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Resource centre on India's rural distress
 
 

Poverty data based on consumption expenditure gives skewed result-Rajesh Shukla

One would expect a debate such as the current one on poverty estimates to be conducted with a serious exploration of its various facets. However, instead of a comprehensive, fact-driven exploration, the debate has yielded aspersions on the intellectual honesty of academicians. Although given its electoral connotations, one does expect political biases to creep into the debate, the barrage of criticism hurled at the Planning Commission, over its affidavit in the Supreme Court on the poverty estimates, has been truly astounding. 

Poverty estimates exist because they are useful for gauging the impact of growth on the poor, however one wishes to define them, and for aiding in the identification, albeit through a convoluted process, of households that deserve government help. It would, however, be fair to state that despite poverty being multidimensional, something that all sensible poverty pundits also accept, lack of conceptual clarity and requisite quality data on necessary welfare indicators, lead us to estimate it on the basis of only consumption expenditure. Though the current debate has focused solely on whether these consumption numbers are themselves adequate, we believe that the contours of the debate need to be broadened. Looking at poverty through the prism of purchasing power or consumption expenditure alone is myopic: it ignores other welfare indicators that also measure an individual's well-being. 

The India Protection Index (Shukla et al, 2010) is one such attempt to measure the economic and social well-being of Indians. The index is made up of about 78 indicators, chosen on the basis of their relevance, analytical soundness and availability by adopting a multidisciplinary approach. 

Income-earning capability, expenditure and liabilities and investment and savings are some of the major quantifiable household-level factors directly influencing financial security. In addition, household status, occupational status, asset possession, motivation for savings, feeling of well-being and other dimensions are taken into consideration. The relationships among these indicators are complex, mutually interacting and multidirectional so that each component affects, and is affected by, the rest. 

Some of the dimensions are as given below: 

Earning level: The more protected households are intuitively those with higher income and expenditure and those with members having an educational qualification of 'graduate+'. Well-protected households, thus, have an average annual income almost three times of the annual average, while those fairly protected have an annual income 1.7 times of the national average. 

Occupation pattern: Among the 'well-protected' households, nearly 41% are salary-earners as compared to 8% in the 'under-protected' category. The major source income for two-thirds of the latter category is labour. 

Education: Well-protected households have more graduates (64%) whereas most of under-protected households are either illiterate or low-literate. 

Product ownership: While 6%of Indian households have a car, the figure stands at less than 1% for under-protected households, while the same is estimated to be 35% in the case of well-protected households. For colour TVs, the national average is 37, 12% for the under-protected and 84% for the well-protected. 68% of well-protected households own motorcycles, while the figure is 5% for under-protected households. 

Financial inclusion: Almost all well-protected households have an account in some financial institution or other, with almost 88% owning life insurance. For the under-protected, the same stands at 29% and 5%,respectively. 70% of the well-protected households prefer bank deposits, while nearly 52% under-protected households keep their savings at home. 

Financial optimism: Nearly 94% of well-protected households are confident about the stability of their major source of income. Only 9% of the under-protected claim such confidence. In the event of losing their major source of income, only 19% of the under-protected households, as against 72% and 96% in the protected and well-protected categories, would be able to sustain on their current savings. 

The debate on inclusion growth has brought to the fore issues regarding the creation of safety nets and the establishment of a welfare society. I believe we merely lost the focus and real issue due to considerable information deficit about not only the parameters on which well-being is to be judged but also the extent of the data gap. Ideally, we need 'modern thinking and practical approach' to create context and meaning of true 'welfare and well-being'. 

We hope that the current analysis may make for a more nuanced and informed debate to understand the multidimensional nature of welfare. 

(The author is an independent consumer economy expert)