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India has just witnessed a dramatic decrease in the number of poor. Data released by the Planning Commission last week showed that less than a quarter of Indians—21.9% to be precise—now live below the poverty line (BPL). The decline occurred in both rural and urban areas, but was far more spectacular in rural areas. In the seven years from 2004-05 to 2011-12, the number of poor living in rural areas fell by a whopping 109.8 million. Rural poverty decreased in the preceding 11 years—1993-94 to 2004-05—as well, but at a Hindu pace: 2.3 million people ceased to be poor.

This remarkable change should have been a cause for celebration. Instead, within days, the commission’s figures were criticized as being unrealistic. It is understandable if economists dispute the details of how poverty is measured for that is what they do. Instead, political leaders cutting across party lines labelled the poverty line a cruel joke. It was as if a crisis would ensue if poverty were to decline beyond a “reasonable" level. India, it seems, has an “ideology of poverty" that is essential for governments and political parties alike.

In the last seven years, there has been a pronounced rural bias in economic policymaking. Plans, schemes and laws have all been crafted keeping in mind the well-being of the rural poor and elections have been won in the name of the poor. What will happen if these poor people no longer exist? What if India’s leaders misunderstood the link between the economic growth and political outcomes? It is an interesting subject to speculate on.

Any government’s claims for re-election depend on its ability to demonstrate competence in running the country effectively. Basically, this requires ensuring good growth, maintaining some standard of governance and ensuring smooth functioning of markets. This combination is sufficient to deliver what a modern electorate demands. This was the trend in India from 1991 to 2004. Since 2004, the nature of Indian political economy has changed as dramatically as the rapid decline in poverty which, interestingly, also began with that date.

When the United Progressive Alliance (UPA) assumed power in 2004, its advisers and intellectual supporters argued that benefits of growth had bypassed India’s poor. Growth was considered to be largely urban centric with a marked anti-rural bias. The evidence for this was at best shaky. Widely reported cases of rural suicides, in a couple of states, were generalized into a claim for widespread rural distress. What was ignored was the rapid increase in minimum support prices in those years for key crops such as wheat and rice. A rural boom ensued which did translate into a modest decrease in rural poverty. India was on its way to reducing poverty but this was ignored in the policymaking process.

Why was the political cart put in front of the economic horse? If one faulty assumption, as mentioned above, was “economic", the other one, clearly political, was that India was still a rural country. These leaders refused to see the rapid pace of urbanization that was afoot. Seen together, the twin assumptions—that rural India was in distress and that the bulk of citizens lived there—made a strong case for expenditures of the kind seen in the past seven years. Spend rural and reap rural made a compelling political strategy.

The numbers released last week throw all this into doubt and confusion. Now that a vast mass of the rural poor have, well, disappeared, what is to be done? Ideally, governments and political parties that respond to changes in material conditions alter their political strategy accordingly. In practice, this is difficult for many reasons. In the UPA’s case the problem is acute: entire swathes of the policymaking apparatus (the National Advisory Council is one example) have been built around faulty assumptions. Too much of capital—real and political—has been sunk behind the “rural cause" for mere poverty numbers to force a course correction. Is it surprising then that the first reaction of ministers, and those intellectuals and economists supporting the government has been to either question the poverty numbers or to blatantly deny that poverty could fall so fast. In the days and months to come, more denials and more questions are likely. And certainly the spending spigots will remain open.

To be sure, there is no notion of fairness in economic growth. The two belong to different universes—moral and economic. Democracies cannot afford a hermetic separation between the two. But there is a serious limit on mixing the two that is permissible rationally—without risking growth itself, something that will condemn the poor to remain poor. The UPA government did not understand this limitation when it went about spending recklessly. The poverty numbers are down and economic sense dictates that it crunch expenditures on its so-called flagship programmes.

That may not happen as poverty, you see, is a very useful fiction.

Siddharth Singh is Editor (Views) at Mint. Reluctant Duelist will take stock of matters economic, political and strategic—in India and elsewhere—every fortnight. Comments are welcome at siddharth.s@livemint.com. To read Siddharth Singh’s previous columns, go to www.livemint.com/reluctantduelist

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