Why are some people poor and some relatively rich? This is an age-old question and has multiple answers. The answers aren’t quite multiple, there are different ways of looking at the same problem. The income of a household, or per capita income, is one indicator of relative prosperity. Since we don’t have satisfactory data on income, we go by a surrogate indicator, per capita consumption expenditure. How is income obtained? By selling a good or a service in the market, for the most part, by selling labour services. The moment we mention the market, there is an implied price and the poor person’s per unit labour input is valued less than the rich person’s. Obviously, this is about able-bodied people in working-age group and one doesn’t have in mind those who voluntarily opt out of the labour market. That is, this isn’t about the classic economist’s trade-off between work and leisure. Often, we say poor don’t possess requisite skills. That’s a factual inaccuracy. Every individual possesses some skills. What we really mean is that poor people don’t possess skills valued by the market, or possess skills with low market value. Hence, the emphasis on skill development, an entirely valid focus. However, in addition to developing skills, it is sometimes also possible to develop markets for skills already possessed by the poor.

The market thus has a skills ladder, measured according to per unit price of those skills. If one leaves out issues like inherited wealth, the poor are poor because they are low down on the skills ladder and the rich are rich because they are higher up. Therefore, the path towards prosperity is to make available education, skills, health outcomes and assorted other stuff that enables one to move up that skills ladder. One can’t quarrel with that proposition. If one goes back to Adam Smith, David Ricardo or whoever else has analysed wealth creation from the beginning of modern economics, there has been the story of division of labour and specialisation. These enable an individual to obtain a better price per unit of labour rendered and become more “productive”. Now think of rich versus poor with or without the urban/rural lens. If you live in urban India, more often than not, electricity is available at the flick of a switch and cooking gas and water at the turning of a knob or a tap. That’s not quite true of an urban slum, where one has to queue up for water. It is certainly not true of rural India, where one still has to trudge kilometres in search of water and firewood.

Water, electricity, transport, education, health, financial transactions—you can keep adding to the list, the average rural resident spends much more time on these pursuits than the average urban resident. The poor urban resident spends much more time on these pursuits than the rich urban resident. Stated differently, since some services have been outsourced, so to speak, the relatively richer person has more time to spend on more “productive” pursuits, over and above the point about the richer person’s skills possessing higher value. Conversely, the relatively poor person spends a lot of time on “unproductive” pursuits that are unnecessarily in-sourced. Unlike time-use surveys in developed countries, isn’t it surprising that there is little research in India on what poor people spend their time on? If you are poor, you will spend more of your income on food. If you are rich, you will have more of discretionary income. There is plenty of stuff on distribution of consumption expenditure, nothing on distribution of time. Part of the reason is lack of data, since the National Sample Survey Organization (NSSO) asks questions on consumption expenditure, not on time expended. But surely it would be interesting to obtain answers to such questions and ask them?

Does it make a difference? After all, low per capita consumption expenditure and high share of time spent on unproductive pursuits are likely to be correlated. If nothing else, I think it makes a difference in terms of mindsets. Consumption and income are outcomes of a process of engaging with the labour market, time is more in the nature of an input. We have plenty of public expenditure schemes (Union and state) on providing what can broadly be called public goods and services. If we focus on consumption expenditure, the mindset is one of enhancing consumption expenditure and income and therefore, the lens becomes one of income transfers and subsidies, not necessarily on what causes that low consumption expenditure or income in the first place. If in addition (not as a replacement), we focus on time, we will begin to recognise that in-sourcing occurs because of lack of collective goods—roads, water, electricity, primary health centres, skills, education. Whether it is Union or state resources, the kitty for public expenditure is limited. Because of market failures that still exist, scope for private sector engagement in such areas exists, but is also limited. Therefore, there is a question of prioritisation in expenditure of those public resources.

To drive home the point, let us take an example. Does MGNREGS increase the amount of time poor spend on productive pursuits? In lean agricultural seasons, perhaps. But in general, even if the answer is yes, it will at best be lukewarm. Does PMGSY increase the amount of time poor spend on productive pursuits? Almost certainly, yes. Thus, accepting the trade-off in resources, PMGSY is better than MGNREGS. You will argue that this is nothing but approaching asset creation in a roundabout way and is tantamount to asking whether public expenditure leads to incremental improvement in household asset ownership and amenities. While that’s true, I think it would be interesting for NSSO to ask questions that lead to a time-use survey.

The author is Member, NITI Aayog. Views are personal

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