Saturday, October 01, 2011

Is Consumption of Rs.32 per day a realistic poverty line?

Simply stated, Yes. 

It is higher than it has ever been. The number of people  defined as poor by this yardstick are higher than they have ever been.

That is reason number 1 - we haven't objected in the past, so why the outcry now? 

This is a consumption figure, remember. And a per capita figure. Not the gross revenue of any itinerant businessman on a single day. Thus, your domestic servant's family, with 4 earning members earning an average of Rs.3,000 per month (translating to a family income of Rs.12,000 per month) are possibly under the new poverty line as drawn. How many of us are comfortable with paying a full-time bai more than Rs.3,000 per month, though she sets at least one of you free to earn not less than 10 times that sum? 

If your bai  has an unemployed husband, she is most definitely under the line. But how many of us are willing to bear the burden of maintaining a husband on a salary of (say) Rs.3,000 per month? 

We  are a poor country - we have lifted as many people as the entire population of Australia out of absolute poverty in the last 15 years alone. But we still have just as many queueing up! Poverty is a BIG issue in India, and will remain so for the next 15-20 years, make no mistake. We can look forward to abolishing absolute poverty levels and setting relative ones, linked to quality of life, that they have today in richer nations. I saw that in the UK, the homeless bring out their own monthly magazine with ads, to generate revenue. I really hope that in my lifetime, I will buy or advertise in such a magazine in India.

One possible accelerating factor is if we realize anywhere near the fullest potential of the UID Scheme, and convert all welfare and subsidies into direct  cash transfers through the banking system straight into the accounts of beneficiaries identified by a combination of 10 fingerprints and 2 iris scans. When, and to the extent that happens, it will prove to be a welfare accelerator that will make the India of today seem like driving with a hand-brake fully engaged. Today, it is estimated (no, there is no way of finding out the actual figure) that nearly 85% of the welfare spending, running into lakhs of crores of rupees per year, does not reach the intended beneficiaries. That is why I am rooting for Nandan Nilekani's UID Scheme completely.  If we can extract 7-8 times more welfare for every buck the Government spends on welfare, our GDP growth rate will surely soar, with the increased demand from people who have more money than ever to spend. Giving a fillip to all local businesses. It will be the tide that raises  all boats. 

Of course, so many of our babus and businesses will then have that much less black money  money to throw around. But few will shed a tear for them.  And I am sure that Ratan Tata and Adi Godrej and Savitri Jindal won't mind if they pay Rs.1,000+ for the gas cylinders in their home kitchens. Why should they be subsidized? Better to remit Rs.600 per cylinder purchased direct to the accounts of those who are below the poverty line automatically, minutes after they have paid for their own cylinder at full prices. This is a dream that I hope comes true. All power to Nandan Nilekani and his gang. 

Hope this does not seem idealistic in retrospect! 

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