Indicus Analytics: Poverty check

Despite the UPA?s efforts, poverty in some states remains a challenge

Correct estimation of poverty, or more precisely, identification of below poverty line (BPL) households, is crucial given the increase in government welfare programmes and the need to check leakages in the existing delivery systems. The revised methodology for the estimation of poverty given by the 2009 Tendulkar Committee Report has been accepted by the Planning Commission. This recommends moving away from anchoring poverty lines to the calorie -intake norm to adopting estimates of consumption expenditure based on Mixed Recall Period (365 days for low-frequency items like clothing, footwear, durables, education and institutional health expenditure and 30 days for all the remaining items) as the basis for future poverty lines.

Other changes proposed in the methodology have also been accepted. The Report estimated the all-India rural poverty headcount ratio for 2004-05 at 41.8 per cent, urban at 25.7 per cent; the overall national poverty ratio, therefore, stood at 37.2 per cent. Although it is true that the Tendulkar Committee’s estimates are not strictly comparable to previous official poverty estimates and show a much higher incidence of poverty than the earlier estimates, the Committee emphasised that “even though the suggested new methodology gives a higher estimate of rural headcount ratio at the all-India level for 2004-05, the extent of poverty reduction in comparable percentage point decline between 1993-94 and 2004-05 is not different from that inferred using the old methodology”.

Using the latest estimates by the Tendulkar Committee for 2004-05, we find that rural poverty is higher than urban poverty in all states except Meghalaya. The states with the least gap between rural and urban poverty are Kerala and Haryana; there is more homogeneity across the rural-urban divide in these two states. The state with the highest level of overall poverty in 2004-05 was Orissa; 57.2 per cent of its population falls below the poverty line. While a little over 60 per cent of the rural population was defined as poor, Orissa’s urban poverty was the second highest in India with 37.6 per cent. Bihar has the highest share of urban poor, 43.7 per cent, but with lower share of rural poor compared to Orissa, it ranks second in overall poverty in the country. (Click here for graph)
 

THE BOTTOM LINE
Poverty headcount ratio	1993-94	2004-05
Existing methodology                                    (%)
Rural	37.3	28.3
Urban	32.4	25.7
Combined	36.0	27.5
Tendulkar Committee methodology
Rural	50.1	41.8
Urban	31.8	25.7
Combined	45.3	37.2

In Chhattisgarh, Madhya Pradesh and Jharkhand, rural poverty exceeds 50 per cent. At the other end of the spectrum is Nagaland, the only state with overall poverty less than 10 per cent. This is due to the extremely low level of rural poverty in the state. There are only five states/Union Territories where rural poverty is 20 per cent or less — Kerala, Delhi, Jammu and Kashmir, Meghalaya and Nagaland. If we look at urban poverty, there are three states with urban poverty less than 5 per cent — Himachal Pradesh (4.6 per cent), Nagaland (4.3 per cent) and Sikkim (2.9 per cent).

Though the change in methodology has resulted in a higher incidence of poverty, there is no doubt that the mechanism that accommodates changing consumption patterns is a fairer system to identify the poor. The plethora of poverty alleviation programmes since Independence have succeeded in reducing the overall share of the poor, but poverty in some states remains a challenge and calls for more effective targeting of the poor.

Indian States Development Scorecard, a weekly feature by Indicus Analytics, focuses on the progress in India and across the states across various socio-economic parameters

sumita@indicus.net