By Arvind Panagariya
It is curious that while the voter has come to appreciate the value of growth and routinely hands election victories to the Patnaiks, the Modis and the Nitishes, our national leadership on either side remains stuck in the belief that growth only helps the rich. The phenomenon has manifested itself most recently in its denunciation of the sharpest decline in poverty in the nation’s history.
Rather than seize the opportunity and claim credit for it â€” after all, the 8% growth, which was central to the decline in poverty could not have happened without the sustained reforms by former Prime Minister Atal Bihari Vajpayee â€” the national leadership of the Bharatiya Janata Party has chosen to decry the poverty decline itself. It argues that the Planning Commission’s estimates are based on an unacceptably low poverty line. Not to be outdone, the Congress leadership recently rushed to reprimand Raj Babbar and Rasheed Masood for (clumsily) trying to defend the poverty line.
The significance of the latest poverty numbers can be best appreciated by recognising that during the first three decades of Independence, the nation saw no decline whatsoever in poverty at an even lower poverty line than the currently used Tendulkar line. In contrast, in the latest round, thanks to the 8.6% per annum growth, we have cut the proportion of the population living below the Tendulkar poverty line from 37.2% in 2004-05 to 21.9%. Three large poor states â€” Bihar, Rajasthan and Odisha â€” have each slashed this proportion by 20 percentage points or more.
The latest estimates also resolve some anomalies produced by the previous survey conducted in 2009-10. That survey showed that despite double-digit growth, since 2004-05, poverty declined by just one percentage point in Bihar and by two percentage points in urban Gujarat.
The latest survey resolves both anomalies. According to it, between 2004-05 and 2011-12, poverty fell 21 percentage points in Bihar and 10 percentage points in urban Gujarat. The poverty level in Bihar, by far the poorest state in the country, now stands below India-wide poverty level in 2004-05. Poverty in urban Gujarat has dropped to 10%.
But our politicians and television journalists uniformly deny these gains on the specious pretext that the Tendulkar poverty line is too low to accurately capture the progress in poverty alleviation. It does not matter that at $1.29 per person per day in purchasing power parity (PPP) dollars, this line is above the $1.25 poverty line that the World Bank uses to measure extreme poverty in more than a hundred developing countries.
It also does not matter that at Rs 5,000 per month at 2011-12 prices, an urban household of five having this poverty-line income can buy every month 48 kg of cereals, 3.15 kg of pulses, 17 kg of milk, 20.6 kg of vegetables, 6 kg of eggs, 1.5 kg of meat, 3.1 kg of edible oil, 1.2 kg of fresh and dry fruits, 3.5 kg of sugar, 2.3 kg of salt and spices with more than half of the budget still left for rent, fuel, clothing, education and healthcare.
For the sake of argument, however, suppose we do raise the poverty line 50% above the Tendulkar line. This amounts to Rs 7,500 per month per urban household of five at 2011-12 prices. In PPP dollars, it equals $1.94 per person per day, a hair’s breadth below the $2 line that the World Bank reserves for measuring poverty in the middle-income countries.
In ongoing research, economist Vishal More and i have recalculated poverty rates at this higher poverty line. Predictably, the population living in poverty in 2011-12 jumps to 56.4% at this higher poverty line from 21.9% at the Tendulkar line. Yet, the percentage point reduction in poverty since 2004-05 hardly budges: 14.6 compared with 15.3 at the Tendulkar line. Even as we raise the line to $2.25 at PPP, poverty decline remains robust at 11.9 percentage points.
But something important is lost when we replace the Tendulkar line by these higher lines. Households crossing the Rs 7,500 per month threshold in 2011-12 are overwhelmingly those that had already crossed the Rs 5,000 threshold in 2004-05. Therefore, measuring poverty at Rs 7,500 tells us nothing about the fortunes of the households that were living in abject poverty on less than Rs 5,000 per month in 2004-05.
Our state-level calculations at the higher poverty line reinforce this point. Larger percentage-points reductions at the Rs 7,500 line come in relatively richer states: Tamil Nadu, Maharashtra, Punjab, Haryana and Andhra Pradesh. The only exception is Rajasthan, which exhibits a decline of 24 percentage points des-pite being a low-income state. In Bihar and Odisha, which show declines of 21 and 25 percentage points, respectively, at the Tendulkar line, the reduction drops to less than 12 percentage points.
The implication of this exercise is stark: if we wish to track the destitute, the prudent course will be to leave the Tendulkar line alone. If a higher line is still needed to give comfort to our politi-cians and television journalists, let us introduce a second line. It is time that the politicians and television journalists recognise the obvious: by denying the unprecedented poverty decline that has happened, they run down growth and harm the poor in the process.
The writer is professor of Indian political economy at Columbia University.