Michael — Probably poverty levels in India will shoot up if you measure, if you can that is, income instead of consumption patterns. I have a comment at your post too taking “nutritional deficiency” into consideration. Some discussion is happening at my blog as well. For the sake of other readers, my comment is based on an article by CP Chandrashekhar and Jayati Ghosh that appeared in The Hindu Business Line in 2003.

Arjun — I too tend to believe that back of the envelope calculations on unadjusted NSS data will tell you precisely nothing. I’ve tried to show this by adopting Aadisht’s method of computation to the “palak and other leafy vegetables” section. A simple computation shows the enormous skewness that happens. This is in a comment at Aadisht’s original post.

Its a seemingly cool idea, but I’m simply not convinced by it. I would like to know the degree of mechanization in agriculture for the rural poor before believing the caloric burn thesis. Given the lack of public investment in agriculture, and the other signs of deprivation- increasing unemployment, more evidence of farmer suicide and so on, I would be loath to assume that you have full scale industrialization proceeding in the hinterland. I would also assume that regardless of the caloric burn rate, as industrialization proceeds, there should be at least a small increase in total consumption, and not a fall. No doubt calorie intake is a flawed method, but its at least a more reliable measure of inter termporal poverty calculations than we have with the NSS reports. By the way, back of the envelope calculations on unadjusted NSS data will tell you precisely nothing. Its not worth it because the statistical problems with NSS are tremendously difficult.

Ravi, there is of course no counterfactual to your claim that without reforms the poverty rate would have been worse. Its like the justification for the Iraq war. I am also not sure that you can attribute increased agricultural output and sharp reductions in poverty rates in the 1980 to price support mechanisms (it appears that irrigation and public investment had a lot to do with it).

Yes it is frustrating that we don’t have the correct reports. I tried searching using the keywords Aiyar gave and came up with a blank.

“Of course, these are average figures and don’t necessarily prove that everyone in rural India is consuming more. There is always a possibility that the rich have become much richer, and their consumption skews average consumption upwards while the poor are still in bad shape. It’s also possible that there are some states in which consumption has increased and they’re skewing the numbers.”

Now Aadisht’s refutation of the above para is:

“But if you look at other NSS reports, you find that that hasn’t happened- the consumption of people in the lowest five income percentiles has also increased.”

Neither Aadisht nor I have been able to check the consumption figures for the bottom percentiles to claim that skewness hasn’t happened. What Aadisht does is a computation — based on the absolute (and hence skewed) averages available — to conclude that purchasing power has increased even in the bottom percentile. That argument doesn’t look right to me and I have detailed this in a comment at the orginal post.

Utsa Patnaik blames the drastic reductions in the State’s spending on rural development for the agrarian crisis. If I understand right, you too agree with that, and your third para in the above comment suggests so (though you also say that the state doesn’t have another option).

As for why we haven’t seen accelerating reduction of poverty under reforms, there is a simple explanation. For that to happen, the poor have to get jobs. For that, industries have to be set up. Outside of the big cities, it is still a nightmare to set up industries. Land acquisition is a bureaucratic nightmare because in order to “help” the poor villagers, the government doesn’t allow them to sell their agricultural land to set up industries. So naturally it has to be done through government sponsored middle-men. The number of permissions needed are still huge. In other words, what reforms?

Also, the crisis in the agricultural sector has nothing to do with reforms. The green revolution had started running out of steam in the late 80s. It is one thing to give incentives to increase food production when we were facing shortage of food. But by the 80s, we were facing an excess of food. So the government had to, and still has to buy high and sell low. It was the buying at high prices that got landed farmers out of poverty. There is a limit to how much any government can do that and we had reached a limit to getting people out of poverty through that route.

In fact, this policy is now counterproductive, because by buying at high prices, the open market price for food goes up, hurting the landless labourers who have to buy their food from there, worsening poverty. There is no easy solution to the agricultural mess. The only way is to manage a smooth transition of people from the agricultural sector to other sectors, something that has been happening (too slowly for my taste) under reforms. If we hadn’t carried out reforms when we did, we would have simply seen a stagnation in or even a worsening of the poverty rate.

If one’s willing to believe Utsa Patnaik, the conclusion is that per capita consumption wasn’t decreasing at any point in the pre-reforms period, whereas drastic reductions were visible in the post-reforms period. Cancellation in the bottom 30% is taking place because Aiyar does the computation from 73 to 2000 together. (And Patnaik was talking about village India.)

In any case, how do you explain the poor progressing far better under the reforms?

arjun

Ravi — Thanks for that explanation. I agree with you that as people start moving from “starvation” diet to “adequate” diet, the cereal consumption should increase. As they move beyond that, it should reduce. And let us rely upon Aiyar’s assertion of “gradual” reduction though it would have been much better if he also backed it up with some hard stats. In particular, there’s no reduction in the bottom 30%. Then, is it okay to conclude that the bottom 30% haven’t moved out of the starvation diet? How can we conclude in that case that the poor have done far better under reforms than before? What are your thoughts on this?

Arjun — Thanks for those pointers. I too think, as you pointed out, it’s important to note that Prof Patnaik is talking about “total” consumption, as in my earlier long quote.

Vish — I wasn’t surprised either to see Utsa Patnaik’s conclusions.