GDP | kracktivist

#India- Inequality matters #poverty,what statistics say

Radhicka Kapoor

Posted online: Tuesday, Mar 05, 2013 , FE

Given the average GDP growth of 8.5% during FY05 to FY10, the Eleventh Plan target of reducing poverty by 2 percentage points a year was disappointing

That poverty in India has declined between 2004-05 and 2009-10 is indisputable. Poverty estimates based on the Tendulkar poverty line released last year indicated that poverty headcount ratio declined by 8%, 4.8% and 5.7% in rural, urban and all-India, respectively, during this period. This worked out to an annual decline of 1.64% and 0.92% in rural and urban India, respectively. Given that the average growth rate of GDP during this period was about 8.5%, exceeding 9% in three of the five years, and that the Eleventh Plan aimed to reduce poverty by 2 percentage points a year, this pace of poverty reduction is indeed disappointing. If economic growth was the only factor that mattered for poverty reduction, we should have witnessed greater poverty reduction. Moreover, states with the highest growth rate should have performed the best in terms of poverty reduction. But state-wise poverty estimates indicate that this is not the case. For instance, Bihar and Chhattisgarh witnessed average growth rates of about 10% during this period, yet poverty declined by less than 1%.

While growth is unquestionably necessary for substantial poverty reduction, it appears that growth is getting weakly linked with poverty reduction. In other words, the growth elasticity of poverty (GEP) is not high enough. GEP gives the percentage change in a chosen poverty measure in response to a 1 percentage change in GDP or mean income and can be interpreted as the poverty reducing impact of growth. In the poverty literature, GEP is found to be a function of initial income distribution, and it has been shown that rising levels of inequality lower GEP. The rationale for this is that the higher the initial inequality, the lesser the poor will share in the gains from growth. Martin Ravallion explains this succinctly as: “Unless there is a sufficient change in the distribution, people who have a larger initial share of the pie will tend to gain a larger share in the pie’s expansion”.

The National Sample Survey (NSS) data point in the direction of rising inequality in India. The Gini coefficient for rural India increased from 0.27 to 0.28 between 2004-05 and 2009-10, with rural inequality rising in 11 states. The Gini coefficient for urban India increased from 0.35 to 0.37, with urban inequality increasing in 18 states. Moreover, the ratio of per capita income between the top 15% and bottom 15% of the population has risen from 3.9 to 5.8 in rural areas and from 6.4 to 7.8 in urban areas during this period. This indicates that not only is inequality between the two groups on the rise, but also that the benefits of economic growth have not trickled down to those at the bottom of the distribution. Importantly, this rising inequality has reduced GEP.

Moreover, these inequality measures need to be interpreted with caution as India measures inequality based on consumption rather than incomes, and consumption inequality tends to be lower than income inequality because of consumption smoothing by households. Also, the NSS estimates of consumption expenditure fail to capture the top income groups, thereby resulting in underestimation of inequality. Therefore, inequality in India is higher than what we believe by looking at these estimates.

Importantly, inequality of consumption is about ‘inequality of results’ and not ‘inequality of opportunities’, which may be more important but are much harder to measure. Such inequalities are associated with gender or caste, access to key social services, particularly healthcare and schooling and access to credit markets; and these tend to undermine productivity, retard growth and consequently impede the task of poverty reduction. To achieve a higher rate of poverty reduction and make the growth process more inclusive, India will need to address these inequalities in opportunities that impede poor people from participating in the growth process. This will require increased spending on education and health, and creation of quality jobs and social safety nets for the poor and vulnerable. Conditional cash transfers (CCTs), which reinforce focus on schooling and health, if designed and targeted appropriately, can also go a long way in addressing such inequalities of opportunity. Allowing children to move faster and higher up the education ladder than previous generations will enable them to enjoy better prospects in the workforce than their parents. Research at the International Poverty Centre has found that CCT programmes such as Bolsa Familia and Oportunidades were responsible for about 21% of the fall in the Brazilian and Mexican Gini coefficient, each of which fell by approximately 2.7 points between mid-1990s and 2000s.

Over the last few decades, India has lifted people out of poverty at an unprecedented rate, but the pace of poverty reduction is being seriously challenged by rising inequality, which hurts GEP.

This makes a strong case for prioritising distribution and making income distribution more equal before embarking on a high growth path. Moreover, increasing inequality could undermine the basis of growth itself by reducing social cohesion and undermining the quality of governance by increasing pressure for inefficient populist policies. That myopic political responses to growing inequality to assuage voters can have disastrous consequences for the economy is well explained in Raghuram Rajan’s book, Fault Lines: How Hidden Fractures Still Threaten the World Economy. It was to address the rising income inequality in the US that credit, in particular housing credit, was pushed on low income households fuelling the crisis. It is therefore imperative that in the quest for higher economic growth we do not ignore the perils of rising inequality, one of the most pressing problems we are likely to face in the coming decade.

The author is an economist with a keen interest in the field of poverty and inequality in developing countries

The GDP Growth, Inequality in China and India and trusting any Statistical Data (delurk.wordpress.com)
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Immediate Release-Planning Commission of India to hand over Health Care to Corporate Sector

English: Montek S. Ahluwalia, Deputy Chairman, Planning Commission, India, speaks at the closing plenary of the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008 (Photo credit: Wikipedia)

PRESS STATEMENT

Planning Commission of India to hand over Health Care to Corporate Sector

The draft health chapter of the 12the Five Year Plan document is being discussed for final adoption by the Planning Commission by the end of August, 2012. The Jan Swasthya Abhiyan (Peoples Health Movement – India) expresses concern regarding the present recommendations and plans outlined in the draft chapter. The chapter fails to build on the recommendations of the High Level Expert Group (HLEG) set up by the Planning Commission, misquotes the Group’s recommendations in many places and ends by proposing a plan for restructuring the country’s health system that would effectively hand over health care to the corporate sector. It is particularly problematic that the plan document invokes the concept of Universal Health Care, while actually proposing a strategy that is far removed from the basic tenets of Universal Health Care.

The Plan document recommends increase in public expenditure on health from the present 1% to 1.58% of GDP. This is in sharp contrast to the HLEG recommendation of increasing this expenditure to at least 2.5% of the GDP and also at variance with the earlier pronouncements by the Prime Minister. Secondly it proposes that the Central government’s (which collects most of the taxes ) share in the additional health expenditure would be less than half of what states would contribute and that Centre’s contribution would be conditional on states’ contribution! The Planning Commission seems to have decided thatIndia will continue to be among the bottom 10 nations in terms of percent GDP spending on health.

What is of even greater concern is the strategy proposed for restructuring of the country’s health system in the document. The Plan document proposes a transition from: “….the present system which is a mixture of public sector service provision plus insurance, to a system of health care delivered by a managed network”. There is, thus, a road map envisaged where the Government will abandon its central role of providing health care and become primarily just a ‘manager’ of the new system envisaged.

The document’s vision of ‘universal provision of public health care’ includes two components. “..preventive interventions which the government would be both funding and universally providing” (see annexure) and “clinical services at different levels, defined in an Essential Health Package, which the government would finance but not necessarily directly provide”. What, in essence, this formulation proposes is that the Government would, over time, confine itself to providing a small package of services and would be primarily just a purchaser of virtually all clinical services from the corporatised private sector. The Government would thus finance (with public money), strengthen and bolster an already resurgent corporate sector providing medical services. On the face of it, this appears an almost diabolical ploy to hand over the profit-making clinical services sector to corporate hospital chains. It would also decisively halt and eventually reverse the moderate achievements of the National Rural Health Mission, in expanding public health infrastructure and services in parts of the country.

The public health system will now be asked to compete with the private sector to attract patients. A system is envisaged where: “each citizen family would be entitled to an Essential Health package in the network of their choice. Besides public facility networks organized .. private and NGO providers would also be empanelled to give a choice to the families”. Even this truncated role of the public system is qualified by the proviso that” “..public facilities will have to be strengthened, networked, and their managers provided sufficient autonomy to purchase goods and services to fill gaps as per need”. In other words, public only in name, but would be vitiated by the logic of the market and by the incorporation of private players into its fold.

The HLEG had, in its report, commented that: “…since there is virtually no focus on primary level curative, preventive, and promotiveservices and on long-term wellness outcomes, these traditional insurance schemes often lead to inferior health outcomes and high health care cost inflation”. Yet the Planning Commission’s document repeatedly talks about expansion of the health insurance scheme called RSBY and its vision of Universal Health Care is nothing but a more expanded version of the RSBY scheme.

The document announces another bonanza to the corporate medical sector in the form of grants to set up hospitals and private medical colleges. It says: “Health has now been included with other infrastructure sectors which are eligible for Viability Gap Funding up to a ceiling of 20% of total project costs under a PPP scheme. As a result, private sector would be able to propose and commission projects in the health sector, such as hospitals and medical colleges outside metropolitan areas, which are not remunerative per-se, and claim up to 20% of the project cost as grant from the Government”. It may be noted that the only eligibility requirement is the location, and not any contribution to public health goals.

This document proposes that public health facilities will have “flexibility” to raise their own finances. The Plan document says: “Tertiary care facilities would have an incentive to generate revenues if they are provided an autonomous governance structure, which allows them flexibility in the utilization of self-generated resources within broad policy parameters laid down by the Government”. There are several ways in which such flexibilities can be misused, including in the form of levying of user charges and arrangements with private entities that seek to extract benefits that conflict with the public health goals of public institutions.

The HLEG had recommended : “enforcement of price controls and price regulation on essential and commonly prescribed drugs”. However, this document does not even mention drug price regulation, in spite of a pending Supreme Court directive that the Government should expeditiously put in place a system to control the prices of drugs. Neither is the recommendation of the Expert Group, that the production of drugs and vaccines in the public sector be incentivised, reflected anywhere in this Planning Commission’s chapter.

The ideological bias of the Planning Commission’s report is clear when it says: “A pure public sector delivery system involves funding a large public sector health system, with little incentive for the service providers to deliver a quality product”. Such an assertion flies in the face of global evidence that the best performing health systems are those that are publicly financed and where health care is provided either almost entirely by the public sector or by a combination of the public sector and non-corporate providers. Neighbouring Sri Lanka has been long held as an example of such a system, where over 90% of in-patient care and over 50% of out-patient care is provided by the public sector. Mortality and morbidity rates in Sri Lanka are far better than in India, in spite of the country having a lower per-capita GNP. Thailand, in recent years, has made rapid strides in providing universal access to health services by increasing public finances and by significantly expanding public provisioning of health services. In contrast, the United States, provides ‘choice’ between public and private providers but is by far the worst performing health system among all developed countries, in spite of spending over 8% of GDP on health care.

The Planning Commission’s recommendations, perhaps make some sense if seen purely in the context of neoliberal economic policies. Injection of public funds into a floundering economy through the financing of the private, corporate controlled, hospital sector may seem attractive in such a context. But the strategy is disastrous in public health terms, and is designed to finish of the vestiges of a public health system that still survives in the country.