Surjit S. Bhalla: Don't ask, don't tell

CALLING THE BLUFF

Something I have never understood, but for which I would welcome comments and help, is why there is a large intellectual constituency in India that just cannot acknowledge the progress in the war on poverty. Any mention of a significant drop in poverty in India is met with derision, contempt, incredulousness, and finally, and invariably, with the comment that "you just don't know what you are talking about".

And then a gentle, friendly comment: "Please travel through India, visit a village for at least once in your life, and then find out how incredibly wrong you are."

Then comes the clincher: "When I visited SEWA (headquartered in Ahmedabad) or Sewa Mandir (headquartered in Udaipur), I was told how the poverty statistics the government puts out just fail to capture the reality of the poor."

Now SEWA, like many other NGOs, has done, and continues to do, laudatory work. So much so that today, the analysis of poverty, (nee the conclusion that poverty is as rampant as ever in India) has taken on a new lease of life.

Well-endowed NGOs, located in regional metropolises, are defining the terms of the debate. These NGOs have become not only the eyes of NRIs and foreigners, but also their computers, able to spit out considerably more authoritative estimates of the magnitude of poverty among a billion people""and the trend!

For this ingenuity, otherwise reasonable scholars genuflect, and do so regardless of the cost to their reputation. They must feel that there is no cost""after all, nobody can dare accuse them of not having done proper research because after all, they have talked to the poor; more accurately, talked to people who have talked to the poor!

All of this would not matter if a hundred flowers were allowed to bloom; but the tragedy is that the Indian government is neurotically obsessed with the notion that economic reforms (even and perhaps especially those instituted by the present Prime Minister, Manmohan Singh) have not helped the poor; that a new NGO/Left paradigm of "development with a human face" is the need of the hour, and that those who question those with good intentions themselves have bad intentions.

Large NGOs facilitate large foreign-based researchers, making available to them their local fiefdoms for travel, interviews, field research, etc.

And then this is sold to our over-eager politically correct government as the true underlying reality. There is another aspect to worry about: NGOs cannot get more money for development if they show that their need is less!

Donors would then rather go to Africa, where there is a large demonstrable need, and the Indian NGO will relatively lose out to the African NGO.

Better therefore to paint a gloomy picture""this way all parties in the exchange are better off. The NGO gets more money, the donor babus make their owners assuage their guilt, and who knows maybe the poor also benefit.

The dilemma of domestic NGOs is exactly the dilemma faced by international NGOs (INGOs) like the World Bank, United Nations, and their "poor" cousins like the Asian Development Bank (ADB).

These organisations, bureaucracies, are dependent on "guilt money". If you show to the rich donors that poverty is declining at only a snail's pace, then it means that whatever is going on out there (globalisation, governments, greedy multinationals, etc.) is just not working. Hence more money, for more power, for more bureaucracy to fight poverty, etc.

If instead, these INGOs were to show that large-scale poverty reduction was being made, then how will they raise money? Like everyone else in this globalised competitive world, the INGOs need to raise capital to pay salaries.

And the staff at the donors' shop need to keep their jobs as approvers of money to fight poverty. So the entire chain has a self-interest in preserving the myth that poverty has not declined by much.

Some individual countries, however, take pride in reducing poverty. China, for example, refuses to allow the World Bank, or anyone else, to mess about with her poverty data.

So poverty in China shows a large decline""and a decline that has caused a large dent in world poverty. So how to show that world poverty remains a problem""never mind, India is there""and especially influential interest groups there who want to show that poverty has not declined, perhaps even increased.

If it works for INGOs, it should work for states in India. They are strapped for funds to pay salaries and replenish electoral funds.

And Indian politicians just love to honour the commitment to fight poverty"" so much so that the less a state reduces poverty, the more money it gets from the Planning Commission to fight poverty. Just the same as the domestic NGOs and the INGOs. It never got, it cannot, get better than this (Montek, take note).

I should mention that in all these organisations there is considerable heterogeneity""and considerable disagreement with the party line.

At a World Bank seminar on India some six months ago, Mr Michael Carter, country director, remarked: "The big unsung story about India is the rapid strides it has made in poverty reduction!" Clearly no guilt money involved with Mr Carter""but has he checked with his bosses in Washington?

If he did, he would have found that he was not acting in the interests of the World Bank. Its self-produced data show that despite 20 years of growth, Indian poverty declined by only 15 percentage points (pp). Official data show the reduction to be 15 pp; official data corrected for statistical irregularities show the decline to be 22 pp. And in 2000, there was almost three times as much poverty in India as in neighbouring Pakistan (13.4 per cent in 1998).

Perhaps Mr Carter (and the Indian left) needs to accept the INGOs' "virtual reality": that dictatorship, civil strife, terrorism, and extremely slow economic growth make the best environment for reducing poverty "Big Time".

Poverty figures in India, especially for 1999-2000, are hotly contested, and believed to be a gross understatement of poverty. Data for the next year, 2000-01, can serve as a useful cross-check. Curiously, but not surprisingly, these data have not been utilised at all by those claiming that the 1999 figures were suspect. The figures for 2000-01 corroborate, in every dimension, the facts yielded by the ostensibly inaccurate 1999 data.

Unfortunately, NSS consumption surveys are problematical for interpreting poverty trends: the mean consumption growth shown by these surveys has been very low, especially in contrast to the growth revealed by national accounts data.

It is growth rates which determine trends, and it is the trend in poverty decline that is controversial. The NSS consumption growth is at the low end of the range; national accounts consumption growth, and NSS survey growth in incomes, and wage rates, are clustered and close to each other. In other words, the NSS understates consumption growth, and understates poverty decline. Growth in incomes of the poorest has been much larger than growth in average consumption.

Thus, it is a considerable stretch to conclude that there has been minimal poverty decline in India, as some left intellectuals continue to proclaim.

The reality is just the opposite. The World Bank believes that poverty in India is 35 per cent; official government of India data suggest it is 24 per cent; and if these official data are corrected for definition differences and accurate price data, then poverty in 2000 is only 17.5 per cent, i.e. fully half the figure reported by the World Bank. Mr Carter is right""poverty reduction in India is an unsung success story. But he should look within his own organisation, and its ideological associates worldwide, to find out as to why it is so unsung.

ssbhalla@oxusresearch.com