Moving Out of Poverty in India–World Bank Report

Tuesday, September 8, 2009

Moving Out of Poverty in India–World Bank Report

Drawing a Line Under Poverty in India
It’s tempting to ask the World Bank for a few hundred copies of their new study, “Moving Out of Poverty: The Promise of Empowerment and Democracy in India,” and mail them to the Prime Minister and every Cabinet minister, minister of state and state chief minister in the nation. Unveiled last week, the study tracks the fate of 30,000 rural Indians in 300 villages in four states from 1995-2005.Before you holler “this was just as the last government was starting, we have a new government now,” one of the things that is most telling about the report is how up-to-date it remains on the issues of rural poverty in India – and how it provides the ballast for simple, targeted priorities that the new government would do well to heed as it prepares to throw megabucks at the poor in the name of inclusion.

Paul Beckett
The study, conducted in Uttar Pradesh, Andhra Pradesh, West Bengal and Assam, found that poverty was, not surprisingly, cyclical. People don’t get above the line and automatically stay there nor do they necessarily fall into poverty permanently. And they move in each direction for very different reasons. The trick, then, is to neutralize the pressures that drive people into poverty while fostering the stimulants that lift people out.

The biggest thing that sinks people is a health shock, the study found. To change that, “health systems that are affordable and function well must be available to poor people.” Death of a family member and the financial burden of dowry payments also were high on the list.

To expand upward mobility requires creating meaningful jobs. That means the government needs to link poor people to markets, improve their market know-how and provide credit that goes beyond meeting their immediate needs, the study finds. Hard work alone is not enough to promote economic mobility. Organized companies, now almost exclusively present in cities, need to find ways to create employment and teach skills in rural areas.

“I doubt the babu rubbing his grubby palms at the prospect of more government lucre coming his way sees any of that as much of a deterrent.”

On the issue of governance, the study concludes that “local democracy, with all its imperfections, is already beginning to play positive roles in at least some poor people’s lives,” especially in areas where self-empowerment groups are giving collective power where an individual would have none.

Finally, creating assets for the poor, specifically housing, is vital for moving out of poverty: “Having decent shelter, while clearly important to raising living standards, is also a bottom-line requirement for earning ‘citizenship in the village,’ living with dignity, and accessing all other benefits.”

I compared these findings with the government’s agenda for the next five years as spelled out by President Pratibha Devisingh Patil in her speech to Parliament June 4. For the most part, it measured up reasonably well, at least on paper.

Expansion of rural healthcare. A new education bill to make quality education a right. Increase literacy, especially among women. Improve rural infrastructure, including giving every panchayat (village council) a broadband connection within three years. New targets for rural electrification, irrigation and road connectivity. Revamping banks and post offices to increase financial inclusion. A national skill development initiative. Doubling the target for rural housing construction.

But here’s where the government’s plan veers off course. In the president’s speech and other government communications, there is an outsized emphasis on programs that may offer some temporary relief for the chronically poor but do little to actually move people out of poverty.
Exhibit A: The National Rural Employment Guarantee Act. Government officials give it so much credit in winning the election for Congress that they are now talking about a big expansion in the type of work it covers and, some reports suggest, coming up with a version to cover the urban unemployed.

The NREGA’s “transformational potential is unfolding before our eyes,” the president boasted. A few paragraphs later comes a new budget-buster called the National Food Security Act that would give every family below the poverty line heavily subsidized rice or wheat.

As a result, the NREGA and other massive welfare programs — already viewed as “flagship” even though the NREGA, for one, largely involves meaningless busy-work — will take on even more prominence and suck up even more money in the new government.

I’m not disputing that India needs these safety nets for those who truly require them. But the government would do far better to focus on making more lasting improvements in rural lives so that the NREGA and its kin become less prominent in the next five years, not more. Ideally, these welfare programs should be sought by fewer and fewer people as investments in infrastructure, training and services kick in.

Instead, five years from now, despite all the other promises about rural investment, I suspect the NREGA and other similar welfare programs will be held up as the government’s major achievement in “improving” lives in the countryside.

The NREGA didn’t exist during the period studied by the World Bank. But the study’s editor, Deepa Narayan, is an expert in poverty reduction and this was her conclusion: “The NREGA and many of the government programs that people talk about seem to help people in surviving and coping but it’s not clear they really help them escape poverty.”

Then there is the related and inexorable issue of corruption. Whether it is the NREGA or valuable programs like improving roads in the countryside, it is a given that vast sums dedicated by the government to reducing rural poverty in the next five years will be diverted to enriching middle men, local and national politicians and bureaucrats. Simply by clamping down on the orgy of corruption that accompanies its programs, the government could greatly enhance the aid and investment it provides at no additional cost.

Ms. Patil made some lackluster efforts on that front. She dedicated her government to “increasing transparency and public accountability of NREGA by enforcing social audit and ensuring grievance redressal by setting up district level ombudsman” and “establishing mechanisms for performance monitoring and performance evaluation in government on a regular basis.” I doubt the babu rubbing his grubby palms at the prospect of more government lucre coming his way sees any of that as much of a deterrent.

It would have been much more heartening to hear Ms. Patil utter something along the following lines: “Any employee of the government of India or of her states caught with their hand in the public kitty or diverting funds destined for her citizens will be prosecuted speedily and punished severely with the full force of the law.” But she didn’t, did she? And rural India will be all the poorer for it.

—Paul Beckett is the Wall Street Journal’s bureau chief in New Delhi
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