The poverty guessing game in India

Until now, alleviation of poverty has been considered principally the responsibility of a welfare state. India is not an exception where the welfare of its citizens has been one of the primary responsibilities of the state since Independence.

Numerous policies have been put together to help draw poorer sections of society into the mainstream and enjoy the fruits of development. Since that hasn't happened automatically in India, a shift in strategy for poverty reduction took place during the late 1970s and early 1980s through focused income-generation schemes for the poor.

Among a wide range of surveys covered by the National Sample Survey Office (NSSO), a household consumer expenditure survey was most pertinent for an analysis of poverty since the beginning of the exercise in 1950. It is redundant to mention here that data on expenses are considered more relevant for studying the standard of living and hence poverty than those on earnings, due to several reasons.

Poverty assessment in our country was based on collecting information on consumption expenditures across households and evaluating that household expenditure with regard to a given poverty line. Eventually, consumption of households falling below the poverty line was considered poor and defining the poverty line seemed to be the most important in the above method.

A Planning Commission working group in 1962 enumerated the poverty line in India for the first time in terms of a minimum food and non-food necessity of individuals for a healthy livelihood.

The quantification of the poverty line was set at a per capita spending of Rs 20  per month at 1960/61 prices. In 1979, the poverty line was defined by the Task Force on Projection of Minimum Needs and Effective Consumption Demand as per capita consumption expenses level meeting the typical per capita every day calorie necessity of 2,400 kcal per capita daily in rural areas and 2,100 kcal per capita daily in urban areas together with a minimum of nonfood spending.

As per the then estimates, the poverty line in monetary units was Rs 49.09 per capita per month in rural areas, and Rs 56.64 per capita per month in urban areas. Afterwards, poverty lines were enumerated by revising the aforementioned poverty line estimated in 1979.

During the 7th Five year Plan (FYP), the use of private consumption deflator was recommended and used across the country. This method was criticised mainly because there were price and consumption basket differentials in different regions which were overlooked.

Again, the expert group constituted by the Planning Commission in 1989 suggested using state-specific poverty lines after considering interstate price disparity. It is important to mention here that the poverty ratio is simply a measure of the percentage of people whose consumption expenses fall below a given poverty line.

Another debate on poverty in India came out in March 2012 when the Planning Commission brought out the poverty estimates for 2009/10. According to its estimates, all India poverty estimates had declined from 37.2 per cent in 2004/05 to 29.8 per cent in 2009/10, with a fall from 41.8 per cent to 33.8 per cent in rural areas and a fall from 25.7 per cent to 20.9 per cent in urban areas. 

According to the counter-argument, the Planning Commission undercounted the poor as they used a different concept of a poverty line altogether in 2009/10.

According to some experts, a different poverty line was considered when poverty estimates were redone for 2004/05, alongside doing the same for 2009/10. Given the inflation, the nominal poverty line couldn't have declined which it seemed to have. In the face of the counter-arguments, the Planning Commission virtually discarded the Tendulkar Committee's estimation method where divergence had taken place because of insertion government overheads on the mid-day meal scheme, as part of household expenses in 2009/10.

The Tendulkar Committee's estimation faced criticism also on the grounds that it abridged the calorie requirement from 2,100 Kcal per day for urban areas and 2,400 Kcal per day for rural areas to a single standard of 1,800 Kcal per day which was an underestimation leading to the exclusion of a considerable number of poor.

The latest debate on this issue surfaced in June-July 2013 as soon as the Planning Commission revealed the poverty estimates for 2011/12 (NSS 68th round). As mentioned by the Planning Commission, since 2009/10 was not a normal year as a consequence of a severe drought, the NSSO repeated the large-scale survey in 2011/12. Poverty estimates are 25.7 per cent, 13.7 per cent and 21.9 per cent respectively for rural, urban and the country as a whole.

Noticeably, between 2004/05 and 2011/12, the annual average decline in (poverty) percentage points per annum was 2.32, 1.69 and 2.18 respectively. The rate of decline in the poverty ratio during the latest seven-year period from 2004/05 to 2011/12 was around three times that in the 11-year period from 1993/94 to 2004/05. These estimates provoked stern criticism almost instantaneously.

It has been argued that official poverty lines indicate an inferior standard of living. Critics have noted that with a gradually poorer standard, poverty statistics are consistently likely to confirm apparent progress even when real deprivation is aggravating. Merely applying price indices to advance base year monthly poverty lines and ignoring the actual current spending level irked sector experts.

It is important to mention here that a number of representations opposing the Tendulkar Committee's poverty line led the Planning Commission to constitute an expert group under the chairmanship of Dr. C. Rangarajan, in June 2012, to reconsider the method for the measurement of poverty. The new committee is expected to put forward its report by mid 2014.

If we imprecisely glance through the methodologies followed in different countries across the globe, poverty lines connote diverse things in different countries. Some European countries use to draw their poverty line relative to their national average. More specifically, poverty is measured on the basis of 'median net disposable income'. The US considers the basic cost of food for a family multiplied by the number of family members and adjusts the same every year against inflation. Some developing countries demarcate the poverty line on the basis of consumption expenditure.

With new estimations coming out almost every other day, wrapping up the most unwrapped debate is neither simple nor reasonable. First, it is not new for the government of a welfare state to spend on pro-poor initiatives, but one may wonder about it is justifiable to merge that expenditure into household expenditure.

Second, the methodology for estimating poverty may change over time in the socio-political set up of a country like India, but one should validate the comparability.

Third, merely applying price indices to advance base year monthly poverty lines does not take into account the factual increase in the cost of living over the long run. Eventually, the disagreement in the monetary value of the poverty line may well be debated but one should bring clarity about the factors to be considered in the subsistence level of living so that we are able to reflect the poor in the true sense, both qualitative and quantitative.

(The observations are entirely personal and have no connection with the viewpoints of the Ministry and the funding agency (DFID), the author works for.)