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Getting behind poverty numbers

Aug 12 2013, 01:03 IST
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SummaryPoverty alleviation schemes will not succeed if states refuse to come on board and divert funds to plans like FSB

The recently-released data on poverty is quite interesting. The poverty ratio as measured by the Tendulkar methodology has come down to 21.9% in 2011-12 from 37.2% in 2004-05. This is certainly a major achievement. There can be debate about whether the criteria used is right or wrong, as the average monthly expenditure (which is the route chosen here) has been pegged to R816 per month in rural areas and R1,000 in urban areas. But, in economics, once we define a criteria and stick to it, there is nothing amiss as long as we are using the same yardstick at two periods of time. At a broader level, one can ask whether anyone can actually live on an income of R26-27 a day, which is a third of what the World Bank would define as a poor person based on $1.25 a day, which comes to around R78 based on exchange rate of 2011-12? But, even so, the fact that the level of deprivation has come down based on certain criteria is a good sign.

In the current context, two questions arise. The first is when we are going for food security, we are covering around 70% of the population, and while it has been admitted that the aim is not to cover just the poor but also the not so poor, the difference in numbers is quite large. The Food Security Bill (FSB) makes sense if we link it to the $2 a day criteria of the World Bank, which, by the 2010 estimate, comes close to the number of 800 million population. The conundrum is that if the government gives importance to the Tendulkar poverty ratio, it would actually be opening the door for controversy because by these criteria we have only 269 million poor people in India and, by covering 800 million under FSB, we could be overdoing it. Alternatively, we should not pay heed to the Tendulkar criteria and use it more as a theoretical reference point as it cannot really be linked to the actions of the government.

The second contextual issue raised is how has this number come down sharply from 407 million in 2004-05 to 269 million in 2011-12, while it remained flat between 1993-94 and 2004-05 (404 million in 1993-94)? Of late, there has been a war of words, which is quite typical in the context of economists, between Sen and Dreze at one end

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