The worst isn’t over

In 2010, the UPA must redouble its efforts to mobilise resources for large public expenditures that can combat rising poverty and unemployment. Sitaram Yechury writes.

As 21st century’s first decade ends, globally capitalism has exposed its historical limitations with the economic recession continuing. Large-scale destruction of wealth, decline in industrial production and global trade have, according to the International Labour Organisation, increased global unemployment by 61 million people. The total number of unemployed people stands now at 241 million. This is accompanied by a sharp drop in the real wages of the people who have jobs. This declined from 4.3 per cent in 2007 to 1.4 in 2008. Both these put together have, according to the World Bank, pushed an additional 89 million people into poverty taking the global figure to above 1.5 billion.

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While we in India may be patting ourselves for having remained relatively insulated from global shocks, mainly due to the Left blocking many financial liberalisation reforms under UPA-I, the majority of Indians, mainly the poor have been subjected to the relentless battering of rising unemployment and high food prices. This obviously has pushed many more people in our country into poverty.

Prime Minister Manmohan Singh struck a very defensive tone at the recent conference of the Indian Economic Association by stating that “the percentage of the population living below the poverty line has certainly not increased.” There is an obvious realisation that the economic policies of liberalisation or reforms has ended in creating two Indias — a Shining and a Suffering. In an admission of guilt of sorts, he said, “Based on the available evidence, we can claim that there is no evidence that the new economic policies have had an adverse effect on the poor. He also said, “In fact, it (poverty) has continued to decline after the economic reforms at least at the same rate as it did before”.

This, in fact, tallies with the latest official estimation of the incidence of poverty. The Suresh Tendulkar Committee, set up by the Planning Commission, has now put out an estimate that over 37 per cent of Indians live in poverty as compared with the existing officially estimated 27.5 per cent. Earlier, the National Commission on Enterprises in the Unorganised Sector estimated on the basis of consumer expenditure data that 78 per cent of Indians are being forced to survive on less than Rs 20 a day. This implies that nearly three-fourths of our population is today living in poverty.

There is a great deal of controversy on the methodology adopted for arriving at correct estimations of poverty. There has been a tendency of gross underestimation. Notwithstanding this, it is now officially recognised that the number of people living below the poverty line has been growing in absolute numbers.

This also converges with the fact that many a state government has challenged the Centre’s estimations of those living below the poverty line (BPL). This has become significant since the budgetary allocations for rural development programmes and the supply of foodgrains to the states from the Centre are determined by these estimations. The UPA’s commitment to the aam aadmi turned out to be more of a deception in the wake of gross underestimation of the BPL population.

Simultaneously, the quality of livelihood of the aam aadmi has sharply declined due to rising food prices — by a whopping 20 per cent this year. Despite all official explanations of a demand-supply mismatch, the worst monsoon in 37 years etc, the fact remains that the government has completely failed in arresting this runaway inflation. Much of this rise in prices can be attributed to speculative trading in commodities. Since April 2009, the companies that have invested in food stocks have reported returns ranging from 150 to 300 per cent. There is no other way to control food prices except to crack down on such speculative trading and by banning forward/futures trading in all essential commodities. This must be accompanied by strengthening the public distribution system. Unless this is done, the double whammy assault on the aam aadmi cannot be prevented.

Under these circumstances, the prospects of a better livelihood for a vast majority of our people will crucially depend on increased governmental outlays for poverty alleviation programmes. A sharp increase in such allocations appear remote given the large shortfalls in revenues. During the first eight months of this fiscal year, indirect taxes under the three major heads — excise, customs and services — have yielded close to half the budgetary estimation. Similarly, the direct tax receipts have also been less than half of the budget estimate. It is unlikely that these shortfalls will be made up in the last quarter of this fiscal.

The poor can expect an improvement in their livelihood in the coming year only if the UPA redoubles its efforts to mobilise resources for large public expenditures that can combat both poverty and unemployment. During the last fiscal, the government announced that it had foregone legitimate tax revenue to the tune of Rs. 4.18 lakh crore. One good way to begin the new year would be to resolve not to repeat this and instead transfer this amount to public investments that will both create new jobs and improve the quality of livelihood of our people.

Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP

The views expressed by the author are personal