of GDP); in the 1980s, the divergence was about the same size but of the opposite sign.

Moreover, the estimates of “household” investment varied substantially from year to year. The residuals are much smaller in the new National Accounts, but the prior years remain a problem and efforts will be needed to ensure the gap does not widen again.

Regarding specific sectors, the estimates of GDP in the key agricultural sector are based on combining yield and acreage estimates, both of which could be subject to large errors - it might be possible to use satellite estimations at least as a check.

The industrial production index, the responsibility of the Ministry of Planning and Program Implementation, shows large month-to-month

swings in individual industries that make it difficult to interpret the direction of this increasingly important sector.

Hopefully the new index, re-based to 1993-94, will resolve some of these problems.

Finally, in trade, RBI estimates of imports have typically exceeded customs estimates - in 1996-97 and 1997-98, they exceeded by 23-25% (around $10 billion), but in 1998-99 the gap fell to $ 5.7 billion (See Annex Table 8.4).

Less than a third of this seems to be explainable by the shift of gold and silver imports into customs data following the liberalization of such imports in October 1997.

These examples suggest that major efforts are needed, not only to publish data quickly but to improve its quality and consistency, both internally and with other data sets, supported by analytical work. This would make the large amounts of data being collected more useful to policy makers and the public.

Another, more fundamental problem, on which there is wide agreement, lies at the stage of primary data collection itself, and will need to be corrected in order to create a lasting solution.

(Footnote 1 : All 1998-99 figures are revised estimates. All GDP related figures in this chapter from 1993-94 onward are based on the new National Accounts except, as noted, when it is necessary to make comparisons with pre-1993-94 data. The growth rates in the new National Accounts are somewhat higher than the old. Moreover, there is an absolute difference in the new and the old (nominal) estimate in 1993-94 of 9.0%, correspondingly reducing the ratios of most items to GDP, such as budget figures, investment, and trade, by about 8.0%.

This difference in the new Accounts reflects a re basing to 1993-94 prices and sectoral value added coefficients, plus the inclusion of some new products; the old National Accounts series was based on 1980-81 prices and value added coefficients.

The largest absolute sectoral differences between the old and the new series are in agriculture (8% higher than the old National Accounts estimates in 1993-94), real estate, including owner-occupied housing (10%) and trade (13%).

The fishing and mining sectors are also much larger in percentage terms in the 1993-94 based series, but their small absolute size means they contribute little to the difference in overall GDP between the old and new figures.

Since the CSO has not yet revised the pre-1993-94 GDP figures, this Report re-estimates them by applying the old growth rates to the new 1993-94 figures, which leaves the pre-1993-94 year-to-year growth rates unchanged.

)

-arun gupta

``Researchers at the National Sample Surveys or other research agencies will tremble at suggesting that the country is becoming richer even when faced with irrefutable data that the poor are consuming much more. This perhaps explains why on the same NSS data, researchers from Princeton University have concluded that India`s rural poverty had declined from 38.3% in 1987-8 to 32.9 in1993-4 while Government officials concluded a miniscule decline from 39.3 to 37.2 for the same period. As with all orthodoxies, inconvenient facts will be dismissed as aberrations and the faith in a poor India will be staunchly proclaimed.``

For more information about this controversy, take a look at :

http://wbln1018.worldbank.org/sar/sa.nsf/a22044d0c4877a3e852567de0052e0fa/d0046a5e61043caf85256882007bc41d?OpenDocument

(or, go to www.worldbank.org, and choose India in the country/region selector, and follow links therefrom on Indian poverty).

Quoting from there :

1.15 Inconsistencies in Statistics raise questions about how much of the slower poverty reduction is a statistical artifact. The recent NSS surveys cover a much smaller number of households than the larger quinquennial surveys, the most recent of which was held in 1993-94, but are still large enough to be statistically accurate (See footnote 3).

A more serious problem is the increasingly large discrepancy between the NSS and the National Accounts. The NSS shows not only that poverty did not decline much in the mid-1990s, but that mean per capita consumption, a key determinant of poverty reduction according to various analyses, did not rise very much. Thus, according to the NSS, poverty stagnated not because inequality increased, but because of slow growth.

However, the NSS per capita consumption figures are an increasingly smaller fraction of estimated consumption in the National Accounts - from 77% in 1970-71 to only 66% in the 1997, as shown in Box 1.1. Applying the NSS estimate of the distribution to the consumption figures in the National Accounts results in poverty falling in the nineties as well as the eighties (See Box 1.1).

Moreover, the National Accounts consumption estimate is itself a declining fraction of total GDP: from 65% in 1988-89 to 57% in 1997-98. This fall is explained almost fully by a rise in the statistical discrepancy – the difference between expenditure and production estimates of GDP - from around zero at the end-eighties to around 10% nowadays (See also Box 8.1). Hence consumption in the National Accounts may itself be underestimated.

1.16 The differences between the NSS and National Accounts in consumption are reflected also in discrepancies with respect to food consumption. In particular, the National Accounts show rising per capita cereal availability, whereas the NSS shows declining per capita cereal consumption (Box 1.1).

In theory, these two should be approximately equal.

1.17 One possible explanation for the growing difference between consumption in the NSS and the National Accounts might be a failure of the NSS to capture the consumption gains of high-income households.

The NSS shows only a marginal worsening of income distribution. But if the surveys are failing to capture substantial gains accruing to rich households, they could be underestimating the rise in both mean consumption and inequality.

Under-reporting of rich consumers is a common problem for household surveys. However, the estimated increase in availability of cereals (from the National Accounts) is consistent with a fairly constant income distribution and falling poverty - increased demand for cereals comes mainly from rises in income among lower income families – and goes against the hypothesis that it is the “missing rich” which explain the difference between the NSS and the National Accounts.

1.18 One final source of evidence in this regard is the NCAER Market Information Survey of Households (MISH). This provides annual information on self reported income from a sample of 18,000 households, slightly smaller than the NSS annual sample size.

The income poverty line set by NCAER in defining its “low income group” is rather high compared to the poverty lines used with the NSS consumption data, but shows a clear downward trend in poverty in both rural and urban areas. MISH also surveys a larger set of households on possession of standard durable items (watches, televisions, etc), something which NSS does not inquire about in its annual rounds, and MISH finds consistent increases in ownership levels over time, even among low income households.

1.19 In sum, the National Accounts data (and the NCAER data) suggest that strong growth occurred in the 1990s and that the NSS under-estimates consumption growth and consequently poverty reduction;

while the NSS data suggest that not only did poverty stagnate but that the National Accounts over-estimate consumption growth.

Choosing between these two hypotheses, or variants involving changes in income distribution, is not easy, and well beyond the scope of this Report.

With discrepancies such as these, the only conclusion that can be made confidently is that India’s statistical architecture, once a model for other developing countries, needs more consistency checks (See Box 8.1).

-arun gupta

SELLING POVERTY,

There is a lot of truth in the general direction of your article. In the circle of international organisations, it is a common remark that ``indians are the ultimate salesmen, they sell everything, including poverty``. When the ``purchasing power parity index` was being developed for use by the world bank, indians fought tooth and nail to limit the inclusion of services in the ``basket`` so that indian income will not be scaled up. Indians wanted to include cosmetics and consumable durables, relatively expensive in india compared to medical and legal services so that indian PPPI will go down to qualify for development funds at low, in those days, 3% with fifty year repayment and initial ten year grace period.

Situation in india vary significantly from state to state, but being a visitor for more than two decades to kerala, I can promise you, situation has improved significantly, though more crowded. There is a descernable change, significantly in the mood of the people, and above all there is labour shortage in Kerala, people from tamil nadu are coming to de manual work. As the saying goes, ``kerala is the Dubai for a Tamilian.``

Poverty is not as big a business as it used to be. India, being the only non-communist country with statutory rationing, off take of low quality ration food grain is usually a measure of the poverty. In large parts of south india, ration items have been reduced to Kerosene,sugar, and cooking oil, with no oftake of food grains. It would be useful to know the source of your impessions, the long queue of beggers etc.