Friday, November 18, 2011

India: Poverty, Inequality and Inclusiveness

There has been a lot of stories in the Indian and international media about  "growing inequalities".  Every one has his own story about slums and Ambani palaces. Prominent International journals publish articles about the increase in "Indian" billionaires forgetting that many of them are citizens of UK and other countries, and their rise is more reflective of inequality in UK or these countries than in India!  A proper understanding of this issue requires an understanding of the key types of inequality.
    At the first level we must distinguish between income distribution and wealth distribution.  At one level, wealth is merely a an accumulation of savings from income and is likely to rise with income. However in a fast growing economy like India with shortages arising from failure of government policies and regulations, it can be a reflection of large and arbitrary changes in prices of assets.  The most visible and glaring instances in wealth inequality in India today are those arising from a stratospheric increase in land prices(higher in Mumbai and Delhi than in New York or Washington).  Anybody who owns or controls the limited supply of urban land in the fast growing cities of India, can become an instant millionaire or billionaire. Almost by definition this will change the wealth distribution adversely! The solution is to change the policies, regulatory systems and management of cities so as to rapidly increase the supply of habitable land.  this will bring down the price of land to a level that is appropriate for a lower middle income country that India is, so that a middle class person can afford to buy land.
   At the second level we have to distinguish between the distribution of private income/consumption and the supply of Public goods and services by the government.  Again the most glaring and visible inequality/inadequacies are in the supply of public goods and services.  The best example of these are the slums.  It is the lack of good roads, drains, clean drinking water, sewage and sanitation that hits you when you go into or even pass by one of the ubiquitous slums in every city of India.  This contrasts with the relatively orderly and clean appearance of the upper middle class and richer colonies.  The limited research done on the quality and distribution of basic public services in India suggests that it is among the worst in the world.  This what need correction most urgently. Further it is to a great extent linked to Urban governance and urban infrastructure issues, though village development also leaves much to be desired.
   An additional factor at the other end of the spectrum is resource rents (minerals-coal, iron ore, telecom spectrum) and rent seeking in Government procurement.  Such rents give windfall revenues to those who take leasing and contracting decisions and those who collude with them and thus worsen both the income and wealth distribution.  A simple situation is to institute a transparent auctioning procedure that ensure that any rents accrue to the State not to individuals.
  At the third level we have to distinguish between income poverty, hunger and malnutrition.  Even though the first two are related they are quite different from the third.  Though poverty reduction has been closely co-related with reduction in proportion of people who are hungry, the latter is completely unacceptable in modern India.  However, hunger is either located in isolated pockets or specially dis-advantaged people and the only way to eliminate it is to identify exactly where each hungry person is! Generalized solutions will not work quickly enough.  One of the purposes of the Multi application smart card (MASC) based on the Unique identification number (UID) that committee(s) chaired by me had proposed and worked out the operational plan, was to achieve this objective.
  On the other hand the problem of malnutrition is completely different problem from income or consumption poverty. It exists even among the non-poor and an increase in income or reduction in poverty will not automatically solve this problem.  On the other hand programs like the wheat-rice based Public Distribution System (PDS) designed for the poor seems to have accentuated the problem for both poor and near poor, by focusing excessive attention on stomach filling but not very nutritious cereals! My research has shown that there are two major causes of malnutrition.
   One is lack of public health and hygene i.e. clean water, drainage, sewage, sanitation and control of communicable diseases.  When a person (infant, child or teenager) has dyarheea no amount of food is going to reduce malnutrition.  The other is information and knowledge about personel health, hygiene and nutrition. In the old days before PDS, grand mothers and old wives tales passed down nutrition information gained over centuries through do's and don'ts on what foods items to consume and when has been lost, partly because of wrongheaded ideas that wheat and rice are better foods than locally available coarse cereals, berries, vegetables and obscure fruits.  The only thing that can be done now is to teach modern nutrition in schools and through public education campaigns and try to relate it to locally available produce, particularly in rural and semi-rural areas and to food labelling in urban and semi-urban areas.

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