How is poverty estimated?
The poverty line is taken as a cut-off between poor and non-poor, and is derived on the basis of a minimum requirement of a person. In the absence of data on income, the poverty line in India is measured in terms of monthly per capita consumption expenditure (MPCE) on food and non-food items as compiled by the National Sample Survey Office (NSSO) from its survey of households.
Which are the different models adopted to estimate poverty over the years?
The Planning Commission appointed panel headed by YK Alagh defined the poverty line in 1979 as MPCE level of R49.09 for rural areas and R56.64 for urban areas at 1973-74 prices at national level. Then, the DT Lakdawala committee in its 1993 report recommended a poverty line in terms of a calorie norm based on a fixed consumption basket. A panel headed by Suresh Tendulkar further refined the methodology in 2009 to include expenses on education and health.
Why has the Planning Commission released poverty data now?
The poverty data is released by the Planning Commission once every five years. This periodic estimation of poverty lines and poverty ratios is done for the years for which large sample surveys on household consumer expenditure are conducted by the NSSO. The last survey was conducted in FY10. Since FY10 was not a normal year because of a severe drought, the NSSO repeated the large-scale survey in FY12, the results of which were released in June. The current poverty estimates are based on the results of this survey taking national poverty line for rural areas as R816 per capita per month and R1,000 per capita per month in urban areas using the Tendulkar methodology. For a family of five people, the all-India poverty line in terms of consumption expenditure would amount to about R4,080 per month in rural areas and R5,000 per month in urban areas. These poverty lines vary from state to state because of inter-state price differentials.
Why has the poverty data release come under criticism?
The timing of the poverty data release ahead of Lok Sabha elections, due in the first half of 2014, and also its comparisons, have been questioned on the premise that the UPA government is trying to take advantage by showing an impressive figure of poverty reduction during its tenure. The percentage of persons below the poverty line in FY12 has been estimated as 25.7% (41.8% in FY05) in rural areas, 13.7% (25.7%) in urban areas and 21.9% (37.2%) for the country as a whole. In FY12, India had 270 million persons below the Tendulkar stipulated poverty line as compared to 407 million in FY05?a reduction of 137 million persons over the seven-year period. During the 11-year period 1993-94 to 2004-05 the average decline in the poverty ratio was 0.74 percentage points per year, which accelerated to 2.18 percentage points per year during 2004-05 to 2011-12. According to the Planning Commission, it can therefore be concluded that the rate of decline in the poverty ratio during the most recent seven-year period FY05 to FY12 has been about three times of that experienced in the 11-year period 1993-94 to 2004-05.
Why have UPA Cabinet minister Kapil Sibal and Planning Commission deputy chairman Montek Singh Ahluwalia admitted that the method used is abstract and needs revision?
The new poverty figures have been questioned on the premise that poverty lines considered are low?how can a family of five with R5,000 monthly consumption expenditure be considered above the poverty line in urban areas? The Tendulkar panel in 2009 suggested the poverty lines focusing on the adequacy of expenditure from the normative and nutritional angle. Moving away from the calorie norms, the committee based its poverty lines on the expenditure on food, education and health. The methodology has been criticised by several experts saying poverty lines have been kept low. The government on its part has set up a committee headed by C Rangarajan to revisit the methodology for estimation of poverty.
Does this mean that the new poverty numbers are wrong?
Though the current poverty data shows decline on the basis of Tendulkar poverty line, which is being reviewed and may be revised by the Rangarajan committee, an increase in the poverty line will not alter the trend outlined in the current estimate. Even if a new methodology is adopted, the absolute levels of poverty may change but the trend rate of decline would be similar.
What are the norms for calculating poverty globally?
The lowest of World Bank estimate was $1.00 a day at 2005 prices, which is considered close to India?s poverty line. The next lowest was $1.25 a day on a purchasing power parity basis averaging for the poorest 15 countries, and the highest has been $2.50 a day, which is the median of all countries except the poorest 15.
