Plan Panel To Discuss New Poverty Formula

The H D Deve Gowda government appears determined to break up the national poverty line into state-level poverty lines and thus alter the pattern of budgetary allocations to states. A full meeting of the Planning Commission is being held under the chairmanship of the Prime Minister today to discuss the Lakdawala Committees formula to ascertain the level of poverty.

If the Lakdawala formula is accepted, the official number of people below the poverty line in 1993-94 will jump from 16.5 per cent to 36 per cent of the population. This will also mean drastic changes in the allocation of Central resources under anti-poverty programmes and the public distribution system.

 

Dilution of the ninth plan approach to basic minimum services like education and health and lower allocation for the infrastructure sector is also possible if the Commission accepts that the extent of poverty is far greater than earlier claimed.

The Lakdawala formula is based on the premise that commodity price levels are different in different states, besides being different in rural and urban areas. Therefore, the committee recommended use of National Sample Survey (NSS)data to draw up a poverty line for each state.

This is in contrast to the task force method currently applied, which assumes a common countrywide level of poverty across all urban and rural areas.

The Planning Commission has re-examined the Lakdawala report and suggested one minor change. The Lakdawala report had recommended the use of a simple weightage to consumer price index (CPI) for industrial workers and CPI for urban non-manual employees.

The Commission has now said that the CPI for industrial workers would suffice to calculate poverty in the urban areas. It has, however, agreed with the Lakdawala Committee report on using the CPI for agricultural labour in determining the levels of poverty in rural areas.

On the other hand, if the full Planning Commission rejects the Lakdawala formula and sticks to the current method of calculating poverty, the Commission could project a reduction in the level of poverty to 10 per cent of the population by the end of the ninth plan period. If a 7 per cent growth rate is achieved in the ninth plan, it will be possible to reduce poverty below 10 per cent under the current method of calculation, said a Planning Commission source.

Under the task force method currently practised, the Planning Commission adjusts the NSS data of consumption to bring it to the level of aggregate numbers that have been revealed by the Central Statistical Organisation (CSO).

Planning Commission officials have been using the private consumption deflator as recommended by the CSO instead of using the CPI. But, the Lakdawala report has recommended use of only the NSS data without any statistical adjustment. Planning Commission deputy chairman Madhu Dandavate has repeatedly pushed for acceptance of the Lakdawala report on the plea that it is closest to the ground situation.