Understanding the poverty line


What it signifies, what it does not tell us and what it will definitely not be used for

Great shrillness has marked the current furore over the Planning Commission’s latest poverty estimates. No surprise, therefore, that understanding and wisdom have flowed in an inverse proportion. Surprising and sad, however, is the fact that some political leaders have at times spoken in a manner deeply hurtful to theaam aadmi and others have shown complete lack of understanding of what these estimates are all about.

manmohan singh1--621x414

A Committee chaired by one of India’s finest economists, former Chairman of the Prime Minister’s Economic Advisory Council and the National Statistical Commission, the late Suresh Tendulkar, computed poverty lines for 2004-05 at a level that was equivalent, in purchasing power parity (PPP) terms, to one U.S. dollar per person per day, which was the internationally accepted poverty line at that time.

Tendulkar line

PPP refers to a method used to work out the money that would be needed to purchase the same goods and services in two places. Across countries, this is used to calculate an implicit foreign exchange rate, the PPP rate, at which a given amount of money has the same purchasing power in different countries. The 2004-05 Tendulkar poverty line was Rs.16, which in PPP terms, is equivalent to one U.S. dollar per person per day.

The new poverty estimates of Rs. 29 per person per day recently released by the Planning Commission are equivalent, in PPP terms, to the new internationally accepted poverty line of $1.25. The suggestion that somehow this much money is enough for people to survive in any conceivable form has given rise to understandable public anger, much exacerbated by insensitive suggestions by some members of the ruling party that even less could be enough.

There could not be a more ridiculous tragedy of errors on all sides. All that the Planning Commission has done is to use the most credible source of consumption data available in the country (the National Sample Survey Organisation) to compute poverty estimates that are both on parity with international standards and enable comparisons within India over time and across States. There is no value judgment being made about the adequacy of this amount of money for any meaningful purpose. All that is being done is to provide an estimate (using the very same methodology) that allows one to compare the number of people below a certain consumption level (aka poverty line) in 1993-94, 2004-05 and 2011-12. Nothing more, nothing less.

Huge decline

The data show that the rate of rise of consumption expenditure in the last decade far exceeds the rate in the previous decade. While those below this consumption poverty line actually went up marginally between 1993-94 and 2004-05, they fell dramatically from 41 crore in 2004-05 to 27 crore in 2011-12. This huge decline in the number of people below this poverty line needs to be taken very seriously.

Ascertaining precisely the contribution of the Central government in this achievement is not a straightforward matter, since it is not government action alone that determines the course of an economy. And State governments also play a crucial role. This is a matter of research and more satisfactory answers will emerge only over time.

However, there can be no denying that Verdict 2004, in which the people of this country voted with their feet to reject the slogan of India Shining, placed great public pressure on the new government at the Centre to move in the direction of more inclusive growth. And it is clear that since 2004, there has been an enormous and unprecedented rise in expenditure by the Government of India on programmes of social inclusion, such as MGNREGA. There is also overwhelming evidence of a rise in wages of the poorest people in rural India. How much of this is directly or indirectly attributable to MGNREGA is another scholarly question, on which divergent views have been expressed. But no one disagrees that MGNREGA certainly played a role here. Nor can it be denied that during this period India became one of the fastest growing economies in the world.

What is even more important, however, is to clarify what the poverty line does not signify. Contrary to popular misunderstanding, there is no suggestion whatsoever that the benefits of government programmes will be restricted to those below this poverty line. The aim is not, as many canards make out, to artificially or falsely reduce the poverty numbers in order to score political brownie points or to bring down the allocations that have to be made on anti-poverty programmes.

Landmark contribution

Quite to the contrary, the incontrovertibly clear landmark contribution made by the UPA-II government is that for the first time in the last 20 years, the poverty line has been delinked from entitlements of the people of India. Indeed, with the 12th Plan, this government has taken the first steps in acknowledging that poverty is a multi-dimensional concept that cannot be reduced to consumption expenditure alone. To illustrate, till now if you were to be regarded as a beneficiary of the Indira Awaas Yojana (IAY) or the Total Sanitation Campaign, you needed to possess a BPL card. The distribution of these cards was plagued by humungous errors of inclusion and exclusion, such that many of the really poor would not be included but those with muscle power at the local level managed to hustle BPL cards even if they were not poor.

During the 12th Plan, all this is poised to change with the enshrining of the principle — “programme-specific indicators for programme-specific entitlements.” This is a clear recognition that poverty has many dimensions, each of which is to be tackled by different programmes and the benefits of each programme will either be universal (as in MGNREGA, health, primary education, sanitation, mid-day meals, etc.) or be based on data on specific deprivations such as homelessness.

The Socio-Economic and Caste Census (SECC) conducted by the Government of India, in partnership with all State Governments, is nearing completion. The SECC data will be presented in gram and ward sabhas across the country over the next few months and this will enable a kind of social audit of this data and foster citizen awareness and participation in the process. The SECC contains invaluable information on homelessness, manual scavenging, disability and a host of other deprivations, all of which are major constituents of poverty. These will be used to identify the people entitled to specific benefits. Thus, the homeless will be the beneficiaries of IAY and the disabled will get disability pensions, irrespective of whether or not they have a BPL card. The food security legislation will cover 67 per cent Indians, which is more than three times the number of people living below the consumption poverty line (22 per cent).

Of course, whether the consumption poverty line should remain as low as $1.25 is a relevant question. This is the internationally accepted definition of absolute poverty. There is also a notion of moderate poverty pegged at two U.S. dollars. But my counter-questions are: even if we were to raise the poverty line to two U.S. dollars, would it be right to exclude people from benefits of government programmes such as PDS, based on such a line? And should a uniform line, at whatever level, be at all used, in an indiscriminate manner, across programmes? As has been done for decades now?

To its abiding credit, UPA II answers these questions in the negative. Almost all its programmes are now either universal or based on deprivation-specific data. They have no reference to any kind of poverty line. The data on consumption expenditure poverty are used only for the purpose of comparison over time and across States. There is a clear recognition that poverty has many dimensions and data on each of these are used to guide programmes meant to overcome those forms of poverty. Thus, nutritional poverty data come from the National Family Health Survey, housing poverty and disability data from the SECC, sanitation poverty from the 2011 census and so on.

In fact, the 12th Plan clearly acknowledges that even if the figure of people below the consumption poverty line were to fall to zero, removing poverty in India will remain a challenge till every Indian has access to safe drinking water, sanitation, housing, nutrition, health and education. That is the challenge we need to focus on, rather than splitting hairs over the singular estimation of poverty.

(The writer is Member, Planning Commission)


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