February 03, 2005

7.1 per cent at a blow

As it was meant to, the headline caught my eye. This morning in the Times of India, front page: "India's per capita income rises by 7.1 per cent". This is a paper that frenetically roots out cheery news about India, so by now I'm conditioned to expect only that kind of news in it. And this headline nicely fits that expectation.

Only, the copy below it doesn't quite measure up. "India's per capita income rose sharply by 7.1 per cent in real terms", it starts, promisingly enough, but the next words give it all away. That per capita income rose sharply by 7.1 per cent in real terms -- "to Rs 11,799 in 2003-04." The rise was "from Rs 11,013 the previous year". (All italics mine. The numbers, and thus the "real terms", are calculated at 1993-94 prices. You'll find the report here).

A sharp increase, 7.1 per cent? Well, that's what the headline-writer wanted you to think. But think about it some more, won't you? The average Indian earns just short of Rs 12,000 a year. That's about $280. Less than a dollar a day; in fact, about 75 cents, Rs 30, a day. If you, reading this, are earning an Indian salary, stack your earnings up against that per capita income and then give a thought to how many Indians earn not just less than you do, but less than seventy-five cents a day. (Much less). How many of them does it take to drag our per capita income down to there, from the rarefied salarial heights you -- yes, you -- occupy?

Many indeed.

This line of thought takes me back to a letter I got a few years ago from a man in Kolhapur District, Maharashtra. The letter wasn't directly to do with per capita income; yet in some ways, it was. See for yourself.

The man runs an organization there that has a sanitation programme in six villages. He begins: "One of the basic imperatives of civilised existence is proper sanitation. According to a recent finding only 6 percent [of] Indians have access to a toilet. This fact must shame a country boasting five thousand years' continuous civilisation. ... Therefore [this] sanitation programme is a priority for us."

By the time he wrote, his outfit had built 125 family toilets at Rs 4,800 each. This cost was met by a government subsidy of Rs 3,500 for those below the poverty line, Rs 2,500 for others, with the beneficiary contributing the rest. He wrote to me and others to share his experiences and conclusions. These were, "to put it moderately, thought provoking."

In his own words, which are far more effective than any paraphrasing I might attempt, here are four of his conclusions:

  • Every village is riven with groups [reflecting] the political groupings at the District level. The village panchayat [council] is controlled by one group while the other either sulks or becomes blindly antagonistic. ... The group out of power whips up opposition against the ruling group, even on a non-issue like toilet construction. We also found ostracised minority groups [with] sober and enlightened elements, uncorrupt and inbued with a zeal to do good.

  • The Sarpanch [council head] and the ruling coterie is crassly selfish and ... corners illegally the benefits to themselves.

  • In one village [we found] that the subsidy for [those] below poverty line was distributed at Rs 2,500 per unit [instead of] Rs 3,500. Obviously, the difference was pocketed by the ruling coterie.

  • Four hundred million [Indians] go to sleep on an empty stomach. ... The per capita consumption of milk of the 250 million at the lower poverty levels is 25 gms a day. Yet the rulers ... hold forth glibly about the national Milk Flood. ... Planning and development without distributive justice in a democratic polity is a fraud. The enormity of this inequity is unparalleled in the annals of human history.

Let me pick out one little item from there: whole milk, these days, is about Rs 20 a litre. Not a number to make you or I perspire. But if someone earns less than Rs 30 a day, how much do you think she might spend on the white stuff?

Enough, evidently, to buy 25 grams of it.

But there's been this "sharp" rise of 7.1 per cent, has there not? So this less-than-Rs-30-person is now likely buying just under 27 grams of milk a day. Drink up, lady!


Postscript: The real reason I wrote this up was to make the point that we don't often understand such words as "per capita" and "average." Who is the "average" Indian, after all? Me? My daughter? Altaf who runs the corner store? You, getting ready to comment on this? The woman who lives in the flower-bed next to Altaf's store? Are we all average? Is income what we should use to define "average" in the first place?

I don't know.

But here's an example of what I am getting at. Today's Times (Friday Feb 4) comes with the weekly supplement called "Times Drive", which as far as I can tell is advertising wrapped up as car reviews. That aside. The lead article is about an ugly thing called the Hyundai Tucson, and that lead article begins with this sentence:

  • Ten years ago, if you asked the average Indian which car he would like to own, the response in most cases would have been Maruti. [Italics mine]

Hmm. If by average Indian this writer means an Indian who earns our per capita income of Rs 11,799, I'm not sure the response would have been "Maruti." Because the cheapest car available in India would set him back about 20 times his annual income. Given that, I think this average Indian's response might have been closer to "Don't make me laugh."


Anonymous said...

Yes, Dilip, we all know there are poor people in India, and your post is hardly an eye-opener. So what's your point exactly? What would you like to be done, what policy changes would you like our government to make, how much should the per capita be, how can that be achieved? Use your blog to address these issues in a constructive manner instead of going on and on about poverty. We all know it exists. Now instead of repeating the problem ad infinatum, tell us the solution.


Dilip D'Souza said...

Neela, a small clarification. "Per capita" already means "average".

I don't know how to tell you what a "minimum per capita should be." I don't know what "should" means in this context. Per capita incomes are just that, per capita incomes. Plus there are some caveats I will get to below.

Still, I think I know what you are trying to get a handle on. I would imagine that in a city like Bombay, Rs 40,000 is a reasonable individual annual salary (per capita). This is entirely off the top of my head.

Sriram, I'm willing to be corrected, but I find it hard to believe that in the '90s, your father earned "only a little bit more than" Rs 12000 a year. Are you sure you don't mean a monthly salary?

As for "ostracized minorities", those weren't my words. I think what my correspondent meant by them was that caste and religious issues played a part even in such an innocuous thing as building toilets. And even so, there were some groups who did just what you say: built their toilets or whatever else regardless.

Somesh, the whole point ("exactly") of my piece is that we don't all know that there are poor people in India, we don't all know poverty exists. Please see, for example, my postscript above.

What I would like to see done, policy changes and so forth, are matters for another post, another article, some of which I have written about elsewhere, some of which I'll write about here in the future. This post was just to draw attention to that per capita.

I should say, I also see this piece as a follow up to my Ambujwadi pieces. What happened in Ambujwadi, what is happening to slums across this city as I write this, is one sure way to increase poverty; thus to decrease per capita income.

Dilip D'Souza said...

The caveats I mentioned in the previous comment:

1) First of all, I believe this Rs 11,799 figure is a per capita individual income, not for a family. That makes a difference.

2) A direct comparison with dollars and cents is not entirely correct. This is why such figures usually speak about "purchasing power parity" (PPP); meaning you should look at them in terms of what they can buy. The conventional wisdom is that in PPP terms, per capita income in India is more like four or five times its absolute value. (Someone please correct me if I've got this wrong).

Dilip D'Souza said...


Believe me, the purpose of this post was not to make you or anyone feel bad. Feeling bad doesn't make a dent in poverty nor should it. Poverty just is -- it is a matter for feeling bad only if wealth is also a matter for feeling bad. My feeling is that poverty must be tackled, first of all, not out of shame or guilt; but just as an issue that needs attention.

7% is indeed sharp, and you are right to make that point and remind guys like me of it. There is gloom, but there are also silver (well, at least brass) linings.

But I couldn't disagree more on laws to control population -- but my disagreement is not on the grounds of freedom. Yes, our enormous population is the reason per capita income is so low, but laws are not the most efficient way to curb population growth.

For one example: Amartya Sen has shown (I think in his "Poverty and Famines" book) that over the same period of some 40 years, Kerala did better at reining in population growth than China did. (Tamil Nadu was close).

China went about it with laws; Kerala with an emphasis on universal education (especially for women) and health care. Besides, China is now saddled with the fallout of those laws -- a badly skewed sex ratio, for starters.

Dilip D'Souza said...

Vasanth, the 2001 census showed Kerala has a sex ratio of 1058 (1058 women per 1000 men): compare to the national ratio of 933. (see here).

Part of that is attributable to the large number of Kerala's men who live, for example, in the Middle East. Thus a better indication of the sex ratio is the ratio among children 0-6 (which also gives an idea of what the future will be like): according to this table that ratio in Kerala is 960 (960 such girls per 1000 boys) -- lower than, in the main, only the northeastern states; and comfortably above the national ratio of 927.

China's child sex ratio in 1990 was at 898 and falling. Worse still, the sex ratio at birth in 2000 was at 856. (see for example this report).

There are all kinds of interesting and alarming consequences of a badly sweked sex ratio. For some speculation on some of it, do read what I wrote here.

Finally, I'd like to say that Kerala did not emphasize education and health in order to "control the population growth", nor was it my intention to imply that. That emphasis was merely a recognition that that's the best way to "develop." Curbing population growth is a side-effect.

Dilip D'Souza said...

Sriram, I couldn't agree more with you about the role of government, and about richphobia. But that example from Kolhapur I mentioned had nothing to do with government, apart from taking advantage of an announced Government subsidy. A private organization built those toilets using the help of the locals who would benefit from them. I think that is precisely the formula that can and will work. There are others like it in other fields too.

Yet one point the man from Kolhapur was making was, even with this private initiative, there are caste and religious equations at play, there is corruption at play, there are political rivalries at play.

Dilip D'Souza said...

But Vasanth, I don't know what we are disagreeing on. I fully agree that the political class has failed us. We want change, there will have to be less government and more individual, local initiative. As I mentioned to Sriram just above, I think that Kolhapur example shows just that.

But there are two points I want to make.

One, it's no use simply reviling politics and politicians. At some point, you cannot escape politics: that's what societies and countries are about. The middle-class, people like you and me who loathe our politicians, will have to get involved in politics, and electoral politics. The challenge is in using the realities of electoral politics -- that politicians must, of necessity, be focused on winning the next election -- to bring about the changes or reforms we all seek.

Two, education is key, but I'm surprised you focus on higher education. In fact I believe the future of this country depends on how well we can make quality primary education available and affordable to every Indian child. Not everyone need go to college; but I think it is vital that everyone goes to a reasonable primary school, at a minimum.

Dilip D'Souza said...

Honest PP:

Your post is misleading. 1. The 12K figure is at 1993-94 prices.You're right, of course, and thank you for pulling me up on this. The 12K figure is at 93-94 prices, so when I converted to dollars, I should have used the 93-94 dollar exchange rate, not the current one.

2. Per capita GDP (above is GNP) is near $600.Actually this raises a whole other debate on the efficacy and worth of GDP (both by itself and vs GNP). But that, another time. The point is well taken, though.

As I said somewhere above, there is gloom, but guys like me should be reminded that there are also silver linings.

Anonymous said...

Dilip, I appreciate your post except for some technical mistakes. Per capita is 12000. This means that a family of 4 earns 48000. So things are not really as bad as you think. If the per capita is 21000 then a family of 4 earns 84K pa. which is frankly speaking a comfortable amount. The actual problem is that this is the "average" income of a family of 4. I suspect the median is much lower. What I mean is that the super rich boost the average by a significant amount. I suspect the median (earnings of a family of 4 at the 50th percentile) would be closer to 42K than 84K pa

Dilip D'Souza said...

Anonymous, you're right re: family income vs individual income, and this is the point I made in one of the comments above where I spoke of caveats.

And you're also right, it did strike me that the median income would be a better measure than per capita. Oddly enough, walking home from a tennis game last evening I was puzzling over just this, and wondering where I can find out the median income. Any pointers?

Anonymous said...

I dont know how GDP is calculated, but one way would be to sum up all the financial transactions that have taken place. Since each transaction is expenditure for one party and income for the other, the net sum divided by popln gives the per capita income. In such a methodology it can be very difficult to calculate the median. Also, illegal & informal transactions get skipped. The only reasonable way to estimate median income would be perhaps to conduct an extensive survey and extrapolate.

Dilip D'Souza said...

> I dont know how GDP is calculated,
> but one way would be to sum up all
> the financial transactions that
> have taken place.

This is in fact just how GDP is calculated: it is a sum of all the financial transactions. Which is why it is an unsatisfactory indicator of economic health, if still a popular one.

This is a thread to explore some other time. But there are people who are looking at different kinds of indicators. For example, there's the Genuine Progress Indicator, from the California group Redefining Progress. Take a look at what they are talking about.

Anonymous said...

hi all

dilip i m very sorry to say that the post is nothing more than the work of an idle mind...most probably that of a professional in n office in the middle of the month with little or no work.

i agree with sriram in totality when he says (in his words) that most of the poor of our country or for that matter of this world r poor bcos of their own shortcomings. i say "most", for i belive a certain percentage of them has been playing on extreeeeeemely unequal grounds (e.g. the blacks in SA's apartheid regime, the dalits in our country etc.)

about the nos. , per capita income is just one of the ways of measuring a country's economic condition and we can never deny the importance of this figure. wot ur article talks bout is disparity, and there are HAZAAR ratios and figures calculated to measure that.

tamuj nothing to feel bad about, for u deserve wot u have. u or ur father or his father must have slogged his heart out for this to happen. about solutions, population is a real big issue but recently TOI (the same newsapaper, an article in which kicked off the whole debate here) ran a story titled "Thank God, we failed in population control"...pretty interesting reading. and believe me if u guys have seen the BRICs report by GldmnSchs u will see how this "drawback" will act as our greatest strength in the coming years. nowhere here m i saying that we should throw all the rubber we have in our cupboards and start producing as many children as possible. all i wanna convey is that we r not in the pit that we r in and hence there's no cause to rue over our population figures. in one sentance, we are yet to cross the line of danger on the population front and lets ensure that we never do that.

nasi gud work correcting the figures...thanks for u saved me the effort.

in the end... my kinda solution (please know that i idolise hitler and think that nathuram was no lesser a patriot than the man he killed) for the prob is make sure that every1 in the country works according to the best of his capability using the baton if the need be... count all frauds with national funds equal to treason punishable by death or tortured life imprisonment and stop bowing to international pressure the way CHINA did.