Still smug about the high growth years?

The latest report on the number of poor Indians shows a third of the population living below the recalibrated poverty lines.

C Rangarajan, a former governor of the Reserve Bank of India and former chairman of the Prime Minister’s Economic Advisory Council, was asked to look into the matter after serious doubts were raised about the official poverty estimates put out by the UPA government. The panel has submitted its report, but what the new government will do with that knowledge is a matter of speculation.

The UPA government, caught with its knickers in a twist, has failed to make a dent on poverty. The failure is likely to be countered by a re-packaging of the ‘Gujarat model’. Presumably the Government will go about applying that ‘model’ on a national scale. Will we see more of the jobless growth debacle?

Be that as it may, Rangarajan’s new poverty lines —₹32 in villages and ₹47 in cities — raise important caveats to the growth experience that the Government seems willing to emulate, if not overtake.

For one, the decline in poverty the UPA claimed to have achieved was of a lesser magnitude than stated earlier. Yes, Rangarajan would say poverty did decline.

The number of poor fell from 463.6 million in 2009-10 to 363 million in 2011-12, according to Rangarajan, and not to 269 million as claimed by the UPA on the basis of the Tendulkar committee’s methodology. For the panel, nearly a third — 29.5 per cent — of Indians are below the poverty lines it has re-calibrated.

For another, the new estimate of BPL in urban areas shows that the number of poor doubled in 2011-12 when set against the earlier lower BPL estimate undertaken by the Tendulkar panel. Rising urban poverty points to some flaws in the discourse of growth that sets so much store by urbanisation. Policymaking has failed to make cities a viable option for a flight from rural poverty.

Revealing as the panel’s new estimations are, they still conceal as much as all poverty line calculations do. They hide the multidimensionality of poverty. Being poor doesn’t just mean living below a level of income calculated by someone in Delhi. Poverty, like age, is not just a number. Like age, it connotes a host of capabilities or lack of them.

In his classic work on poverty in America, Pulitzer Prize-winning journalist David Shipler describes poverty as the disintegration of capabilities we take for granted. Reading his 2005 book The Working Poor: Invisible in America , it becomes clear that dealing with poverty involves building capacities and access to services such as education and health on a sustained basis.

Poverty is a matter of disempowerment, of the sustained lack of access or ability to access such goods and services that enable advancement in the quality of life. That is how the McKinsey Global Institute saw poverty.

Early this year, a remarkable study by a team from the MGI distinguished abject poverty from deprivation, bare subsistence from a decent standard of living. It developed an Empowerment Line based on eight “essential” needs — food, drinking water, sanitation, energy, housing, health care, education and last but not least, social security.

Applying this metric, the authors found that 56 per cent of the population of India was deprived. Rangarajan’s re-calibrated poverty lines tote up almost a third of India in abject poverty. The MGI’s Empowerment Line shows more than half not much above the bare subsistence level. Not a very good resource base for resurgent India.

And yet the McKinsey metric falls a bit short of empowerment. In general terms, this means that the MGI’s use of empowerment is somewhat restrictive, even though it paints a large profile of well-being.

The OECD adds that extra element. In ‘Policy Guidance Note: The Role of Empowerment for poverty reduction and growth’, it considers empowerment as an access to essential services and goods but equally as securing rights in the evolution of policies that affect them.

Economic empowerment then is identified with social and political empowerment reflected in the capacity of the poor to negotiate prices and wages. This becomes more necessary in economies where markets “are characterised by lack of competition, abuse of economic power and poor terms of trade for those who are weaker and enter the market on disadvantaged terms.”

The OECD report points to lack of jobs and fierce competition for them as a disempowering situation for they inhibit the power of labour to organise and negotiate wages, with women being particularly handicapped.

But it is possible that governments can engender disempowerment while attempting to boost growth, particularly in urban India. Once governments liberalise labour laws that provide workers with rights to secure and negotiate better wages, will that help the poor and vulnerable?

Some might argue that the repeal of rigid labour laws such as sections of the Industrial Disputes Act actually removes the crinkles in the labour market and creates the ground for more jobs and better wages.

But job creation and wage increases are the result of a host of factors. If the years of high growth showed an inverse relationship to jobs it was because Indian manufacturing was undergoing two simultaneous processes.

On the one hand spikes in productivity were replacing labour-intensive techniques. On the other, the vast labour force that has been flooding into the growth centres from a neglected and unproductive agriculture was blunting the industrial workforce’s bargaining power.

In fact, organised manufacturing had cracked the rigid code of labour laws by simply increasing the participation of contract and casual labour, even on the shop floor. And this increase was accompanied by a reduction in the cost of compensation as that US Department of Labor study found in its global comparisons of compensation for factory workers across countries some five years ago.

It is not surprising then that Rangarajan’s new estimates of poverty in India should find a doubling of the poor not in the villages but in India’s urban areas — the epicentres of India’s growth ‘drivers.’