Surjit S Bhalla: Ten Lies and an Act: II

The first part of this three-part series documented two of the ten lies, near lies and falsehoods (LNLF) that have gone into the formulation of the Employment Guarantee Act (EGA).

The first lie was the statement that the EGA was the property of the Left; it actually originated with the Congress election manifesto.

The second lie was the assertion that the EGA would generate employment for the poor; it was shown that the poor were too poor not to work and that the poorest""agricultural labourers""had an unemployment rate of close to 1 per cent. Hence, the EGA would only provide substitute employment and not additional employment.

This part adds four more to the list. The third lie is the lie on social spending.

For some time now, international aid organisations like the World Bank and the NGOs (whose own influence, power and income growth, not surprisingly, depend on the conversion of such LNLFs into "facts") and social experts have been stridently claiming that India spends too little on health and education, both in absolute terms, and especially with regard to its comparators (other developing countries).

Sometimes, perhaps with journalistic licence, there is some exaggeration; Mr Jean Dreze, the lead author of the EGA Act, has this to say: "Public social spending in India is barely 6% of GDP, compared with 17% in the US, 26% in Britain and 36% in Sweden" (Financial Express, December 17, 2004).

It is difficult to count the number of LNLFs in this statement, and somewhat shocking that it was written by someone who has co-authored several books on the subject with Amartya Sen, i.e. by someone who should know not better, but considerably better.

First, there is the problem that the comparison is being made with developed countries with per capita incomes more than 10 times that of India. Second, the figures cited by Mr Dreze for the rich countries include pensions, social security, unemployment benefits, etc., i.e. rich world concerns.

A revealing comparison is the public expenditure on health and education (primary and secondary). The comparative picture in 2000, and one radically different from the painting by Mr Dreze, is as follows: developed countries spent, on average, 9.5 per cent of GDP; Eastern Europe spent 8 per cent, and developing countries 7.5 per cent, India 4.5 per cent and China 3.4 per cent (World Bank WDI data).

For all developing countries with per capita incomes up to twice that of India, average expenditures were only 3.6 per cent of GDP. Comparing like with like, India is a good, if not a star, performer in social expenditures.

It is another story altogether whether such expenditures are actually effective""the fact remains that India spending too little on social services relative to what one should expect, is a lie. But how can anyone object to lies if they can ostensibly benefit the poor?

Noteworthy about the EGA is the Bollywood campaign conducted by its advocates to garner support. Heart strings are tugged at, sometimes unnecessarily and often tangentially.

All in the game of trying to prey on the middle class' sense of goodness. And convinced about their own goodness, the advocates have become brazen. Ms Aruna Roy, another advocate of the EGA, rather boldly proclaimed on an NDTV programme, "We the People", that an employment guarantee was needed to alleviate hunger and starvation deaths.

How did she know this? Because she had worked in villages for the last twenty years and we just have to believe that she will not tell a lie. Mr Jean Dreze echoed Ms Roy's analysis and conclusions on hunger, starvation, and the importance of the EGA to prevent such horrors.

This is the fifth lie, i.e. that only the weatherman knows which way the wind blows, or only those weathered by working among the poor people know not only what poverty is in a local area, but in the entire country of a billion people. (This disdain for empirical evidence is the defining characteristic of those who know they are stating an LNLF.)

Household surveys were invented to help identify such casual empiricism. The National Sample Survey has asked a specific question on hunger for the last twenty years. The question: "Do all members of your household get enough food everyday?"

There are three possible answers: yes, throughout the year; some months of the year; or no. The last two categories indicate the presence of hunger.

Somewhat strikingly, the latest NSS survey (July""December 2002), conducted during the worst drought in the last thirty years, shows the incidence of hunger (chronic plus seasonal) to be only 1.6 per cent of the rural population.

It was not always this low; in 1983, 17 per cent of the rural population did not have two square meals throughout the year; this number had declined to 5 per cent in 1993-94 and 3.1 per cent in 1999-00.

This quite conclusively establishes that while poverty remains, hunger is not a problem for more than a very small fraction of the Indian population.

On the same NDTV programme, Dreze stated the need for the EGA by referring to Indian economic history: "If it had not been for employment programmes, India would have had starvation deaths in the last thirty years, just as it did in the 19th century". If true, the implications are depressingly profound, i.e. that the Indian economy is much the same as it was more than a 100 years ago.

The sixth LNLF is that "India's tax-GDP is very low in international perspective: about 15 percent (centre plus states) compared with, say, 37 percent in OECD countries" (Jean Dreze, The Hindu, November 22, 2004).

There is a pattern here; compare India to the richest countries in the world to make an economic point. I didn't realise that the intellectual left had been so caught up in the "India Shining" rhetoric of the BJP!

Again, a simple reading of international data for circa 2000 would suggest that the Indian tax-GDP ratio of 15 per cent is the same as the median developing country, and about 1 percentage point lower than the average East Asian economy.

For countries with PPP per capita incomes up to twice that of India, and excluding all countries with per capita incomes below India, the median tax-GDP ratio in 2002 was only 14.1 per cent, the average somewhat higher at 16.8 per cent of GDP.

So it is wrong to contend that since the EGA would cost only 1 per cent of GDP, India can well afford the additional taxation. There might be a need for additional taxation, but it is incorrect to state that Indian tax collection is "very low".

In this data age, all data-based "facts" can be readily verified. We have used World Bank WDI data throughout in making cross-country comparisons, and these calculations suggest that a fair amount of the fact-based support for the EGA is just not there.

It is noteworthy that the president of the World Bank, Mr James Wolfensohn, was rather fulsome in his praise for the EGA. He should ostensibly know, because poverty reduction is the raison d'etre of the World Bank.

How is it that a deeply flawed initiative like the EGA is able to garner intellectually credible support? It is a question for all of us to consider.

One reason might be the fact that today, both government policies to eradicate poverty and the poverty studies needed to support such initiatives are major industries.

Any dent in calculations of poverty is met with extreme hostility. So while we ponder about the retraining of workers due to the imperative of globalisation, spare a thought, and a dime, for those poor-rich fellows whose profits derive from the industry of poverty.

(The first part of this series appeared on December 25/26)