Estimating Poverty in India

Democratic government is supposed to assure a dignified standard of living to all its citizens. In economics, Poverty line in intended to measure precisely this minimum standard of living which is acceptable to societal conscience. It is basically expression for estimation of minimum amenities of life which should be available to every citizen. Recently in India there has been lot of controversy in estimating levels of poverty prevalent in the country. Estimates have varied from as low as 28percent (Planning Commission) to as high as 77percent (Arjun Sen Gupta Committee). Such difference essentially results due to varied methodology followed in estimating poverty. Reasonable accurate estimation of poverty is essential as it is an important data needed for effective policy making. The level of poverty would determine the type and quantum of intervention required by government through various measures for reduction of poverty

Calorie basis for estimating poverty

 Traditionally in India, poverty is measured in terms of minimum calorie intake required by an adult person for healthy living. This has been position from 1960’s onwards when Lakhandwala formulae was adopted by Planning Commission. The minimum calorie intake is 2400 calories in rural areas and 2100 calories in urban areas. This calorie level is translated into monetary terms for estimating poverty in various states as per the prevailing price levels in them. Thus absolute amount in rupee terms is determined which is needed to buy quantity of cereals sufficient to provide required calorie intake.

Critique of calorie basis

This formula has been criticized by many eminent economists due to two reasons. It ignores other essential amenities like health, education, and housing in estimating poverty. These are vital in themselves to ensure minimum standard of life as per the emerging values and ethos of the society. Some like health, sanitation is also needed to generate capacity of food absorption in body. Thus they can’t be ignored while estimating poverty. Secondly, it is alleged that the transition of calorie intake to monetary terms lacks effective methodology. The amount in rupee terms thus determined is not sufficient to buy calorie levels especially considering the double digit growth in food price index in last few years. This coupled with ‘target’ public distribution system in vogue keeps many million persons out of poverty estimates. All India average of Rs 526 per person per month (or Rs13 per person per day) is too low for purchasing cereals required for sufficient calorie intake.

N.C Saxena and Tendulkar Committee

       

Prime Minister and Ministry of Rural Development has recently constituted N.C Saxena and Tendulkar Committee to overcome and suggest measures for this problem in poverty estimation. They have come up with data of 50 percent and 37 percent poverty level respectively. UNDP measures poverty at the level of $1/per person per day which has been revised recently to $1.25/per person per day.It also measures person living below $2/per person per day in member countries.This is considered a level assure minimum food intake and other necessities like housing, health and education. Comparative chart of these estimates has been reproduced below.

 

                                                                                                                               

                                                                                                                                          (figures in %)

	1990	1999	2005
Below $1 a day
India	33.3	27	24.3
World	29.9	22.8	16.1
Below $1.25 a day
India	51.3	44.8	41.6
World	41.7	33.7	25.7
Below $2 a day
India	82.6	78.4	75.6
World	63.1	57	47.6

(Source: World Bank)

India’s proportion in world poverty

 Thus table brings out the point that India has generally assumed from 1990 onwards, has not been able to translate its economic growth into effective reduction of poverty levels on comparative basis. Number of person’s living below line in India as a percentage of world’s poor has in fact increased from 1990 level. This increase has been even drastic if we consider the income level of $2/per person per day.

Need to link Poverty and Malnutrition data

Poverty estimates for more reliability and consistency also needs to be linked with malnutrition data and hunger index. India’s position has fallen to level of 66 among 88 countries in hunger index. Amartya Sen has also estimated that in many Indian States persistent malnutrition prevails at the level higher than even sub-sahara countries. Multi-dimensional Index recently brought by research foundation based in U.K. whose methodology is more in line with current thinking on poverty estimation has confirmed above finding’s of levels of poverty prevalent in the country. Comparative table of various estimates has been reproduced below for easy reference-

Planning Commission	28.3%
Suresh Tendulkar Committee	37.2%
N.C. Saxena Committee	50%
Arjun Sen Gupta committee	77%
World Bank	41.6%

Requirement for effective estimates

                                                                                                                               Reasonable accurate poverty estimation is essential for effective policy in field of poverty elimination. It is also essential for delivery of govt. assistance to those who are not able to benefit from the liberalized economic system. Poverty estimate’s is also linked with issues of food security. Thus it will in a way determine the food requirement’s for the country as a whole. Thus quantum of agriculture subsidies and investment’s required especially through public sector can be ascertained. Similarly, India stood at lowly position of 171 among 175 countries in terms of public sector investment in health as a percentage of G.D.P in recent U.N.D.P report.  India’s investment in health sector as a percentage of G.D.P is abysmally low at 0.9%.  Similar augmentation of investment is required in field of education and low cost housing for effective policy intervention for removal of poverty. This can only be possible based on adequate estimate’s regarding prevalent poverty level. India needs to leverage its higher economic growth rates for social sector expenditure to reach the goal of inclusive growth.

Augmenting Statistical Capacities

For effective data collection on poverty steps needs to be taken at two levels. First: At macro- level for overall determination of poverty level prevailing throughout the country. Second: Inclusion of only deserving person in BPL list.  Thus errors of both wrong inclusion and exclusion need to be curbed. Capacity building through effective training mechanism is required for bureaucracy at cutting edge level who is the first one to collect data at the grass root level. Panchayat’s and Municipalities need to be effectively involved in the process of data collection for strengthening local democracy as well as to curb tendency of wrong exclusion which is in a way is more painful as it excludes necessary assistance from public sector to needy person. Gram Sabha need to be strengthened as a institution to make sure that the social elites in rural area’s don’t hijack the public sector benefit’s made for the purpose of poverty-elimination.

Ensuring Consistency of data

At macro level poverty estimates from different sources need to be collaborated and reconciled by Planning Commission for the purpose of consistency of data through different avenues. Poverty estimates need to be linked with sample data for employment generation in unorganized sector, national income statistics, NSSO data for internal consistency. Govt. machinery needs to be strengthened for purposes of effective data collection and reconciliation. Planning Commission can play a pioneering role in same by becoming an effective linkage mechanism among different central govt. ministries, state govt. machinery, statistical institutions, and international bodies like U.N.D.P World Bank etc involved in data collection which would assist in estimating reasonably accurate poverty level’s prevailing in the country.

Concluding Remark

Thus to reach the goal of inclusive growth, India needs to develop its statistical capacities for effective data estimation on poverty levels for augmenting its capacity to develop effective policy mechanism and delivery mechanism for poverty elimination to ensure its rightful place among developed countries by 2020 as envisaged by Ex-President Mr. Abdul kalam in India Vision-2020.