Business Standard

Will plan panel poverty numbers enrich UPA in 2014 polls?

India needs a broader and more realistic de facto definition of the poor

Shantanu Bhattacharji  |  New Delhi 

Will in India ‘officially’ end in a decade? If we scrutinise the Planning Commission’s  latest statistics thoroughly, it suggests so if the current trend continues. Arguably, the plan panel claims that poverty incidence had declined from 37.2% of the population in 2004-05 to 21.9% in 2011-12 — a decline of 15.3 percentage points in a period that roughly coincides with the first eight years of the United Progressive Alliance (UPA) rule at the Centre.

In absolute terms, 137.4 million people were lifted above the poverty line over the seven-year period. Compared with 407.2 million poor people in 2004-05, the number came down to 269.7 million in 2011-12 — a reduction of 33%.
 
On Thursday, after leader Raj Babbar's comment that a hearty meal in Mumbai can be bought for Rs 12 triggered a nation-wide controversy, another leader Raseed Massod claimed just Rs 5 was sufficient for it in Delhi. Can a party that claims to be pro-poor tolerate shockingly insensitive comments made by their leaders? To exploit the Commission data advocating decline in poverty backfired on the Congress as the focus shifted to concerns over rising inflation and the inequality between the rich and the poor.

The pertinent questions about inflation and inadequate resources available with the under-privileged drowned the bid after figures on the so-called poverty meltdown became public. According to the latest poverty estimate, those who are desperately poor in the country have to subsist on just Rs 33.33 per day in urban areas and Rs 27.20 in rural areas. This is marginally higher than the figures tentatively announced last March of Rs 32 in urban areas and Rs 26 in rural areas.

The Poverty Line for 2011-12 has been estimated at Rs 816 per capita per month in rural areas and Rs 1000 in urban areas for the year 2011-12. That means a family of five living on the edge of poverty would have to survive on Rs 4,080 per month in rural areas and Rs 5,000 per month in urban areas, according to the Planning Commission.

Despite the recent uproar over the appallingly low level at which the Suresh Tendulkar committee set the poverty line, the government has chosen to stick officially with that line even though it knows that for all practical purposes the incidence of actual poverty is nearly three times higher.
 
While the plan panel-derived poverty lines and estimates have been all-important in the past because they are used to draw up BPL lists and allot entitlements, their inappropriateness is demonstrated by the fact that the government itself is now moving away from using these numbers altogether. According to a report in The Hindu,  Rukmini S and MK Venu say that following the Cabinet’s clearing of the Food Security Ordinance, the plan panel has estimated that subsidised foodgrain entitlements will cover 67% of the population. Simultaneously, economists advising the Ministry of Rural Development have told the southern-based newspaper that the exclusion criteria to be derived from the ongoing Socio-Economic and Caste Census are likely to leave out the top 35% of the population while the bottom 65% will be considered below poverty line (BPL).
 
The article further quoting Planning Commission member Saumitra Chaudhuri says that by covering 67% of the population, the government is in effect drawing the poverty line 85% higher than what it is currently drawn at.
 
The poverty numbers are estimated on the basis of consumption expenditure captured in the five-year surveys undertaken by the National Sample Survey Office (NSSO). The decline in poverty numbers was first reported by The Hindu on 16 July.
 
The last one was made in 2009-10. Logically, the next one should have been in 2014-15.  But 2009-10 was not a “normal year” because of a severe drought. That’s why the NSS decided to repeat the large-scale survey in 2011-12. Breaking with the tradition of bringing it out every five years, the Manmohan Singh  government came under scathing attack for bringing out the poverty estimate three years ahead of schedule.
 
The World Bank has adopted a universal thumb rule: it says those living on less than $1.25 a day should be considered poor. The rupee’s value against the dollar averaged 47.85 in 2011-12. The purchasing power parity (PPP) rate for the rupee against the dollar could be arrived at by dividing the average exchange rate by 2.55. So, at the 2011-12 exchange rate of Rs 47.85 a dollar, the PPP rate would be Rs 18.76. The $1.25 poverty line at that PPP rate would mean Rs 23.45 — less than India’s poverty line for both rural and urban areas as announced for 2011-12. 
 
Some economists are of the view that economic realities, such as high inflation, rent and commodities, mean it is impossible to make even bare minimum purchases of food with such small amounts of money. The average cost of 1 kilogram of rice sold through the government’s public distribution system at subsidised rates for instance is currently around Rs18-20. The estimates don’t present a real picture of the number of those who live in very poor conditions, critics add. NC Saxena, a former bureaucrat who monitors food programmes on behalf of the Supreme Court of India, says the estimates of numbers living in poverty are meaningless in the current economic climate, reports the WSJ.
 
The formula used to measure poverty in the current report had been suggested in 2009 by Suresh Tendulkar. It had been widely criticised for underestimating consumption expenditure in the country. Last June, the Planning Commission had appointed a committee headed by C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, to revise the poverty measurement formula. The committee is expected to submit its report in the middle of next year.

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Will plan panel poverty numbers enrich UPA in 2014 polls?

India needs a broader and more realistic de facto definition of the poor

Will poverty in India 'officially' end in a decade? If we scrutinise the Planning Commission's latest statistics thoroughly, it suggests so if the current trend continues. Arguably, the plan panel claims that poverty incidence had declined from 37.2% of the population in 2004-05 to 21.9% in 2011-12 - a decline of 15.3 percentage points in a period that roughly coincides with the first eight years of the United Progressive Alliance (UPA) rule at the Centre. In absolute terms, 137.4 million people were lifted above the poverty line over the seven-year period. Compared with 407.2 million poor people in 2004-05, the number came down to 269.7 million in 2011-12 - a reduction of 33%.
Will in India ‘officially’ end in a decade? If we scrutinise the Planning Commission’s  latest statistics thoroughly, it suggests so if the current trend continues. Arguably, the plan panel claims that poverty incidence had declined from 37.2% of the population in 2004-05 to 21.9% in 2011-12 — a decline of 15.3 percentage points in a period that roughly coincides with the first eight years of the United Progressive Alliance (UPA) rule at the Centre.

In absolute terms, 137.4 million people were lifted above the poverty line over the seven-year period. Compared with 407.2 million poor people in 2004-05, the number came down to 269.7 million in 2011-12 — a reduction of 33%.
 
On Thursday, after leader Raj Babbar's comment that a hearty meal in Mumbai can be bought for Rs 12 triggered a nation-wide controversy, another leader Raseed Massod claimed just Rs 5 was sufficient for it in Delhi. Can a party that claims to be pro-poor tolerate shockingly insensitive comments made by their leaders? To exploit the Commission data advocating decline in poverty backfired on the Congress as the focus shifted to concerns over rising inflation and the inequality between the rich and the poor.

The pertinent questions about inflation and inadequate resources available with the under-privileged drowned the bid after figures on the so-called poverty meltdown became public. According to the latest poverty estimate, those who are desperately poor in the country have to subsist on just Rs 33.33 per day in urban areas and Rs 27.20 in rural areas. This is marginally higher than the figures tentatively announced last March of Rs 32 in urban areas and Rs 26 in rural areas.

The Poverty Line for 2011-12 has been estimated at Rs 816 per capita per month in rural areas and Rs 1000 in urban areas for the year 2011-12. That means a family of five living on the edge of poverty would have to survive on Rs 4,080 per month in rural areas and Rs 5,000 per month in urban areas, according to the Planning Commission.

Despite the recent uproar over the appallingly low level at which the Suresh Tendulkar committee set the poverty line, the government has chosen to stick officially with that line even though it knows that for all practical purposes the incidence of actual poverty is nearly three times higher.
 
While the plan panel-derived poverty lines and estimates have been all-important in the past because they are used to draw up BPL lists and allot entitlements, their inappropriateness is demonstrated by the fact that the government itself is now moving away from using these numbers altogether. According to a report in The Hindu,  Rukmini S and MK Venu say that following the Cabinet’s clearing of the Food Security Ordinance, the plan panel has estimated that subsidised foodgrain entitlements will cover 67% of the population. Simultaneously, economists advising the Ministry of Rural Development have told the southern-based newspaper that the exclusion criteria to be derived from the ongoing Socio-Economic and Caste Census are likely to leave out the top 35% of the population while the bottom 65% will be considered below poverty line (BPL).
 
The article further quoting Planning Commission member Saumitra Chaudhuri says that by covering 67% of the population, the government is in effect drawing the poverty line 85% higher than what it is currently drawn at.
 
The poverty numbers are estimated on the basis of consumption expenditure captured in the five-year surveys undertaken by the National Sample Survey Office (NSSO). The decline in poverty numbers was first reported by The Hindu on 16 July.
 
The last one was made in 2009-10. Logically, the next one should have been in 2014-15.  But 2009-10 was not a “normal year” because of a severe drought. That’s why the NSS decided to repeat the large-scale survey in 2011-12. Breaking with the tradition of bringing it out every five years, the Manmohan Singh  government came under scathing attack for bringing out the poverty estimate three years ahead of schedule.
 
The World Bank has adopted a universal thumb rule: it says those living on less than $1.25 a day should be considered poor. The rupee’s value against the dollar averaged 47.85 in 2011-12. The purchasing power parity (PPP) rate for the rupee against the dollar could be arrived at by dividing the average exchange rate by 2.55. So, at the 2011-12 exchange rate of Rs 47.85 a dollar, the PPP rate would be Rs 18.76. The $1.25 poverty line at that PPP rate would mean Rs 23.45 — less than India’s poverty line for both rural and urban areas as announced for 2011-12. 
 
Some economists are of the view that economic realities, such as high inflation, rent and commodities, mean it is impossible to make even bare minimum purchases of food with such small amounts of money. The average cost of 1 kilogram of rice sold through the government’s public distribution system at subsidised rates for instance is currently around Rs18-20. The estimates don’t present a real picture of the number of those who live in very poor conditions, critics add. NC Saxena, a former bureaucrat who monitors food programmes on behalf of the Supreme Court of India, says the estimates of numbers living in poverty are meaningless in the current economic climate, reports the WSJ.
 
The formula used to measure poverty in the current report had been suggested in 2009 by Suresh Tendulkar. It had been widely criticised for underestimating consumption expenditure in the country. Last June, the Planning Commission had appointed a committee headed by C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, to revise the poverty measurement formula. The committee is expected to submit its report in the middle of next year.
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