To a babu, it is something to ponder over,
To a rich man, to mock and laugh about,
To the middle-class, as irrelevant as ever
To the poor, it’s bread and butter about!
The issue of “Poverty Line”, especially as deliberated on the television screen over the past month, has gripped the minds of all strata of people. One could hear discussions on the same issue right from a nukkad-tea-stall to a high-tea event. The public perception that planning commission has made a mockery of poverty has been heightened by the Rs. 32 per day representation of the original affidavit. While this represents the very encouraging argumentative side of the Indian populace, the concept of poverty line still remains elusive to many. Here we will see the poverty line in the light of its objective, definition, calculation and suggested modifications.
“Poverty Line”, in its present form, is an economic indicator among many others, indicating the equitable distribution of a country’s economic progress. First established in 1970s, the poverty line has been updated every decade by taking into account the inflationary pressures and rising consumer expenditure on different goods and services. By checking what exact percentage of people lies below this benchmark, one can see whether economic growth has trickled down to the country’s underprivileged as well. In fact, about 70% of Indians lay below this line in 1970 and 32% remain so even today. Rather than stirring a hue and cry on the definition of poverty line, it is more important to debate and discuss the past practices which led to this fall in percentage and how they could be strengthened to make the reduction even faster.
Talking of the confusion created over the issue; let’s get the picture of the poverty line clearer. As per the affidavit submitted by the planning commission to the Supreme Court, a family of 5 spending less than Rs. 4824 per month in urban areas OR less than Rs. 3905 per month in rural areas is defined to be Below Poverty Line. The affidavit neither makes any reference to the daily expenditure per person, which has been widely exaggerated through various media to be Rs. 32 per day per person, nor does it make a subjective comment that any person even marginally above this line is living a perfect life. The objective of drawing a line is to see how many people have risen above it over a period of time. This objective makes it impossible to move away from the old definition, as any major changes in the mode of calculation will make the poverty line historically incomparable. Govt. of India draws a separate Food Security Bill to which almost 96% of the Social Benefit Schemes are linked and which defines almost 41% of the population as beneficiary. Hence the benefit of these schemes is spread over a much wider target population than as defined by the Poverty Line. Only about 4-5 schemes such as Old Days’ pension, total sanitation campaign, national social benefit scheme, state subsidies for kerosene etc. are linked to Poverty Line, others are not.
As we see in the above graph, India’s GDP has grown exponentially after 1990s and hence benchmarking of India’s economic progress in the post-liberalization era is more logical. Even Tendulkar Committee report, which has been used as the basis for calculation of poverty line by Planning Commission, has documented some preliminary work for re-estimation of poverty lines after 1990s with a modified mode of calculation.
Here some light has to be thrown on the methodology of calculation of poverty lines and the suggested changes in the same. The calculations are based on the nationwide survey conducted by National Sample Survey Organization, which collects the consumer expenditure on various different products and services. Certain basic products and services such as Food, Education, Medical expenses, livelihood expenses, Rent etc. are collected together into a Poverty Line Basket and consumer expenditure on the same is analyzed. The latest poverty line calculation has used the Minimum Daily Dietary Requirements for a person as specified by Food and Agriculture Organization (FAO) in 2008 and NSSO survey of 2004-05 for benchmarking against the existing consumption of Indians. By matching the minimum dietary requirements (1770 calories per person) with the total expenditure on the products in Poverty Line Basket by a family of 5 which meets that requirement, the poverty line has been set.
But there is an anomaly in fixing the minimum dietary requirements (MDR) of a person in the calculation of latest Poverty Line. The MDR used according to the specifications of FAO was originally defined for a sedentary worker whereas the people below poverty line under consideration are mostly involved in heavy work. Even considering the work done under the NREGA scheme as the norm for the amount of work done, the MDR will be much higher for a person and hence the total expenditure of a family of 5 which meets that MDR (3800 calories per man and 2925 calories per woman, as mentioned in the Food and Nutrition Security Bill released by planning commission on its website) will shoot up. The latter MDR is actually used for defining the Food Security Bill (FSB) beneficiaries and the use of the same will benefit in bringing parity in the two measures, i.e. Poverty Line and FSB.
Apart from these technical issues of MDR, there is also a need to relook at the Poverty Line Basket and allot more product categories and services to it. For example, even “Entertainment”, as very broadly defined by the NSSO in its “2007-08 Household Expenditure Survey”, should be considered as a necessary and essential part of personal life, however negligible its share may be in the total expenditure of underprivileged people. Such measures may not drive the poverty line up, but will make it only more comprehensive in its definition.
Having described the poverty line calculations, it is interesting to note how the same concept is used in modern economies. A look at the Poverty Line definitions in US shows similar types of confusion as well, where two main measures of poverty, “Poverty Threshold” defined by Census Bureau and “Administrative guidelines” issued by Dept. of Health and Human Services, do not match. At the same time, US and many other European countries such as France use “Relative Poverty” line concept (For calculating Poverty Threshold). A state of “Relative Poverty” means “having significantly less access to income and wealth than other members of society”. Thus, Relative Poverty encompasses all people below a certain percentage of median consumer expenditure of the country, whether these people lack essential resources or not. The core of poverty line fixation in this case lies in fixing the threshold percentage. This percentage in different European countries and US ranges from 49% to 60% generally. There, the Poverty Threshold is more of an indicator of income inequality than anything else. Also, since poverty threshold is defined as a percentage of median consumer expenditure, an automatic inflationary correction happens. While such a concept in India will surely throw a huge percentage of people below poverty because of the wide rich-poor divide, it will be of little use in gauging economic growth penetration and allotment of beneficiaries for social benefit schemes.
Thus, while India must continue with its policy of defining Poverty Line based on Poverty Line Baskets, the Baskets themselves should be modified as detailed earlier and such a benchmark should be set from the year 1990. Having such a comprehensive poverty line, that too based in the year 1990 after which the liberalization phase set in, will give a clearer picture of economic progress and its benefits to the poor and also cut the doubling of efforts for calculating two separate measures.
While the experiments with living on Rs. 100 per day abound and public insinuations of making a mockery of poor get hurled at the Planning Commission, there is little interest in going behind the apparent facts and finding the objective behind the actions of government officials. Of course, the picture is never black and white and there are bound to be some grey areas of mistakes in deciding who is poor and who is not, but what poverty really needs for eradication is efficient and effective implementation of the development programs, a sense of purpose in each responsible officer to see no hungry face in India and a solidarity shown by all stakeholders, public, government, systems as well as politicians. Defining who is poor is just the first step!
Authors : Prasad Vaidya, Priya Amrute
The authors are PGDM students at S.P. Jain Institute of Management and Research
References –
1. Report of the Expert Group to Review the Methodology for Estimation of Poverty, Govt. of India, Planning Commission, under chairmanship of Prof. Suresh Tendulkar, November 2009
2. Household Consumer Expenditure in India, 2007-08, National Sample Survey Organization, March 2010
2. Household Consumer Expenditure in India, 2007-08, National Sample Survey Organization, March 2010
3. Food and Nutritional Security Bill, part of Tenth Five Year Plan 2002-2007
4. Interviews of Mr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, on different News Channels
5. Wikipedia – for GDP growth graph –
