Poverty reduction in India: Mere words or doable?

Beyond boundaries

Outside China, which is a case in itself, are there democratic countries where millions have demonstrably been lifted out of acute poverty? As the debate continues in India about what constitutes poverty and whether a person can really subsist on Rs 32 a day, it may be worthwhile to look at other comparable countries with millions in poverty and their strategies to address the challenge. One such country is Brazil, where this writer is the Indian Ambassador.

There are good reasons why looking at Brazil has relevance and validity for us. Brazil is a huge country ( two and a half times our size), with a large population, the fifth largest in the world at nearly 200 million. It has a GDP comparable to India at around two billion dollars, but with a smaller population has a higher per capita income.

Above all, it is a fellow developing country with challenges in education, health, and employment generation apart from poverty. It is also a noisy democracy like ours, with a complicated coalition government, the executive and the parliament often at loggerheads, and with wide regional disparities from the mega towns like Sao Paulo to relatively backward eastern regions, much like our own. Political consensus is not won easily and Brazilians themselves will concede that corruption and inefficiencies are inherent in the system. It is all the more impressive then that with all these familiar features the poverty reduction figures show a positive picture.

In 2010, Brazil had less than 5 per cent of the people in extreme poverty, defined as living with less than 67 Reais per month or approximately around $1.25 a day that is the UN norm. The numbers below the line in 2010 were nine million as compared to fifteen million in 2004 and thirty four million in 1981.

These figures showed steady and significant reduction of poverty over two decades. Brazil uses another category of those who are called ‘poor’ as compared to ‘extremely poor’ and here again the data shows that millions had risen up from this category in the last five years. Brazil’s current target is to remove extreme poverty by 2014 and objective observers regard this as achievable. It is clearly a success story and therefore it is worth looking at some of the inferences drawn by Brazilian social scientists from their experience.

But first, we can derive some consolation from the fact that just as in India, in Brazil too, issues such as the figure for what constitutes poverty, whether it should be based on consumption or income, and if consumption, the portion for food etc. etc. are hotly contested among experts. It would seem that economists are as divisive on definitions of poverty as on how to redress it.

Notwithstanding the rigorous academic debate, there are some conclusions that Brazil’s think-tanks derive with regard to what has worked in reducing poverty.

Family benefit package
The central role of social policy: For nearly a decade Brazil has practiced the now famous Bolsa Familia ( family benefit package ), the innovatively designed scheme for conditional cash transfers. Under this scheme about 13 million of the most vulnerable families get cash support of a small amount provided they meet some conditions: children are vaccinated, attend schools, benefits to go the mother and so on, to make it effective.

The World Bank regards this scheme as the best designed program for poverty reduction through income support and the scope for corruption or wastage is minimal as there are no intermediaries. All the 41 million beneficiaries are seen on a list on the computers with their unique ID. The cash is obtained through a swipe card even in the jungles in the Amazon!

Other schemes, notably benefits for the elderly, disabled, and social security networks are targeted at specific groups to ensure that they stay above the extreme poverty line through income transfers.

Evidence shows that cash transfer through government schemes such as the above alone are not sufficient to make a family stay above the poverty line. Some connection with the labour market is also essential for at least one member of the family. Work, whether agricultural, casual or informal is a requirement and hence social policies look at what the economists term as the `productive inclusion’ of all segments. A minimum wage work for at least one in the family and some support for the elderly and the children should lift a family above the line of extreme poverty.

Brazil has been growing at around 4 per cent in the last five years. Economic growth is good in itself but evidence seems to suggest that by itself cannot result in poverty reduction without social intervention. Inclusive growth is hence the mantra as it is with us.

My talks with analysts and economists also showed that Brazilians had arrived at a near consensus on social policies aimed at elimination of hunger and alleviation of poverty. Interestingly no one was arguing that supporting the extreme poor made them permanently depend on subsidies, a belief sometimes held by ultra pro- marketeers.

On the contrary, most believed that to break the intergenerational transmission of poverty i.e. the inability of families to escape the trap of poverty from one generation to the next without access to education and employment, a supporting hand was necessary.

As one economist told me: “With a mere one percent of the GDP being spent on targeted programs, absolute poverty can be removed from Brazil by 2014 and we can certainly afford that”. No two countries are alike and no one solution fits all, but Brazil’s case shows that poverty reduction is a matter of deeds and not only words.

(The writer is India’s ambassador to Brazil)