When good economics means pretty bad politics
Since social sectors are mostly state subjects, the question is if state governments will accept the difficult political task of telling people they are no longer ‘poor’.
The National Food Security Act (NFSA) was passed in 2013, just about 10 years ago. Broadly, every Indian knows what the NFSA does. Priority households will receive 5 kg of foodgrains per person every month at subsidised prices. For a household under AAY (Antyodaya Anna Yojana), the entitlement will be 35 kg per family every month. The NFSA covers 75% of the rural population and 50% of the urban population. These percentages and figures are not even in the Schedules. They are in the main body of the statute and any deviation, or shortfall, will be a violation of law, as passed by Parliament, unless NFSA is amended.
Any subsidy has a cost. The money has to come from somewhere. In absolute terms, what does 75% of rural population and 50% of urban population amount to? Depends on the year. If we use old population figures, something like 800 million. (These are actual identified beneficiaries. The absolute number of those entitled is slightly higher.) Census 2021 has been delayed. If we use estimates of what the total population and its rural/urban distribution might be, we will have a figure of around 900 million. And this is cast in stone, unless the law is amended. It will be cast in stone even in 2047, unless the law is amended. Wasn’t it a bad idea to freeze those numbers in the body of the statute in 2013, with a presumption that many people in India would be permanently poor? It certainly was. Doesn’t require a great deal of foresight to see this.
Just as Census 2021 has been delayed, there has been no NSSO consumption survey after 2011–12. The way NFSA works is the following. 75% rural and 50% urban is fixed. Using the consumption survey for 2011–12, the former Planning Commission worked out rural/urban numbers for states. Given those numbers, it is up to states to identify target beneficiaries.
The difference between a census and a survey is important. A survey is based on a sample. A census represents complete enumeration. A population census isn’t the only census that is around. There is the Economic Census (also delayed) and SECC (Socio Economic and Caste Census), the last from 2011–12. Since a survey is based on a sample, it doesn’t tell us which individual or household is poor and deprived. To use perhaps a bad analogy, that’s the difference between actual voting results and an opinion poll. Identification requires a census, and in this case, something like SECC, suitably updated. At best, a survey tells us about trends.
The United Nations Development Programme (UNDP) brings out a global multidimensional poverty index (MDPI). In July 2023, this report said that between 2005–06 and 2019–21, 415 million people moved out of poverty in India and the percentage of poor dropped from 55.1% to 16.4%. The components of MDPI are health, education and living standards.
Following this, Niti Aayog brought out (also in July) a progress report on multidimensional poverty. To quote from this, “The MPI estimates highlight a near-halving of India’s national MPI value and decline in the proportion of population in multidimensional poverty from 24.85% to 14.96% between 2015–16 and 2019–21.” Let’s skip the details of MDPI methodology, since that’s not relevant for now. Where do I get data for computing these numbers? To quote Niti, “Thus, the prerequisite for the construction of the MPI is that all the data required for it must come from the same single survey, as otherwise the creation of household deprivation profiles will not be possible. To create household deprivation profiles, it is presently neither possible nor feasible to collate data on a single household from several different surveys, i.e., health indicators from the different rounds of National Sample Surveys, education indicators from the National Achievement Surveys, etc. The global MPI is constructed using Demographic and Health Surveys (DHS) in countries where it is available. … The DHS for India is the National Family Health Survey (NFHS), which is conducted by the International Institute for Population Sciences (IIPS) under the aegis of the Ministry of Health and Family Welfare (MoHFW), Government of India.” In other words, the MDPI declines are attributable to NFHS-5. There can be problems with surveys and their designs. Historically, there have been inconsistencies between the Census and NFHS. Hence, one can quibble about the Niti assertion of a single survey. But that will largely be pedantic.
The more important point is, within the figure of 14.96% in 2019–21, the head count ratio (Niti figure) is 19.28% for rural India and 5.27% for urban India. Nonetheless, 75% of rural India and 50% of urban India will get subsidised food. To repeat, NFHS is a survey. We still need to figure out which individual/household is deprived (there is a household to individual matching issue too). That gets us back to SECC or its variants. SECC (both rural and urban) has exclusion and inclusion criteria. Other than updating SECC, surely, we need to take a relook at both the exclusion and inclusion criteria. For instance, ownership of a landline means exclusion from SECC rural. That may have been relevant in 2011–12. It is relevant today. Given the government’s emphasis on housing, what does households without shelter (automatic inclusion under SECC rural) mean? SECC urban also talks of ownership of a landline as automatic exclusion. The bottom line is both simple and messy.
(1) Shouldn’t we have a common definition and common set of uniform questions (Census versus NFHS versus SECC) to decide who is poor and deserving of subsidies?
(2) Shouldn’t we accept that as India develops, and as individuals/households are empowered and become less deprived, they should graduate out of being poor, not merely as a number (as in UNDP and Niti reports), but also in terms of receiving subsidies? (This requires amendments to NFSA, among other things.)
(3) Without a Census, something like NFHS only goes a limited distance. It is good to project trends of success, or failure as the case may be, but that doesn’t help at the level of the individual or household.
(4) Since social sectors are mostly state subjects, will state governments accept the difficult political task of telling people they are no longer “poor” and therefore, no longer entitled to subsidies?
While empowerment is always the objective of a good economic policy, success in that, and the attendant loss of entitlement, is not always an attribute of good political policy. Good economics can sometimes be bad politics.
Chairman, Economic Advisory Council to the PM