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Fixing poverty line at Rs 32 per capita/day doesnt even guarantee a bare subsistence by Raghav Gaiha & Vani S Kulkarni
-The Economic Times
 
The UPA government - especially the Planning Commission - has been taken to task for fixing a poverty line at a level (Rs 32 per capita/day in urban areas) that does not even guarantee a bare subsistence. In the medley of scathing critiques and rebuttals, three strands of arguments seem dominant.

One is that the poverty line is utterly unrealistic as a measure of subsistence requirements of food, health and education. Indeed, it has been argued that the poverty line is so low that it could barely buy one or two items of a subsistence basket. 

Another related but distinct argument is that delinking of subsistence requirements from calorie norms is mistaken, if not misguided. If the poverty line is anchored to acalorie norm, given changes in activity patterns and lifestyles, and improvements in the epidemiology of infectious diseases, it will have greater credibility in identifying the poor. 

Rebuttals, on the other hand, range from a theological defence of the poverty line ("the best and most reasonable construct given available data") to an odd mix of ethics and economics in which both get a raw deal. It is argued by several distinguished economists, including one from MIT - increasingly portrayed as the fountainhead of all that is new in the Economics of Poverty - that we should not mix the measurement of poverty with the separable issue of deserving beneficiaries of anti-poverty programmes (such as the targeted public distribution system or TPDS). 

This is not just specious but, worse, both bad economics and ethics. The Tendulkar committee (of which one of us was a dissenting member) invested considerable time and energy in determining appropriate prices to revalue the urban poor consumption basket in 2004 with (largely ad hoc) add-ons for health and education needs. 

A grievous error, rationalised weakly on grounds that calorie requirements are hard to quantify, was to delink the poverty line from calorie/nutritional norms, robbing the former of any normative significance. If there is no nutritional basis to a consumption basket, it is hard to understand why it should have any policy significance at all. 

But even if this objection is ignored - though there are strong grounds why it should not be - the use of a fixed food consumption basket for poverty comparisons flies in the face of relative food price induced substitutions in consumption baskets. Our recent work confirms that even the poor make such substitutions. Reinforcing this concern is the dietary transition in which consumers are switching away from cereals towards more expensive sources of calories such as fruits, vegetables, vegetable oils, etc. 

Some of these changes reflected in an across-the-board decline in cereal calories were swept aside in constructing a poverty line as irrelevant then as it is now. Ad hoc add-ons for health and education expenditures lack not just credibility but twisted the poverty tale, manifesting in a warped defence of a poverty estimate higher than the official count on the grounds that the poverty line covers not just food but also health and educational requirements. 

The pretentious defence of the poverty line separating the ethical from the economics of assisting the poor is flawed. Amartya Sen's seminal contributions illuminating the ethical foundations of economics are ignored in the arguments that identification of the poor on the poverty line of Rs 32 is a legitimate descriptive exercise separable from the ethical issue of targeting the poor on the basis of their needs. 

It is further argued that if the UPA government/Planning Commission gives in to the rising crescendo of how abject the poverty line is and decides to raise it, there is a risk of greater assistance to the states with more moderate poverty.

This rests on a conflation of the identification exercise (a headcount of poor) with the aggregation exercise in which different dimensions of poverty are aggregated (number of poor, and intensity of poverty). The FGT class of poverty indices that aggregate these dimensions would help avoid the risk of directing resources away from the acutely poor. 

The more fundamental issue of separating the identification of the poor from targeting the needy is flawed, as the former is integral to the latter. Sen's capability approach illustrates this connection. If, for example, public policy focuses on the capability to live a healthy and meaningful life, a starting point is careful assessment of nutritional deprivation. 

In conclusion, the presumption that a higher poverty line and larger numbers of poor to be assisted would be fiscally disastrous isn't just fallacious but seductive in its simplicity. By contrast, a tilt to the other extreme of universalising the food subsidy, looming on the horizon, is escapist, as it distracts attention from drastic but feasible reforms to the TPDS. 

(Gaiha is Professor of Public Policy, Faculty of Management Studies, University of Delhi; and Kulkarni is Research Associate, Department of Sociology, Yale University)