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Cross the aisle: Nyay for the very poor


By P Chidambaram

Finally, a political party has found the courage to bite the bullet. For too long we have ducked the issue, declined to face the moral argument, and trotted out excuses for our unwillingness to take radical measures to eliminate poverty.


The vast majority of the people of India were always poor. (I could be accused of being anti-national.) We were very poor at the time of Independence. The per capita income (at prices then prevailing) was Rs 247. Few had jobs outside agriculture. Literacy was at 17 per cent. Life expectancy at birth was 32 years. All these indicators pointed to massive and widespread poverty.

In 72 years, all indicators have improved. Millions have moved out of agriculture and hold jobs in the organised sector. The literacy rate is 73 per cent, life expectancy at birth is 68 years and per capita income at current prices (2018) is Rs 1,12,835.

We should be happy; at the same time we should be ashamed that nearly 250 million people are still very poor. A similar number will be thrown up if we count the people without a proper home (not a hut); or without a patch of land; or without sufficient food on many days of a month: or without a regular source of income.

We can be legitimately proud that millions of people have escaped the vicious grip of poverty. Every survey has reported that between 2004-05 and 2013-14 (the UPA years), at least 140 million people were lifted out of poverty.

Some more may have breached the poverty line under the NDA government, even while some who were hit hard by demonetisation and the flawed GST may have slipped below the poverty line. My guess is that one number cancelled the other under the NDA government. We have to await data for the period.

The inevitable conclusion is that there is a significant proportion of the population that lives in poverty. That proportion is variously estimated at between 20 and 25 per cent. In absolute numbers, it is a staggering 250 to 300 million. The economic question is, can we rely on growth alone to lift them out of poverty? The moral question is, should we rely on growth alone to lift them out of poverty?

The answer to the economic question is, yes we can. Rapid growth will eventually wipe out poverty. It will also allow us to build a social security system that will offer support in the event of anyone falling below the poverty line due to a personal tragedy or business failure. The catch is, this may take years, and the very poor will suffer great hardships and humiliation during that period. Hence, the answer to the economic question is not entirely acceptable.

The answer to the moral question is, no we cannot. We must look beyond growth and employ other radical measures to wipe out abject poverty. The one measure that has the broadest support among economists and social scientists is direct cash transfer to the target population. In fact, Dr Arvind Subramanian, Chief Economic Adviser between 2014 and 2017, had devoted a whole chapter to the idea in the Economic Survey 2016-17.

The idea of a Universal Basic Income (UBI) has been debated for many years. Direct Cash Transfer to targeted groups of people is a variation of UBI. Pilot schemes on cash transfer to targeted groups have been tried in many countries. There is a lot of literature on the subject. Many doubts about direct cash transfer have been effectively answered.

Nyuntam Aay Yojana (NYAY, meaning Justice) announced by the Congress party promises to make a direct cash transfer to 50 million very poor families every month/year. The sums involved are considerable but whether India, after 72 years of Independence, should embark upon such a scheme to eliminate poverty must be answered with an economic mind and a moral heart. In my view, there can be only one answer: yes we must do it, overcoming all challenges. The quality of a good government lies in successfully implementing a difficult scheme, not shooting down a scheme that is morally imperative and economically feasible.

India’s GDP, at current prices, has grown in the last 15 years (see table) and will grow, in nominal terms, at between 11 and 12 per cent every year:

2004-05 Rs 32,42,209 crore

2009-10 Rs 64,77,827 crore

2014-15 Rs 124,67,959 crore

2019-20 Rs 210,07,439 crore

By 2023-24, it is expected to reach Rs 400,00,000 crore. The total expenditure of the Central and state governments in 2018-19 is estimated at Rs 60,00,000 crore, and this number too will grow as revenues increase every year.

The moral-economic question is, should not the country set apart up to 2 per cent of its GDP to lift the poorest 20 per cent out of poverty. Remember, the bullet train between Ahmedabad and Mumbai will cost upwards of Rs 1,00,000 crore! The write-offs in the handful of corporate insolvency cases that have been resolved so far amount to more than Rs 84,000 crore! If a few people ‘deserve’ such largesse, why should 50 million families (250 million people) not deserve a small fraction of the GDP or of the total expenditure?

The poor have the first charge on the country’s resources. The Congress has recognised this principle and thrown the gauntlet.