Poverty in India has fallen between 2004-05 and 2011-12, or so suggests data recently released by the Planning Commission. The poverty ratio was 37.2% in 2004-05 and fell to 21.9% by 2011-12.
The Congress led United Progressive Alliance(UPA) has been quick to claim credit for this fall in poverty. The opposition parties from the left and the right have slammed the government, and questioned the numbers put out by the Planning Commission.
So who is right on this occasion? The government? Or the opposition? Before we get around to answering these questions, it is first important to understand how the Planning Commission decides who is poor and who is not.
A poverty line separates the poor section of the population from the non poor section. Those below the poverty line are deemed to be poor and those above it are deemed to be not poor. And what exactly is a poverty line? As S Subramanian writes in The Poverty Line “A poverty line is identified in monetary units as the level of income or consumption expenditure required in order to avoid poverty.”
So how is the level of income or consumption expenditure required in order to avoid poverty decided on? An essential criterion for avoiding poverty is the availability of adequate nutrition, writes Subramanian. Hence, a calorie norm is identified. The amount of money required to consume the identified number of food calories becomes the cut off point, or the poverty line. Those who consume less than that are deemed to be poor.
This criteria was first clearly addressed by the Indian planners in 1979 in a Planning Commission Report of the Task Force of Minimum Needs and Effective Consumption Demand. As Subramanian writes “In identifying consumption expenditure poverty norms for India, the Task Force employed a nutritional norm of 2,435 (rounded off to 2,400) kilocalories per person per day in rural areas, and a norm of 2,095 calories (rounded off to 2,100) kilocalories per person per day in the urban areas. These were average figures based on calorie allowances recommended by a Nutrition Expert Group in 1968…The Task Force was able to come up with an ‘average’ requirement of calories for what one might call a ‘representative’ Indian, in each of the rural and urban areas of the country.”
So what does this mean? It means that anyone in rural India consuming less than 2,400 kilocalories per day was deemed to be poor. For urban India this number was at 2,100 kilocalories. Through a statistical regression the total expenditure necessary to consume either 2,400 kilocalories or 2,100 kilocalories was estimated.
The Tendulkar Committee formula, a new formula to estimate the poverty line, came into effect in 2009. This formula, other than considering the expenditure on food, also took expenses on education, health and clothing into account.
When Professor Suresh Tendulkar changed the formula he argued that the old formula did not take into account the fact that calorie intake had dropped to 1770 kilocalories in urban areas. Despite this change the influence of the old calorie norm on the new formula is considerable, feel experts.
And how much is the expenditure as per the Tendulkar Committee formula ? As the Press Note on Poverty Estimates, 2011-12, released by the Planning Commission points out “for rural areas the national poverty line…is estimated at Rs. 816 per capita per month and Rs. 1,000 per capita per month in urban areas. Thus, for a family of five, the all India poverty line in terms of consumption expenditure would amount to about Rs. 4,080 per month in rural areas and Rs. 5,000 per month in urban areas.”
Assuming 30 days in a month, this expenditure comes to Rs 27.5 per day for the rural areas and Rs 33.33 for urban areas. Hence, anyone whose expenditure per day is less than these amounts is categorised as poor.
How adequate is this poverty line of Rs 27.5-Rs 33.33 per day? If one were to believe film star turned Congress politician Raj Babbar, this amount is more than enough. “Even today in Mumbai city, I can have a full meal at Rs 12. No no not vada paav. So much of rice, dal sambhar and with that some vegetables are also mixed ,” he told reporters today (i.e. July 25, 2013).
Of course, this clearly proves that Mr Babbar has not stepped onto the streets of Mumbai for a very long time. His days of struggle in the film industry having been long over.
Even if we believe that one can get a meal for Rs 12 in Mumbai, eating is not the only expenditure that a man needs to incur in order to survive.
Given this, it is easy to prove that the poverty line in India has been set at a very low level. There have been a spate of comments criticising this. Shivraj Singh Chouhan, the Chief Minister of Madhya Pradesh called the Planning Commission figures a cruel joke on the poor. “I would like to ask the Prime Minister and Congress president whether they could have their meal in just Rs 32(if one divides Rs 1000 by 31 days, it comes to Rs 32.25),” Chouhan said.
This is something that Praful Patel of the Nationalist Congress Party, which is a part of the UPA, agreed with. “The ceiling set by them (Planning Commission) is totally wrong. In today’s time, Commission should set a new ceiling keeping in mind inflation and high cost of living. We do not agree with this data,” Patel said. Brinda Karat of the CPI(M) said that the Planning Commission figures were “dubious” and “discredited” and added “salt to the wounds of the poor”. Similar reactions came in from other political parties as well.
So, the poverty line in India is at a very low level and hence needs to be increased is a conclusion that can be easily drawn from. As N.C. Saxena, member of the National Advisory Council, who headed a Planning Commission panel on poverty told The Hindu “the narrow definition of poverty we have been using, where the line is really what I call a ‘kutta-billi’ line; only cats and dogs can survive on it.”
But raising the poverty line is not simple and has serious implications. As Jagdish Bhagwati and Arvind Panagariya write in India’s Tryst with Destiny “While reasonable people may differ on whether it is reasonable to further raise the poverty line, the subject is far more complex than commonly appreciated.”
And why is that the case? “The dilemma in raising the poverty lines is best brought out by considering the implications of poverty lines that are significantly higher than those currently in use and are advocated by many of the current critics of the Planning Commission. Thus, for example, suppose we raise the rural poverty line to Rs 80 and the urban one to Rs 100 at 2009-10 prices. What would these lines imply?” ask Bhagwati and Panagariya.
This would designate 95% of the rural population and 85% of the urban population to be poor. The impact of this would be that the money that the government spends to tackle poverty would be spread over a much larger number of people and thus would have less impact in tackling poverty. As Bhagwati and Panagariya point out “With tax revenues still relatively modest, significant redistribution in favour of the destitute requires limiting such redistributions to the bottom 40 percent or so of the population. Spreading them thinly over a vast population will give too little to the destitute to make a major dent in poverty.”
Lets understand this through an example. Let us say there are 100 people. Of this 20 are deemed to be poor. The government decides to spend Rs 100 to help them. Hence, on an average each one of them benefits to the extent of Rs 5.
Now lets the definition of poverty is changed and 90 out of 100 people, are deemed to be poor. The government still spends Rs 100 on them. The benefit per person comes down to a much lower Rs 1.11 (Rs 100/90). Hence, the more poor lose out at the cost of the less poor.
In fact, this is not the first time such a situation has arisen. In 1962, the Perspective Planning Department (PPD) of the Planning Commission had discussed a similar dilemma. As Subramanian writes partly quoting a PPD document “’The balanced diet recommended by the Nutrition Advisory Committee together with a modest standard of consumption for other items would cost approximately Rs 35 per head (per month). But at present less than 20% of our population can afford it’…The implication is quite clear. A poverty line of Rs 35 per person per month would have plunged 80 per cent of the Indian population into poverty: wiser counsel advocated a more modest norm of Rs 20 per person per month.” This brought down the poverty rate to 60%.
Hence, there is no point in pushing up the poverty line without having the resources to tackle it. If resources are limited they should be deployed to help those who need it the most.
But the Congress led UPA government has done exactly the opposite by getting the President to sign on the Food Security Ordinance. The food security scheme aims at providing subsidised rice and wheat to nearly 82 crore Indians or 67% of the total population.
This effectively means that the government thinks that 67% of the Indian population is poor and cannot afford to buy rice and wheat at market rates. But as per the current poverty line only 21.9% of the population is not getting adequate nutrition. So which is the right number? 21.9% or 67%? The Congress led UPA government needs to answer that question.
It seems the government is working on a new poverty line to justify the massive expenditure that it will incur on the Food Security scheme. As The Hindu reports “economists advising the Ministry of Rural Development have told The Hindu that the exclusion criteria to be derived from the ongoing Socio-Economic and Caste Census are likely to leave out the top 35 per cent of the population while the bottom 65 per cent will be considered below poverty line.”
Meanwhile, it will claim that the poverty has come down on the basis of the current poverty line and numbers put out by the Planning Commission because of the social programmes it has launched over the last few years.
As the old saying goes “heads I win, tails you lose”.
The article originally appeared on www.firstpost.com on July 25, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)