‘Shift debate from fiscal deficit to jobs and productivity growth’
2 min read 20 Feb 2014, 01:22 AM ISTThe authors of the report, 'From Poverty to Empowerment', talk in an interview about the priorities for the future in reducing poverty levels
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New Delhi: Even as the debate about how to measure poverty and progress in reducing it continues, a new report produced by the research arm of consulting firm McKinsey and Co. presents a comprehensive view of deprivation and ways to tackle it. The authors of the report, From Poverty to Empowerment, Anu Madgavkar, senior fellow, McKinsey Global Institute; Shirish Sankhe and Rajat Gupta, directors at the institute, spoke in an interview about the priorities for the future in reducing poverty levels. Edited excerpts:
How are the key messages of the report different from other growth and poverty alleviation prescriptions?
Sankhe: There is the bold objective of lowering the headcount of deprived to 7% of India’s population by 2022 and the two new frameworks of empowerment gaps and access deprivation that we intend to use for other countries. We find that about 90% of the impact we can have on the 56%, or 680 million vulnerable, impoverished and excluded people who are below the empowerment line will come from non-farm job creation, agriculture yield improvement and effective public spending. India needs to shift the debate from fiscal deficit to focus on these levers.
Madgavkar: Unlike previous studies, we have looked at access deprivation, disregarding income measures. It turns out that Indians, on average, lack access to about half of the basic services they need. We found that a lot of districts similar in income and consumption levels differed greatly in access to basic services; this puts the spotlight on governance.
What are the key areas for job creation and reducing deprivation in access to services?
Sankhe: Among public services, we think health-care, education and food are the three most important to focus on. It is amazing how much progress India has made in delivering these in some pockets. We are saying we need to scale it up to the whole country. For poverty reduction, we think the best jobs are those in manufacturing, construction, retail and tourism.
Jobs in construction are seen as of poor quality. Why does the report recommend 40% of the new jobs in this sector?
Sankhe: At this stage of economic development, countries have been dependent on these sectors. You are building the country and though construction jobs may not be the best, they are not as low productivity as farm jobs, especially when you are trying to pull workforce away from farms.
Madgavkar: The focus is on sectors that can create jobs on a more distributed basis, providing opportunities to use local entrepreneurship and existing skills in the second- and third-tier cities.
With weak growth, the central government has been cutting spending to keep within deficit targets. Do you think this is an opportune time to argue for more public spending?
Gupta: Social spending needs to go up, a substantial portion of it in health, but it needs to be more purposeful. We have looked at over 200 examples of how public programmes become effective— have empowered agencies, infrastructure delivery units, use technology to bring more transparency, involve communities, use non-government partners through systems such as charter schools. We are a big votary of an outcomes rather than inputs-based approach to government programmes— was the impact defined, did it happen, was it measured?
Madgavkar: We are not arguing for a massive shift but for measured increases in social spending along with enabling reforms that will help crowd in private investment.
Sankhe: We have not quantified it, but most of these reforms need to be taken up at the level of states.
