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New poverty measures: Rangarajan used nutrition, spending and consumption behaviour

Says poverty estimates are reasonable

Indivjal Dhasmana & Sanjeeb Mukherjee  |  New Delhi 

The latest official estimate of India’s poor, from a committee chaired by C Rangarajan, head of the former Prime Minister’s Economic Advisory Council, is based on certain normative standards of food and non-food consumption, as well as behavioural aspects of classes concerned for consumption of some other items.

It not only takes normative levels for adequate nourishment, clothing, house rent, conveyance and education, but also considers behaviourally-determined levels of other non-food expenses.

The committee has estimated that almost 30 per cent of us were poor in 2011-12.It uses separate data sets for rural and urban parts.

The panel computed the average requirements of calories, proteins and fats on the norms set by the Indian Council for Medical Research in 2010. These are differentiated by age, gender and activity for all-India rural and urban regions. The report was recently given to the government.

Accordingly, the energy requirement as calculated by Rangarajan is 2,155 kcal per person per day in rural areas and 2,090 kcal per person per day in urban areas. This is significantly lower than the 2,400 kcal in rural areas and slightly less than 2,100 kcal in urban areas used by the earlier Lakdawala panel. The reason given is that the age profile and working conditions have changed with time.

The protein and fat requirements have been estimated on the same lines. These are 48g and 28g per capita per day, respectively, in rural India and 50g and 26g per capita per day in urban areas.

A food basket which simultaneously meets all the normative requirements of the three nutrients defines the food component of the poverty line basket proposed by the panel. These nutrient norms are met for persons located in the sixth fractile (25-30 per cent) in rural areas and for those in the fourth fractile (15-20 per cent) in urban areas, given in the National Sample Survey Office (NSSO) report on consumption expenditure for 2011-12.

The average monthly per capita consumption expenditure on food in these fractile classes is Rs 554 in rural areas and Rs 656 in urban areas, according to the NSSO report.

The non-food component of the poverty line basket has both a normative component and one given by the observed consumption pattern of households in the fractile group in which the food component is located.

The normative component relates to private consumption expenditure on education, clothing, shelter (rent) and mobility (conveyance). Since it is difficult to set minimum norms for these essential non-food items, the panel recommended that observed expenditures on these items by households located in the median fractile (45-50 percentile) be treated as the normative minimum private consumption expenditure on these items.

This works out to be Rs 141 per capita per month in rural areas and Rs 407 in urban areas, according to the NSSO report referred to.

For all other non-food goods and services, the observed expenditure of that fractile class which meets the nutrient norms (the 25-30 percentile in rural India and 15-20 percentile in urban India) is taken to define the poverty line in respect of these items. This works out to Rs 277 per capita per month in rural areas and Rs 344 in urban areas, on the basis of the NSSO survey of 2011-12.

The new poverty line, thus, translates to a monthly per capita consumption expenditure of Rs 972 in rural areas and Rs 1,407 in urban areas in 2011-12. Or, Rs 32 in rural areas and Rs 47 in urban areas on a per capita daily basis. However, Rangarajan says the best way is to take it on a monthly household consumption basis. Taking a household as five members, this would mean Rs 4,860 in rural India and Rs 7,035 in urban parts.

Similarly, the panel calculated states’ poverty lines. Based on these, Chhattisgarh had the highest incidence of poverty, with almost 47.9 per cent of the population below the poverty line in 2011-12. Andaman and Nicobar had the least incidence, with only six per cent poor.

The states having the highest incidence of poverty, according to the Rangarajan formula, are Assam, Jharkhand, Manipur and Odisha, apart from Chhattisgarh. Those with the least number of poor as percentage of their population are Andhra Pradesh, Goa, Kerala, Punjab, Puducherry, and Lakshadweep. The percentage of people under the Rangarajan poverty line has been based on the national population of March 1, 2010.

First Published: Tue, July 08 2014. 00:45 IST