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Poverty is a new market for management firms

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The Rs 1,336 proposed by McKinsey will neither help run this household nor provide any 'empowerment'.

The Rs 1,336 proposed by McKinsey will neither help run this household in rural Karnataka nor provide any ‘empowerment’. The family’s entrepreneurship, running a cooked food stall in a part of the house, keeps it comfortably above the poverty line.

There is a new contributor to an old subject in India. The subject is poverty, and the newcomer is a management consulting company. This sort of company has no experience with such a subject, however the McKinsey Global Institute – which works as “the research arm of consulting company McKinsey” – has not been short of advisers on the matter.

What does this consulting company say and why should we keep an eye on their activity in this subject? This institute has issued a report called ‘From poverty to empowerment: India’s imperative for jobs, growth and effective basic services’. The proposal, unabashedly touted as new thinking, is that India should focus not on a poverty line but on a “more comprehensive measure of what it would take to satisfy a person’s basic needs for food, energy, housing, drinking water, sanitation, healthcare, schooling and social security”.

This new thinking – presented as a startling innovation in the same way that a new brand of running shoes or some such frippery is launched – is called an “empowerment line”. This ‘line’ has been placed at Rs 1,336 rupees a month – which McKinsey points out is about 50% higher than the national official poverty line.

McKinsey_India_poverty_coverWhat is sought to be fixed at the bidding of the current government of India and at what cost? This new report by the McKinsey Global Institute suggests that Rs 330,000 crore should be spent over the next 10 years to “empower 680 million Indians who are only marginally better than those under the poverty line”. And moreover that this spending be increased to reach 1.08 million crore by 2022 because “the government’s spending on various development schemes” does not “effectively reach much of the public”. At current rates of exchange, that is US$ 173 billion and what handsome percentage of that will be marked (or unmarked) as consultants’ fees?

Likewise, we must also examine those who have provided, as McKinsey has said, “insights and guidance” for this work. Among those listed are Subir Gokarn, director of research of Brookings India and former deputy governor of the Reserve Bank of India; Vijay Kelkar, chairman of the India Development Foundation, former chairman of India’s Finance Commission, and former finance secretary, Government of India; Montek Singh Ahluwalia, deputy chairman of the Planning Commission of India; Arun Maira and B K Chaturvedi, members of the Planning Commission of India; Rakesh Mohan, India’s executive director at the International Monetary Fund; Nandan Nilekani, chairman, Unique Identification Authority of India; S Ramadorai, adviser to the Prime Minister, National Council on Skill Development; and Soli Sorabjee, former attorney-general of India.

Disconnected entirely from the dynamics of district livelihoods and factors that influence income and well-being, consulting companies such as McKinsey must not continue to be engaged by central and state governments in any capacity.

Disconnected entirely from the dynamics of district livelihoods and factors that influence income and well-being, consulting companies such as McKinsey must not continue to be engaged by central and state governments in any capacity.

These people are votaries of the thesis that GDP growth is good, and that all policy must conform to such a doctrine. Hence it becomes easier to see the connection between the direction that the UPA 1 and UPA 2 governments have taken till here, and the firm grip finance and industry have on the country’s journey into ‘development’, aided by the outpourings of management consulting companies such as McKinsey. This ‘empowerment index’ is nothing but a repetition of the desire that over the period 2010-20, urban India must create 70% of all new jobs in India and these urban jobs will be twice as productive as equivalent jobs in the rural sector, as stated in ‘India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth’, a report by the McKinsey Global Institute issued in early 2010.

The expectation is that as India’s cities expand, India’s economic profile will also change. In 1995, India’s GDP was divided almost evenly between its urban and rural economies. In 2008, urban GDP accounted for 58% of overall GDP. By 2030, according to the McKinsey report’s calculations, urban India will generate nearly 70% of India’s GDP. Such a transformation, if it comes to pass, is expected to deliver a steep increase in India’s per capita income between now and 2030 wherein the number of middle class households (earning between Rs 2 lakh and Rs 10 lakh a year) will increase from 32 million to 147 million. And it is against the drawing of that alarming line of minimum urbanisation drawn four years earlier, that this new line must be viewed, together with the injunction that “India can bring more than 90 percent of its people above the Empowerment Line in just a decade by implementing inclusive reforms”.

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6 Responses

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  1. […] There is a new contributor to an old subject in India. The subject is poverty, and the newcomer is a management consulting company. This sort of company has no experience with such a subject, howev…  […]

  2. If not these companies who else would? what is the other way?

    Vinod Mane

    February 25, 2014 at 14:52

    • There is society (‘samaj‘), which has looked after these matters from the time villages (‘grama‘) became organised, and that is the essence of ‘grama swarajya‘. The government (‘sarkar‘) has a role, but companies in the modern world are designed only to profit and to exploit resources at least cost to themselves.

      makanaka

      February 26, 2014 at 09:45

      • May be you are right as this is what we were taught in our journey upto here hence we suspect any initiative by any of such company. Skeptism is good food for thought but moderation is required while ridiculing the efforts hope I am able to drive the point across

        vinodmaneVinod Mane

        February 26, 2014 at 10:50

  3. Thanks for this very sharp, deeply felt, analytical and informed take on the report and drama of the McKinsey- kind. I do agree that this report particularly requires many revisits and critical examination of its positioning and its timing too. However, as you allude McKinsey are not the only one pursuing this agenda .
    The GROWTH-AGENDA is an overwhelming, overarching and overpowering one that is embraced with wholehearted and most often uncritical ways, therefore there is a very severe danger to that. I will not though agree that people who write such prescription by definition are ignorant about poverty- empowerment understanding or knowledge, it is just that this group of business and its allies pursue an agenda that full fills its objectives. The fact that in spite of 30 years of such a wonderful approach we have more than 700 million in India languishing in such unjust powerlessness , lack of dignity and dehumanizing poverty, this is the evidence that we should spot-light and argue for a sustainable growth that is by definition inclusive and not what it has produced-We’ve long known that life isn’t fair and that the world’s wealth is unevenly distributed. But the latest factoid from Oxfam on global poverty and inequality is breathtaking. In a new report, the nonprofit reports that just 85 people—the richest of the world’s rich—hold as much wealth as the poorest 3.5 billion. That’s half the world’s population. This is the direct result of the Growth- agenda and it is the most shameful one to put it moderately.
    How do we deal with the above? We need to marshal enough experience and knowledge not just to contest the what the dominant growth-agenda says, but make as much as robust case for changing the dominance of a mono-prescription. The work will be slow and often bye-passed but the effort must go on. In this process our language and engagement must be moderate and include those who are well intentioned but might not have direct experience of poverty. Let us not throw the baby with the bath water.!

    Pushpanath Krishnamurthy

    February 27, 2014 at 16:30

    • I appreciate the comments made here. However, the idea of ‘moderation’ achieving change is not one I have seen as being successful in any way. Please remember that the widespread civil disobedience, the agitation, the protests and direct action which won for India independence were not born from a ‘moderate’ approach. This work is no different.

      makanaka

      February 28, 2014 at 21:42


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