Why UPA years can be termed as Golden period for poverty reduction in India?

During his farewell speech on May 15^th 2014 Manmohan Singh commented that “History will be kind of him”. Well I can’t be sure about the History but Poverty reduction data is certainly Kind to him and his Government.  Manmohan Singh led UPA ruled over India for 10 years. This 10 year tenure has been subject of debate among experts with many of them criticizing it for its dismal record on fighting corruption, policy paralysis specially in its last 2 years and dual centres of power etc. Well certainly there is some truth in each of these allegations. However most of these experts will agree with me on this fact that India witnessed significant reduction in poverty during the UPA years which is dubbed as the worst Government India ever had by Modi and his Bhakts. Even the Chief Economic Advisor of the incumbent Government Arvind Subramaniam commented in 2015 that in the last few years, our economy has not done as badly in reducing poverty as some people will have us believe .He also said that the rate of poverty reduction achieved during the five-year period from 2005-2006 to 2011-12 was the fastest in the history of the country.

Let’s first bring out official data to confirm whether there is any truth in what Arvind Subramaniam said in 2015.

According to the Planning commission data based on Tendulkar Committee poverty reduction from 1999-00 to 2004-05 was 0.85% points per annum. This jumped to 1.3% points per annum between 2004-05 and 2009-10 and 2.2% pts per annum between 2004-05 and 2011-12.

Thus speed of Poverty reduction was three times faster between 2004-2011 in comparison to 1999-2004 period.

Even a World Bank study released in 2016  has said that the India’s national poverty rates fell much more sharply between 2005 and 2012, when the UPA government ruled the country, compared the decade between 1994 and 2005.

What is even more surprising was the fact that poverty reduced at a comparatively slower rate between 2004-10 followed by sharp and unprecedented reduction between 2010 and 2012 which coincided with the tenure of UPA 2 which is much criticized by experts for policy paralysis.

Which Factors contributed to this Trend?

(a)   High GDP Growth: India's GDP growth for the period 2005-2011 had been phenomenal. It remained above 8% for most part of this period and even breached the 10% mark (highest growth ever) before it started to decline: 

 High tax revenues which were the result of higher growth rate allowed the government to undertake significant expenditure on social sectors high. 

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Secondly one of the major initiatives undertaken by the government was the Mahatma Gandhi National Rural Employment Guarantee Scheme (commonly known as MNREGA).
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The World Development Report 2014 described the Mahatma Gandhi National Rural Employment Guarantee Act as a "stellar example of rural development"

This law creates an entitlement of 100 days of unskilled employment per year, at minimum wage, to all workers in rural areas who demand it. The law also provides for social audits and redress of grievances," the report states, while noting that the programme served as an instrument of providing a safety net for the poor.

"One of the key achievements of the Mahatma Gandhi NREGA has been that it has provided the rural poor with a safety net during times of adversity such as droughts, floods or a failed harvest. Demand for work is massive, mostly from poor and disadvantaged groups, and at times of the year where no other work is available. Not only does the programme offer a useful safety net, but it also helps spread awareness of rights and promotes dignity. The most significant aspect which makes the Mahatma Gandhi NREGA stand out as an employment creation and poverty alleviation scheme is the fact that work is provided as a legal right and not just a one-time scheme.

(a)   ~World Development Report, 2014
 

Thirdly there was better implementation of social sector schemes which not only increased the access of these schemes but also led to significant reduction in leakage in the landmark schemes like PDS ,Mid-Day meal and MNREGA. As data from  NSS 68th round  indicates that Overall, the national percentage of households accessing PDS cereals, that had declined from 27% in 1993-94 to 24% in 2004-05, increased to 39% in 2009-10 and further to 45% in 2011-12. Simultaneously, grain leakages which had jumped from 28% in 1993-94 to 55% in 2004-05 reduced to 40% in 2009-10 and further to 35% in 2011-12.

The importance of entitlements like PDS and mid-day meal in reducing poverty can be deciphered from a Planning commission paper written by Himanshu and Abhijit sen .According to their paper  between 1993-94 to 2004-05, out of 0.85 % point poverty reduction p.a. 0.73%pt was due to income growth and rest due to PDS &MDM. Between 2004-05 to 2009-10, out of 1.28 %point poverty reduction p.a., income component was 0.87 %point only while rest all came from PDS and MDM. This shows the importance of PDS and MDM extension in accelerating rate of poverty reduction.

b) However, 2009-10 was a severe drought year where incomes were highly depressed. If we look from 2004-05 to 2011-12 where poverty reduction was 2.2 %point p.a., 1.6% points came from income growth and remaining 0.6% points from PDS. This means nearly 30% of poverty reduction happened because of PDS and MDM (despite all the leakages). Poverty ratios would be ~4.8% points higher (i.e. close to 27% instead of 22%) if there were no PDS and MDM.

Fourthly terms of trade began to shift in favor of agriculture since 2004 and it continued till 2012-13.Terms of trade shift was also responsible for high inflation during UPA years however it significantly increased the income of farmers and since still around 46% of our population are farmers, this contributed to massive reduction in poverty rates.

Fifthly real wages rose sharply in India during the UPA years. Thus during the period 2007-10, the average cumulative real farm wage rates increased by 16.0% at the all India level while between 1999-00 to 2004-05 the rise was 0.6% only.

Sixthly increase in budgetary allocation and wider coverage of social sector schemes like ICDS, Janani Surakshana Yojana,Janani Shishu Suraksha Karyakaram and NRLM also played an significant role in reducing poverty.

Seventhly the world bank study reveals that Poverty reduction in India was fueled by rising consumption levels, while consumption inequality remained more or less stable since 2005” “Consumption inequality measured by the Gini coefficient, after rising appreciably between 1994 and 2005, has remained almost unchanged in both rural and urban areas since then.”
“Consumption growth of the bottom 40% averaged an anemic 0.8 percent per year between 1994 and 2005, and increased four‐fold to 3.3 percent per year between 2005 and 2012, averaging more than 5 percent annually during the last two years of this period”,

These figures presented above certainly refute the allegations of many Right-Wing supporters in India that the period between 2004-2014 was an era of Dark Age. If Manmohan Singh would have done even  50% marketing of what Modi is doing of his flagship programmes and achievements certainly Congress would have surely touched three figures in 2014 General elections. But as we all know that he was a through Gentleman who worked not for publicity or cheap gimmicks but for the betterment of the nation, first as a beauracrat and later as Finance Minister and Prime Minister of India. While people may or may not be Kind to him in future but I am pretty sure that history will definitely be kind to him.