Economics India

Monday, March 06, 2006

"End of Great Poverty Debate In Sight" says Mr. Surjit Bhalla

For the past several years, there has been a considerable debate going on among “real” economists and “political” economists about what happened to poverty in India during 1990s.

The debate concerned both political and statistical issues in India's poverty. Following the introduction of economic reforms in early 1990s, India witnessed high rates of economic growth but the effect of this growth on poverty remained a controversial topic. GOI’s official numbers showed an acceleration in the rate of poverty reduction from 36 percent of population in 1993-94 to 26 percent in 1999-2000. Many economists challenged these numbers as showing both too little and too much poverty reduction!

Mr. Bhalla says that the 1999-00 NSS survey which provided the basis for these numbers became controversial for two reasons: first, it showed a largish poverty decline in the post reform 1990s; second, the NSS had asked for food consumption according to two separate recall periods—7 and 30 days. The critics from the leftist parties said that because of this statistical “lapse”, the 1990s poverty decline was more mirage than reality, and therefore how economic reforms had not produced extra growth, etc. In response to this criticism, NSSO changed the survey design to that which prevailed in 1993-94 and before.

Both sides of the poverty debate perceived the poverty reduction claims as political, as hidden were important statistical issues such as discrepancies between surveys and national accounts, the effects of questionnaire design, reporting periods, survey non-response, repair of imperfect data, choice of poverty lines, and interplay between statistics and politics. However, there was general consenses that even if official numbers seemed too optimistic, particularly for rural India, the poverty in India did reduce during 1990s.

Mr. Surjit Bhalla expects this poverty debate should end soon as the data from 2004-05 NSS data becomes available. His educated speculation is as follows: "Per capita consumption in the first pre-reform 10-year period (1983 to 1993-94) rose at a low rate of 1.7 per cent per annum. In the next 11-year post-reform period (1993-94 to 2004-05), per capita consumption has risen at more than twice that rate—3.9 percent per annum. These data merely reflect the higher GDP growth that has occurred in India post the 1991 economic reforms, introduced first by the then reformist Congress. These rates are for national accounts data; the NSS survey mean consumption, the basis for poverty calculations, increased at a lower 1.0 percent annual rate in the 1983 to 1993-94 period; this survey growth rate is also expected to more than double, in keeping with the trend revealed by national accounts data”.

We will have further updates on this topic as we go along, as poverty numbers have underlying political implications. They tell us which government did better or worse than the other….and the party in power generally wants to tell the poeple that no other except itself is concerned about improving the lot of India’s poor..... they also do not want to loudly say that the other party had in fact done better?

On our part, we should look at these data and government policies as objectively as we could, without worrying about which party is in power.

What do you think? Please comment.

15 Comments:

  • Professor Deshpande,

    Who is Mr. Surjit Bhalla? and why is he saying that the poverty debate end is in sight. A reference to his thesis would have helped.

    I think poverty in India will cease when every body below the poverty line says so - not when Mr. Bhalla (whoever he is) says that the debate is over.

    I think poverty exists even in th US - have you been to the Indian lands in the west and the share-cropper areas in Missisipi.

    As long as there is World Bank - Poverty alleviation will continue or we may have to move into Bhutan style Happiness development.

    Can you recommend any good readings on Indian economics - most stuff is stale.

    Please look at the reports that Planning Commision just released on Human Development and State Reports - already stale.

    Have seen the other blog on India's development by Dr. Atanu Day (ex Berkeley) who has now moved to India (Pune).

    Even the stuff they teach here in colleges is not current related to India.

    And what is the Bank doing in all of this? Seems like a lack of strategy.

    I guess economists just produce reports and now blogs.

    By Anonymous Anonymous, at 4:07 PM  

  • Response to Anonymous' Comments above:

    1. Mr. Surjit Bhalla is a well known economist who writes on India's economic issues including poverty. You see him often on CNBC India. For more details, please use Google web search -- just type the words Surjit Bhalla and click on search.

    2. Yes, indeed there is poverty in US but the proportion of the population below the poverty line is relatively small and those below the absolute poverty level is still very small.

    3. In one of the comments below, a list of economic publications on India is provided. Please do read these but the best way to remain in touch is to read Economic Times, Financial Times, Business Standard; and EPW all of which are now available on the web. Also see various World Bank reports on India and GOI web sites.

    4. Yes, I recently came to know of Dr. Day's blog.. I will be looking at it.

    5. Economists are now in charge of India's economic policy and development -- including Prime Minister Mr. Manmohan Singh, Finance Minister Mr. Chidambaram and Dy Chairman of Planning Commission Mr. Montek Ahuliwalia. Those who run blog want to contribute to economic thinking on issues of immediate interest.

    By Blogger Ramesh G. Deshpande, at 11:40 AM  

  • Happy Birthday Mr. Ramesh Deshpande

    By Anonymous Anonymous, at 3:58 PM  

  • Dear Ramesh:

    You have opened an important topic for discussion. Indeed it will be great if the debate on "Poverty in India" started by late VM Dandekar reaches a closure. Since I was trained at the Indian Statistical Institute where NSS originated and I know the importance of the National Sample Survey and I do trust those survey data. The lower income expenditures do not show significant growth and until they do show that growth the "Great Poverty Debate", I am afraid, will not lead to a quick closure.

    I tend to believe that until agriculture reaches a 4% growth rate combined with liberalization policies, we are far away from reaching the above Closure.

    Chandra

    By Blogger Chandrashekhar Ranade, at 5:28 PM  

  • Poverty debate re-opened.

    Can we think of happiness index that the Bhutanese have been proposing.

    By Anonymous Anonymous, at 6:28 PM  

  • Happiness comes from the consumption of goods or services. That is in economics, Happiness coming from Nirvana has no economics.

    By Anonymous Anonymous, at 4:58 AM  

  • Happiness with consumption - is the goal.

    In the long term we are dead....


    John Maynard Keynes

    By Anonymous Anonymous, at 6:26 AM  

  • Where are you Mr Deshpande ?

    By Anonymous Anonymous, at 12:15 PM  

  • Sorry for the gap in issuing blogs last week. I was very tied up with other activities. We will have more urgent and interesting posts in the coming days.

    By Blogger Ramesh G. Deshpande, at 6:52 PM  

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