Growth and Gharibi

Have you tried living on $1.25 a day? Well, some students tried, in India and Guatemala, and failed. They had to beg and borrow to survive and they lost weight fast. India’s poor by this cut-off definition are at 300 Million. But wait, our GDP is growing at more than 7% and our ‘dollar billionaires’ are in double digits, just about, according to the Forbes List 2016. So we are okay, right?

That’s a question we – as human beings, citizens, policy makers, businesses – ask ourselves all the time. Of course, the definition of ‘we’ can be very narrow or very broad. If we take the nation state as a unit then the easiest measure to fall back upon is the Gross Domestic Product (GDP) of a country. It is easy to understand (if not calculate!) and amenable to comparisons with the past or with other countries (there are qualifiers, always!).

It is also amenable to ‘fudging’. An article on the Editorial page of the Economic Times, June 3, 2016, said, “At 7.6% India is the fastest growing economy or the best data fudger”. This refers to the disproportionately high ‘discrepancies’ that have arisen in the calculation of GDP this time around. There are two ways to get to the GDP – add up production or add up expenditure. There will always be a difference (discrepancy) between the two, for various reasons. But the media has gone to town over this because if one adjusts for the same the real rate could well be around 4%.

Well, 4% or 7.6%, they are missing the point. Shouldn’t they be asking, like the journal Caravan in their August issue, why this ‘Growth Fetish’? The questions we want answered are – Does growth in the GDP mean balanced development? Do most people have what it takes to lead a life of dignity? Are some people being left behind? How are our children doing?

The immediate response to the above is likely to be – well, India’s poverty is half of what it was 20 years ago: in 1995, 50% were below the poverty line and now there are only 24.7%. According to UN's Millennium Development Goal (MGD) targets, we are on track.

Having looked at Growth, let’s try to look at the ‘fudging’ around Gharibi. The World Bank revised its poverty line to $1.90/day, last year. This was no acknowledgement of how ludicrous the original, $1.25 poverty line, was but simply a rebasing of the line to account for the decreasing purchasing power of the dollar. The Bank claims that the new poverty line is roughly equivalent to the old line, in real terms. But in effect it is actually significantly lower and, therefore, makes it seem as though there are fewer poor people than before. A more ethical definition of poverty, devised by Peter Edward of Newcastle University at $7.40 a day (needed to achieve normal human life expectancy of 70 years), would increase the proportion of the global poor from 10% to 60%.

The early assumptions of a natural ‘trickle down’ have been debunked and Thomas Piketty’s magnum opus, “Capital”, points to increasing inequalities today, driven by the “tendency of returns on capital to exceed the rate of economic growth”. In the last 100 years data shows that after a steady decline from the peak of the late 1920s and a sharp downturn after WW II, the curve flattens for the next three decades and then the increase begins. The double spike in 2000 and 2007 is telling. And we are back to the inter-war levels. This tendency to generate extreme inequality is a matter of concern, for its potential to “stir discontent and undermine democratic values”.

Our own experience of ‘jobless growth’, stagnant wage levels, and growth of the informal sector, points to large scale, systemic exclusions from the fruit of economic growth. The construction sector, for instance, employs 44 Million people, accounting for 10% of total employment, with a 70-30 split between the unorganized and organized sectors. While all employment in the unorganized sector is informal in nature, large sections of the organized sector also have informal arrangements with labour. The informal sector in the industry, therefore, makes up for 98% of employment with no social security cover to talk about. Mobile Creches has experienced this exclusion through the decades, in the course of knocking on a thousand doors – of principal employers who commission the construction project, real estate developers, leading contractors of Delhi and Mumbai, labour contractors who bring the workers from rural interiors, labour ministries in charge of implementing labour laws and others who matter, who make decisions.

What the naked eye observes – villages without electricity, homes without toilets, children outside schools, garbage on the streets, little girls lining up for water from tankers, farmers committing suicides – doesn't look like growth. What the national data tells – anemic women, early marriages, absence of maternity support and underweight, malnourished and stunted children – doesn't sound like development.

Nobel Laureate Amartya Sen has been pointing out the contrast between India’s growing economy and its poor record on social indicators, especially endemic under-nutrition in children. At the release of the Focus on Children Under Six (FOCUS) Report, 2006, he reaffirmed the fundamentals: invest in the care, nutrition, education and health of our children, NOW.

Mobile Creches works for children of the informal sector workers – living on construction sites and urban slums. They have no role to play in the India Growth Story. And their gharibi – as in deprivation from resources, basic services, skills, decent homes, crèches and schools – is being fudged, in debates about discrepancies and redefinitions of poverty lines.

We need to change the plot.

#Mynameistoday, the Mobile Creches blog, will attempt to inform, provoke and connect, on issues of critical importance to our present and future.

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See also:

Thomas Piketty, “Capital – in the Twenty First Century”, Belknap Press of Harvard University Press, 2014

Abhijit V. Banerjee, "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty”, 2011

Jean Drèze and Amartya Sen, “Hunger and Public Action”, Oxford: Clarendon Press, 1989

John Steinbeck, “The Grapes of Wrath”, 1939