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Indian Economic Policy

Notes On the question of setting a target of poverty reduction, the Eleventh Plan mentions : “The Plan
document has admitted that the percentage of poverty in 2004-05 is about 28 percent and thus, the
11 Plan intends to reduce it by 10 percentage points by 2017. This would imply a rate of reduction of
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poverty by about 1 percent during 2004-05 and 2016-17. This is even less than the decline in poverty
observed during 1973-74 and 1986-87 when the average growth rate of GDP ranged around 5 percent.”
There is another problem raised by Mohan Guruswamy et. al. about the definition of poverty line.
“While the definition of hunger in terms of calories can remain constant, the definition of poverty is
relative to the present levels of general prosperity...the present official poverty line is based only on
calories and hence accounts for little else but the satiation of one’s hunger.
It would have been more accurate to define this as a starvation line, as that is exactly what it is.”
(Emphasis added). The Planning Commission, thus, intends to reduce starvation line up by 10 percent
by 2017. For providing a basic minimum, poverty line needs to be redefined in terms of basic needs
approach. While India is aiming to become a super-economic power by 2020. it will only reduce
starvation by the date. In the light of this. India should adopt the International Poverty Line of $2 per
day as the basis of determining the percentage of people in poverty. As per the Human Development
Report (2007/2008), on the basis of $1 per day, for the year 1999-00, people below the poverty line in
India were of the order of 34.3% and if we use the norm of $2 per day, then 80 percent of the Indian
population was below the poverty line. The present poverty line on the basis of calories does not
even meet the rock bottom standard of poverty set at $1 per day, not to speak of reaching the standard
of $2 per day basis on basic needs approach. The Planning Commission should, therefore, upgrade
the poverty line to reach international standards as it intends to do in other sectors of manufacturing,
services and yield of output in agriculture. It should not seek a false sense of satisfaction that it has
been able to effectively reduce poverty. It is heartening to note that the Planning Commission has
appointed an expert group to revise the poverty line.
Reduction of Unemployment

The Planning by reducing the estimate of new entrants to the labour force to 45 million instead of 65
million as indicated by the Approach paper and with a backlog of 35 million unemployed has reduced
the total requirement of employment opportunities to 80 million. By providing the target of 58 million
employment opportunities, the rate of unemployment has been reduced from 8.36% in 2006-07 to
4.83% in 2011-12. The Planning Commission is itself not sure of the projection of 45 million new
entrants and to save itself from criticism, it has stated a number of qualifications. The whole approach
to reduce the rate of unemployment so sharply in a span of 5 years is nothing but statistical jugglery.

Issue of Labour Flexibility
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Shorn of its frills to pay homage to inclusive growth, the 11 Plan is a new avatar of the Report of the
Task Force on Employment Opportunities headed by Dr. Ahluwalia in 2001. It mentions.”It must be
emphasized that labour flexibility does not mean”hire and fire”. There are many aspects of labour
laws where greater flexibility is neededand would be in the interest of labour as a whole in the sense
that it would actually generate large volumes of employment in the organized sector by encouraging
employers to expand employment. This flexibility is especially needed if we want to exploit the
enormous opportunities offered by export markets...we should evolve a consensus on the scope of
reforming key labour laws including especially the industrial Disputes Act and the Contract Labour
(Regularization and abolition) Act.” The statement very admirably clothes the hidden agenda of the
Planning Commission. This is due to the developments taking place in the organized sector in recent
years. The Textile Minister wants (i) raising of working hours from 48 to 60 per week, (ii) allowing
women to work in night shifts, (iii) permitting contract labour, (iv) easy exit norms and (v) treating
export industry as a public utility for the purpose of Industrial Disputes Act. To add to it. Commerce
and Industry Minister wants Special Economic Zones to be exempted from labour laws. Obviously,
the direction in which the UPA government intends to push labour laws is amply clear, however, it
may camouflage its policy in the 11 Plan by soft words.
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The Planning Commission has set the goal of inclusive growth. It notes the fact that despite sharp
increase in productivity, real wages of labour have declined. ILO report on Labour and social Trends

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