The Congress has initiated a navel-examining process – why is it nowhere. The prime culprit identified by the wannabe leaders of the declining-into-oblivion political party is the economic reforms initiated by its very own Dr. Manmohan Singh, Finance Minister during 1991-96. During these economic reform years, especially 1991-1993, Manmohan Singh helped initiate major departures from India’s socialist state path which it had assiduously followed for 40 years.

The economy was substantially opened up to the outside world, the Neta-Babu driven (read corruption infested) industrial licensing scheme was scrapped, the capital market was put on the path of being free, and Indians, who had long enjoyed political freedom, were allowed to start catching up with the rest of the world with a "new" liberty - economic freedom. All sounds good, but important questions have been raised about the economic reforms. Justifiably, the major objective of Indian economic policy has to be the reduction in absolute poverty. And this is where Dr. Singh is alleged to have failed. And the evidence is provided by the water-heavy artillery of Indian academia, and the Indian left, who, seeking to revisit to the glorious past of Marx-Lenin-Stalin Ism, want "good" pro-poor economic policies to be brought back.

An interesting twist to what may have gone wrong was provided by eminent economist, and Delhi University Vice-Chancellor, Deepak Nayyar. At a seminar sponsored by the Asian Development Bank at the Delhi School of Economics on July 20th, Nayyar described the Indian economic record since the seventies as follows: "During the seventies and eighties, India registered very moderate growth in economic growth, and a reasonable reduction in poverty; but during the nineties, there has been an acceleration in economic growth, and no reduction in poverty. This fact deserves an explanation". Mr. Nayyar outlined a new hypothesis, and one that can be the subject of a few Ph.D. dissertations. The hypothesis being that moderate growth (economic GDP growth is interchangeably used with growth in private consumption) is excellent for poverty reduction, but "high" growth can be problematical. If Dr. Nayyar is right, then Mr. Manmohan Singh was wrong. The Congress does not need to go thru any complicated navel pyrotechnics - it is the fast growing economy, stupid.

Dr. Nayyar has facts to support his contention, and he is in very good company. Drs. Sunderam and Tendulkar presented a paper "Poverty in India: An Assessment and Analysis" documenting exactly the "facts" alleged by Dr. Nayyar. Nobel prize winning economist, Amartya Sen, has been warning us about the this "likelihood" for decades. The World Bank, in the last few years, has been leading the charge against "bad" market policies. India is "the jewel in the crown" of evidence substantiating the allegation that market economies need to be harnessed by "good governance" of the state, the bureaucrats and institutions (who presumably know better and know exactly what levers to pull to reduce poverty - which is why India saw no poverty reduction for 30 years, 1953 to 1983). Indeed, the now canned World Development Report (WDR) 2000/01 - Attacking Poverty - had as its major premise the need for extra-terrestrial interventions to reduce poverty in India, since growth had obviously not delivered the goods.

What are the facts that have caused this upheaval for right minded thinkers, their left- minded counterparts, and policy makers, and made a bad situation worse for the poor? The authoritative National Sample Survey (NSS) of India, a pioneer in household surveys, is the source for information on poverty trends. The table documents the trends in absolute poverty as revealed by the "Head Count Ratio" (HCR). The HCR is a simple counting of the percentage of poor; and the poor are defined according to a certain level of real per capita expenditure. (The definition of the poverty line is not material; but it corresponds to an annual p.c. expenditure today of approximately Rs. 4440).

The data seem to support the contention of the World Bank, the defunct WDR 2000, and large portions of Indian academia. Data for two decades are reported - the pre-reform years 1977 to1987, and the post-reform years 1987 to 1998 (Jan-June). From 1977 to 1987, consumption growth was a moderate 1 % per capita per year (pcpy), and the poverty reduction (according to NSS) a correspondingly moderate 1 % pcpy. From 1987-1998, consumption growth tripled to more than 3 % pcpy, but the HCR showed an increase of 3 percentage points. In other words, more than a 34 percent increase in average consumption growth was accompanied by an increase in poverty. Surely the evidence is tight to show that the economic reform policies should be reviewed, and junked - and Dr. Singh banished from the Congress party. And the Swadeshi Jagran Manch, a Luddite cousin of the ruling BJP, consulted for the new right is left economic policy.

But something funny happened on the way to the pre-determined ideological position of "economic reforms are bad for the poor and here is the proof". Fast bowlers come in pairs - this is well accepted theology. Estimates of expenditure growth and poverty also come in pairs - either the survey data are used to generate both growth and poverty, or the survey mean is adjusted to the national accounts (source for GDP data) to generate estimates of household growth in expenditures. (This "Keep it Simple, Stupid" or KISS method, was used prior to 1996 by the Government of India.) These are the only two logically consistent estimates.

The big mistake (a la Nayyar, Sundaram-Tendulkar, the World Bank) is to take consumption growth from national accounts, and poverty change from survey data i.e. violation of the pair rule.

Using pair-wise data, the following results obtain. For the pre-reform decade (1977 to 1987) the NSS reports a 11 percent growth in real per capita expenditures and a 10 percent decline in the HCR. The KISS estimate of growth is 13 percent, and the decline in poverty is 11 percent.

For the post-reform period (1987 to 1998), the NSS and KISS estimates are very different. NSS estimate for real per capita expenditure increase is only 5.9 percent, and poverty is shown to have increased from 39.3 to 42.6 percent! In contrast, the KISS estimate is that per capita expenditures increased by 34.4 percent, and that the HCR declined by 26 percentage points - from 38 percent in 1987 to only 12 percent in 1998.

The evidence is startling - and convincing. Growth in NSS expenditures (proxy for economic growth) is one for one correlated with decline in poverty; as is growth in national accounts based expenditures and decline in poverty. It is rare to find such a consistent pattern. The Congress party can choose to believe that there was no growth at all in Indian incomes from 1987-1998. And that Dr. Singh's economic reforms were bad for the poor. But it absolutely cannot conclude that there was both economic growth and no poverty reduction. The conclusion is clear - have growth, and obtain poverty reduction.