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The great and infuriating poverty debate-Saugato Datta

The debate over the poverty numbers in India is oddly impoverished.

Judging from the vociferousness with which India’s press and English-speaking upper-middle-classes are debating the latest poverty figures, those who chide the wealthy for a lack of concern for the poor are barking up the wrong tree. And no doubt much of the breast-beating about the “absurd” poverty cutoffs and the declines in poverty (exaggerated! inadequate!) is extremely well-intentioned. Unfortunately, the discussion is - for the large part - also grotesquely misinformed and counter-productive. Perhaps this is inevitable when the rich contemplate the lives of those who must make do with but a fraction of their resources. (At least nobody’s asking the poor to eat mithai, although an article that involved a correspondent bemoaning the difficulty of making do on Rs28 a day while buying processed food and chhole-kulche from a Delhi stall came close). But it is deeply frustrating to watch such an important economic and policy issue reduced to a series of inanities.

The first popular misconception about poverty in India seems to be that the poverty line is designed to separate the poor from the comfortably off. Yet it is not, and it never has been. From its inception, the goal of the measurement of poverty in India - as indeed in most very poor countries - has been much more modest. The poverty line in India is perhaps more properly called a “starvation” or “destitution” line: it simply tries to measure how much money is needed to sustain a very basic diet that gives a person the number of calories needed to stave off hunger.
Now, one could argue that the calorie cutoff itself needs to be raised, though it is hard to see why, given that the average Indian is becoming more sedentary and even poor Indians are presumably not becoming more dependent on hard labour than they already were. (Parenthetically, I would surmise that raising the poverty cutoff to Rs40 a day would still evoke the same howls of horror, because those of us who spend Rs40 on some lukewarm coffee would still find it impossible to imagine how anyone could live on that sum for a day.) One could also argue with complete justification that meeting a calorie cutoff is not enough. Clearly, someone who is barely able to feed himself or herself is still “poor” by most reasonable standards. But none of this makes the poverty rate as it is currently calculated a useless piece of information. After all, by the government’s own estimates, nearly 30% of our population falls below this admittedly low bar. This is an enormous number, and it seem perfectly valid for a government to argue that it wishes to concentrate poverty alleviation efforts on those who cannot even meet this most minimal of life’s requirements. The exercise is both intellectually valid and practically useful.

Of course it also makes sense to measure how those above this line but still poor are doing. It would be extremely useful to have a better, more frequently updated numbers for the overall distribution of household income, so we also have a better grip on how different segments of our population are faring. For instance, it might be extremely useful to have a second, less stringent poverty line, perhaps at twice the level of the existing one, and to see how the number of Indians under it changes. Call it the “near-poverty line”, if you will. This is the reasoning behind the World Bank having two international poverty lines, those popularly known as the dollar-a-day and the $2-a-day lines.

Which brings me to the second, astonishingly widely held misconception. This is that the government’s poverty cut-off of around $0.44-a-day in rural areas is “too low” because it falls short of the World Bank’s $1.25-a-day. This is just plain wrong: it may be too low (as discussed above) but it’s not any lower than the Bank’s. The World Bank’s poverty line is in PPP dollars, and the “PPP exchange-rate” for India according to the 2011 Economic Survey was Rs.15.5 =$1. This means that it cost around $0.30 to buy in India what would cost $1 in the US. Adjusting for differences in price levels, therefore, the Planning Commission’s Rs22-a-day cutoff for rural areas is between $1.25-$1.50 in PPP dollars. This is entirely unsurprising since the famous dollar-a-day line was derived by noting that many developing countries’ national poverty lines were clustered around that figure. It would therefore be extremely odd if India’s poverty line, which was one of the ones used to get the World Bank’s, were but a fraction of the international poverty line.

Saugato Datta is a development economist and journalist. He has been a researcher at the World Bank, an economics writer at the Economist, and is now Vice-President for international development at ideas42, a behavioral-economics research and design lab based in Boston.