Re-imagining poverty

Stop focusing on poverty lines, focus on causes

Recently, an expert committee headed by C Rangarajan, who was the chairman of the prime minister's economic advisory council in the previous government, submitted a report reviewing the methodology for poverty estimation. It sought to improve on the previous exercise, carried out by a committee chaired by the late Suresh Tendulkar. It claims to have done this in a number of ways. First, it has reverted to an earlier practice of using different consumption baskets for rural and urban estimates. Second, it has also returned to a nutrition-based benchmark; the Tendulkar norms had de-emphasised this, setting minimum requirements for calories, proteins and fats as a composite dietary threshold. Of course, it has added to this normative consumption needs of other things - clothing, rent, transport, education, etc. - that are combined with the cost of achieving the nutritional standard to estimate separate rural and urban poverty lines. These work out respectively to Rs 4,860 and Rs 7,035 a month for a family of five at 2011-12 prices. Based on these benchmarks, rural and urban poverty ratios were 30.9 per cent and 26.4 per cent respectively, down from 39.6 per cent and 35.1 per cent in 2009-10. The aggregate poverty ratio was 29.5 per cent in 2011-12, down from 38.5 per cent in 2009-10.

The fundamental reason why so much time and effort is spent in trying to measure poverty accurately is that it provides a basis for designing and prioritising anti-poverty measures. If, for example, nutrition deficiency is a major outcome of poverty, then the state needs to focus on access to food. On the other hand, if the inability to meet other needs, such as education or healthcare, defines poverty, that should point to other ways of alleviating it. The expert group recognises the need to account for access and delivery of public services in estimating poverty, but refrains from doing so because of methodological challenges. This is an unfortunate shortcoming for a group of such eminence - particularly when a recent report by McKinsey attempts to do just that. In the absence of this more holistic approach, the country is left with little more than another benchmark, reasonable as it may be. There are also larger questions on the robustness of such poverty data, based as they are on the findings of the National Sample Survey, whose coverage is said to be much narrower than that of the national accounts estimates.

How might poverty estimates be made more useful for policy? Even with all their limitations, which need to be worked on in any case, they could still provide guidance - through granularity. How many households, for instance, are unable to meet the nutritional norms, and where are these concentrated, if at all? If nutrition is taken care of, on what other needs should programmes focus - better and cheaper transport? More access to healthcare? The answers will vary across states and, very likely, even within states. Obviously, the estimates are based on samples, so drawing inferences about small regions is difficult; but granular estimates should yield some clues about what the priorities should be. Further, going beyond the poverty line itself, households above but close to it are always vulnerable to shocks. Can some judgement about the nature of shocks be made, so that effective safety nets can be designed? In short, the debate must move from the headline numbers to the real causes of the problem.