Wednesday 22 August 2012

A richer approach to poverty reduction

India can learn from Brazil’s Bolsa Familia and China’s Gansu Programme to make refinements to its MGNREGA scheme.The development experiences of Brazil, China and India provide a valuable opportunity to understand the relationship between growth and distribution over periods of high rates of growth.

The growth story playing out in all the three emerging economies have resulted in large regional as well as spatial inequalities, between rural and urban poles along paths of human migration. The patterns of inequality since the 1990s vary across these countries.

In Brazil, the Gini index, a measure of inequality, reduced from 0.61 to 0.54, while it increased in both India, from about 0.31 to 0.33, and China, from 0.29 to 0.42, over the same period (the Gini index ranges from zero to one; the higher the index, the greater the inequality).

The evidence from the Millennium Development Goals and other globally endorsed measures of human development show a number of serious shortcomings in the growth strategies of the three emerging economies. These are particularly striking in relation to education and health attainments, asset distribution, and employment opportunities as well as with regard to social inequalities by region, race/caste, gender and disability.The differences between the countries is also significant, with health inequalities exceeding educational inequalities in China, educational inequalities being the worst in India and asset inequality exceeding all others in Brazil.


The reduction in poverty per unit of growth in GDP per capita over the nineties to the middle of the last decade was the highest in Brazil (minus 4.3 per cent), compared with minus 0.8 per cent for China and minus 0.4 per cent for India. This difference is, in part, attributable to the fact that Brazil saw a reduction starting out with a high level of poverty as well as inequality. China and India, on the other hand, began with low relative levels of inequalities before embarking on reforms. The growth process that resulted from this, however, ended up increasing their inequality and poverty levels.

It is the alarming changes in inequality and poverty that, in turn, have been the trigger for national programmes of poverty reduction in all three countries in recent years.The key to address these issues in each of these countries is found in their nationally initiated flagship social programmes: The Bolsa Familia in Brazil, the Gansu Poverty Reduction Programme in China and the Mahatma Gandhi National Rural Employment Guarantee Act or MGNREGA in India. Each target particular types and aspects of rural poverty that have been most prominent in the respective countries.

Each of these programmes has been devised and financially supported by the federal government and implemented by provincial/State governments through decentralised mechanisms that operate at the lowest administrative unit of the country concerned. Furthermore, each programme has had a short-term goal of reducing poverty and a long-term goal of breaking the intergenerational cycle of poverty.

In the case of the Brazilian Bolsa Familia, the mechanism for poverty reduction was via a conditional cash transfer programme targeting two groups: extremely poor families and moderately poor families. The eligibility for these transfers is determined by information stated by households themselves and this information is cross-referenced with a federal database.

Cash payments are made on the conditional basis of evidence showing regular school attendance and vaccinations for children of the families, along with health clinic visits and participation in vocational training and nutrition courses.

The Gansu Poverty Reduction Programme is a targeted poverty reduction project designed to support the Chinese Government’s Eight-Seven Poverty Reduction Plan and reduce absolute poverty in the remote and inaccessible areas of the backward Gansu Province and the Inner Mongolia Autonomous Region.

The project seeks to improve the livelihoods of poor households in these regions by raising their incomes through increased grain and livestock production. The focus of this provincially targeted programme is on improving rural incomes by moving households away from agricultural to alternative income generation activities within the rural areas.

In India, the flagship has been the MGNREGA programme, a national employment generation programme that is managed by the Ministry of Rural Development. The current debate around the registration and verification of households for MGNREGA employment is an important matter.


The focus on employment as well as targeting and monitoring the households eligible for the scheme is a welcome objective. But at the same time, MGNREGA lacks the financial benefits provided by the Bolsa Familia programme and has also not factored in the dimension of livelihood diversification that is at the core of the Gansu poverty reduction programme.

The different approach to poverty reduction adopted in Brazil and China indicates that there might be lessons here that India could learn from. In particular, the ability to bring about a reduction in rural poverty by sending children to school, which has been a resounding success in the Brazilian case, or the new non-farm rural income generation that symbolises the Gansu programme, are attractive policy outcomes that have not yet been discussed with regard to the MGNREGA.

These are important dimensions that should be visited in the current discussions of how to further refine the MGNREGA programme. It is already clear that India has reached the tipping point from which it would move towards becoming predominantly urban. But the poor who remain in agriculture will find themselves increasingly hard-pressed to find sustained forms of employment.

If MGNREGA goes beyond a simple increase in rural employment, to incorporating the possibilities of building rural, non-agricultural based livelihoods (as envisioned in the Gansu programme) and even consider linking these to financial incentive packages (a la the Bolsa Familia model), it can emerge as a channel for not just short-term poverty alleviation, but long-term improvement in the capabilities of India’s rural poor.

Er Reema Chordiya [ BE, MBA, Member of the Advisory Board at
Minu-Sepehr AeroSpace University,USA ]
Manager HR

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