Needed: A new poverty line which shows 67% of the country is poor

Vivek Kaul
The Congress party after claiming that its social policies over the last nine years had helped bring down poverty in the country, now seems to have done a volte face.
Data released by the Planning Commission on July 22, 2013, suggested that poverty in India had declined from 37.2% in 2004-05 to 21.9% by 2011-12. Several spokespersons of the Congress party led United Progressive Alliance(UPA) were quick to claim credit, and attributed this to several social sector programmes that the party had launched during its tenure.
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 who are 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.”
The consumption expenditure in order to avoid poverty is set at Rs 816 per person per month in the rural areas and Rs 1000 per person per month in the urban areas. For a family of five people, this amounts to Rs 4,080 per month in rural areas and Rs 5000 per month in urban areas.
These numbers were set by the report of the expert group to review methodology for estimation of poverty. The report was released in November 2009 (It is better known as the Tendulkar committee report).
The committee arrived at that numbers taking into account the expenditure on food,
clothing, footwear, durables, education and health.Actual private expenditures reported by households near the new poverty lines on these items were found to be adequate at the all‐India level in both the rural and the urban areas and for most of the states,” the report said.
Interestingly, the Tendulkar committee poverty line was an improvement on the earlier poverty line which only took into account the expenditure
required to consume an identified number of food calories. For rural India this number was 2,400 calories. For urban India this number was at 2,100 calories. Anyone consuming less than this was deemed to be poor.
The Tendulkar committee made the poverty line multidimensional, by considering several other expenditures other than just food. An immediate impact of this was that the poverty ratio for 2004-05, went up from 27.5% to 37.2% of the total population. From that level the poverty ratio has come down to 21.9% in 2011-12.
So prima facie this sounds good. The trouble crops up when Rs 816/Rs 1000 per month is converted into expenditure per day. 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.
Having already linked the reduction in poverty to the social sector schemes launched by the government, the Congress spokespersons had to defend the Rs 27-33 per day expenditure cut off for poverty.
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 ,” film star turned politician Raj Babbar told reporters.
Rasheed Masood, a Congress leader from Delhi, went a step further and said “You can eat a meal in Delhi in Rs 5 I don’t know about Mumbai. You can get a meal for Rs 5 near Jama Masjid.”
Farooq Abdullah of the National Congress, a constituent of the UPA, said that even Re 1 was enough to satisfy hunger. “If you want, you can fill your stomach for Re 1 or Rs 100, depending on what you want to eat,” Abdullah said.
Of course these gentlemen were trying to justify the unjustifiable. Rs 27-33 per day expenditure as a cut off for poverty is too low. But the argument is not as simple as that. As we saw the current poverty line is an improvement on the earlier line. There has been a lot of criticism of the late Suresh Tendulkar, who headed the committee that redefined the poverty line. As T N Ninan wrote in the Business Standard “The late Suresh Tendulkar, who redefined the line some years ago, has come in for unfair criticism – because he actually raised the poverty line substantially. The result was that what was 27 per cent poor in 2004-05 under the old definition became 37 per cent using Tendulkar’s definition.”
The simple solution it seems is to increase the poverty line. But as this writer explained earlier, increasing the poverty line has its own serious repercussions.
Also, even if we were to increase the poverty line, the percentage of decline of in poverty will remain the same. As Pronab Sen, chairman of the National Stat­istical Commission, told Outlook “even if we double the norm from Rs 33 for urban poor and Rs 28 for rural poor, the percentage of people below poverty line may double but the percentage of decline in poverty will remain roughly the same.”
Economist Bhaskar Dutta wrote something along similar lines in a column in The Indian Express. “the dramatic reduction in poverty according to the Planning Commission estimate also guarantees that there would be a sizeable reduction even if the poverty line were set a higher level.”
And this fall in poverty, irrespective of where we set the poverty line at, has been substantial. As Swaminathan Aiyar wrote in The Times of India “India has just reduced its number of poor from 407 million to 269 million, a fall of 138 million in seven years between 2004-05 and 2011-12 . This is faster than China’s poverty reduction rate at a comparable stage of development, though for a much shorter period.”
Instead of trying to make these slightly nuanced points the Congress party got stuck with justifying the poverty line cut off. The trouble was that it couldn’t go on and on about the “poverty has come down message”, simply because through the food security ordinance the party plans to distribute heavily subsided(almost free) rice and wheat to nearly 82 crore people or around 67% of the country’s population.
If the poverty has actually come down then the
garibi hatao politics that the Congress party has been successfully peddling for nearly four decades, wouldn’t find any resonance any more. It would hit at the heart of the business model of the Congress party.
Hence, the party has done a quick volte face on the poverty line and is now vociferously criticising it. “If the Plan panel said those who live above Rs 5,000 a month are not at poverty line, obviously there is something wrong with the definition of poverty in this country. How can anybody live at Rs 5,000?” union minister Kapil Sibal asked at a public function.
The Congress general secretary, Digivijaya Singh, was also critical of the poverty line. “I have always failed to understand the Planning Commission criteria for fixing poverty line. It is too abstract can’t be same for all areas,” he tweeted.
Rajeev Shukla, Minister of State for Parliamentary Affairs, also joined his senior colleagues in criticising the poverty line. In fact, he went a step further and totally disowned it. “I want to demolish this myth that the poverty line has been fixed by the government. Government has not fixed any poverty line. This recommendation has been made by an expert panel headed by Mr. Tendulkar. This is a report of the Tendulkar Committee which has been put forward by the Planning Commission. Neither the Government has accepted it nor has it fixed it,” he said.
So, does Mr Shukla mean that the Planning Commission is different from the government and is not a part of the government? I guess some history is in order here. The website of the Planning Commission clearly points out that “The Planning Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community.”
Over and above this the Planning Commission is headed by the Prime Minister, who currently happens to be Manmohan Singh. So how can the Planning Commission be different from the government? Manmohan Singh as always has been made the scapegoat by the Congress party here as well.
Meanwhile, there is another committee at work with the brief to come up with a new better poverty line. This line will be needed to justify the massive food security scheme. If only 21.9% of India’s population is poor, then its difficult for the government to justify distributing heavily subsidised rice and wheat to nearly 67% of India’s population.
So what is needed is a new poverty line which shows that 67% of India’s population is actually poor. As Aiyar put it in his column “The government found it difficult to say this was good politics even if it was bad economics. Instead, it appointed the Rangarajan Committee to devise a higher poverty line.”

The article originally appeared on on July 29, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)