The Planning Commission recently stated in an affidavit before the Supreme Court that BPL criteria could be incomes of Rs. 32 or 25 per day per person, in urban and rural areas respectively. The furore created by this rather injudicious statement led to both a backtracking by the government and a spate of poverty solutions by experts and civil society organisations. An article titled, “What the poverty debate misses” by Kirit S Parikh, in ‘The Times of India’ datelined 4 Oct 2011, illustrates the kind of muddled thinking that characterizes many of the poverty solutions touted out in public space. Reading the article, one does not know whether the author is advocating the UID project, branded as, Aadhaar, or whether he is suggesting a solution for providing subsidised food grains to those below a defined poverty yardstick. Seven times the author mentions Aadhaar, of which, five times he talks of Aadhaar Card. Could it be that he is not aware that Aadhaar is NOT a ‘card’, but merely a number in a database? Media often mentions ‘Aadhaar card’, when the chairperson of UIDAI [Unique Identification Authority of India] has repeatedly clarified that, there is no such card. Yet, why is this misconception propagated?  The article first proposes use of smart cards or food coupons. It then points to the “messy problem” of printing the coupons and distributing them to the poor. The author sees the UID number as a solution to printing and issuing coupons. Perhaps, he is ignorant of the “messy problem” of capturing the biometrics of the poor and authenticating them at the PDS food distribution shops. However, he readily admits that even with the “Aadhaar cards”, the task of identifying the poor remains. The learned researcher accepts, “Large exclusion and inclusion errors of the present system of issuing BPL cards will still persist”. He suggests universal right to food as a means of overcoming exclusion errors. He further suggests that instead of identifying the poor, excluding the “easily identifiable rich”, making PDS universal. The flip-flop of confusion continues as the article proposes “self selection”, in the universal PDS scheme, by households purchasing rations with an Aadhaar card. Does the author assume that the “easily identifiable rich” would not have an Aadhaar card, if indeed such card were to exist sometime in future? Next, the author, says, “the problem of diversion (of PDS food) can be taken care of by providing food coupons or Aadhaar card linked entitlements that can be purchased at any shop.” One cannot but help noticing the contradiction a few sentences earlier, when the “messy problem” of printing coupons was decried. He goes on to advocate “co-operatives” in remote areas as a way of combating traders who would overcharge in the above “any shop” scheme.  Why should the cooperatives be confined to remote areas? A few paragraphs later, the author suggests cash-transfers through Aadhaar cards. He concludes that 200 million poor households could be provided Rs. 4,500 per year through cash transfers, keeping Rs. 4000 Crores for “administering cash transfers”. He fails to notice that the administrative cost is nearly 50 % of the total cost! This seems to be the conclusion of the article; cash transfers to 200 million poor households through UID. In arriving at the conclusion has he forgotten the misgivings he expressed regarding the problem of identifying the poor. One is reminded of the children’s fable of catching the crow by placing ghee on its head and waiting for it to melt and blind the bird! The author’s circular reasoning begs the question.

These apparently scholarly solutions miss the basic causes for poverty and ways to lift people out of it. Hence, the solutions concentrate on identifying the poor, uniquely, numbering them and locating them. This is not because solutions are unavailable. It is due to the refusal to accept available solutions. Galbraith calls this “innocent fraud”. He explains, “There is always popular error. What prevails in real life is not the reality, but the current fashion and pecuniary interest”; “this fraud derives from traditional economics and its teaching.”

A simple poverty-alleviation solution has two dimensions. One is to provide immediate sustenance to the needy. The other is to adopt and implement economic policies that would eradicate poverty.

The first is quite easy. Universalize PDS, install effective accounting, facilitate cooperatives (unfettered by political parties), prevent damage to food stocks, distribute them and impose stringent penalties for corruption. This eliminates the costs of identification and the corruption accompanying it.

The solution to the second dimension lies in Schumacher’s thesis. He says, “Development does not start with goods; it starts with people and their education, organisation and discipline”. “Alleviation of poverty depends the removal of deficiencies in education, organisation and discipline.” Schemes like MGNREGS are counter-productive. They condemn people to life-long labour, with no hope of exit. The effort should be to provide education and skills that are relevant, to the needs of, and usable in, the places where people live. This would prevent rural unemployment that produces mass-migration into cities. It is impossible to handle such exodus of immense proportions. The wasted resources of the JN-NURM project should be a lesson. If not, rural unemployment becomes urban unemployment. The task is to create millions of workplaces in rural areas and small towns with appropriate technology and education / skill impartation. For this, resources could be found from diverting funds now locked in wasteful effort in big cities. As Schumacher says, “It is necessary, that at least an important part of the development should by-pass the big cities and be directly concerned with the creation of an agro-industrial structure in rural and small-town areas.” The current attempt to impart city skills to rural population, like making them capable of employment in BPOs, is foolish.


Organisation could be provided through people’s cooperatives, where politicians and political parties or governments have no administrative role. Discipline would come from within the cooperatives themselves. The requirement is for change of mindset from fashionably current western economic thinking to realistic, indigenous economic solutions. This is indeed difficult when the economic policy is formulated by those schooled in traditional failed policies of World Bank and IMF.