Poverty in South Asia: Approaches to its alleviation

South Asia faces a difficult challenge in alleviating absolute poverty. Besides a sustained labour-intensive, employment-oriented strategy of economic growth, a direct assault on poverty is needed. In addition to redistribution of land, the political feasibility of which is very limited, pove~y-alleviating measures in South Asia are classified into three types: a system of subsidized food distribution; creation of assets, mainly through credit targeted towards the poor, for self-employment; and public employment schemes on public works projects. Among the conditions governing their success are: widely based public support; accurate identification of the poor; and strong local government capable of implementing technically sound and economically efficient projects.

The author is Senior Policy Advisor at the International Food Policy Research Insti- tute, 1776 Massachusetts Avenue, NW, Washington, DC 20036, USA.

‘Much has been written in the past about poverty in individual countries in South Asia - often focusing on selected aspects of poverty or pa~icuiar measures for alleviating poverty in specific countries. An attempt is made here to analyse the salient aspects of poverty as well as important poverty-alleviating measures in South Asia in a comparative framework - drawing lessons and pointing out, wherever perti- nent, common elements and diveroences. *See World Development Report: World Bank, Washington, DC, 1990, p 29. 3/hid, pp 2, 29.

Poverty in South Asia

Approaches to its alleviation

Nun.11 Islam

The poor, primarily defined as those who fail to achieve a certain minimum level of income and consumption, constitute a significant proportion of the population in South Asia.l For international comparison, the World Bank considers those with an income below $370 per capita in 1985 purchasing power of US dollars as the poor. There is another category of poor, ie those defined as extremely poor, whose per capita income lies below $275 a year in 1985 purchasing power of US dollars.2 A different but closely related aspect of poverty is inadequate access to health and education facilities. The United Nations Develop- ment Programme (UNDP) Human Development report of 1990 sought to rank the developing countries in terms of what it calls the human development index, ie a weighted index of life expectancy, infant mortality and adult literacy. However, no attempt is made to define a minimum level for this index.

South Asia contains 30% of the total population of the developing world but a much higher percentage, 47%, of the total number of poor in the developing world. The total number of the poor in South Asia is estimated to be 520 million in 1985, accounting for 51% of the population, with the total number of the ‘extreme’ poor being about 300 million and accounting for 29% of the population. In terms of the social indicators characterizing the extent of poverty, the performance of South Asia is below the average for the developing world as a whole. For example, while infant mortality in South Asia is 172 per 1000, the average life expectancy is 61 years and net primary school enrolment is 74%, the corresponding averages for the developing world as a whole are 121 per 1000, 62 years and 83% respectively.

In 1985 South Asia as a whole had a higher percentage of poor people in the population, 51% compared with East Asia (20%), Latin America (19%) and Africa (47%). The average percentage for the developing world as a whole was 33%.3

In terms of social indicators, South Asian countries except Sri Lanka were in the range of what UNDP calls the low human development index. Amongst the South Asian countries, Sri Lanka had the highest life expectancy - 71 as against 59 in India and 52 in Bangladesh; Sri Lanka also had the highest adult literacy rate, 87%, with the rest ranging from 43% in India to 30% in Pakistan, and the lowest infant

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Poverty in So& Asia

mortality at 21 per 1000, with the rest of South Asia ranging from 180 in Bangladesh to 97 in India. (See Table 1.)

The large majority of the poor in South Asia are in the rural areas; most of them are employed in agriculture as small farmers or landless labourers or in the related occupations. The extreme poor are those who often do not have access to food which provides minimum nutritional requirements. More often than not they do not possess adequate physical energy for performing additional work. Without any assets or stocks to fall back upon they suffer most from short-term fluctuations in income or employment caused by natural disasters or other causes and are unable to meet the unexpected costs of sickness and other emergen- cies. (See Table 2.)

The urban poor who frequently belong to such occupational groups as construction workers or artisans are either subject to open unemployment or have access to only occasional or irregular employment in the informal sector. Though the urban poor are often better off in terms of level of income, they suffer on occasion more than the rural households from the effects of severe overcrowding such as bad sanitation and contaminated water, etc. The children of the urban poor are victim to a multiplicity of infections caused by the hazardous living conditions and a lack of hygiene.4

Table 2. State of rural poverty (percentages of population below the poverty line).

Bangladesh 1985186 51 Pakistan 1984 24 Sri Lanka 1985 30 Nepal 1984/85 50 India 1984 48

Note: Estimates of the poverty line in different countries are not strictly comparable and are not based on the criteria used by the World Bank.

Sources: Bangladesh: S.R. Osmani, ‘Notes on some recent estimates of rural poverty in Bang- ladesh’, Speciai issue on Poverty in Bangladesh, Bangladesh Institute of Development Studies, Dhaka, 1990. Pakistan: S.J. Malik, tffterf~io~af and Regional Aspects of Povetiy in Pakisfan, 7984-85 to 7987-88, International Food Re- search Institute, Washington, DC, 1991, Table 1. Sri Lanka: C.E. Rouse, A Sfudy of the Poor in Sri Lanka, World Bank, Washington, DC, 1990. ln- dia: K. Kakwani and K. Subarao, ‘Poverty and its alleviation in India’. unpublished manuscript, World Bank, Washington, DC, 1989. Nepal: Poli- cies for improving Growth and Alleviating Pover- ty, World Bank, Washington, DC, 1989.

Economic growth and poverty

A high level or rate of growth of income is not necessarily associated with a high level of human development index or access to social services such as education and health. A relatively high index of social development is primarily a function of public expenditures on social sectors such as education and health services. The latter is not related to a high level of per capita income. There are countries such as Korea which followed a ‘growth-mediated strategy’, ie used the fruits of high economic growth to expand public expenditures on social services and thus to achieve a high level of human development. At the same time there are countries such as Sri Lanka which did not wait until they achieved a high per capita income or rate of growth in order to undertake high levels of expenditures on social services but followed a ‘support-led strategy’, ie expanded public expenditures on social services ahead of income growth. Other countries such as Pakistan achieved for several years a high level of income or economic growth but did not correspondingly increase their expenditures on social services.5

Even though economic growth is conceived as a principal means for alleviating poverty, the extent of its contribution to poverty alleviation depends on both its pace and pattern. If economic growth is associated with an increase in income inequality, the rate of growth must be high enough to offset the poverty-inducing effect of increasing inequalities; otherwise the adverse impact of an increase in inequality may offset the

4M.A. Hussain, ‘Nutrition policy and the beneficial impact of fast economic growth. The more equitable the

urban poor in developing countries’, Food initial income distribution, the greater is the impact of a given increase

PO/& Vol 15, No 3, June 1990, pp 18s in growth rate on poverty alleviation. 192. 5Jean Dr&ze and Amartya Sen, Hunger

There has been much debate about the trends in poverty over time.

and Public Action, WIDER Studies in De- Not only have consistent time series data on income distribution or

velopment Economics, Clarendon Press, other indicators of poverty been lacking, but also methodologies and Oxford, UK, 1989. coverage of households for estimating the indicators of poverty have

FOOD POLICY April 1992 111

“S.R. Osmani, ‘Notes on some recent estimates of rural poverty in Bangladesh’, Special Issue on Poverty in Bangfadesh, Bangladesh Institute of Development Stu- dies, Dhaka, 1990; Rizwanul Islam, ‘Rural poverty, growth and macroeconomic policies: the Asian experience’, lnfemational Labour Review, Vol 129, No 6, 1990. ‘Martin Revallion, The C~a~/~~g;ffg Arifh- metic of Fovea in 6~ffglades~, World Bank, Washington, DC, 1990. ‘A.R. Khan, Poverty in Bangladesh: a consequence of and a constraint on growth’, Bang/aoesh Development Stu- dies, September 1990. %lam, op tit, Ref 6; S.J. Malik, fnferre- gional aid ~egj~~al Aspects of Poverfy in Pakistan 1984-85 to 1987-88, Internation- al Food Policy Research institute, Washington, DC, March 1991. ‘OM S Ahluwalia, ‘Rural poverty, aqricultu- . . ral production and prices: a reexamina- tion’. in J.W. Meflor and G.M. Desai. eds. Agr~~~~tura~ Change in Rural Pobertyl Johns Hopkins Unfversity Press, Balti- more, MD, 1985. “S.P. Gupta and K.L. Datta, ‘Poverty cal- culation in the Sixth Plan’, Economic and Polifical Weekly Bombay, i 4 April 1984. ‘*C.H. Hanumant~a Rao, ‘Changes in rural poverty in India: implications for agricultural qrowth’, Dr RP Memodal Lecture, New Delhi, December 1985. 13World Bank, India: Poverty, Empioymenr and Social Services, Report No 7617-N, Washington, DC, 1989. 14D E Sahn. ‘Chanaes in the livina stan- dards of the poor in Sri Lanka during a period of macroeconomic structuring’~ World ~evelopmeff~, Vol 15, No 6, 1987; G.S. Fields, Pove~, i~equa~jty and De- ve/opme~f, Cambridge University Press, Cambridge, UK, 1980. 75W. van Ginneken, ‘Social costs of res- tructuring: the experience of Sri Lanka’, lnternati~nal Labour Organization, Gene- va, 1990, mimeo. “World Bank, Sri Lanka ~ufr;ti~~ Review, Report 7575CE, Washington, DC, 1990. “Islam, op tit, Ref 6. j8World Bank, World Development Report, Washington, DC, 1978 and 1990; World Bank, op tit, Ref 16.

changed over time. This has inhibited a systematic analysis of trends in poverty. However, on the basis of various studies certain broad conclusions can be drawn.

Most studies on Bangladesh indicate that rural poverty increased between the early 1960s and mid-1970s. What happened in the 1980s was less clear. Some studies show a reduction in poverty between 1981/82 and 198.5/86 and others contend that such a reduction did not take pla~e.~ One study shows that there was a decline in poverty between 1981182 and 1983/84, which was then offset by an increase in poverty between 1983184 and 1985/X7 The controversy regarding the behaviour of the poverty index during the 1980s is due to the lack of consistent time series data as well as to changes in the methodology of estimating p0verty.s

Most of the relevant studies on Pakistan indicate that rural poverty worsened in the 1960s. An improvement occurred between 1969/70 and 1979 and continued in the 1980s.” Research on poverty in India has produced many conflicting results. Thus Ahluwalia finds that rural poverty increased in the 1960s and declined in the 197Os,‘a while Gupta and Datta find exactly the opposite, ie improvement in the 1960s and deterioration in the 1970s.” Rao finds improvement during the period between 1977178 and 1983/84.” The World Bank, on the other hand, indicates a steady reduction in poverty during the 1970s and 1980s.i3 While there are significant conflicting results for the 1960s and 197Os, there seems less disagreement that India did succeed in alleviating poverty in the 1980s. Why and how far it has so succeeded remains inconclusive and seriously debated.

Poverty in Sri Lanka seems to have declined during the 1960s but increased during the 1970s. There is also evidence of an increase in malnutrition between 1975’76 and 1981/82. There was also a substantial decline in calorie intake among the poorer population, notably among the poorest 30%. ” During 1978/79 and 1986/87 rural poverty seems to have increased.” The World Bank reports that during 1983-87 agricultural wages failed to keep pace with increases in food prices, and unemployment also increased during that period. With increasing unemployment and stagnant real wages, the incidence of real poverty was likely to have been higher.‘”

The lack of relevant data on poverty in Nepal is especially acute, but what partial evidence is available indicates that rural poverty increased in the 1960s and early 1970s. Subsequent analysis indicates that the increase in rural poverty continued between 1976177 and 1984185.”

In terms of progress in health- and education-related indicators of well-being the situation is different among the various South Asian countries. Unlike the indicators of poverty based on the per capita income/consumption of the poor such as the poverty line, the social indicators of poverty have. recorded consistent improvement over time in all countries between 1960 and 1988. Life expectancy at birth increased from 39 to 51 in Bangladesh, from 42 to 58 in India, from 36 to 51 in Nepal, from 42 to 55 in Pakistan and from 61 to 71 in Sri Lanka. Similarly, adult literacy increased in all the countries, ie from 21% to 43% in India, from 10% to 26% in Nepal, from 16% to 30% in Pakistan, from 61% to 87% in Sri Lanka and from 22% to 33% in Bangladesh. ”

In contrast, the percentages of the population below the poverty line as well as the level and distribution of access to social services amongst

112 FOOD POLlCY April 1992


the population are widely different among the countries in South Asia. During the early 1980s the percentages of the population below the poverty line in India and Bangladesh were higher than in Sri Lanka and Pakistan. For example, the percentage of the overall population below the poverty line was 43% in India, and in Bangladesh it varied between 36% and 51% (depending on various alternative estimates). Sri Lanka, on the other hand, had only 27% of the population below the poverty line, and in Pakistan the percentage was 23%.19

The percentage of poor people in the population in the South Asian countries was not related to the average level of aggregate per capita income nor to their rates of growth in income. India and Pakistan, with roughly similar per capita income, had wide differences in terms of the incidence of poverty. Bangladesh and India had roughly a similar incidence of poverty but wide differences in per capita income. Moreov- er, for the various sub-periods during the period 1965-88, India had higher rates of growth (varying between 3.6% and 5.2%) than Bang- ladesh (varying between 2.4% and 3.7%); at the same time, however, they had a similar range of incidence of poverty during the entire period, Sri Lanka had the highest per capita income in South Asia - higher than even Pakistan - but also suffered from an incidence of poverty (in terms of population below the poverty line) which was either higher than or roughly within the same range as that in Pakistan; during this period Sri Lanka achieved a rate of growth (about 4%) lower than that of Pakistan (5-6%).2”

“For the evidence, see World Bank, World Deveiopmenr Report, Washington, DC, 1990: Osmani. on cit. Ref 6; and T.N. Srinivasan and Pranab K. Bardhan, eds, Rural Poverfy in South Asia, Columbia Universi~ Press, New York, NY, 1988. 20World Bank, World Developmenf indicators, Washington, DC, April 1990; World Bank, World Development Report, Washington, DC, 1983 and 1990. 2’J.N. Bhagwati, ‘Poverty and public policy’, World-Developmeni Rep&, Vol. 15, No 5, May 1988; Judith Tendler, ‘What ever happened to poverty alleviation?‘, World Develooment. Vol 17. 7 Julv 1989. pp 1033-1044. ’ 22World Bank, World Development Report, Washington, DC, 1990 and 1991.

Broad-based growth strategy with a bias towards the poor

Regarding the present state of poverty as well as the perspectives for the future, two basic questions are relevant. First, how have the South Asian countries approached the problem of poverty alleviation? Second, in the light of past experience and analysis, what measures are likely to contribute towards the alleviation of poverty? In their public policy pronouncements the South Asian governments have espoused poverty alle~~iation as an important objective of their development strategy. However, as elsewhere in the developing world, there has been considerable debate as to whether economic growth or redistribu- tive measures are the principal means of reducing poverty.2’

In all countries the rate of growth in income quickened during 1980-88 compared with 1965-80, as seen in Table 3. At the same time the growth rate of agricultural GDP also increased in all countries to varying degrees or at worst remained stagnant. During the last two decades South Asia grew at a lower rate than East Asia both overall and on a per capita basis. During the 1980s per capita income growth rates in East Asia were almost twice those in South Asia (see Table 4). Similariy, the savings and investment rates were consistently lower in South Asia than in East Asia.“2

The index of poverty, however, improved only in Pakistan and India, though to varying extents; in Bangladesh, Nepal and Sri Lanka there was no improvement whatsoever. In Pakistan the improvement in poverty is deemed to be due to temporary and transient factors, especially large-scale overseas migration and remittances arising there- from. These helped Pakistan’s rural poverty in various ways. First, migration reduced the labour surplus and caused acute and widespread labour shortages in peak agricultural seasons. Second, the substantial


Poverty in Soutk Asia

Table 3. GDP orowth rates in South Asia.

Agricultural GDP Per capita GDP growth rate growth rate

196-O 1989-68 196580 1980-08

India 340 3.6 5.2 2.5 2.3 Pakistan 350 5.1 6.5 3.3 4.3 Bangladesh 170 2.4 3.7 1.5 2.1 Sri Lanka 420 4.0 4.3 2.7 2.7 Nepal 180 1.9 4.7 1.1 4.4

aPercentages of GNP.

Source: World Bank, World Development Report, Washington, DC, 1983 and 1990

Gross savings rate? Gross investment rete’ I I \ 1965 1980 1968 1965 1966 1988

15 20 21 17 23 24 13 6 13 21 18 18 6 2 3 11 17 12

13 24 13 12 36 23 0 7 10 6 14 20

inflow of remittances led to increased demand in the non-farm sectors, especially for construction and services. This caused a general increase in demand for labour in the rural economy. These two factors contributed to a possible increase in the real wages of rural labourers. Remittances also added substantially to the household income of the rural poor. In households below the poverty line, however, the percentage receiving no remittances was four times that of households receiving remittances.

In Sri Lanka, on the other hand, during the 1980s there was a significant cut in social expenditure, especially in safety net measures for the poor, which led to a deterioration in their nutritional status and an aggravation of poverty.

Over the years, as experience has accumulated, consensus has been emerging that in order to alleviate poverty three interrelated measures are needed. A broad-based growth strategy with an emphasis on expanding income and employment opportunities for the poor ensures that the standard of living and consumption of the poor rise. Second, public expenditure on social sectors, ie health, education and nutrition services, should not only be increased but should also be redirected to expand the access of the poor to social services. Third, measures must be taken to directly help the very poor, ie those who benefit either slowly or inadequately from economic growth. Economic growth takes a long time before it has an impact on the poorest group because of the various disabiIities and disadvantages they frequently endure.

Since in most South Asian countries a large part of their national

Table 4. GNP growth rates, 1966-86.

Per capita Growth rates GNP (US$) 7 , 1908 1966-73 1973-80 1960-86 1 Q6\5-88

South Asia 320 1.0 (3.61

East Asia

Sub-Saharan Africa

Latin America and Caribbean

Developing Europe, Middle East and

540 5.4 ’ (7.9)

330 3.0 (5.9)

1840 4.1 (6 6)

2000 5.6

2.0 3.2 1.8 (4.1) (5.6) 4.4 6.6 5.2 (6.5) (7.9) 0.1 -2.8 0.2

(2.7) (0.3) 2.4 -1.6 1 .Q (5.1) (O-9)

2.1 0.8

Source: World Bank. World Development Indi- North Africa (7.5) (4.2) (3.2)

caters, Washington, DC, April 1990. The base Low-income countries 3.6 2.4 40

year for the estimates of growth is 1980 constant 16.0) (4.6) 4.6 2.4

!;I)

prices. Per capita GNP is in 1988 prices. The fig Middle-income

ures within brackets indicate GDP growth rates. countries (6.9) (4.9) (2.5)

114 FOOD POLICY April 1992

Poverty in South Asiu

income and an overwhelming part of their employment are derived from the rural sector, the key to a broad-based development st~tegy is accelerated growth in the rural sector. In fact, an intensification of agricultural growth helps alleviate urban poverty as well. First, a reduction in rural poverty discourages or slows down migration from the rural to the urban areas and thus prevents the creation of overcrowded urban slums and overstretched or overburdened social services and infrastructure. Second, by reducing the need as well as the pressure for remittances or other income transfers from the urban poor or not-so- poor to their rural dependents, it enables an increase in the standard of living of the urban poor. Third, broad-based agricultural development helps stimulate non-agricultural development in both rural and urban areas.

It is now widely recognized that a broad-based employment-oriented development strategy requires the elimination of or a significant reduction in distortions in overall macroeconomic policies relating to trade and exchange rate policies, interest rates and wage policies as well as labour market regulations. High industrial protectionism and over- valued exchange rates discriminate against agriculture and inhibit labour-intensive export-oriented manufactures. In South Asia these distortions are increasingly being corrected; the important role of export markets in expanding income and employment is recognized.

An important policy issue in this context relates to the high population growth, which acts as a constraint on efforts to alleviate poverty. A rapidly expanding labour force magnifies the task of providing employment opportunities. The South Asian countries have population growth rates ranging from 3.2% in Pakistan and 2.8% in Bangladesh, to 2.2% in India and 1.5% in Sri Lanka. The poor households usually tend to have larger families and a larger number of dependents. A high rate of population growth therefore affects the poor households more severely than the rich. The pressure of increasing rural population has led to the subdivision and fragmentation of agricultural holdings, very small and uneconomic farms and growing Iandlessness; it has also imposed a burden on the physical and social infrastructure and thus pre-empted resources which would otherwise have been available to increase the per capita availability of social services and infrastructure.

The Green Revolution in most South Asian countries consisted of employing labour-intensive technology.2” Agricultural growth based on seed-fertilizer-irrigation technology increased labour requirements per hectare; increasing cropping intensity also added to employment opportunities. Increased production kept food prices from rising under the pressure of increasing demand. Thus increased employment, on the one hand, and low food prices, on the other, helped alleviate poverty. The latter was especially important because the poor spend a very large proportion of their income on food.

Technological progress to date has been focused on high-potential irriigated areas and on major cereal crops. Some of these areas have not only had high population density but also a large poor population. The rainfed, low-potentjal areas also contain large numbers of poor people; but their chances of getting out of the poverty trap have been slim unless technological progress in agriculture has spread to these regions or non-farm employment, supported by heavy investment in infrastructure and human capital formation, has expanded. The alternative of migration to the high-potential areas undergoing rapid growth - a process

23Hans P. Binswanger and Joachim von Braun, ‘Technological change and com- mercialization in agriculture: impact on the poor’, paper presented to IFPRlNVorld Bank Poverty Research Conference, Airlie House, VA, 25-28 October 1989; Amanda Wolf, ‘The relation between growth and poverty: an overview’, unpublished paper, lntemationai Food Policy Research lnsti- tute, Washington, DC, 1990; Ethisham Ahmad and Stephen Ludlow, ‘Poverty, inequality and growth in Pakistan’, back- ground paper for the LzIorld ~evelo~me~~ Report, World Bank, Washington, DC, 1989; M. Hossain, Nature andtmpact of the Green Revolution in Bansladesh. Re- search Report 67, International Food’Poli- cy Research Institute, Washington, DC, Julv 1988; Clive Bell and Robert Rich, ‘Rural poverty and agricultural performance in India between 195657 and 1983- 84’, working paper, World Development Report, World Bank, Washington, DC, 1990; P.K. Bardhan, ‘Poverty and “trickle- down” in rural India: a quantitative analysis”, in John W. Meltor and Gunvant M. Desai, eds, Agrjcutf~rat Change and burst Pove~y, Johns Hopkins University Press, Baltimore, MD, 1985; C.H. Hanumantha Rao, D.B. Gupta and P.S. Sharma, ‘Infra- structural development and rural poverty in India: a cross-sectional analysis’, in ibid: Raisuddin Ahmed, ‘Growth and equity in Indian agriculture and a few paradigms from Bangladesh’, in ibid.

FOOD IWLfCY April 1992 115

*“Peter Oram and Broca Sumiter, ‘Study on the location of the poor’, paper pre- pared for the Technical Advisory Commit- tee to the Consultative Group on Interna- tional Agricultural Research, International Food Policy Research Institute, Washing- ton, DC, 1990. 251jat Nabi, Naved Hamid and Shahid Zahid, The Agrarian Economy of Pakistan: fssues with Policy, Oxford University Press, Oxford, UK, 1986. 26Peter B.R. Hazel, Rural Growth Link- ages: Household Expenditure Patterns in Malaysia and Nigeria, Research Report 41, International Food Policy Research institute, Washington, DC, 1983: Sudhir Wanmali, Rural Household Use of Ser- vices: A Study of Miryalquda Taluka, India Research Report 48, International Food Policy Research Institute, Washington, DC, 1985; Askoh Parikh, ‘Intersectoral linkages in Asian agriculture’, unpublished manuscript, World Bank, Washington, DC, 1986; Barbara Harriss, ‘Regional growth linkages from agriculture and resource flows in the non-farm economy’, Economic and Politicat Week/y, Vol XXII, No 1 and 2, 1987, pp 31-46; Nuruf Islam, ‘Agricultural growth, technological progress, and rural poverty’, in John P. Lewis, ed. Strengthen- ing the Poor: What Have We Learned?, US-Third World Policy Perspectives No 10, Transaction Books, New Brunswick, NJ, 1988, pp 121-132; Raisuddin Ahmed and Mahabub Hossain, Developmental Im- pact of Rural infrastructure in Bangladesh, Research Report 83, International Food Policy Research Institute, Washington, DC, 1990.

already underway - has been only a partial solution. Acceleration of growth in the inadequately exploited high-potential areas which have not benefited from technological progress should continue to be given high priority, particularly since, given the present state of research, the prospect of a technological breakthrough in low-potential areas remains highly uncertain in the near future. But this should be combined with efforts to expand agricultural research on the low-potential areas to develop appropriate technology; a combination of crops, livestock and forestry projects suitable for such regions must also be promoted.24

There have been adverse income-distributional consequences of technological progress in the selected areas of the region; these have been due partly to macroeconomic or microeconomic policies which encouraged or subsidized labour-displacing mechanisation and partly to land tenure or tenancy reforms which increased the uncertainty of landlord-tenant relationships or encouraged the acquisition of land by the landowners.25

In general, rural non-farm sectors have responded strongly to vigorous agricultural growth. The highly Iabour-intensive rural trade and services expanded; to the extent and in the regions where agricultural growth has been mainly focused on small and medium farmers, their increased consumption expenditures have been directed towards Iabour-intensi~~e light consumer goods and services, which are often locally produced. Agricultural growth has also stimulated demand for inputs from the non-agriculturat sector, such as fertilizer, agricultural implements, etc, and for processing, marketing and distribution.

In view of the pressure of an expanding labour force, increased employment in the non-farm sector holds the key to the alleviation of poverty in South Asian countries. In most of these countries the relative importance of the sector is increasing, partly due to the ‘pull’ exercised by an increase in urban or non-farm employment opportunities, even though at a very low level of labour productivity and hence per capita income or wages, and partly - maybe more so - due to the ‘push’ given

by the pressure of increased rural unemployment and landlessness. Expansion of productive employment in the non-farm sector, urban and rural, depends on the availability of physical infrastructure, such as electricity, transport and communications, as well as credit and technical training and extension designed to promote small-scale trade and industries.2” Attempts to protect small cottage or household industries from competition with large-scale industry have not proved conducive to either efficient growth or employment generation. Provided they use labour-intensive techniques, large-scale industries are likely to provide greater aggregate employment in the long run even though in the short run they may replace low-productivity household or small-scale industries. A higher level of income and aggregate demand resulting from efficient industrialization rapidly expands employment. The small-scale industries do have an important role, but their long-term survival depends upon their integration in a complementary interrelationship with the larger-scale sector, each producing components or semi- finished outputs for the other, as illustrated by the examples of Japan and Taiwan.

Pro-poor bias in development programmes

To ensure that growth significantly assists poverty alleviation, it is

116 FOOD POLICY April f992


essential that it is biased towards the poor. It is necessary to provide the poor with better access to such assets as land, credit and other non-labour inputs. The contribution that land redistribution can make to the alleviation of rural poverty has been much discussed. Even though the average size of farms is small, and is diminishing over time through a progressive subdivision and fragmentation under the pressure of an increasing population, there is significant inequality in land distribution at least in specific regions in each South Asian country. This inequality is great in Pakistan and slight in Bangladesh, with in-between degrees of inequality in various states of India and Sri Lanka. A successful redistribution of the land, wherever it is highly unequal, could make a contribution to the reduction of poverty by providing land to small farmers or landless labourers.

Experience in South Asia is not very encouraging in this respect. This has been not only because the ceilings fixed for land distribution in India, Pakistan, Bangladesh and Sri Lanka were very high but also because there were innumerable loopholes in the administration of such ceilings. Even in the states of Kerala and West Bengal in India, where tenancy reforms were hailed as a success by many impartial observers, the ceiling was fixed at 20 acres in Kerala and 2.5 acres in West Bengal, which yielded a surplus of less than 2.5% of the cultivated land in Kerala and only 1% in West Bengal. In Pakistan the ceilings imposed and loopholes retained were very high, and even in Bangladesh and Sri Lanka they were too high, at 33 and 25 acres respectively, with the result that the proportion of land above these limits was very small. To make matters worse, the meagre amount of land that should have been legally available could not be fully acquired as the landowners made use of various loopholes to keep possession of their lands. Thus ceiling legislation has achieved very little.

Could tenancy reforms, ie greater security and a higher share of income for the tenants or sharecroppers, succeed? Again, results to date are not very encouraging. Within the structure of the labour market and its interlinkages with input and product markets, existing sharecropping and tenancy systems have seemed to provide enduring, mutually acceptable benefits which tenancy reforms have not been able to substitute for and improve upon. Given the prevailing ownership rights and the acute land hunger, those who are able to lease lands have reason to consider themselves privileged compared to others. Tenancy reform must ensure that the services provided under the tenancy system, such as consumption loans, working capital loans, distress relief and other elements of insurance, are forthcoming from alternative sources if the traditional resources, ie landlords, disappear. Moreover, if within the complex web of the rural sociocultural network the tenants are to organize themselves to ensure the implementation of whatever tenancy laws have been enacted by the government, they must be given countervailing political power so that the landlords cannot retaliate with evictions.

Thus the political feasibility of an effective land distribution programme in the South Asian countries seems to be limited in the light of past experience. An increase in the bargaining power of the very small farmers or landless labourers through their improved organization, on the one hand, and widespread education and literacy, on the other, are among the factors which might in the future help achieve a more equitable land distribution.

FOOD POLICY Aprit 1992 117

“Paul Mosley and Rudra Prasad Dahal, ‘Credit for the rural poor: a comparison of policy experiments in Nepal and Bang- ladesh’, Manchester Papers on Develop- ment, July 1987, pp 45-59; Robert V. Pulley, Making the Poor Creditworthy: A Case Study of the Integrated Rural De- velopment Program in India, Discussion Paper 58, World Bank, Washington, DC, 1989; G.M. Desai and John W. Mellor, ‘Institutional finance for agricultural development’, unpublished manuscript, Inter- national Food Policy Research Institute, Washington, DC, 1990. “M Hossain, Credit for Alte~iat~on of Ru- raf &erty: The Grameen Bank in Bang- fadesh, Research Report No 80, intern&- tional Food Policy Research Institute, Washington, DC, February 1988. 29N. Kakwani and K. Subbarao. ‘Povertv and its alleviation in India’, unpublished manuscript, World Bank, Washington, DC, 1989; Jean Dreze, ‘Poverty in India and the IRDP delusion’, Economic and Political Weekly, September 1990, pp A95A104.

To increase the productivity of the small farmer it is necessary to devise mechanisms and measures which ensure their increased access to essential inputs such as water, fertilizer. seeds and other tabour- intensive implements. Market imperfections exist in the input markets because of institutional shortcomings, high transaction costs and monopoly elements in certain stages of the marketing and distribution process. The cost of distribution, such as providing inputs to a large number of widely dispersed small farmers, can be reduced if the recipients are organized effectively to receive and productively utilize such inputs. Frequently the poor are located in the low-potential or remote areas, entailing high distribution costs and hence requiring subsidies. Except in the early years when the new technology is introduced, subsidies on modern inputs are not particularly helpful for the poor. What is more important is a stable and adequate supply of inputs and credit so that the poor farmers can have easy access to them. A shortage in the supply of inputs and/or a lack of adequate transport and communication systems lead to the rationing of supplies and the emergence of monopoly elements in the market. Given the limited economic bargaining strength of the small farmers, they are likely to fare badly.”

These considerations apply equally to the provision of credit with which the rural poor can secure access to inputs and new assets and make productive use of whatever assets they acquire. A considerable variety of innovative approaches have been taken by both government agencies and the private sector, especially the voluntary non- governmental organizations, which may provide guidelines for the future. Two examples are often quoted -the Grameen Bank scheme in Bangladesh and the Integrated Rural Development Programme (IRDP) in India, The Grameen Bank has attracted wide attention in terms of its effective utilization of credit, high rate of repayment and successful identification and targeting of the poorest of the poor. The bank covers a small percentage of the target group - 64% of rural poor households - and it confines itself to the women members of rural households (one member per household). ‘*The return to family Iahour is higher than the going wage rate in the majority of trading activities, but in cattle and poultry raising it is less than the agricultLlra1 wage rate. The latter are dominated by female members whose alternative employment opportunities are limited. The excercise of ‘peer pressure’ on the members of the borrowers’ group, intensive intragroup consultation for the identification and formulation of bankable projects, involvement of bank staff in the supervision and management of loans as well as subsidies from the government to cover the high costs of administration of small loans all contribute to its success.

The Integrated Rural Development Programme in India - a much larger programme covering 20-30% of rural poor households - provides subsidized loans as well as a capital subsidy up to 3&50% of the loan.‘” Projects are identified and formulated by local government officials as well as the bank staff, and not so much at the initiative of the borrowers. Evaluations of the IRDP undertaken so far indicate that the repayment record is poor and the performance of the projects is mixed, measured either in terms of assets created and retained by the borrowers after a period of three to five years or of increased income generated by the assets. More than half of the assets created by the IRDP failed to add to the income of the beneficiaries. The proportion of beneficiaries whose


assets ceased to exist after two to three years varied between 20% and 50% .30

The IRDP is said to be driven by targets of credit supply fixed for it by the government as well as by the amount of subsidy fund available rather than by the effective demand for credit. Excess demand for milch cattle has been an example of the lack of balance between supply of and demand for assets financed by IRDP credit. Also relevant is the availability of complementary resources to utilize the assets and market the products. Milch cattle are a profitable asset where there are milk-chilling plants. Again, sewing machines provided under the IRDP remain unutilized in the absence of demand for their services.

The selection criteria for eligible beneficiaries do not ensure the participation of households which have the skills, education and motiva- tion to be self-employed and which provide evidence of efficient utilization of credit. Assistance has gone to people just below the poverty line rather than to the poorest. About 1520% of the beneficiaries are above the poverty line, and 60% of the beneficiaries belong to the top half of the poor. 3’ In this respect the Grameen Bank has been more effective, since 90% of its beneficiaries belong to the poorest group.“’

The provision of credit for income-generating activities needs to be seen as a part of a wider programme to mobilize, stimulate and motivate the poorest househoIds to improve their capability. Apart from mobihz- ing savings, such a programme may have to cater for the multiple needs of the borrowers such as loans for consumption purposes. Moreover, such credit programmes face the problem of recruiting a sufficiently large number of workers with requisite training and education to perform a wide variety of functions. The provision of credit for self-employment of the rural poor in income-generating projects needs to be integrated within a broader framework of overall economic growth. Without corresponding growth, particularly in the agricultural sector, based on technological progress and accelerated investment, returns from self-employment projects are likely to decline or expected returns are not likely to materialize. In the case of Grameen Bank it is already evident that the rate of return from repeat loans is lower than from the original loan; also larger loans have seldom been fully utilized.“”

If credit programmes for the rural poor are to expand in the long run, it will be difficult, if not impossible, to retain the present system of rather informal identification and formulation of projects; a more formal method with the participation of local government institutions for generating a stream of mutually supporting investment projects which ensure the supply of complementary inputs, on the one hand, and expanding markets for each others’ outputs, on the other, may be needed. It will be useful to involve the non-government organizations in this process so that they can help identify and formulate as well as implement viable project proposals. As the size of such credit programmes increases the credit institutions may need to confine themselves to the examination of projects and the administration and supervision of loans. The development agencies, local and national, may undertake the responsibility not only of ensuring the eligibility of borrowers, but also of motivating the beneficiaries about their rights and obligations; they should provide the necessary organizational support and assistance to the prospective borrowers.

30S.R. Osmani, Sociaf Security in South Asia, International Centre for Economics and Related Disciplines, London School of Economics, London, April 1988. 3’N.J. Kurian, ‘IRDP: how relevant is it?‘, Economic and Political Weekly, 26 De- cember 1987. 32Hossain, op cif, Ref 28. 331bid.



Table 5. Expenditures on social services.

Private Primary expenditures education

Health on health Education expenditures expenditures (per capita expenditures (% of total (% of GNP) PPP $) (as % of GNP) education expenditure) 1988 1985 1986 1985-88

India 0.9 2.6 3.4 43.3 Pakistan 0.2 20.0 2.2 40.2 Bangladesh 0.6 2.2 39.1 Sri Lanka i.3 6.6 3.6 93.5 Nepal 0.9 - 3.8 35.7 Bhutan _

tow human development countries 0.8 4.2 3.2 43.2 (excluding India) 0.7 7.5 3.1 43.0

Medium human development countries 1.5 11.8 4.0 43.8 (excluding China) 1.5 4.3 49.7

High human development countries 4.6 82.5 5.1 34.1

All developing countries 1.4 7.1 3.9 41.1

Source: Human Development Repoti, United Least developed countries 0.9 3.3 46.2 Nations Development Programme, 1990, p 148.

Access to social services

A major component of an anti-poverty strategy is to promote human capital formation amongst the poor. Increased access to education and health services enables them to make efficient use of the employment and income-earning opportunities generated by the process of economic growth. In any case, access to health and education is also considered as among the direct components of human welfare.‘j Hence the provision of increased social services is not always to be conceived as an input in the production process; it is an independent objective by itself. While access to health and education promotes a healthy and educated workforce and increases productivity, after a point there is a trade-off between physical investment, on the one hand, and social services, on the other. Among South Asian countries, Pakistan has been more successful than Sri Lanka in achieving a higher rate of income growth for the poor but with a much more limited access to health and education services; Sri Lanka has achieved a limited expansion in the income-earning opportunities of the poor but a very liberal access to social services (see Tables 1 and 5).

However, in order for the poor to obtain a much higher degree of access to social services, public expenditures on social sectors need to be expanded in South Asia by diverting resources away from the military and non-productive expenditures. Defence expenditures, which are high in most South Asian countries, cannot be considered in isolation from the competing claims for resources needed for the expansion of social services. Non-economic and economic objectives tend to conflict. How to generate a social consensus for an appropriate trade-off is essentially a political exercise. Secondly, there is the question of the reallocation of priorities within the social sectors themselves. While as

53ee Human Development Report, Un- late as 1986 Sri Lanka spent 1.3% of GNP on health expenditures,

ited Nations Development Programme, Pakistan spent barely 0.2%) India 0.9% and Bangladesh 0.6%. Similar-

1990, pp 128-131, 148; and Joachim von ly, Sri Lanka spent 3.6% of its GNP on education, with a heavy Braun, ‘Emerging patterns of absolute poverty and strategies for its rapid reduc-

emphasis on primary education (94% of educational expenditure),

tion’, paper presented at SIDA-IFPRI whereas Pakistan spent barely 2.2% of its GNP on education, with only

seminar, Stockholm, May 1990. 40% of it on primary education. The relative lack of emphasis on

FOOD POLICY April 1992

Poverty in South Ask

primary education is evidenced in India and Bangladesh as well as Pakistan (see Table 5).

There is a need for increased efficiency in the use of resources within the education and health sectors with a view to enhancing their impact on the poor. South Asia not only spends a relatively small percentage of its GNP on education and health services; it also places less emphasis on primary education and primary health care. The region has a large rate of unemployment amongst the highly educated and at the same time a low rate of literacy, a high rate of infant mortality and low life expectancy. In the health sector, priorities have to be redirected away from the curative health services, mostly concentrated in the urban areas, towards preventive primary and secondary health care services, especially in the rural areas. In the education sector, emphasis should shift from higher educational institutions in the urban areas to rural primary and secondary education, and to technical education in both rural and urban areas.

In view of the very large expenditures involved in expanding rural services to a much larger population, the search for a cost-effective method of financing assumes urgency. In this regard there are three interrelated issues: the extent of local government responsibility for financing and implementation; the relative role of public and private enterprise in the provision of services; and payment for the more expensive, specialized health and education services by the beneficiaries, who are mostly not poor.

Direct assault on poverty

Measures are needed to directly help those who are unable in the short run to take advantage of growth opportunities; in the interim period their income is unlikely to increase sufficiently to provide them with a minimum standard of living and access to services. Among these measures the most important are (a) the augmentation of the purchasing power and food consumption of the poor thorugh the direct transfer of food or income supplements, and (b) special programmes undertaken by the government for the provision of employment for the poor.

South Asia has experimented with a large variety of schemes for the provision of both subsidized food and employment for the poor. Public food distribution schemes have served the dual purpose of providing supplements to the income of the poor and direct access to nutrition. The subsidized distribution of food for the poor in South Asia has taken a number of forms, including: (a) the distribution of food through ration cards or food stamps, ie entitlements to quantities of selected food items or to a certain amount of monetary value, for designated households considered as poor, (b) school feeding programmes as we11 as feeding of pre-school children through such institutional arrangements as health and maternity clinics, and (c) feeding of vulnerable groups such as women and children.

In Sri Lanka, when food subsidies in the form of free rice rations were available in the 1970s they contributed the equivalent of 16% of the purchasing power of low-income families. In Bangladesh food subsidies

35NuruI Islam, ‘South Asia: those who increased the consumption of the poorest 15% ofthe urban population

were left behind: issues and perspectives’, by E--25% in 1973-74. During the late 1970s food subsidies contributed

Asia Pacific Journal of Rural Development, half the income of low-income families in the state of Kerala, India.“’ Vol I, No 1, July 1991. Food distribution in Kerala covered almost the entire population (97%)



360smani, op tit, Ref 30. 37Per Pinstrup-Andersen, Food Subsidies in Developing Countries, Johns Hopkins University Press, Baltimore, MD, for Inter- national Food Policy Research Institute, 1988; J.S. Sarma, ‘Determinants of admi- nistered prices of foodgrains in India’, in John W. Mellor and Raisuddin Ahmed, eds, Agriculfuraal Price Policy for Develop- ing Countries, Johns Hopkins University Press, Baltimore, MD, 1988, pp 155-170; Raisuddin Ahmed, ‘The pricing principles and public intervention in domestic markets’. in ibid.

122

at a level of per capita intake that was by far the highest among all the Indian states.s”

The food distribution schemes were often limited to urban areas, covering both the poor and non-poor. The availability of publicly distributed food in the rural areas was frequently constrained by either a lack of adequate supplies or an insufficient number of outlets; difficul- ties in the identification of appropriate beneficiaries were no less a constraint. Attempts have been made to improve the system of targeting for the poor and reduce the leakages to the non-poor. There are two problems that stand in the way of a properly targeted food distribution system. While the appropriate targeting is desirable and essential in order to reduce the cost of the food subsidy scheme, the cost of identifying and administering a subsidy scheme only for the poor without leakages is very substantial. To be cost effective a system of targeting has to be based on easily identifiable characteristics of the poor; it is not easy to devise such a scheme. A narrowly targeted scheme from which the non-poor do not benefit at all may have limited political support and hence may not survive in the long run. The political support for the broad-based food subsidies in Sri Lanka before the mid-1970s was partly due to their wide coverage - in fact the entire population was covered. The real value of targeted food stamps, introduced in Sri Lanka in 1979 and directed towards the poorest of the population, was quickly eroded by inflation. Moreover, there was no provision in the scheme for inclusion of the newly born or those whose income suffered serious losses in the subsequent period. This experience indicates that the effectiveness of targeted policy measures depends upon constant monitoring of the system, especially under the conditions of rapid socioeconomic change, ie changes in prices, wage income, employment, etc.

There is a need to achieve a balance between the two conflicting considerations, ie the economy of successful targeting and political support for a more broadly based scheme. To subsidize the food principally consumed by the poor or to confine the scheme to geog- raphical areas where the poor are concentrated are among the ways to target food distribution at low cost, but they are not always feasible.”

Food distribution schemes specifically directed to the benefit of vulnerable groups such as women and children are also administratively expensive but are highly targeted and seem not to face any significant political resistance. Successful schemes in this regard have included the feeding programme for pre-school children in Tamil Nadu in India and for poor women and children in Bangladesh (entitled the Vulnerable Group Development Programme). In the latter scheme the distribution of subsidized food is combined with training and skill development opportunities for poor women. As rural health centres and maternity clinics expand and improve in South Asia, the possibility of successfully administering targeted schemes directed towards poor women and children will improve; this is demonstrated by experience elsewhere in the developing world.

School feeding programmes in primary and secondary schools have often been recommended as a way not only of improving the nutritional levels of children attending school but also ensuring a higher level of school attendance. Admittedly, food taken at school by children partly replaces food taken at home, and therefore the entire amount of food so distributed does not constitute a net addition to their energy intake;


Povert?: in Sotcth Asia

nevertheless there is a net addition either to their energy intake or to the income of their family. Furthermore, a higher level of school attendance contributes to higher levels of education and literacy and, therefore, to human capital formation. The challenge faced by these programmes is how to devise a cost-effective method of administration; for example, school feeding programmes must not divert the valuable time of the teachers from their primary responsibility. The role of non- governmental organizations in the administration of feeding programmes outside or inside school, which is in many instances becoming increasingly significant, needs further evaluation.

An important measure designed directly to alleviate poverty is establishing public employment schemes for the poor at wages, paid in kind and money value, below the prevailing market rates for the construction of public works such as roads, irrigation projects, drainage schemes, reforestation schemes, etc.“* These schemes include the Food for Work programme in Bangladesh, in India the National Rural Employment Programme, the Rural Landless Employment Guarantee Programme and the Maharashtra Employment Guarantee Scheme, and in Sri Lanka the recently introduced Janasaviya Programme. These projects are highly Iabour intensive and are unlikely to draw participation from the non-poor; therefore they provide a measure of self- targeting. If the targeting is to be based on such poverty indicators as the size of landholdings? the considerable discretion given to the implementing agency for the selection of beneficiaries opens up the possibility of corruption. The employment guarantee scheme in Mahar- ashtra provided each participant with an average of 160 days of employment, the Food for Work Programme in India provided each participant with about 44 days work and the National Rural Employ- ment Programme provided about 55 days.”

In Bangladesh 75% of participating households were landless or had less than half an acre of land whereas in the rural population as a whole the proportion of the landless labourers represented only 45%. Of the wages received by the workers on these projects, 5(f-60% was a net gain in income after deductions for forgone earnings. A rough estimate indicates that the Food for Work Programme in Bangladesh created about 300 000 jobs, which constituted just under 5% of unemployment among the rural labour force in 1983184.“”

Under the ~aharashtra Employment Guarantee Scheme every adult 38Martin Ravallion, ‘Reaching the poor who wanted a job in rural areas was given one, provided he or she was through rural public employment: argu- ments, evidence and lessons from South

willing to do unskilled manual work on a piece-rate basis. The wages

Asia’, unpublished paper, World Bank, paid were below the prevailing agricultural wage rate. During the early Washington, DC, 1990; Abraham Amrita, 1980s 90% of the beneficiaries were below the poverty line, whereas in ‘Maharashtra Employment Guarantee Scheme’, Economic and Politi~ai Weekly,

the state as a whole only 49% of rural households were below the

No 15, 1980; Sartearthi Acharya and V.G. poverty line. Small and sometimes not so small farmers also joined in Panwalker, The Maharashtra Employment this programme in the lean season when many would otherwise remain Guarantee Scheme: impact on Male and Female Labor, Wowing Paper, Population

idle. By the early 1980s it constituted 10% of the state budget and

Council Program on Women’s Role and included a large variety of irrigation works and other agriculture-related Gender Differences, New York, NY, 1988; land development projects. There were a few unique features of the S. Guhan, ‘Aid for the poor: performance and possibilities in India’, in John P. Lewis,

scheme, which accounted for its large size and success. Maharashtra was

ed, Sfrengfheffjng fhe Poor: What Have one of the richest states in India in terms of overall per capita income, We Learned?, US-Third World Policy but one of the poorest in terms of rural income. The bulk of the revenue Perspectives No 10, Transaction Books, New Brunswick, NJ, 1988.

(6O-70%) was raised from the urban sector, particularly from the city of

3gOsmani, op tit, Ref 30. Bombay. Thus, while the financial burden was entirely borne by the -?&id. urban sector, the rural sector being totally exempt, the distribution of



41C. Abeygunawardana, ‘Some observa- tions of the implementation of the Janasa- viya Program’, unpublished manuscript, April 1989; Godfrey Gunatilleke, Govern- ment Policies and Nutrition in Sri Lanka: Changes During the Last 10 Years and Lessons Learned, Sri Lanka Center for Development Studies and Cornell Food and Nutrition Policy Program, Ithaca, NY, 1989.

the benefits disproportionately favoured the richer landed classes. The state’s politics were such that the scheme was strongiy dominated by the powerful rural elite which succeeded in extracting surplus from the urban sector to combine it with unemployed rural labour for the creation of productive assets.

In 1989 Sri Lanka introduced the Janasaviya Programme, which combined the existing food stamp scheme with the provision of wage employment and income-generating investment opportunities. Public expenditure on this scheme for the country as a whole constituted about 3.5% of GDP by 1991.

Each household received a monthly cash payment over a period of two years; a component (RS 2400 per month) was used for consumption and another part (RS 1042 per month) was saved and accumulated in a bank to be granted after a period of two years for investment purposes. The consumption component of the entitlement was to be spent on buying goods, mainly food and essential consumer goods, from the local village cooperatives which were thus given an important role in marketing and distribution. 4’ A five-person ‘support team’ or set of facilitators selected by the community helped in the identification of beneficiaries.

The entitlement to food coupons was conditional upon each household providing 24 days of labour every month to be employed on rural public works identified by the local community. Non-governmental agencies also participated in the support groups as well as in the identification of various elnployment projects,

The investment resource available at the end of two years was to be invested by beneficiaries in various kinds of income-generating activities. The regional rural development banks had undertaken to help identify investment projects as well as to provide supplementary resources. During the period of two years the beneficiaries received technical training in various types of income-generating activities, including small-scale industrial or trading activities.

The basic problem faced by the public employment schemes is the identification of worthwhile projects and the provision of non-labour inputs, so that they are not merely job-creating devices but also generate productive assets. If well executed and directed towards the poor, public employment schemes not only contribute to the stability of income for the poor but also exercise an upward pressure on market wages. In addition they may act as early warning devices for famine or acute distress due to crop failure, etc. Expanded and organized employment opportunities increase the bargaining power of the rural poor.

Over the last decade or so there has been a gradual trend in South Asian countries away from subsidized food distribution on a general scale towards more targeted schemes and employment-generating projects. Employment schemes financed through food-for-work projects also increase the availability of food for the benefit of the rural landless. At the same time, the objective of stabilizing foodgrain prices has assumed increasing importance in recent years. Instead of offering targeted food subsidies to individual households, the objective is to ensure food security at times of crisis by stabilizing prices through the use of publicly held food stocks in open market operations, built up partly from domestic procurement but mainly from imports. The objective was quite successfully met in Bangladesh in 1979 and 1984, when food shortages were acute. Similarly, in India the public food distribution system, which held large buffer stocks, was an effective



instrument for agricultural price support and stabilization; it played an important role in combating the impact of drought-induced food shortages on a number of occasions.

The relative emphasis on direct food distribution to the poor, on the one hand, and self-employment and wage employment schemes, on the other, depends upon the circumstances of each country. But there are some general lessons of past experience which may be kept in mind. A generalized food subsidy and distribution system has not been found to be very cost effective. Apart from its heavy budgetary burden, the leakages to the non-poor are often considerable. While targeted food distribution schemes have a greater impact on poverty, their success depends on the available institutional framework, ie the mechanisms through which the food distribution system works. Local institutions can play an effective role in monitoring and distributing food to the vulnerable groups.

Accountability and transparency in the implementation of both food distribution and employment schemes is aided by the participation of beneficiaries, which also helps ensure honesty and effectiveness. For projects to be technically efficient and well designed, local government institutions must be provided with technical and administrative skills. This was an important feature of the Maharashtra scheme, under which the coordination between the state and local government institutions was quite successful. Comprehensive employment schemes require considerable financial resources. With a high rate of growth of the overall economy and a mechanism for mobilizing financial resources, as in the case of the Maharashtra scheme, their potential for success is considerable. To make such projects politically acceptable it is necessary to strike a bargain among various interest groups. Public works projects provide an example of such a possible convergence of interests. The benefits from roads or irrigation canals can be widely shared. Also, participation in such projects is potentially open to anyone willing to accept the required conditions of employment. Since today’s well-off farmers or landless labourers could be tomorrow’s target groups (if their employment and incomes collapse) many who do not currently participate in such schemes may still value the insurance benefits they provide.

In order to ensure the sustainability of such schemes it is necessary that the implementation of projects including the flow of goods and services provided by them are dovetailed with the overall pace and pattern of economic growth. The demand for assets created by projects (such as the demand for livestock generated by credit schemes) must be matched by their supply. Similarly, assets which are acquired by the poor need to be combined with supplementary resources, eg feed stock must be available for the livestock. Moreover, there must be a demand for the goods and services created by the assets. If the overall economy is stagnant there is inadequate demand for the goods and services generated by the employment schemes. While private initiative and the profit incentive can help identify projects which will find a market for their output, there is also a need for public action for investment in infrastructure as well as in the provision of technical training, education and credit.

In several South Asian countries, where aid dependence is substantial, the scale and success of poverty-alleviating policies and measures are frequently linked with the actions and policies of the international community and donor agencies. It is felt by many in the donor


Povrr(v in Soutfz Asiu

community, especially the multilateral aid agencies, that the provision of aid should increasingly depend, firstly, on a national commitment to poverty alleviation, and secondly, on success in the actual implementation of well-defined measures. Each recipient country may establish a mechanism for monitoring progress in poverty reduction; a set of poverty indicators relating to the income and consumption or nutrition of the poor may be agreed upon. There is no one-to-one correspond- ence between poverty-oriented policies or measures and the extent of the alleviation of poverty, partly because of the intervention of ex- traneous factors not always within the control of an individual country. Therefore the performance of a country on the basis of ‘poverty indicators’ cannot be mechanically used as a basis for development assistance. An in-depth analysis of the success or failure of poverty- alleviating policies and programmes is needed to provide the basis for jud~emcnts regarding a country’s ~erformatlce.

Politics of poverty alleviation

In the design and implementation of measures intended to alleviate poverty ranging from the supply of social services, credit and inputs to food distribution and public employment schemes, the role of appropriate institutions, including the political system and its organizations, cannot be overemphasized. To provide just one illustration, there is the vexed question of the appropriate role of decentralization in the decision-making process. Decentralization to representative local institutions not only ensures the participation of the beneficiaries in the design, monitoring and implementation of poverty-alleviating projects but also helps in the mobilization of resources linked with specific projects or programmes at the local level. A question has been raised as to whether such a decentralization process does not strengthen the hand of the rural elite vis-&vis the rural poor and stand in the way of anti-poverty measures. It is argued that at the national level there are countervailing forces to offset the power of the rural elite, such as the urban middle class or the industrial and trading classes, whose interests do not necessarily coincide with those of the rural elite. This offsetting force does not exist to the same extent in the rural areas. Moreover politicians at the national level do not have the same interests as the local elite, and in fact often compete with them for political power. Therefore they may favour policies and measures to help the poor, even though this may weaken the control of the rural elite over the distribution of patronage. Moreover, the national organizations of farmers and agricultural labourers can wield bargaining power which cannot be matched by their organizations at village or district level where the dependent relationship between the poor and the rural elite is often quite strong. Using their bargaining power at national level, the organizations of the poor can influence measures and policies in their favour.

What is needed, therefore, is to generate as much as possible a plurality or multiplicity of political forces at all levels, both Iocal and national. In an open political system in which the media are free, where public criticism of government policy is unhindered and where the various political parties, associations and organizations vie with each other for influence, the chances that the objective of poverty alleviation will occupy a prominent place on the political agenda are high. This is



also the environment in which the poor can organize themselves; otherwise the strategy of poverty alIeviation will not secure the extent of political support it needs. Since the elite is not always monolithic, if the poor can be organized to articulate and promote their interests, some sections of the elite may seek their support to offset the power of other elite groups. In an open political system the intra-elite conflicts and rivalries sometimes act to the benefit of the poor.

A strategy of poverty alleviation implies a judicious combination of the market mechanism, private incentives and public action. Experience both in developing countries and in centrally planned economies in Eastern Europe and the USSR demonstrates the crucial role of the market mechanism and private incentives in the promotion of growth. At the same time, the role of the government remains critical in compensating for market failures, strengthening market forces and providing public goods in order to promote efficiency and alleviate poverty. However, an overburdened and corrupt government is unable to perform these desirable and necessary functions and can under certain circumstances do more harm than good.

The role of public action should be understood to extend beyond the activities of the state to those groups and organizations at the grassroots, national and international levels. What is necessary to stimulate public action for poverty alleviation is not only political pluralism but also political commitment, ie political will and determination.4” Admittedly, the concept of politica will is not very precise and it is not easy to specify the process through which it operates. A dedicated and committed leadership can indeed generate an effective social response. Political pluralism allows adversarial politics and social criticism, which generate sensitivity on the part of the government to the well-being of the population. A leadership which is committed to social change not only inspires public confidence and collaboration but can also turn out to be hostile to the adversarial role of the public. The task of combining strong and committed leadership with participatory political pluralism poses a difficult challenge for developing countries.4”

42Dreze and Sen, op tit, Ref 5. 43As Sen notes, ‘it is natural to look for the possibility of combining the advantages of committed leadership with those of plural- ist tolerance. Whether such combinations are possible especially in the circumstances that rule in most developing countries remains a challenging question. There is no reason in principle why a poiitical system that allows, encourages, and helps the public to be active (both adversarially as well as collaboratively) cannot also lead to governments that provide bold initiatives and an inspiring leadership. But it is obvious that in practice the actual possibilities are much constrained by social, political and economic circumstances, and the ideal combinations are hard to realize as the history of the world has shown again and again’: ibid.

Conch.dm

South Asia contains the majority of the developing world’s poor, that is, those who fail to achieve a minimum Ievel of income, consumption and nutrition and have very limited access to health and education services. The majority of the poor live in rural areas, and are predominantly engaged in agriculture or related activities. The alleviation of rural poverty constitutes the central core of a strategy for an assault on poverty; it will directly and indirectly help alleviate urban poverty; however, the need for specific urb~n~oriented measures is not denied, especially in cities where poverty is acute and deepening.

The poor have very few assets, either land or otherwise. What they have in abundance is their labour. The basic component of a poverty- alleviation strategy is therefore to expand income-earning and employment opportunities for the poor. A transfer of assets, for example through land redistribution wherever possible, will help. With increasing population and limited land resources, the task of providing long-term employment to the rural landless either through wage employment or self-employment based on the ownership or acquisition of capital assets assumes critical importance.


Experience in South Asia dem[)nstr~~t~s that vigorous agricultural growth based on labour-intensive technological progress raises the income and consumption of the poor. It keeps down the prices of food, on which the poor spend a proportionately large part of their expenditure; and it helps stimulate non-agricultural growth and employment.

An expansion of labour-intensive non-farm employment opportunities, based on a complementary relationship between large-scale and widely diffused small-scale industries, supported by a broadly dispersed physical infrastructure as well as adequate marketing and distribution systems reinforces and in turn is stimulated by the process of agricultural growth. There is not much new in this strategy except that it has to be vigorously pursued on a sustained basis and requires supportive macroeconomic measures including fiscal, trade and exchange rate policies - which is often not well recognized.

At the same time, supplementary measures are needed to launch a direct assault on poverty to assist those who are very poor and who benefit from economic growth opportunities only slowly and over a long period of time. Wide access to health and education facilities enables the poor to take advantage of economic opportunities; adequate health, education, nutrition, shelter, transportation, etc, constitute important components of human development. In this respect, South Asia has lagged behind other developing countries, such as those in East Asia.

The most prominent of the direct measures to alleviate poverty are self-employment schemes for the poor, supported by easy access to credit; public employment schemes such as food-for-work projects and a public food distribution system for augmenting the food consumption and nutrition of the poor. Several such schemes have been in operation in South Asia in recent years and have achieved varying measures of success. The appropriate combination of different approaches depends on the circumstances of each country. To improve the design and implementation of such projects, building on the lessons of past experience, and targeting them increasingly towards the poor to the extent administratively and politically feasible, are essential prere- quisites. Efforts to decentralize the decision-making process to local government institutions in which the beneficiaries can participate as well as to equip them with the necessary technical and administrative capacity can make significant contributions to their success.

Above all, the alleviation of poverty must be high on the agenda of the government. The commitment of the political leadership at the ‘top’ and mobilization of the poor from ‘below’ in an environment of political pluralism in which the government responds to the felt needs of the governed, especially the poor among them, are essential elements of the

strategy. In view of the large magnitude of absolute poverty and limited

resources in South Asia, the assistance of the international community in strengthening national efforts to increase expenditure on social services and direct poverty-alleviating measures can play an important

supporting role.


Poverty in South Asia: Approaches to its alleviation

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