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Poverty line: Usefulness of poverty data-S Mahendra Dev

The purpose of this piece is not to defend the Planning Commission on poverty figures but to indicate that the methodologies have evolved over time after considerable research and they are useful for policy purposes if not for linking with entitlement programmes (some of us have written earlier that the poor and vulnerable are more numerous than the commission's poverty figures and these should be delinked from entitlement programmes). 

The commission has been computing poverty ratios since 1979 based on the Alagh Committee Report of that year. This procedure was subsequently modified by the Lakdawala Committee (1993). 

The commission appointed an expert group led by Suresh Tendulkar to suggest a new poverty line. It submitted its report in 2009. It used the latest data to construct a new poverty line basket to replace the outdated 1973-74 consumption basket. As urban living standards are higher, urban headcount ratio of 25.7% is taken as the new reference point for poverty line basket for measuring poverty. 

It moved away from the calorie intake as anchor for poverty estimation and included price indices for health and education. Contrary to popular belief, the poverty line was higher in Tendulkar Committee's approach, compared to earlier procedures: earlier, the all-India rural poverty line was 356.30 while the Tendulkar Committee suggested 446.68 for 2004-05 - an increase of 25%! Of course, one can find fault with the committee's methodology. 

Poverty declined by 1.5 percentage points per annum between 2004-05 to 2009-10. It is the fastest decline of poverty compared to earlier periods. Both growth and public intervention have contributed. The poverty line in 2009-10 was 4,298 per month for a family in urban and 3,364 per month for a family in rural areas. There are questions on whether one can live with this money. But even if you take the higher poverty line, rate of change would be more or less the same. Even if you increase poverty line and bring 50-60% of population below this line, the fact is that 350 million lived below the poverty line in 2009-10 in India. This is a matter of concern and the need for increase in incomes for these people is obvious. 

The purpose of these estimates at the macro level is to see progress over time (these are already delinked from entitlements). For example, one can examine whether poverty declined faster in the post-reform period as compared to pre-reform period or whether anti-poverty programmes have had an impact on poverty. Which regions/states and social groups benefited during the reform period? 

The rate of reduction in Bihar, Chhattisgarh and Uttar Pradesh was low while poverty declined by 20 percentage points in Orissa. Some other findings are: Scheduled Tribes have high poverty ratio (47%) in rural areas while Muslims have the highest poverty (33.9%) in urban areas. Despite the MGNREGS and increase in agriculture wages, the poverty ratio among agricultural labourers was 50%. These are the concerns regarding poverty estimates and have immense policy implications. 

The government has taken a decision to appoint a technical group to revise/revisit 'the methodology for estimating poverty in a manner that is consistent with current realities'. The government is also waiting for the socio-economic and caste census, 2011, based on Saxena and Hashim committees. It may be noted that the Planning Commission poverty estimates relate to income poverty estimates based on private consumer expenditure (PCE). The Saxena and Hashim Committee recommendations on deprivation may relate more to non-income indicators. 

Using PCE, several alternative estimates have been given by researchers. Directly using the calories for estimating poverty is one measure. Some studies have shown that if we use direct method of calorie deprivation, two-thirds of the population would be poor. Equally, Orissa and Bihar would be richer states than Tamil Nadu and Kerala! By doubling the official poverty line, Arjun Sengupta Commission estimated 77% of the population can be categorised poor and vulnerable. Another issue that needs to be considered is the huge discrepancy between PCE of NSS and National Accounts. To include non-income indicators, one has to have a multidimensional poverty index. 

To conclude, the commission has to review, from time to time, the methodologies for measuring poverty in keeping with changing needs of the population. Poverty lines are only approximations to the socially-accepted minimum standards. Thus, in any poverty line approach, an element of arbitrariness is inevitable. The Mulayam Singh Yadavs and Sharad Yadavs know ground realities better than experts. However, they are certainly not better than Lakdawalas and Tendulkars when it comes to scientific measurement of poverty! 

(The author is director andvice-chancellor of Indira Gandhi Institute of Development Research)