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Notice (8): Undefined variable: urlPrefix [APP/Template/Layout/printlayout.ctp, line 8]latest-news-updates/estimating-poverty-properly-15000.html"/> LATEST NEWS UPDATES | Estimating poverty properly | Im4change.org
Resource centre on India's rural distress
 
 

Estimating poverty properly

-The Business Standard

How to take hot air out of the poverty debate

Once again, poverty estimations are creating a needless debate over what is a modest measurement problem. For many years since 1973, the government had followed a simple formula: if a household could not afford to buy a minimal number of calories and clothing for its members, it was deemed as a household below the Planning Commission poverty line. But there was one problem: survey respondents tend to systematically under-report their expenditure. And so, in the past, reported expenditure was treated as being different from actual expenditure, and this under-reporting was adjusted for. However, as poverty noticeably reduced, the government started changing the time-honoured method in different ways. Each of these changes is aimed at only one direction: ensuring that poverty levels are seen as high.

First, reported expenditures were taken as actual expenditures. This automatically increased the number of poor being estimated. Next, the government added other expenditures, such as urban education spending, to the estimation of the poverty line. This further increased the number of poor being estimated. Then the government decided that a fresh survey was required — while not sure what the criteria for the new poverty line would be. Meanwhile, it accepted a flawed interpretation of survey results, when it took cognisance of findings such as those from the Sengupta Committee. Most of this needless furore on poverty rests on two factors. The first is the distinction between reported expenditures and actual expenditures. The sum of reported expenditures from various National Sample Surveys (NSS) is less than half the actual expenditure according to the National Accounts Statistics. The second is our updated belief that inclusion requires access to not just calories but also other requirements such as basic education, healthcare, and so on. It is, thus, clear that a fresh poverty survey will not solve the problem — people will under-report, more so that now they will expect increased welfare if they report low ability to spend. Nor will a consensus be achieved. Worse, a new poverty line will be non-comparable with the past if it is not based on the NSS. Comparability over time is important, for that will give direction to policy makers — to invest more in growth if poverty is falling, or invest more in welfare if it is not. At the same time, as India succeeds in grappling with calorie poverty, it needs to address concerns over lack of access to minimum basic requirements such as education, healthcare and security.

The solution lies in explicitly recognising that there are shades of poverty. On the extreme end is calorie poverty, as was predominantly captured by the old poverty line — call it the extreme poverty line (EPL). The next step is to incorporate access to basic needs such as education — call it the basic needs poverty line (BNPL). And the last one could be based on developed-country norms — call it the international poverty line (IPL). Use these three benchmarks to measure changes in poverty over time, using the NSS and adjusting for reporting issues. As poverty levels under one set of criteria fall below, say, 10 per cent, orient policy towards addressing the next higher poverty line. This is a far more transparent and honest solution to the poverty conundrum. It will minimise misinformation and provide better information to policy makers and the public at large about the successes of the past as well as the direction ahead.