The hunt for the poor goes on

Planning Commission deputy chairman Montek Singh Ahluwalia today clarified that the poverty line of R32 per capita expenditure in urban areas and R26 in rural areas (at current prices) was a mere indicator to determine how much GDP growth has helped reduce poverty levels. Anti poverty-line programme expenditure is not related to the poverty line estimates. The actual poverty line, Ahluwalia said, will be determined by the BPL census in each state.

Has the official poverty line been scrapped?

The official poverty line?the controversial R32 per day for urban Indians?which is estimated using the consumption data collected by the National Sample Survey Organisation (NSSO), remains as it provides the trends in the poverty line over the years. However, a new poverty line is to be worked out using the BPL census in each state. This will use various parameters?land holdings, for instance?and grade the levels of poverty.

When was the last BPL survey done?

The last BPL census was done in 2002. This was not completed after the Supreme Court intervened.

Are there more BPL cards than BPL people?

There is no readily available data on the numbers on the BPL list at the national level, although many of the states have compiled their own. However, the large discrepancies in the BPL list are brought out by the 2004-05 consumer expenditure survey of the NSSO. A cross tabulation of the numbers showed that only 39% of rural households identified as poor using the official poverty line possess a BPL card. This meant that 61% of rural households who are designated as poor as per the official poverty line are excluded from the rural BPL list. In the top-most rural quintile in 2004-05, nearly 20% of people had BPL cards; it was around 35% in the case of the fourth quintile!

Is the Planning Commission?s definition of poor as those with a per capita daily consumption expenditure of below R26 in rural areas and R32 in urban areas too low and unrealistic?

Planning Commission estimates of the poor are worked out from the bi-decenial surveys of the NSSO. Although the current poverty line estimates of a daily per capita consumption of R26 in rural areas and R32 in urban areas may look small, they are not too low if you consider the daily per capita consumption of an average Indian.

In fact, the numbers for the last four NSSO surveys show that the daily consumption spending of an average Indian in the rural sector was only R9.5 in 1993-94, R16.2 in 1999-2000, R19.3 in 2004-05 and finally R31.8 in 2009-10.

In the urban sector, per capita daily consumption has moved up a little faster, from R15.5 to R28.5, R36.8 and finally to R61.9, during the four different time points.

Suresh Tendulkar re-estimated the daily consumption requirement for the identification of the poor in 2004-05 as those spending below R14.9 in rural areas and R19.3 in urban areas?this is 77% of the daily rural consumption spending of an average Indian and 52% of the average daily consumption spending of an urban Indian during the year. All that the Planning Commission has now done is to raise the per capita daily spending numbers for identifying the poor to R26 and R32, respectively, after taking into account the inflation in the rural and urban sectors since 2004-05.

It will be difficult to say that three-fourths of the daily consumption of an average Indian in the rural sector or half the daily consumption spending of an average Indian in urban areas is too low an estimate for identifying the poor.

Do the NSS surveys understate consumption patterns?

The results of the NSSO consumption surveys have been a major issue as there is a large and growing gap between the consumption spending captured in the national sample surveys (NSS) of the NSSO and the total consumption estimates in the national accounts statistics (NAS) brought out by the CSO. Thus, for instance, the consumption expenditure in the country during 1972-73 was pegged at R33,210 crore according to the NSS estimates, which was 5.5% lower than the R35,131 crore consumption expenditure estimated by the NAS. The difference between the two consumption expenditure estimates has widened over the years, increasing to 24.9% in 1983-84, 38.1% in 1993-94 and finally touching 50.3% in 2004-05. Thus, while the NSS estimated the consumption expenditure in the country as R9,31,415 crore as per the uniform recall method in 2004-05, the NAS estimated the total consumption expenditure in the country as R18,73,729 crore, which is double the NSS number.

How does the poverty line of per capita daily consumption of R26/32 compare to current entitlements of the workers?

The minimum per capita daily consumption requirement of R26/32 in rural/urban areas for staying above the poverty line in 2011-12 means that the total consumption in the rural and urban households, averaging 4.7 and 4.1 persons, respectively, should be R119.6 per day in rural areas and R131 per day in urban areas.

This is substantially lower than the average daily income of salaried or regular workers who earned R232 in rural areas and R365 in urban areas in 2009-10 but higher than the average wages of casual workers whose daily earnings were only R93 in rural areas and R122 in urban areas as per the most recent NSSO survey in 2009-10. However, the significant increase in the wages of casual workers since 2009-10 would have narrowed down the differentials substantially.

How do India?s national estimates of the poor compare to the international poverty line of the World Bank?

The World Bank compiled its first estimates on global poverty by using a dollar a day yardstick in the 1990 World Development Report, which was the typical poverty line in the low income countries at that time. Later, in 1993, it revised the poverty line to $1.08 a day at 1993 PPP prices. The most recent poverty line estimated by the World Bank is set at $1.25 per day, and this was estimated by using the mean poverty line in the 15 poorest countries in the world ranked by per capita consumption. The poverty line is regularly updated by using the latest information on the cost of living in different countries. And the most recent one is based on the 2005 PPP prices. India?s national poverty line roughly equals to $1.02 per day in 2005 PPP terms. However, the Tendulkar committee has since then revised up the poverty line numbers by 25.4% in rural areas and 7.5% in urban areas, which would bring it closer to the global benchmarks.

What do the poor own?

According to NCAER data, 7.5% of the rural poor owned a two-wheeler in 2004-05 and the figure was 21.3% for the urban poor.

Does poverty depend on education in India?

Over a third of all poor are illiterate, but just around 3% of them are graduates. Put another way, 57% of all illiterates are poor, while just 6.6% of all households headed by graduates are poor.