Defining a poverty line for India

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Published: May 22, 2015 12:18:41 AM

Once the Panagariya committee decides on a poverty line, it needs to be updated every year by applying cost inflation index to keep it realistic

In India, defining a poverty line has been a controversial issue, especially since mid-1970s when the first such poverty line was created by the erstwhile Planning Commission. It was based on minimum daily requirement of 2,400 and 2,100 calories for an adult in rural and urban areas, respectively. Economists such as DT Lakdawala and later YK Alagh, among others, were involved in working out the poverty line from time to time.

Recently, some modifications were made considering other basic requirements of the poor, such as housing, clothing, education, health, sanitation, conveyance, fuel, entertainment, etc, thus making the poverty line more realistic. This was done by Suresh Tendulkar (2009) and C Rangarajan (2014) during the UPA regime.

The Tendulkar committee stipulated a benchmark daily per capita expenditure of R27 and R33 in rural and urban areas, respectively, and arrived at a cut-off of about 22% of the population below poverty line. It sparked of a furious row, as these numbers were considered unrealistic and too low. Later, the Rangarajan committee raised these limits to R32 and R47, respectively, and worked out poverty line at close to 30%. This 2014 report also did not assuage the critics and was turned down by the NDA government. It is interesting to note that minimum per capita daily expenditure requirements in the 1970s were fixed at R2 and R2.3, respectively, and no such hue and cry was made at that time.

Since then, many government, non-government and private organisations have come out with different poverty lines using different methodologies. But none was widely agreed upon. The current NDA government has now constituted a 14-member task force under NITI Aayog’s vice-chairman Arvind Panagariya to come out with recommendations for a realistic poverty line. There are a few points on which the task force should ponder upon.

One, it is learnt that the NITI Aayog is mulling with the idea of suggesting a 40% cut-off limit (reasons not known) to count the number of poor using the NSSO consumer expenditure data of 2011, which would put this at 484 million against 363 million (about 30% of country’s 1.2 billion population) as given by Rangarajan. Although this idea has the merit that it would eliminate controversy that arises when the poverty line is explicitly defined on the basis of per capita daily expenditure, but it can’t be denied that a cut-off limit of 40% would throw up some benchmark per capita expenditure figure which would, of course, remain obscure from public view. Perhaps we may avoid popular agitation, in the short term, in this manner. But, are we doing justice to the poor if we discover that even this benchmark expenditure is not sufficient to assure a reasonable quality of life for the poor based on the basic parameters as mentioned above. So, the task force should first decide the benchmark expenditure and then arrive at the cut-off limit.

Two, increasing 30% cut-off to 40% would involve much higher spending on the part of central and state governments and this may not be feasible with our present resources. I am not aware how much role the finance ministry plays during the deliberations of the task force, as the cut-off has to be practical for the purpose of implementation.

Three, Tendulkar and Rangarajan have done some work for defining the poverty line and we should improve upon their methodologies. The NSSO data of 2011 should be carefully analysed and the nutritional standards evolved by the Indian Council of Medical Research and National Institute of Nutrition should be taken into account while deciding on the poverty line. The views of bodies such as NCAER who have been working on the same may also be taken.

Four, enhancing the cut-off limit to 40% may give political advantage to the NDA, which is battling its anti-poor image and also facing allegations of crony capitalism. However, to think so would be a mistake and short-sightedness. The schemes, meant for the poor, would get diluted because of larger coverage of population and this may affect those at the lowest rung of the poverty ladder.

Five, once we decide on a poverty line, it needs to be simply updated every year by applying cost inflation index to keep it realistic.

Let the Panagariya committee be our last best effort in defining a poverty line for India.

The author is former director, Central Statistical Organisation

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