Estimation of poverty based on development parameters like availability of housing, roads, power, health facilities, education and jobs will be a better model for funding schemes
The country might soon have a completely new model for tracing and tackling poverty. The implementation of the idea being discussed currently by the NITI Aayog would mean a complete shift from the headcount ratio-based mechanism to assess poverty. In the new framework, poverty will be linked to the development parameters fixed by the government to design flexible schemes to be funded as per the specific needs of a state.
At present, whether a person is below the poverty line or not is measured in India on the basis of daily expenditure. The Rangarajan committee, set up by the UPA government, has recommended setting the threshold at R32 per person per day for rural and R47 for urban poor—the existing levels for the two are R27 and R40, respectively. It reviewed the methodology suggested by economist Suresh Tendulkar that had estimated the number of poor in India at 269 million and projected the number rising to 363 million based on the poverty line covering certain normative levels of nourishment, clothing, house rent, conveyance and education, along with a behaviourally determined level of other non-food expenses.
The expert group estimated that 30.9% of the rural population and 26.4% of the urban population were below the poverty line in FY12. In rural India, 260.5 million individuals were living below the poverty line and in urban India, 102.5 million were below the line. The poverty ratio declined from 39.6% in FY10 to 30.9% in FY12 in rural India and from 35.1% to 26.4% in urban India—a total of 91.6 million individuals were lifted out of poverty during this period.
While it is true, there has been a reduction in poverty, the whole exercise has remained controversial because of the R32 per day spending limit, and there is also a question mark on its efficacy in handling poverty at the ground level.
The NDA government, therefore, has done well by setting up a task force headed by the NITI Aayog vice-chairman Arvind Panagariya to review the poverty benchmarks. Prime Minister Narendra Modi announced the creation of this task force at the first meeting of of the governing council of NITI Aayog on February 8. This panel will define poverty and also recommend a roadmap to alleviate it.
On the face of it, the job may appear similar to that of the other committees of this kind, primarily projecting a number that would suggest whether poverty has gone up or down. But, with a clear change in the growth paradigm and the expectations of the people from the government, where the voters prefer better facilities and jobs over dole politics, there seems to be little point in just projecting the number of poor based on their spending. What matters more today is what kind of amenities people have access to—health, sanitation, education, roads and jobs—and, therefore, the poverty measurement parameters have to be these and not expenditure figures. The beauty of the model capturing poverty based on the availability of these facilities would be, it can be utilised to identify where the government—both the Centre and the states—need to spend more. In fact, if it is found that, say, a higher number of people don’t have proper roads in Uttar Pradesh and Bihar as compared to states like Gujarat or Maharashtra, more funds could be diverted into these states to build roads—this is what prime minister Modi has been talking about.
Though the model is yet to be given a final shape—the Panagariya panel is expected to submit its report by June 30 and the government will take a final call on this after that—one of the biggest advantages of getting into this framework would be that it could marry the NDA government’s development targets with poverty eradication.
Finance minister Arun Jaitley has already outlined the targets to be achieved by the government by 2022, the 75th year of India’s independence, in the Budget this year. These targets—a roof for each family in India, basic amenities such as 24-hour power supply, clean drinking water, a toilet, and access to a road for every house as well as 100% electrification by 2020, medical facilities in each village and all weather roads for every habitation—will obviously be better indicators of poverty.
This also means that, based on such estimates of poverty, the states and the Centre can together work on identified objectives like building 2 crore houses in urban areas and 4 crore houses in rural areas, adoption of off-grid solar power, construction of 2 lakh kilometres of roads, upgradation of over 80,000 secondary schools and addition and upgradation of 75,000 junior/middle schools to the senior-secondary level, besides those required for improving health or sanitation facilities. Even areas such as the development of communication facilities, creation of irrigation infrastructure and skilling could be made part of this exercise.
The poverty data, based on the new model, will throw up the developmental needs in specific areas in a region, state, and also at the national level. While this will help the Centre and the states remodel different schemes, there could also be a possibility to attune them as per the requirements of individual states. Above all, it will help the NDA government walk its talk on co-operative federalism and the states will also be able to present a true picture of their development credentials. The challenge before the NITI Aayog now is to develop this idea into a plan that is acceptable to all the states so that the Centre doesn’t find it difficult to implement. Together with the changed devolution pattern suggested by the 14th Finance commission, this has the potential to transform the development landscape—it is worth giving a try.