Which adjective would you use to pinpoint the nature and condition of the Indian economy – ‘baffling,’ ‘inexplicable,’ or purely ‘criminal’? While one side of the coin says that India is projected to become a $5 trillion economy and will soon emerge as the third-largest economy in the world, the other side emphasises that around 11% of the population is poor in India, according to World Bank data, and 189.2 million people still go to bed hungry every night.
Note that India has not declared its poverty figures since 2011; the National Sample Survey Office was about to release a survey in 2017-18, but the government stopped its publication.
Emeritus Professor Prabhat Patnaik, a distinguished economist from Jawaharlal Nehru University, delves into this crucial subject in a conversation with Subhoranjan Dasgupta.
In December 1984, I asked Günter Grass, arguably the greatest novelist of post-war Europe, and a trenchant critic of North-South divide as well as globalisation: What disturbed you most in my country? His answer was, “A sea of raging poverty pockmarked by a few islands of vulgar luxury peopled by citizens, who are most callous and smug.” Does the same picture prevail in 2024?
Very much so. The fact that the gap between the rich and the poor has widened dramatically will be readily conceded. Chancel and Piketty, who use income tax data to estimate the share of the top 1% in national income, as a measure of inequality, found that this share, which had gone down to 6% in 1982, was 22% in 2013-14 which was higher than any year since the Income Tax Act was introduced in India in 1922. It was much the same in 2014-15, the last year for which they made an estimate.
No matter what reservations one may have about their estimation method, the figures are too striking to be ignored. But many would claim that while inequality may have increased, poverty has come down because of our high growth rate and would cite, in support of their claim, the Multidimensional Poverty Index (MPI) prepared by the UNDP (United Nations Development Programme), which shows a steep decline in the Headcount Poverty Ratio from 29.17% in 2013-14 to 11.28% in 2022-23.
The MPI, however, is based on intellectual confusion.
Every mode of production has the poor within it displaying a particular set of characteristics. Hence, every mode must have its own criteria for identifying poverty. Under feudalism, children in a poor family would be starved, left uneducated, and intensely exploited by being forced to join the workforce, but children in a poor family under capitalism, especially advanced capitalism, would be going to poor schools, having poor healthcare facilities, living with dilapidated furniture and run-down gadgets in squalid surroundings, and being pushed into crime.
If we define poverty simply in terms of, say, whether children go to school or not, then we would be mistaking the sheer introduction of capitalist modernity as a reduction in poverty, and needless to say, there would be no poverty at all so measured in even a middle-income country.
The MPI is a weighted index using criteria for a household to be considered non-poor, like access to piped water, non-thatched dwelling (which could be merely a one room hut with a metal roof), toilet; having a bank account (whether or not the balance is zero); it gives only one-sixth weight to what is misleadingly called a nutrition indicator, namely the body mass index (BMI), which does not actually measure nutritional status. Since it is a ratio (weight in kilograms divided by the square of height in metres), it can have exactly the same value for persons of normal weight and height, as for persons of the same age who are seriously undernourished and stunted. Even the latter, therefore, would not be considered poor.
In a society like ours, where different modes of production coexist, poverty should be defined in terms of some supra-mode index. Access to a minimum nutrition level, though downplayed by the MPI, has traditionally been such an internationally accepted marker. If we take access to 2,200 calories per person per day in rural India and 2,100 calories per person per day in urban India, as the benchmarks for defining poverty as the Planning Commission had done since 1973, then the proportion of the poor rose from 58% in 1993-94 to 68% in 2011-12 to over 80% in 2017-18 in rural India. On the same dates, the proportions were 57%, 65%, and an estimated 60% in urban India. The increase in nutritional deprivation is, therefore, indubitable and confirms Günter Grass’s impression.
Some economists insist on the ‘determining’ figures of the GDP and per capita income to challenge, as they say, the ‘inveterate pessimists’. How would you react to their emphasis, particularly, when you recall that not only Joseph Stiglitz and Amartya Sen but also Simon Kuznets, who designed the GDP, have focused on its limitation as a genuine marker? Some countries, like New Zealand, have already rejected the GDP as a dependable evaluator.
I find it strange that even people who should know better still take so much pride in the GDP growth rate. Apart from the fact that our growth rates are exaggerated, as a host of authors from Pronab Sen to Arvind Subramanian to Ashoka Mody have emphasised for different reasons, the GDP itself is conceptually inadequate for capturing well-being. This is not just because in the service sector, it is impossible to distinguish between a transfer and the purchase of an output; above all, it is because the distribution of output among the people is what matters.
In the old days some oppressive Maharajas used begar or corvee labour to build palaces for themselves. The construction of such palaces would boost the GDP but surely not be lauded as welfare-augmenting.
The reason for the current emphasis on GDP serves an official purpose. It can be used to legitimise transfers to big capitalists, especially crony capitalists, at the expense of the working [class] people on the spurious plea that they would make investments and boost the GDP, which is supposedly a good thing. Through the emphasis on the GDP, the nation’s interest is made identical with the interest of crony capitalists.
Also read: Five Issues That Are Hurting the Indian Economy
We agree that the stock/share market is soaring. But how many Indians are connected with the takeaways guaranteed by the stock market? What is the actual percentage of the beneficiaries?
Only about 3% of India’s population is reportedly connected with the stock market compared to 55% in the US. Even in China, the figure is higher at 13%. This does not, of course, mean that ordinary people’s money is not invested in the stock market, but it is invested through financial intermediaries, because of which people are proximately insulated from stock market risks.
An important reason behind introducing the new pension scheme was to increase the reach of the stock market and make more people bear stock market risks. But the reaction against it shows people’s scepticism regarding the stock market. The people at large, therefore, have little to celebrate from a stock market boom. Even productive investment decisions are little influenced by the ongoings in the stock market, being largely determined by the expected growth of markets for goods.
In FY23, banks in India waived loans worth Rs 2.09 lakh crore, of which 52.3% were loans from large industry houses. This munificence for the super-rich was followed by another drastic decision – the welfare measure for the poorest of the poor MGNREGA will henceforth benefit only those who have Aadhaar cards, which means, millions stand to be excluded. How do you explain this colossal dichotomy?
Such dichotomy is a hallmark of right-wing governments. This government, on one pretext or another, has been trying to whittle down the MGNREGS. The drastic and ill-thought-out lockdown on account of the COVID-19 pandemic saw thousands trekking back to their villages; they were saved because of MGNREGS, whose outlay had to be increased. But now immediately afterwards, the effort to truncate MGNREGS has started again.
On the other side, loan waivers given to big capitalists by nationalised banks are, at one remove, just budgetary transfers. The loans so waived are partly just filched, and partly represent advances made under government direction for infrastructure investment that cannot be repaid. The colonial government had provided guaranteed returns for such investment; the National Democratic Alliance government likewise makes nationalised banks bear the risks involved. Its so-called economic “strategy” lies not in increasing people’s consumption but in inducing big capitalists to invest in infrastructure, rather like what the Russian economist Mikhail Tugan-Baranovsky had visualised, namely “investment for investment’s sake”.
Also read: India’s ‘Amrit Kaal’: Hunger, Inequity and a $30-Trillion Economy
Whenever international agencies, which are not enemies of the present dispensation, claim that three out of four Indians go underfed in the country, or India is ranked 111 out of 125 countries in the Global Hunger Index, economists serving the government raise a howl of protest. Where does the truth lie? Are the international agencies prejudiced Cassandras or are they impeccably impartial?
As I mentioned above, the increase in nutritional poverty in the neo-liberal era is an indubitable fact. The recent post-COVID-19 distribution of free foodgrains may have moderated [its impact], but not nullified it. This again takes us back to what prevailed in the colonial period. The last half-century of colonial rule had seen an immense increase in nutritional poverty in British India, which was reversed, though not fully, by strenuous efforts of the post-independence governments prior to the introduction of neo-liberalism in the early 1990s. After the introduction of neo-liberalism, while the overall per capita availability of foodgrains declined sharply up to 2008 and has still not climbed back to the pre-reform level, its distribution across the population has become more unequal, resulting in the calorie deprivation figures quoted earlier.
It is not just the World Hunger Index that attests this. Even the National Family Health Survey, whose data are used by the MPI, shows that the prevalence of anaemia among women aged 15-49 rose from 53% in 2015-16 to 58% in 2019-21. Hunger and undernutrition are stalking the country. India today is worse placed than both Sub-Saharan Africa and the “Least Developed Countries”.
