China has been far more successful in reducing poverty and is bringing more people under its welfare schemes. India’s record is pitiable, and explains why we consistently falter as compared to our neighbour
Like most developing countries (emerging economies included), China’s own defined poverty line was much lower than the one defined by World Bank. But China has made an attempt for reparation and to remain close to the World Bank’s estimate of $1.25 a day – by raising the poverty threshold by 80% from 1,274 yuan a year in 2009 to 2,300 yuan a year (equivalent to $362)! This historic decision has raised the number of poor to 128 million over just 26.88 million last year and is a volte-face from the earlier stand of deeming just 2.8% of the rural population to be below the poverty line (US has 15%).
However, there is a very interesting note to this move: the new poverty line applies only to the rural population! Probably it is a ploy to stem massive migration from rural to urban centres by providing them a spate of benefits in economic and social spheres; thereby restricting them to their ancestral places.
The addition of poor people to the poverty line is complemented by a buoyed budget towards the poverty reduction fund, which rose by 21% and touched 27 billion yuan. Therefore a new and bloated target group has been defined wherein the Chinese government will set its focus on to the deliverables that will lift them out of the clutches of poverty. They target alleviation of poverty as the core objective, which will also help bridge the widening income gap.
As the government in China is an authoritarian regime, it cannot afford such economic disparity that can eventually lead to a political and social backlash in the near future. Recently, Hu Jintao, President of China, categorically emphasized the government’s strong intent to provide not only food and clothing but also bring the major social sector factors like compulsory education, health care and proper housing to poor doorsteps by the year 2020 [sound quite ambitious?] in a keynote speech. China’s veritable intent towards eradicating the evil of poverty in the country is worthy of applause – as it is a rare instance of a dictatorial regime providing better governance than most of the democracies in developing (and even some developed) economies!
India, on the other hand, is a glaring example of sloppy policy making. An embarrassed Dr.Manmohan Singh had to show a bold face while defending the Planning Commission’s bummer — an irrational new definition of the poverty line for India — the measly Rs.32 per day for urban population and Rs.26 a day for rural population. This new poverty line has been rejected by all and has become a laughing stock for political opponents of the government! While China is embracing more people under their network of social and economic welfare, India is doing just the opposite! Stripping more and more people from welfare schemes can be the only rationale to explain such a ridiculous act! In hindsight, India could also be trying to hide the 400 million who still live on less than $2 a day!
Unlike India, China has reduced poverty in the real sense and not just by merely manipulating the poverty line, with spectacular results! It has brought an umbrella of welfare initiatives for the needy, generated employment, brought in agricultural reforms, built advanced infrastructure, provided facilities of microfinance, and attracted investments in the manufacturing and service sectors — thereby lifting almost 500 million people out of abject poverty. China has been successful in reducing the dominant role of agriculture in providing employment by creating alternative source of livelihood even in the rural areas. Advanced technologies used in farming have ushered in higher productivity for the farmers: a cornerstone in reducing poverty in its vast rural belt. This has been made possible because of crisp and transparent public spending in agricultural research, infrastructure, education, public irrigation and micro-credit facilities! Uniform distribution of public funds was eventually accomplished, even though there were hiccups in between. And most importantly, capital formation resulting from a mercurial rate of investments shot up to 45% of GDP. The domestic savings spurt is the direct consequence of that and it has further gone a long way towards implementing poverty eradication policies. Since the opening of its economy in 1978, fund flow has been thick and fast, especially in the manufacturing sector. The sector has a corroborated growth rate that can catch up with the best in the world at 9.9% in 1980s and 10.3% in 1990s. Manufacturing sector growth between 1980 and 2002 was a humongous 11.3% while service sector was close on its heels with 10.4%.
It is paradoxical that worldwide media attention is focused on China’s manufacturing sector and largely ignores its service sector as a non-entity – when in reality, the latter has registered a growth rate, which surpasses India’s much famed services boom! Another crucial Chinese model that succeeded and is a subject of a case study is China’s rural industrialization led by its rural entrepreneurs called Township and Village Enterprises (TVEs) that contributed generously for the country’s rural prosperity. This growth story is not only circumscribed to local area development, but also has forward linkages with agriculture and social sector development! The model has raised rural income, created opportunities outside agriculture & reined in rural migration.
However, there is a very interesting note to this move: the new poverty line applies only to the rural population! Probably it is a ploy to stem massive migration from rural to urban centres by providing them a spate of benefits in economic and social spheres; thereby restricting them to their ancestral places.
The addition of poor people to the poverty line is complemented by a buoyed budget towards the poverty reduction fund, which rose by 21% and touched 27 billion yuan. Therefore a new and bloated target group has been defined wherein the Chinese government will set its focus on to the deliverables that will lift them out of the clutches of poverty. They target alleviation of poverty as the core objective, which will also help bridge the widening income gap.
As the government in China is an authoritarian regime, it cannot afford such economic disparity that can eventually lead to a political and social backlash in the near future. Recently, Hu Jintao, President of China, categorically emphasized the government’s strong intent to provide not only food and clothing but also bring the major social sector factors like compulsory education, health care and proper housing to poor doorsteps by the year 2020 [sound quite ambitious?] in a keynote speech. China’s veritable intent towards eradicating the evil of poverty in the country is worthy of applause – as it is a rare instance of a dictatorial regime providing better governance than most of the democracies in developing (and even some developed) economies!
India, on the other hand, is a glaring example of sloppy policy making. An embarrassed Dr.Manmohan Singh had to show a bold face while defending the Planning Commission’s bummer — an irrational new definition of the poverty line for India — the measly Rs.32 per day for urban population and Rs.26 a day for rural population. This new poverty line has been rejected by all and has become a laughing stock for political opponents of the government! While China is embracing more people under their network of social and economic welfare, India is doing just the opposite! Stripping more and more people from welfare schemes can be the only rationale to explain such a ridiculous act! In hindsight, India could also be trying to hide the 400 million who still live on less than $2 a day!
Unlike India, China has reduced poverty in the real sense and not just by merely manipulating the poverty line, with spectacular results! It has brought an umbrella of welfare initiatives for the needy, generated employment, brought in agricultural reforms, built advanced infrastructure, provided facilities of microfinance, and attracted investments in the manufacturing and service sectors — thereby lifting almost 500 million people out of abject poverty. China has been successful in reducing the dominant role of agriculture in providing employment by creating alternative source of livelihood even in the rural areas. Advanced technologies used in farming have ushered in higher productivity for the farmers: a cornerstone in reducing poverty in its vast rural belt. This has been made possible because of crisp and transparent public spending in agricultural research, infrastructure, education, public irrigation and micro-credit facilities! Uniform distribution of public funds was eventually accomplished, even though there were hiccups in between. And most importantly, capital formation resulting from a mercurial rate of investments shot up to 45% of GDP. The domestic savings spurt is the direct consequence of that and it has further gone a long way towards implementing poverty eradication policies. Since the opening of its economy in 1978, fund flow has been thick and fast, especially in the manufacturing sector. The sector has a corroborated growth rate that can catch up with the best in the world at 9.9% in 1980s and 10.3% in 1990s. Manufacturing sector growth between 1980 and 2002 was a humongous 11.3% while service sector was close on its heels with 10.4%.
It is paradoxical that worldwide media attention is focused on China’s manufacturing sector and largely ignores its service sector as a non-entity – when in reality, the latter has registered a growth rate, which surpasses India’s much famed services boom! Another crucial Chinese model that succeeded and is a subject of a case study is China’s rural industrialization led by its rural entrepreneurs called Township and Village Enterprises (TVEs) that contributed generously for the country’s rural prosperity. This growth story is not only circumscribed to local area development, but also has forward linkages with agriculture and social sector development! The model has raised rural income, created opportunities outside agriculture & reined in rural migration.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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