Sure, poverty fell, but no thanks to UPA’s NREGA

First published in Firstpost.com: http://www.firstpost.com/economy/sure-poverty-fell-but-no-thanks-to-upas-nrega-981421.html
As the country heads closer and closer to elections, there will be a slow and steady release of facts, figures and sundry survey reports showing 10 years of United Progressive Alliance (UPA) rule in good light. In end-June, the National Sample Survey Organisation’s Employment and Unemployment in India, 2011-12 indicated an uptick on the employment front between 2009-10 (when the last survey was done) and 2011-12 (though a lot of questions remained unanswered, as this story in Forbes India shows). And now the latest poverty estimates released by the Planning Commission yesterday show that poverty decline between 2004-05 and 2010-11 has been faster than between 1993-94 and 2004-05.
Critics – especially political opponents – would be quick to pick holes in this. First, they would probably latch on to this interview that former member of the National Statistical Commission, Amitabh Kundu, gave to The Indian Express. In this, Kundu has argued that if the survey had covered 2012-13, the poverty estimates would not have been that satisfying. So it looks as if the 2011-12 survey was done only to show the UPA in good light. 

This question was raised in the case of the employment figures as well and the current and former chief statisticians refuted the conspiracy theory of statistical skulduggery. Large sample surveys are done by the NSSO every five years. After the 61st round in 2004-05, there was a 66th round in 2009-10. But since that was a bad economic and agricultural year, it was decided that the results would not be comparable with 2004-05 and so it was decided to conduct another survey in 2011-12, after just two years (when the next survey would actually have been due in 2015). This decision was taken even before the results of the 2009-10 survey were out. 

Next, the sceptics will mock the poverty reduction achievements on the grounds that the estimates follow the Suresh Tendulkar poverty line, which is laughably low. But this too deserves to be junked. When the Tendulkar poverty line was adopted in 2009, it actually showed a higher incidence of rural poverty than the earlier Lakdawala formula did. Secondly, when the controversy over the Tendulkar formula first broke in 2010 – and critics (notably from the anti-growth and anti-reforms brigade) insisted the formula was flawed, an exercise was done to show poverty estimates using both formulas. The rate of poverty reduction between 1993-94 and 2004-05 was shown to be slightly higher under the Lakdawala formula (0.77 percentage points) than the Tendulkar formula (0.73 percentage points). So clearly, the Tendulkar formula does not underestimate poverty. 

If the left and the BJP really want to get after the UPA government on poverty, it should be on how this reduction was achieved. The Congress and the intellectual gurus of its welfarist approach will no doubt crow that this is the result of the so-called inclusive growth agenda followed by the UPA since 2004. Specifically, they are going to credit the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with the achievement. But as economist Surjit Bhalla points out in his column in The Indian Express today, this cannot be true. Using the NSSO data, Bhalla points out that MNREGA accounts for a small share of casual employment. Casual work as a percentage of total rural employment, he shows, was only 1.6 percent in 2009-10 and 2.1 percent in 2011-12. And within casual work, MGNREGA accounted for just 36.4 percent and 37.1 percent in 2009-10 and 2011-12 respectively. So MGNREGA, he argues, accounts for just 0.65 percent of total rural employment. 

He also debunks the theory that MGNREGA has helped increase rural wages. MGNREGA wages, he shows, rose by only 25 percent between 2009-10 and 2011-12, while non-MGNREGA casual work wages rose by 39 percent. 

And then comes Bhalla’s most damning indictment. The decline in poverty between 2009-10 and 2011-12 was by 13.1 percentage points; MGNREGA accounted for only 1 percentage point of this reduction. The left will not take up this line of argument because it would not like to junk a welfarist scheme, not matter how bad an idea it is. The BJP too is not averse to supporting bad economic ideas (witness its lack of opposition to the food security bill). 

But the real arraignment of the UPA’s so-called dole-oriented approach to inclusiveness is in these figures, not in junking the Tendulkar line.