[India] PHDCCI offers suggestions for poverty alleviation in India

From New Kerala Online

New Delhi: Even as the Planning Commission has begun an exercise to prepare the Approach paper to the Eleventh Plan(2007-12), PHDCCI came up with wholesome advice on how the government should go about its job of reduction of poverty to ten per cent by the terminal year of the plan, chief of this being that poverty eradication should not mean "a mindset of business as usual." ''What is needed is a holistic approach to poverty reduction,'' Mr Bibek Debroy, the new Secretary General of PHDCCI said in a statement here today.

Mr Debroy, a well-known economist who was till recently with the Rajiv Gandhi Foundation, said poverty reduction to this level will not be possible unless the government creates a congenial environment for growth and improves the delivery mechanisms for anti-poverty programmes.

The first draft of the Approach Paper to the Eleventh Plan (2007-12) reportedly proposes a target all-India poverty ratio of less than 10 per cent by 2012. This compares with the figure of 26.1 per cent for 1999-2000 and the Tenth Plan's target of 15 per cent by 2012.

The Chamber noted that between 1993-94 and 1999-2000 there was a remarkable poverty reduction, thanks largely to the trickle down effect and thrust on anti-poverty programmes.

''Though the target of single digit income poverty ratios in 2012 is a welcome target to have, this will not be possible unless the government creates a facilitating environment for growth and improves delivery of its anti-poverty programmes. When the full-sample NSS figures are available, we will probably find that in 2005, the poverty ratio is around 21 per cent,'' Mr Debroy said.

Roughly speaking, the elasticity of poverty reduction to growth has been of the order of 0.7.

''Even a 10 per cent growth between 2005 and 2012 will not get us to 10 per cent poverty in 2012, unless the composition of growth changes,'' Mr Debroy said.

First, growth must be enhanced by providing a facilitating business environment for private entrepreneurship to blossom. This includes a stable tax regime and flexible labour laws, spliced with upgradation of skills. Second, reforms in the rural sector are necessary to broad-base growth and reduce rural poverty. The elasticity of poverty reduction is higher for increases in rural incomes.

Mr Debroy emphasized that agricultural diversification and commercialization must be encouraged by stimulating off-farm employment.

Third, since poverty is not only about income poverty, public expenditure on education, health and rural infrastructure must be made more efficient and accountable. This was particularly important because the UPA government plans increases in public expenditure through 'Bharat Nirman' and 'Rural Employment Guarantee programmes.' Fourth, there must be greater attention to poverty reduction in backward States like Bihar, Uttar Pradesh, Jharkhand and Orissa and backward districts.

Finally, there was a case for redefining the poverty line, since it was constructed on the assumption that education and health would be taken care of by the State and should therefore not figure in personal consumption expenditure calculations. This was no longer the case and private expenditure on both have increased in the 1990s.

Therefore, the thrust should be on facilitating private sector participation in both physical and social infrastructure sectors, sometimes through public-private partnerships.