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LATEST NEWS UPDATES | New methods needed to answer old controversy in poverty measurement-Sreelatha Menon & Indivjal Dhasmana

New methods needed to answer old controversy in poverty measurement-Sreelatha Menon & Indivjal Dhasmana

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published Published on Apr 9, 2012   modified Modified on Apr 9, 2012

The professional divide on Tendulkar's estimation goes a long way back

A committee is being set up to devise yet another methodology to estimate poverty in India. The step has led to some unhappiness among economists and experts that it amounts to junking the services and competence of an expert like the late Suresh Tendulkar, whose study is sought to be replaced.

Under pressure from all sides over its estimate of people living below the poverty line, the Planning Commission last month virtually abandoned the Tendulkar panel’s estimation method. A committee would now be constituted to revisit the methodology to estimate poverty.

An expert who had earlier served the Planning Commission even told Business Standard that if he was ever asked to head a committee on poverty, he would not accept it. For, the reward was public humiliation, he felt. “Both Suresh Tendulkar and R Radhakrishna, who were part of the four-member committee that wrote the report, were world-renowned for their work on poverty estimates. If their report could be thrown in a dustbin, it shows the light manner in which politicians took these experts,” he said. However, a serving member of the Commission said there was discomfort with some aspects of the Tendulkar committee. He found nothing wrong in setting up another committee. “We have to work in the given circumstances, and we will continue to work as experts,” he added.

Older controversy

In fact, neither the discomfiture with the Tendulkar method nor the decision to revisit the methodology is a sudden development. The Tendulkar poverty estimates have been controversial from the beginning, facing criticism not only from within the Commission but from outside, too. In a press note circulated in January 2011, the Commission noted various problems with the report and said designing a new method for poverty estimation would be needed at some point.

It had said: “A final view on the methodology for measuring poverty in the future will be taken on the basis of the results obtained from the 2009-10 NSSO (National Sample Study Organisation) survey. At that stage, the Commission will consider whether some entirely new approach to poverty measurement is needed or whether the Tendulkar Committee methodology, with some modification, could continue to be the basis of poverty estimates for some time.’’

The main issues it had noted last year, even while adopting the methodology, included the Tendulkar approach of updating rural consumption data on prevailing prices, while not simultaneously revising the urban consumption data. It does so on the premise that the urban data is not controversial and rural data are underestimated, as statistician K L Datta noted in a talk on the Tendulkar estimates, organised and later published by the Institute of Human Development.

The Tendulkar committee, appointed in 2009, estimated the overall poverty rate in India at 37.2 per cent and not 27.5 per cent as was earlier estimated for 2004-05. Poverty in rural India stood at 41.8 per cent and not the 28.3 per cent estimated earlier. The urban poverty rate in 2004-05 was slightly revised downwards to 25.7 per cent from the earlier estimated 25.9 per cent.

In the past, poverty was estimated on the basis of money required for a stipulated minimum calorie intake by individuals. But the Tendulkar committee shifted to a wider definition, including spending on food, education, health, electricity, clothing and footwear.

The fact that the report revised the rural consumption basket to present-day prices and assumed the urban one could remain unchanged led to a huge jump in the number of people below the poverty line in the rural areas, while numbers below the poverty line in urban areas remained almost unchanged. On this point, many other economists and statisticians have been critical.

Critiques

K L Datta found nothing wrong in a new committee being set up to revise the method of estimating poverty. “This has precedence and there is nothing unusual. Every two committees had an intervening period of approximately six to 15 years,” he said. However, the Tendulkar committee was only appointed in 2009.

Datta did not have problems with the numbers yielded by the Tendulkar estimates. He raised the issue of urban versus rural poverty growth but debunked the civil society criticism of poverty lines, saying their approach of looking at a day’s requirement was basically wrong. “There is something called economy of scale and when we look at these numbers, we don’t look at a day’s requirement but requirement of a household as a whole and for the whole month. So, it is wrong to say the poverty line is Rs 28 or 32. It has to be monthly per capita,”’ he says, defending the report.

Economist Himanshu said the Tendulkar committee contents were manipulated by the Planning Commission when it incorporated data on mid-day meals to project lower consumption expenditure among the poor. Yoginder K Alagh, who headed the task force which devised the first ever poverty estimates based on calorie requirements, said the advantage of the Tendulkar committee was that it shifted the emphasis from calories to the demand for food. The framework provided the purchasing power to allow the poor to substitute food items.

Economist Madhura Swaminathan, while acknowledging that the Tendulkar estimates raised the number of people below the rural poverty line from 28.3 per cent to 41.8 per cent for 2004-05, said its methodology was deeply flawed. The poverty line depended on “reduced calorie consumption and fails to provide for reasonable household expenditures on schooling and health”, she said. It reduced the calorie requirement from 2,100 Kcal per day for urban areas and 2,400 Kcal per day for rural areas to a single norm of 1,800 Kcal per day. Tendulkar based it on minimum dietary energy requirement meant for light and sedentary work, which Swaminathan said was a gross underestimate and led to large exclusion of the poor. Datta underlined one of the main issues with the Tendulkar method, accepting the urban poverty ratio as the basis for his estimates. He cited projections made by renowned economist Angus Deaton to say the urban poverty line was as controversial as the rural one and, hence, there was no justification for Tendulkar to consider urban data as reliable. He noted Deaton had calculated urban poverty ratios as 22.8 per cent in 1987-88, 18.1 per cent in 1993-94 and 12.5 in 1999-2000. As opposed to this, the official estimates were 38.2 per cent, 32.4 per cent and 23.6 per cent, respectively, in those three years.

So, while there was a wide gap between these two, Tendulkar was hardly justified in adopting the urban ratios as non-controversial, said Datta. As for rural estimates, again a comparison with Deaton’s estimates shows the official estimates were not unusually low as argued by Tendulkar, who went on to raise these. While Deaton’s estimates were 39 per cent in 1987-88, 32.9 per cent in 1993-94 and 25.3 per cent in 1999-2000, the official rural poverty estimates were 39.1 per cent, 37.3 per cent and 27.1 per cent, respectively.

He further asked: “Can underestimation of such a minor magnitude invoke a decision to scrap the rural poverty line altogether, leading to its being displaced by the urban poverty line which is equally flawed, if not more suspect?”

The Business Standard, 9 April, 2012, http://business-standard.com/india/news/new-methods-needed-to-answer-old-controversy-in-poverty-measurement-/470621/

Tagged with: Poverty bpl



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