Economic Highlights

New Delhi, 21 December 2009

Prices, Poverty & Growth

STOP JUGGLERY OF FIGURES

By Shivaji Sarkar

Reality and projections are foxing the nation. Almost 20 per cent price rise and the growing numbers of the poor are the reality. But when it comes to growth projections nobody is sure whether there is reality in these or these are mere officialese. One can only hope it is not the latter.  

The October figures lead to a claim of 10.3 per cent surge in the industrial production and GDP growth at 7.9 per cent. Basic projections on the low growth parameters of October 2008 -- 4.3 per cent and a comparison with that of October 2009 and the claims of high growth possibilities certainly do not project the actual facts.

Else, the Government would not have grappled with the poverty figures. Growth in this country is not linked to betterment of living conditions of the people at large. Instead, it has been observed that social and financial discrimination increases. Despite the supposed fast-paced pre-2008 growth at around 7 to 8 per cent, it is surprising that the number of poor have not come down. Of course there are different figures by different committees and departments.

This apart, the Government is also unsure whether the growing food prices are adding to the numbers or not? In November alone inflation jumped three-fold from 1.34 per cent in October to 4.78 per cent as WPI. Shockingly, food prices have risen to nearly 7 per cent – from 13.68 per cent on October 31 to 19.95 per cent on December 5. Logically it would marginalize many more and push them below the poverty line. This is what four different figures for poverty estimation seem to suggest. \

Higher poverty ratio has its effect on the Government’s kitty as well. It may swell expenditure on poverty alleviation and subsidy-related issues by over Rs 15,000 crore. The Planning Commission in 2004-05 estimated that 28.3 per cent of the population was below the poverty line. The Government still projects this as the figure of poor persons. There is a dichotomy. It does not take into account the rise in population. The figures have to vary accordingly.

Importantly, three official committees have rejected these figures. The SD Tendulkar committee set up by the Planning Commission has stated that even in 2004-05 there were 41.8 per cent people below the poverty line. Officially there were 38 per cent poor in 1990. The NC Saxena committee set up the Ministry of Rural Development estimated, on the same parameters of per capita calorie intake of the Planning Commission that a poor person requires at least Rs 700 a month to survive.

The committee estimates 50 per cent of the people are below the poverty line. It has also taken into account low-weight children and anaemic women into account for the purpose of its calculation. This means almost 55 crore persons are living in absolute poverty. The Economic Survey of 2008-09 puts the figure at 60.5 per cent on the basis of subsisting on a wage below Rs 20 a day as per National Statistical Organisation Survey. The average works out to Rs 600 a month.

It is important to note that the Budget process has started and is to be presented almost two months later. The Government has to accept one or the other figure for deciding allocations. The closest to the present Government estimates are the Tendulkar committee figures. But these are also 13 per cent higher than the accepted official figures.

Clearly, the figures would be definitely more if the high food prices are taken into account. Incomes have not increased. There were more people who had been out of jobs and even those who are in corporate jobs have seen erosion in wages as most of them have been denied a raise since about two years.

According to the Tendulkar committee, there would be 30 per cent more poor in Chhattisgarh, Jharkhand, Bihar, UP, Rajasthan, MP and even West Bengal. This means that on PDS alone the Government would have to spend Rs 10,000 to 12,000 crore. Expenditure would also increase on schemes such as NREGS, Indira Awas Yojana, Swarna Jayanti Employment Scheme and similar other schemes.

If the rising prices are taken into account, it would further swell the Government expenditure, which it is trying to do with larger borrowings. Presently almost 7 per cent is the estimated fiscal deficit. It is likely to swell further. This has a cascading effect on expenses as also on actual growth prospects. Is the country getting into a vortex?

Regrettably, the Government has not been able to contain the prices. The Union Agriculture and Commerce Ministers, Sharad Pawar and Kamal Nath respectively, are giving statements that are only fuelling up food grain and sugar prices. Prime Minister Manmohan Singh has also warned of further rise in prices. The only dissenting voice is that of Finance Minister Pranab Mukherjee, who says he is concerned about this and is taking requisite steps. His concern appears genuine. But, he has to show results in the Budget and this seems difficult.

If the number of poor and price rise, the Government may do projections but it would be away from reality. It also raises the question about the intention of bringing down the prices. So far, nobody has yet explained why butter has become scarce in the market. The only answer has come from the multi-national retailer Walmart, which admitted hoarding butter stocks after acquiring it from Anand in Gujarat. One needs to look at the meeting of Walmart Chairman S Walton with Manmohan Singh on November 4.  

This above is a grim signal and points to the linkages of price rise and entry of the MNCs and big corporate in the retail market. Somehow nobody raids their warehouses, whereas godowns of the small wholesalers have been searched under the provisions of the Essential Commodities Act.

Indeed, the nation and its parliamentarians need to speak against the entry of big business into the retail commodity and vegetable markets. There is no scrutiny of the officials and others promoting entry of this sector. They lure the Government with artificial growth projections. The Government instead has to look at actual growth of the people. The US and the West are suffering the ills of monopolization of transnational retailers. There is time to secure India from their ill effects.

The Opposition and the Government need to sit together to study the menace. Finances benefit only a few but growth requires a vision and not statistical jugglery. The West and now even Dubai is suffering from financial projections, created in the books. India has survived some of the recent financial crisis but if the present trend continues it may not be able to do so for long.  ---INFA

(Copyright, India News and Feature Alliance)