can companies reduce poverty

the aneel karnani and ck prahalad flare-up (which atanu has covered here and here) has piqued my interest in an old question. how can companies reduce poverty?

according to karnani, ck prahalad’s fellow professor at the university of michigan, the BOP proposition that selling to the poor can simultaneously be profitable and help eradicate poverty is “at best a harmless illusion and potentially a dangerous delusion”. that the only way to alleviate poverty is to raise the real income of the poor. for his part, prahalad asserted it can. that companies merely selling to the poor do reduce poverty. that by selling at more competitive rates, they free up swathes of an household’s disposable income.

in this post, i will not go into all the other stuff they tangled on — about the size of the bop is and so on. the central question, on whether the bop concept can reduce poverty, is more interesting. in this context, a paper co-authored by the head of itc e-choupal, s sivakumar, karnani himself, and some professors from mumbai’s sp jain institute for management studies, is interesting. this paper (mail me if you would like a copy), written about a year ago, says…

The rich have a high capacity to consume – and this is not because of lower unit costs of some items of consumption but it is because of high levels of income. Conversely, the poor have a low capacity to consume – and this is not because of high unit costs of consumption but essentially because of a low level of income…

…Notably, current engagements of ‘selling to the poor’ are often cases of selling essentially to those low-income individuals who are already above the clutches of the poverty trap. These individuals do not suffer from the scourge of ‘poverty’ and business should not be under the mistaken belief that servicing this segment is alleviating poverty.

companies can reduce poverty. but the claim that even selling to the poor reduces poverty seems tenuous to me. and the thought that occurs to me every single time in this context is unilever’s attempts to sell its toothpastes, soaps et al to the rural poor through self help groups. to be sure, the women selling the stuff were richer than before. but what about the rest of the village? was more money flowing into the village? or flowing out of the village? a long time ago, while working on a businessworld cover story that contrasted itc choupal and hll shakti, my boss indrajit gupta and i had a long chat with sivakumar. at that time, he cleaved bop companies into three categories. much later, while working on another story, i wrote about that discussion.

Indeed. Sort through the companies eyeing the opportunity that the bottom of the pyramid connotes, and you will find four categories. Those that boost rural incomes through traditional (agriculture, handicrafts) and non-traditional (BPO) means; those that sell productive investments to the poor (like Agrovet); those that, while doing nothing to boost incomes directly, make the poor far more financially robust (weather insurance, health insurance schemes like Yeshasvini, the commodity exchanges); and, then, those that rejig their product and distribution mix to make the product more accessible for the poor (HLL’s Project Shakti). In this last category, while there might be some incremental job creation, the impact on the village economy (in terms of whether more monies flow in or out) is still open to debate.

in their paper, sivakumar and karnani outline how companies, in the first lot described above, can reduce poverty. they say…

A self-reinforcing process where business invests to develop the productive capacity of the poor and then leverages such capacity as inputs to strengthen business competitiveness and growth proves to be a sound business model to create unprecedented economic and social value.

This process begins with a buy-in by business and the poor into the idea of creating self-reinforcing interest and culminates into consolidation of efficient value chains as well as higher scales of operations for business, on one hand, and reduction of poverty and of economic dualities in society, on the other.

The essential requirements of this model are:
1. The productive capacities of the poor are organized, developed and leveraged as inputs to business;
2. Such process contributes to creation of commercial value for business;
3. Such commercial value yields economic surplus i.e., the commercial value exceeds all costs involved in its creation, and / or strengthens the competitiveness/growth of business; and
4. The poor are remunerated in a fair manner for the goods/services that they provide.
Consequently, the poor do become an important part of the definition of business, to the benefit of business and themselves.

i think rama bijapurkar is planning to write a column on all this stuff soon. i gather she buys into the ck prahalad school of thought. should be interesting to see what she says.

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I am an Indian journalist with interests in energy, environment, climate and India’s ongoing slide into right-wing authoritarianism. My book, Despite the State, an examination of pervasive state failure and democratic decay in India, was published by Westland Publications, India, in January 2021. My work has won the Bala Kailasam Memorial Award; the Ramnath Goenka Excellence in Journalism Award; and five Shriram Awards for Excellence in Financial Journalism. Write to me at


…une plongée dans les failles béantes de la démocratie indienne, un compte rendu implacable du dysfonctionnement des Etats fédérés, minés par la corruption, le clientélisme, le culte de la personnalité des élus et le capitalisme de connivence. (…a dive into the gaping holes in Indian democracy, a relentless account of the dysfunction of the federated states, undermined by corruption, clientelism, the cult of the personality of elected officials and crony capitalism).” Le Monde

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M. Rajshekhar’s deeply researched book… holds a mirror to Indian democracy, and finds several cracks.The Hindu

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Hindustan ki maujooda siyasi wa maaashi soorat e hal.” QindeelOnline

What emerges is the image of a state that is extractive, dominant, casteist and clientelist.Tribune

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Book lists

Ten best non-fiction books of the year“, The Hindu.

Twenty-One Notable Books From 2021“, The Wire.

What has South Asia been reading: 2021 edition“, Himal Southasian


Journalism is a social enterprise…,”

Democratic decay at state level: Journalist M Rajshekhar on book ‘Despite the State’,” The News Minute.

Covid-19 en Inde : “des décès de masse” dont un “État obscurantiste est responsable,” Asialyst.


JP to BJP: The Unanswered Questions“.
Mahtab Alam’s review of “JP to BJP: Bihar After Lalu and Nitish”.

Urban History of Atmospheric Modernity in Colonial India“. Mohammad Sajjad’s review of “Dust and Smoke: Air Pollution and Colonial Urbanism, India, c1860-c1940”.

Westland closure: Titles that are selling fast and a few personal recommendations,” by Chetana Divya Vasudev, Moneycontrol. (Because this happened too. In February, a year after DtS was released, Amazon decided to shutter Westland, which published the book. The announcement saw folks rushing to buy copies of Westland books before stocks run out.)

Time to change tack on counterinsurgency” by TK Arun, The Federal.

All Things Policy: The Challenges of Governing States” by Suman Joshi and Sarthak Pradhan, Takshashila Institute (podcast).

The Future of Entertainment“, Kaveree Bamzai in Open.

On What India’s Watching“, Prathyush Parasuraman on Substack.

The puppeteers around us“, Karthik Venkatesh in Deccan Herald.

Will TN election manifestos continue ‘populist’ welfare schemes?“, Anna Isaac for The News Minute.

Why wages-for-housework won’t help women“, V Geetha in Indian Express.

The poor state of the Indian state“, Arun Maira in The Hindu.

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16 November: Rachna Books, Gangtok, a discussion with Pema Wangchuk.

29 August: Books In The Time of Chaos, with Ujwal Kumar.

21 May: Hyderabad Lit Fest with Kaveree Bamzai and Aniruddha Bahal.

28 March: Paalam Books, Salem, Tamil Nadu.

19 March: The News Minute, “Citizens, the State, and the idea of India

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20 February: A discussion between scholars Usha Ramanathan, Tridip Suhrud, MS Sriram and me to formally launch Despite the State.

6 February: DogEars Bookshop, Margoa.

5 February: The Polis Project, Dispatches with Suchitra Vijayan.

30 January: Founding Fuel, “Systems Thinking, State Capacity and Grassroots Development“.

25 January: Miranda House Literary Society