When the government publishes the data for the 2022-23 Household Consumption Expenditure Survey (HCES), India will see a big debate on consumption levels, inequality and poverty. The debate, when it starts, is likely to be extremely technical in nature. At the core of it will be the comparability, or lack (of), of the current HCES with the previous CES rounds on account of the change in methodology. To be sure, even the National Sample Survey Office (NSSO) is conducting another round of surveys in 2023-24 to see whether the results obtained in the 2022-23 round are statistically robust. A report in the Indian Express suggests that the ministry decided to go ahead with that even though there was a difference of opinion on whether it should be done.
When the government publishes the data for the 2022-23 Household Consumption Expenditure Survey (HCES), India will see a big debate on consumption levels, inequality and poverty. The debate, when it starts, is likely to be extremely technical in nature. At the core of it will be the comparability, or lack (of), of the current HCES with the previous CES rounds on account of the change in methodology. To be sure, even the National Sample Survey Office (NSSO) is conducting another round of surveys in 2023-24 to see whether the results obtained in the 2022-23 round are statistically robust. A report in the Indian Express suggests that the ministry decided to go ahead with that even though there was a difference of opinion on whether it should be done.
Nerdy debates on consumption or poverty statistics in India, to be sure, are nothing new; these have been some of the most fiercely debated economic issues in post-reform India. At the crux of it is the direction of poverty and adequacy of poverty lines in the country. This author has no intention to either reiterate what this debate has been in the past or pre-empt how the publication of HCES data might change its contours going forward. What is of concern for this edition of the column, is a question which might not interest nerds but is extremely important for the trajectory of Indian democracy.
What role has the Great Indian Poverty Debate, as the discussion on poverty in the economic literature is often referred to, played in the country’s political economy? The defining characteristic of this dialectic is a growing gap between the conclusions of economists and politicians in the country.
There is almost a unanimous consensus among economists on the fact that poverty (as it is defined in technical reports) has continuously fallen in India from 1993-94 onwards in every CES round. Now, if governments had taken these statistics at face value (never mind the political rhetoric on the statistics) they should have cut back on spending on the poor.
The actual evidence is complete to the contrary. Politics, at least after the shock defeat of the Atal Bihari Vajpayee-led National Democratic Alliance (NDA) government in 2004, has been allocating more resources to the welfare of the poor rather than cutting back on such spending. From the Mahatma Gandhi Rural Employment Guarantee Scheme and the National Food Security Act (NFSA) under the United Progressive Alliance (UPA) era to the Narendra Modi government significantly expanding the scope of asset transfer programmes such as government housing, toilets, LPG cylinders, piped water and starting direct income transfers to farmers, the evidence of the government taking on more fiscal burden to cushion the poor is unambiguous. In fact, once the interventions of state governments are taken into account, the fiscal ballast which has been used in the anti-poverty battle will be even bigger.
What explains this counter-intuitive phenomenon of governments spending more and more money to support the poor when evidence shows that poverty has been falling significantly and is likely to have become near extinct in India? While the nerd can always go back to the various approaches — both statistical and philosophical — to look at poverty and make an intellectual case for a significantly higher poverty line in India (Surjit Bhalla, in fact, has been making this argument in the recent past), the political economy explanation of it is more exciting and intellectually stimulating in this author’s view.
Even though it is far from what a welfare state ought to be, the growing envelope of welfarism in India at a time of supposedly falling and now almost extinct poverty is a triumph of democracy over neoliberalism in India. Markets left to themselves after the 1991 economic reforms have generated a lot of tailwinds for the incomes of classes with access to either material or intellectual capital in India. But for the vast overwhelming majority of the poor, who continue to be deprived of both kinds of endowments, this has only replaced the economic precarity associated with feudal bondage with the economic precarity of footloose labour.
Unless the state steps in to cushion their livelihoods in some way or the other, it will become very difficult for this class to even ensure basic subsistence. The result would be a strong political backlash against the underclass.
If one were to use Marxist jargon, the growing ambit of support to the poor is nothing but the state paying a part of the social reproduction cost of labour in the Indian economy. This support has to increase when this precarious mass of the poor faces new costs or an exogenous shock to their incomes. More states promising subsidies on utilities such as transport, water and power and the government giving extra rations or cash transfers during the pandemic are clear examples of this.
It is exactly this route that the politics around poverty is going to take in India irrespective of whether or not we have intellectual consensus on the poverty ratio from the 2022-23 HCES round. Not only are we not going to see a rollback of existing anti-poverty programmes, but there will be more pressure on governments to expand the welfare net to other heads of household consumption. In fact, one can also argue that the next generation of have-nots in India are unlikely to be satisfied with just getting a free ration as their universe of aspirations is increasingly being shaped by the conspicuous consumption of the rich in the country which, no matter what the statistics show, has increased at a very fast pace in the last decade or so.
To summarise, the inherent class tension in India’s political economy landscape will only increase rather than decrease going forward despite what happens to official poverty numbers. What is less certain is whether the state’s fiscal resources will grow fast enough to contain them and maintain a balance of macroeconomic and political stability. Winning this battle for good requires a much more hands-on engagement with the nature of capitalist development in India rather than using a part of the revenue to oblige the poor. After all, it is the former rather than the latter which is the mothership of income and inequality in any modern economy.
Roshan Kishore, HT’s Data and Political Economy Editor, writes a weekly column on the state of the country’s economy and its political fallout, and vice-versa. The views expressed are personal.
