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Against the grain

Despite being tipped as a rising power the poor and vulnerable constitute 77 per cent of our population, writes Arjun Sengupta.

india Updated: Aug 20, 2007 23:07 IST

The UPA’s election strategy was based on differentiating between ‘India Shining’ and the India of the masses. As a government, the UPA has identified with the masses, promising that its policies would promote high rate of growth but would also aim at improving employment opportunities and conditions of the ‘aam aadmi’. The National Commission for Enterprises in the Unorganised Sector (NCEUS), in its latest report, has identified the aam aadmi, analysed their living conditions and detailed how they are living today.

The identification of aam aadmi: On the basis of statistics available of per capita consumption of our people, it is possible to divide them into six groups: extremely poor, poor, marginally poor, vulnerable, middle income and high income, in terms of poverty line (PL). Between 1993-94 and 2004-05, when our economy grew at a very high rate, the percentage of Indians who are extremely poor and poor (i.e. below PL), steadily came down, but those belonging to marginally poor and poor steadily went up. In 2004-05, people who were extremely poor and poor was only 21.8 per cent compared to 30.7 per cent in 1993-94. But during these years the percentage of people belonging to marginal and vulnerable groups (with a per capita daily consumption between Rs 12 and Rs 20) increased from 51.2 to 55 per cent). This meant that people below the official PL declined, only to swell the numbers of people just above the PL, and they still remained abysmally poor by any standard.

The number of people belonging to extremely poor and poor came down from 274 million in 1993-94 to 237 million in 2004-05, despite a substantial growth of population during this period. But the marginal group consuming less than Rs 15 per day increased from 168 million in 1993-94 to 207 million in 2004-05. The vulnerable group, having a per capita consumption less than Rs 20 per day, increased from 290 million to as high as 392 million. As a result, the total number of people in India belonging to the poor and vulnerable group having a daily per capita consumption of less than Rs 20 in 2004-05 was 836 million, constituting about 77 per cent of our population. By all means, they constitute our aam aadmi.

Middle-class and the rich: During this period, people belonging to middle and high income groups have grown steadily, constituting a total population of 253 million in 2004-05. The middle-class, with a daily per capita consumption of around Rs 37 in 2004-05 increased from 15.5 per cent to 19.3 per cent during this period. However, people belonging to the high-income group, or the rich, with a daily per capita consumption over Rs 93, increased from 2.7 per cent to 4.0 per cent over this period. The total number of people belonging to middle and high-income group increased from 162 million in 1993-94 to about 253 million in 2004-05, an almost 56 per cent increase in ten years.

The growth of consumption of extremely poor, poor and marginal groups was less than 1 per cent per year. If the vulnerable group is added, the growth rate in consumption for them was 2.8 per cent a year. But for the middle-class, the consumption growth was 4.3 per cent; for high-income group 6.2 per cent a year. Furthermore, the overwhelming fraction of consumption of the poor and the vulnerable consists of cereals, pulses and other food items and some non-essential food items. The share of consumption expenditure of the middle and high-income groups, however, consists much less of cereals and essential non-food items, but overwhelmingly so of the other non-essential non-food items as well as durable goods.

Indeed, in absolute terms, in the year 2004-05, the total consumption of the middle and higher-income groups provided a huge market of the so-called non-essential items and durable consumer goods. The National Sample Survey (NSS) data on consumption is known to be a gross underestimate as the richer sections do not report their full consumption expenditure. Even then the market for such consumption items meant for the middle and higher-income groups was more than $ 48 billion in 2004-05 — more than the total income of many other countries. It undoubtedly provided a huge and expanding domestic and international market in these products, with import duties on most of these items steadily coming down.

The congruence of the underprivileged: The third characteristic of the living conditions of our people is the significant congruence of the poor and vulnerable groups in terms of consumption with the deprived and discriminated social groups with very poor educational achievement. They belong to the class of unorganised and informal workers, with very little regular employment, poor working conditions and no social security. About 88 per cent of India’s SC/STs belong to this group of poor and vulnerable. Similarly, about 85 per cent of all Muslims other than the SC/STs and 80 per cent of all OBCs except Muslims are poor and vulnerable, living below per capita consumption of Rs 20 per day. Only 1 per cent of SC/STs, 2.4 per cent of OBCs other than Muslims, 2.2 per cent of Muslims other than SC/STs belong to the high income rich group, of having a per capita consumption above Rs 93 per day. Further, 86 per cent of all illiterate and 79 per cent of all those who received education below primary level belong to this group. This shows congruence of all those people in India who are poor, deprived and discriminated. They also account for 79 per cent of the unorganised workers with informal and casual employment with no job security, social protection or minimum wages and working in abysmal physical conditions.

Thus, the division of India between these two groups of the poor and vulnerable and the middle and high-income seems to be stark and complete. This 836 million poor and vulnerable are our aam aadmi. And 210 million of middle-class and 44 million of the high-income group constitute the other part of India that is growing steadily and offering a large expanding market for all kinds of consumer groups.

The government has to now consider how to consolidate its position around the mandate it came to fulfil. For that, three features must be considered. First, the country has grown and may continue to grow on the basis of the markets provided, saving generated and investments attracted by the expanding economy of the middle-class and the rich. That provides enough incentives to the domestic and foreign investors to push economic growth even further. The government’s role should be primarily to see that these incentives are not thwarted or that the reforms are not reversed and no hurdles are placed on domestic or foreign investment.

Second, this rate of growth will not automatically spill over to the growth of the poor and the vulnerable, which has remained in that state through the years of high growth and will remain so if the policies are not targeted directly to them. Many development programmes have been launched and quite a few of them have yielded results, but they have bypassed these poor and vulnerable people. All such programmes must now be redesigned, clearly focusing on them. All agricultural programmes must concentrate on the small and marginal farmers with less than two hectares of land holding. All employment programmes must be directed to the landless and the unskilled, with emphasis on skill formation of the youth with little formal education.

Small, micro and tiny enterprises must be promoted with credit, marketing and technology. Clusters of tiny industries deserve SEZ treatment more than the rich exporting units. Priorities in credit should go to the micro enterprises and small farmers. The whole planning process in our country must now centre around helping the poor and vulnerable.

Third, these people need to be supported directly at least for two basic welfare programmes of social security and public distribution. They must be provided a minimum social security covering health, life, accident and old age pension. A single hospitalisation, one death of the bread-earner, one accident or just old age may drive a whole family to destitution. The poor cannot protect themselves. Similarly, an expanded public distribution system, throughout the country, providing essential consumable items can lift a large number of them from hunger and poverty.

Arjun Sengupta is Chairman,
National Commission for Enterprises in the Unorganised Sector

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