Swaminathan : India's poverty reduction better than China's

Discussion in 'Economy & Infrastructure' started by Singh, Aug 4, 2013.

  1. Singh

    Singh Phat Cat Administrator

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    Why no applause for 138 million exiting poverty?




    When China reduced people in poverty by 220 million between 1978 and 2004, the world applauded this as the greatest poverty reduction in history. Amartya Sen, Joseph Stiglitz and all other poverty specialists cheered.

    India has just reduced its number of poor from 407 million to 269 million, a fall of 138 million in seven years between 2004-05 and 2011-12. This is faster than China’s poverty reduction rate at a comparable stage of development, though for a much shorter period. Are the China-cheerers hailing India for doing even better?

    No, many who hailed China are today rubbishing the Indian achievement as meaningless or statistically fudged. This includes the left, many NGOs and some TV anchors. The double standard is startling.

    The Tendulkar Committee determined India’s poverty definition. The Tendulkar poverty line in 2011-12 came to Rs 4,000 per rural and Rs 5,000 per urban family of five. Critics say this is ridiculously low. But it is roughly equal to the World Bank’s well-established poverty line of $1.25 per day in Purchasing Power Parity terms (which translates into around 50 cents/day in current dollars). This is used by over 100 countries, by the United Nations and many other international agencies. When the whole world uses this standard, why call it statistical fudge?

    When China claimed to have lifted 220 million people out of poverty, guess what its poverty line was? Just $85 per year, or $0.24 per day! Whatever statistical adjustments you make for comparability, it was far lower than today’s Tendulkar line. Did today’s critics of the Tendulkar line castigate China for fudging? No, they sang China’s praises.

    The World Bank actually has two lines — $1.25 denoting extreme poverty, and $2 denoting moderate poverty. India can also adopt two lines, the Tendulkar line for extreme poverty and a new Rangarajan line for moderate poverty, at around $2/day.

    But this will in no way diminish the great achievement of slashing the number of those historically called poor — we can call them the “extreme poor”— by 138 million in seven years. Allowing for rising population in this period, the number saved from extreme poverty is even higher at 180 million.

    Given our rising GDP and expectations, we can rename the Tendulkar line as our extreme poverty line. But to condemn it as statistical fudge is ridiculous. The $1.25 line is a world standard, even if it is below the Arnab Goswami line or Sitaram Yechhury line. Indian critics may not accept it, but the world will.

    There is, of course, the separate issue of who should be entitled to various government subsidies, including food subsidies. Economists talk of targeting subsidies at those below the Tendulkar line. But for politicians, the aim of subsidies is to win votes. And clearly you win more votes by extending subsidies to two-thirds of the population, rather than the poorest one-third.

    This spread of subsidies to those above the extreme poverty line was once called “leakages to the non-poor.” But it is considered good politics even if it is bad economics. This explains why the government chose to cover 67% of the population in the Food Security Bill, even though the poverty ratio at the time was 30%.

    However, critics quickly exposed this as a double standard. They asked, if your Food Security Bill views two-thirds of the people as needy, how could you have a poverty line saying only one third are poor? The government found it difficult to say this was good politics even if it was bad economics. Instead, it appointed the Rangarajan Committee to devise a higher poverty line. This line will almost certainly be around the moderate poverty line ($ 2/day in PPP terms) of the World Bank.

    Many critics and TV anchors will cheer at the prospect of freebies to two-thirds of the population. Yet here lie the seeds of fiscal disaster. India is poor because it has spent too much on ill-targeted subsidies, leaving too little for infrastructure and effective education that will raise incomes permanently. Total subsidies (mostly non-merit subsidies) exploded in the 1980s, reaching 14.5 % of GDP, almost as much as all central and state tax revenue. This ended in a fiscal and balance of payments crisis in 1991.

    The risk of a new poverty line of $2/day is that it will create political demands for more freebies to two-third of the population. That will further erode limited funds for productive spending.

    In theory we can limit subsidies to the poorest and cut out unworthy subsidies. In practice, the combined pressure of vote banks and TV anchors threatens to raise subsidies beyond all prudent limits. There lie the seeds of another 1991-style disaster.


    Why no applause for 138 million exiting poverty? « Swaminomics
     
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  3. Known_Unknown

    Known_Unknown Devil's Advocate Stars and Ambassadors

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    What a jumbled mass of nonsense. I always found Mr. Aiyar and his Swaminomics as being a bit too fat on rhetoric but too malnourished in terms of substance. He needs to be told that the $1.25 a day figure was arrived at in 2008 based on 2005 PPP comparisons. Since 2008, inflation and the depreciation of the rupee have made reliance on 2005 PPP numbers impossible.

    In any case, measurement of poverty levels by income is at best, a cop-out. Far more useful would be to measure poverty levels by associated indicators such as malnutrition, access to sanitation, drinking water, electricity, health facilities etc.

    Lastly, the progress in China is believable because it is immediately visible. Cities like Shanghai, Guangzhou and others have been completely transformed and match first world standards. In comparison, the infrastructure, poverty, lack of hygiene, non-existent waste disposal facilities etc are glaring even in the biggest Indian cities making them look like glorified villages rather than first-rate modern cities.
     
  4. sydsnyper

    sydsnyper Senior Member Senior Member

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    @Singh - Though I would love to agree with you, our progress has been barely visible. We have seen an appraised lifestyle in the middle class and a bump in the number of those that would move up from poverty lines, however we also face increasing price rise, massive corruption, vote bank politics, lack of cleanliness and quality of life.

    More than China, we should look at how Germany & Japan rose up from rubbles, cold war politics to be foremost economic powers.
     
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  5. Known_Unknown

    Known_Unknown Devil's Advocate Stars and Ambassadors

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    Marine drive, Mumbai in 1980:

    [​IMG]

    Marine Drive recently:

    [​IMG]

    Guangzhou in 1980's:

    [​IMG]

    Guangzhou now:

    [​IMG]

    ^^Swami has absolutely no idea!!
     
  6. sydsnyper

    sydsnyper Senior Member Senior Member

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    @Known_Unknown - you have a skewed sense of china's progress. Note that this progress came out of three important developments - 1. hammer labour to allow chinese industry to output at exceptionally low costs, 2. displace citizens that come in the path of infrastructure with/without compensation 3. silence free thought and detractors.

    The first factor allowed china to be able to provide dirt cheap manufacturing, causing an explosion in the industry and exploitation in the worker class. The second factor allowed them to pull off transformations in 'gangzhou style' like you showed in your pics. The third factor ensured no one asked questions, or noticed the human cost of all this cosmetic development.

    Mind you, development does not mean more money... especially more money in the hands of the fewer.. but an overall growth and accesses to basic resources to all denizens.

    Would you for example prefer china if you personally were made to work 14+ hours in sub-human conditions so that your bosses made millions and the west got cheap products. Would you prefer India or china if you found an eviction notice on your door one morning for a roadway project, no questions asked or explanations provided. Would you rather be in china if you & your family felt oppressed by their ruling/business class and could not utter a word about them, let alone take legal action....
     
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  7. Known_Unknown

    Known_Unknown Devil's Advocate Stars and Ambassadors

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    I'm sorry but all this whining about working conditions, lack of human rights etc only comes from jealous non-Chinese such as Indians and westerners. The Chinese themselves have no problems with how their country is being run, and the Chinese posters on this forum are proud of what what they have achieved.

    And if you really think that 14+ hour work conditions are bad, tell that to those 600 million Indians who are living below the poverty line. As them if they'd rather work 14+ hours per day to earn money with which they could feed themselves and their families or die of abject starvation.

    It is all a question of which route you'd like to take-China style industrialization may require short term sacrifices (human rights, free speech etc), but will result in amazing long term achievements. If you'd rather not make any sacrifices or make as few as possible, then growth will sputter along for many decades, the country forever consigned to the group of second rate "could have been's"!

    As for your charge of cosmetic development, do you know what the average per-capita income of China is compared to India? In 1949, China's developmental indices were worse than India's. Up till the 1970's, China's life expectancy was worse, and per capita income just about the same as India's. Today, Chinese per capita income is nearly 4 times that of India! That means that on average, the poorest Indian today is 4 times poorer than the poorest Chinese.

    Human rights and property rights are luxuries that developed countries can afford. Once people's stomachs are full and their basic needs met, they can aspire for other things-until then, tooting your "freedom of speech" horn when there are millions starving to death in your country is just stupid.
     
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  8. no smoking

    no smoking Senior Member Senior Member

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    Very good words only if this could be reflected in india.

    India has more billionairs than China while average indian workers wages per hour are only half of what Chinese earns;
    Actually india is lagging even more behind China on providing resources to their citizens on social public servcies: from health care to education.
    So tell me where is your overall growth and basic resources to all citizens?
     
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  9. sydsnyper

    sydsnyper Senior Member Senior Member

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    To both of you - China's has been one model of economic growth.... I am not anti-chinese.. I merely do not agree with your path of progress. The chinese model of oppresive growth is the exact kind of model that kindles revolutions. Your growth model has been seen and studied in the rest of the world, but no one agrees to or likes to follow the path you have taken.

    You can throw all kinds of figures celebrating your success, but dont forget that all that glitz and glam came at the cost of people who were forcibly silenced. China has used authoritarian measures to boost growth, reduce populations, expedite development (in fact you even have a variety of engineered mango that grows in half the time of the usual variety). As goes with the philosophy that what goes up quickly, comes down as fast....this is the same authoritarian power that can bring china's downfall.

    Just like the speedy mangoes are unhealthy and damaging in the long run..... so will your boom....
     
  10. sob

    sob Moderator Moderator

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    To all these figures I just have one single point that is bothering me-- how sustainable are these poverty alleviation figures. One bad monsoon and thousands of farmers would again slip back into poverty. It is like two steps forward and maybe 3/4th of a step back.

    Yes in absolute terms we see that poverty is reducing but is it fast and sustainable enough.
     
  11. Singh

    Singh Phat Cat Administrator

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    1. Chinese Civilization is a lot different from Indian Civilization. Chinese expect their rulers to undertake massive infrastructural projects, they are willing to sacrifice for the "nations" good. The greatest Indian Kings whether in epics of recent history have all been those who guaranteed freedoms, and weren't tyrannical not those who built massive structures and cause large scale displacements.

    2. India's poverty alleviation has been spectacular. China's economic prowess has been much swifter and sharper and therefore takes the sheen out of ours. Lets not forget that our poverty alleviation has not been at the cost of freedoms. We are only behind China in poverty alleviation.
     
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  12. sob

    sob Moderator Moderator

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    I will not comment on the Chinesev vs Indian civilisation, but till the time a large section of our political class and the intellectuals consider Growth and investment in infrastructure to be abhorrent and to be avoided we will continue to lag behind China. We will never be able to pick up pace.
     
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  13. Ray

    Ray The Chairman Defence Professionals Moderator

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    Swaminathan uses figures imaginatively to incubate his pet hobby horses.

    What is poverty?

    Just money?

    Poverty emncompasses manu inputs and it is not money alone or eating dal and roti and nothing more.

    Nutrition is also an important aspect. Dal roti alone can fill the stomach, but not fuel a healthy body.

    A unbalanced body will lead to deformities and disease.

    With the money Swami gloats about, will it pay for the treatment?

    Simplistically put, the slogan Roti Kapda Makan Health is the closest one can go to define the rudiments of existence.

    Addressing that would be alleviating poverty to some extent.

    One really cannot comment on China and its success since one is not too sure about the issues in the hinterland and the poorer provinces of China.

    And I find no reason why we have to compete with China on this aspect. Let us focus on ourselves and give a better deal to our own people.

    The so called poverty alleviation is a statistic phenomenon (here we have competed with China on fudging)

     
    Last edited: Aug 5, 2013
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  14. trackwhack

    trackwhack Tihar Jail Banned

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    Nice bluff by Swami. We have made progress, but that's despite the system not because of it. So there isn't anyone to thank or commend.

    China has the worst Gini coefficient among the top 50 economies.India has the best. So stop right there with the bluffing about how India's rich are richer than Chinese rich or how India's poor are poorer than ....
     
  15. ice berg

    ice berg Senior Member Senior Member

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    CCPS fall or Chinas downfall? A major difference there.
    China is more than CCP and the main drive behind Chinas growth will still be there long after CCP has gone: A skilled workforce and infrastructure.
     
  16. Ray

    Ray The Chairman Defence Professionals Moderator

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    The only problem is that it will be a skilled but an aging work force because of the one child policy that even if changed will take time to grow as replacements.

    Even so, I feel that it is wrong to compare India with China.

    The political and economic environment and social factors are totally different.
     
    Last edited: Aug 5, 2013
  17. Energon

    Energon DFI stars Stars and Ambassadors

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    @Known_Unknown @sydsnyper @Singh...

    Very good posts from all of you kudos. All of you raise very important points and I find myself somewhere in the middle. First I agree wholeheartedly with Known_Unknown in regards to assessing poverty using more pertinent indices like nutrition, literacy, access to adequate public services etc. He's also right about China's ostensible progress in poverty alleviation and yes infrastructure projects are a HUGE part of that success.

    Having said that I think sydsnyper also makes a good point about not taking China's rapid progress at face value and especially not the impressive cosmetic changes in cities like Guangzhou and Shanghai. Admittedly I too was totally mesmerized by China's aggressive strides toward economic progress, but now I have come to realize some of the limitations in the assessment of growth.

    I am a believer in Acemoglu and Robinson's theory that sustained growth involves two main ingredients... centralization of power (to facilitate decision making) and a political structure that is inclusive enough to represent the interests of all subgroups of citizens. China has made major strides in the first aspect, albeit the power structure of the CCP and its ability to make decisions execute them quickly has come at a hefty price. Nonetheless over the past four decades the Chinese establishment has become very adept at centralizing their power which they have then used very wisely to make good decisions and investments especially in infrastructure.

    India on the other hand due to historical circumstances has landed upon the second component of success. What remains to be seen is how well the Indian people capitalize on this. Slow and infuriating as it may be I do think there has been a lot of progress in India's political process, however I think its high time that the federal government give more liberty to state governments (now that the nation is stable and the threat of secession is low) in order to foster competition among states. I feel this is already happening up to a certain extent. The next step of course is investments in large scale infrastructure and passing land and labor reforms, and here too I think this should take place on a state by state basis.
     
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  18. Energon

    Energon DFI stars Stars and Ambassadors

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    After having had the opportunity to live in various developed and under developed parts of the world I've become been wary of considering culture as determinant of rapid success or failure. I'm not denying that culture has a huge impact upon how a society functions, it most certainly does; however cultures are dynamic and they can just as easily have positive impacts as negative ones depending upon the ambient conditions. To me the only significant contribution of a culture toward success/failure is its level of dynamism at a given time. If a society is able to be malleable and adjust then it's bound to be successful, the ones that aren't fail. However virtually every culture around the world has shown itself to exist in either form, so it's hard to say.
     
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  19. civfanatic

    civfanatic Retired Moderator

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    Dynamism and openness to new ideas are important determinants of the "success" of a society, but it is also important to look at the impact a certain culture can have on political structures and order. Chinese Confucian culture is much more conducive to the creation of a powerful, centralized state than Indian culture, with its emphasis on kinship ties and endogamous social groups which operate independently of the state.
     
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  20. no smoking

    no smoking Senior Member Senior Member

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    Well, thanks to India's unique calculation of Gini index: when the other country use distribution of income, india is the only one using distribution of consumption. So basically, if Indian A spends $600 out of his monthly income $1000 and Indian B spends all of his monthly wage of $600, based on Indian Gini calculation, these 2 gentlemen are economically equal! How good is that!

    Pranab Bardhan: How unequal a country is India? | Business Standard
     
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  21. trackwhack

    trackwhack Tihar Jail Banned

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    Go check world bank or UNDP stats. Or any independent assessment. China has the worst Gini and India the best. These are not as per GOI stats. Like I've said, I cant sit down to start educating bots.
     

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