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LATEST NEWS UPDATES | Is India Fudging Its Poverty Numbers?-Tripti Lahiri

Is India Fudging Its Poverty Numbers?-Tripti Lahiri

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published Published on Mar 20, 2012   modified Modified on Mar 20, 2012

According to data released Monday by India’s Planning Commission, the number of people living in absolute poverty in India decreased by 12.5% between 2004-2005 and 2009-2010.

India’s official poverty rate stands at 29.8%, or close to 350 million people using 2010 population figures, down from around 37.2% or 400 million previously. The announcement was based on an analysis of data gathered from roughly 100,000 households between July 2009 and June 2010, by the National Sample Survey Organization. This was compared to data gathered by the same organization between July 2004 and June 2005.

Are these numbers for real? Some skeptics doubt it. The Global Post said that India had lowered the bar for itself, noting that the per capita spending numbers used to calculate the number of poor were below “the poverty line of 32 rupees per day for urban India and 26 rupees for rural India ($0.64 and ($0.52)” that economic planners placed before the Supreme Court in September.

That analysis misses a few key points. The 2011 numbers were proposed as a tool for designating who would be entitled to benefit from anti-poverty programs going forward. After many people protested that the numbers were too low, economic planners appeared to back away from restricting benefits to those below the official poverty line. In addition, those numbers were based on June 2011 price data, according to Planning Commission member Abhijit Sen.

But the poverty numbers released on Monday are a snapshot in time of 2009-2010 and price data from that period has been used to come up with the per capita spending cut-offs. That’s why they are lower than the ones placed before the court six months ago. If the numbers were crunched in a more timely fashion, and the poverty stats released, say, in early 2011 rather than early 2012, this would have been less confusing for everyone — and perhaps resulted in less suspicion of the numbers.

It’s true that India has tinkered with how it has been measuring poverty in recent years, based on the recommendations made by a committee headed by economist Suresh D. Tendulkar. Previously, poverty was calculated mainly by looking at the amount that needed to be spent in order to consume a certain number of calories. That method put the number of poor in 2004-2005 at 27.5% of the population.

The Tendulkar committee tried to look at actual spending on food, as well as spending on health and education. That increased the percentage of poor in India to 37.2% of the population for the same period. People spending less than 15 rupees ($0.30) a day in rural areas and less than 19 rupees ($0.38) a day in urban areas were counted as poor. The report also laid out recommendations for how the data gathered in 2009-2010 should be analyzed so that it would be comparable to the updated 2004-2005 poverty numbers.

Using those recommendations, everyone spending less than 22.5 rupees ($0.45) a day in rural areas and less than 28 rupees ($0.56) a day in urban areas was counted as poor this time around. That’s a pretty significant increase in the cut-offs compared to 2004-2005. However, it is worth asking if the new poverty line adequately factored in the high inflation India has been experiencing in recent years.

Still, broadly speaking, if the number-crunchers have been consistent in how they gathered data in 2004-2005 and 2009-2010, and how they analyzed it, then the drop they are announcing may actually be for real.

The Tendulkar method also brings India roughly in line with how multilateral agencies calculate extreme poverty, which is by gauging how many people live on less than $1.25 a day converted using purchasing power parity. The equivalent of $1.25 a day in purchasing parity terms in India in 2005 was 21.6 rupees in urban areas and 14.3 rupees in rural areas, according to the World Bank.

The argument that these amounts are not enough to live on raises a fair, but different question. Set a new poverty line by all means, but the methodology by which these new poverty lines are established will have to be applied to the data of previous years, too, or it won’t be comparable across time. While the Tendulkar method increases the absolute numbers of Indian poor people when applied to data for any given year, it doesn’t change the trends.

The share of the extremely poor in India’s population has been decreasing — though not as fast as anyone would like. If roughly 10 million people a year go from living under the equivalent of $1.25 a day to just over it, that’s not actually that great. That’s not even 1% of the population today.

It’s also worthwhile remembering that official poverty lines are not intended to demarcate the dividing line between poverty and affluence or a bad life and a good life. They’re the dividing line between absolutely horrible poverty and the next level of poverty, which extremely unpleasant as it still may be, marks a tiny step up.

For comparison, the United States Census Bureau in 2010, when the last census took place, counted a family of five poor if the household had a combined income of $26,439 a year, which worked out to $14.5 per person a day, or $434 a month.

It’s also not uncommon for countries to have two slightly different measures of poverty – one to gauge the official poverty rate and whether it is increasing or decreasing, and another for administrative purposes, to decide who is entitled to benefit from programs intended for the poor. Of course, common sense dictates the two poverty measures should not be miles apart.

The U.S. Department of Health & Human Services puts out poverty guidelines each year for administrative purposes. In 2010, the measure for a family of five worked out to roughly $14 per person per day. In 2012, it’s closer to $15 per person for a five-member family.

The Wall Street Journal, 20 March, 2012, http://blogs.wsj.com/indiarealtime/2012/03/20/is-india-fudging-its-poverty-numbers/

Tagged with: Poverty bpl



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