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Myths about poverty lines-Arvind Panagariya

By the sheer loudness of their protests, NGOs, journalists and intellectuals have bamboozled the prime minister into withdrawing the latest Planning Commission report. The report had shown accelerated poverty reduction, a perfectly plausible outcome in view of accelerated growth since 2003-04. But the critics are not happy that India is succeeding in combating destitution. They therefore tirelessly invent myths to muddy the discourse. If we are to avoid costly policy mistakes, we must expose these myths for what they are.

The first myth is that the Planning Commission plays fast and loose with poverty lines. This myth, endlessly repeated in the media, is an insult to the country's finest tradition of letting professionalism rule without any political interference whatsoever in setting the poverty lines. According to Professor T N Srinivasan, arguably the world's top living expert on poverty, the history of poverty lines in India goes as far back as 1876. That year, Dadabhai Naoroji provided the first set of poverty lines for various regions of India in a paper entitled 'Poverty of India'.

The official poverty lines we have used in recent decades were based entirely on the recommendations of the Lakdawala committee of 1993. Not only was Lakdawala himself a leading scholar of poverty, he also stood on the broad shoulders of such stalwarts as Pitamber Pant, once handpicked by Prime Minister Jawaharlal Nehru to head the Perspective Planning Division of the Planning Commission, and V M Dandekar and Nilakant Rath, both pioneering scholars of poverty in post-independence India. In a nutshell, these poverty lines had been set such that anyone above them would be able to afford 2,400 and 2,100 calories worth of consumption in rural and urban areas respectively, in addition to subsistence level of clothing and shelter.

A committee headed by the late professor Suresh Tendulkar was likewise behind the latest revisions to the Lakda-wala poverty lines that the Planning Commission reported to the Supreme Court last year and also used to derive the number of poor in the report just withdrawn. The integrity and qualifications of Tendulkar are beyond reproach.

The second myth is that the Planning Commission has time and again lowered the poverty lines to make exaggerated claims of poverty reduction. The truth is exactly the opposite. The Tendulkar committee recommended raising the rural poverty line while keeping the urban poverty line at its previous level and the Planning Commission fully complied with that recommendation. After extensive consultation and careful analysis, Tendulkar reached the conclusion that while those living above the Lakdawala urban poverty line continued to be able to afford 2,100 calories, the rural poverty line needed upward adjustment so as to be aligned to its urban counterpart.

Yet, those who have followed the debate subsequent to the Supreme Court filing by the Planning Commission would recall that the uniform impression from media reports was that the commission had lowered the poverty lines. This same impression has been conveyed yet again in the wake of the latest poverty report. For instance, a headline on a major tele- vision channel website states, 'Planning Commission further lowers the [urban] poverty line to Rs 28 [from Rs 32 in the Sup-reme Court filing]'. But, once again, the Planning Commission had done no such thing. The Rs 32 line relates to the year 2010-11 and Rs 28 to 2009-10, with the difference fully accounted for by the higher price level in 2010-11.

The third myth is that the Planning Commission has nevertheless set the poverty lines so low that they threaten to exclude many from benefit-ing from redistribution programmes. The guiding objective behind the poverty line has always been to monitor progress in combating destitution. Therefore, poverty line expenditures have been traditionally set at levels just sufficient to allow above-subsistence existence.

Rather than argue in the abstract what Rs 28 would or would not buy at 2009-10 prices, critics need to concretely analyse the basket of goods that those living on this expenditure actually bought in 2009-10. If they can convincingly argue that contrary to the judgment of Tendulkar, that basket leaves its consumers in destitution, they would have a case. This they have not done.

Drastic upward revisions of the poverty line as suggested by many, especially on the instant Twitter polls that TV channels love to conduct these days, are downright silly.

Suppose we raise the rural poverty line to Rs 80 and the urban one to Rs 100 at 2009-10 prices. What would these lines do?

First, they would designate 95% of the rural population and 85% of the urban population poor. Does anyone believe that all but the top 15% of the urban and 5% of the rural population live in destitution today?

Second, how much good to the bottom 30 or 40% who represent the truly destitute will we do if the tax revenues raised from the top 15% urban population were spread evenly over 95% of the rural and 85% of the urban population?

And finally, suppose we could magically redistribute all expenditures in 2009-10 equally across the population. What do you think this will give each individual? Do not be shocked to hear the answer: barely Rs 41 per day in 2009-10! Everyone would drop well below even the lowest poverty line any critic of the Planning Commission has advocated to date!

The writer is a professor at Columbia University.