New Delhi: Four out of 10 people in rural areas in India are poor, according to a new report—a significant change from an existing estimate dating back to 2004-05, the most recent data available, that pegs rural poverty at 28.5% (which means around three in 10 people in rural areas are poor).
The report, however, does show that poverty levels have declined from the mid-1990s.
If the government accepts the report, which is to be submitted next month, it will have implications for public policy, increase the fiscal burden on the government and lead to greater devolution of resources to states with larger number of poor people.
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The potentially controversial findings are part of the report of the high-level expert group appointed by the Planning Commission and chaired by Suresh Tendulkar, former chairman of the National Statistical Commission. Tendulkar could not be immediately reached for comment.
Some details of this report were first reported on 20 August by the Hindustan Times, which is published by HT Media Ltd that also publishes Mint.
According to a person in the Planning Commission who has viewed the contents of the draft report, but did not want to be identified, it estimates the number of rural poor in 2004-05 at 42% of the rural population, as opposed to the existing estimate of 28.5%.
The report also estimates that between 1993-94 and 2004-05, the number of rural poor dropped from 50% to 42% and in urban India from 31% to 26%. This is also the period when the country witnessed an acceleration in economic reforms and the beginnings of an unprecedented surge in growth that pitchforked India into the exclusive preserve of trillion-dollar economies.
The report has also revised the number of poor in the states. In urban areas, the trend is mixed, with some states showing a higher number of poor people after the revision and some, lower. However, in rural areas, the revision has been uniformly upwards.
The revision in the poverty estimates came about after the expert group revised and expanded the norms that define people living below the poverty line (BPL). The group was mandated to calculate the poverty line and the proportion of the population below it, and if required, to redraw the line itself.
Conventionally, poverty in India has been measured through a minimum household consumption level estimated by the National Sample Survey Organisation, part of the Central Statistical Organisation, the apex statistical body. This measure was anchored in the per capita calorie norms of 2,400 (rural) and 2,100 (urban) per day. The existing official poverty line was originally defined in terms of per capita total consumption expenditure at 1973-74 prices; while the original reference basket of goods and services was left unchanged. This is periodically updated by an expert group, using state price indices. However, the calorie count—which measures individual consumption—assumed in the original poverty line in 1973 has not changed.
Now, the expert group has completely reordered these norms by doing away with the upper bound for the calorie count per person, standardized the price indices and at the same time expanded the criteria to include education, health and actual spending on rent and conveyance as part of the individual’s consumption basket.
The committee justified this shift on the grounds that: the consumption basket of the poor was getting upgraded with the rapid economic growth and rising living standards; the crude price adjustment for inflation was leading to implausible results, wherein urban poverty ratio was higher than that of rural areas in some states; the Consumer Price Index for Agricultural Labourers that was used for measuring inflation for the rural population tended to understate the price rise and hence the extent of rural poverty; and the earlier measure of poverty did not cover private expenditure on education and health, which have been increasing over time.
This fundamental shift in approach, explains an official familiar with the findings, recognizes fundamental changes in the economy and revisits basic assumptions on poverty. In the 1970s, the implicit assumption was that it would be difficult for a BPL person to break free of the shackles of poverty; hence the response of public policy was to prevent starvation. In the new millennium, in a fundamentally transformed economy, by including health and education, the expert group has implicitly asserted that these are requirements for someone to come out of poverty.
According to Harsh Mander, Supreme Court commissioner on the right to food, if Tendulkar has included education, health and actual spending on rent, it’s a very good idea and a reasonable measure of poverty. “Today, a street child can earn up to Rs100 a day. By convention he should be out of poverty, but does he have the shelter and facilities to educate himself and get health benefits?”
Mander also said that expert groups and the government deliberately minimize one’s satisfaction levels so that the quantum of government expenditure on anti-poverty measures is reduced. “Food consumption and per capita income are narrow measures of poverty. It is necessary to improve one’s capabilities in order to move one out of poverty, and education, shelter and good health help doing that.”
He added that even Arjun Sengupta has said over 76% of people in India are poor.
The National Commission for Enterprises in the Unorganized Sector (NCEUS), in a report brought in 2007, said that a majority of the population, 77%, subsists at incomes just above the poverty line, at Rs12 per person per day, and much below the prevailing minimum wages, which range between Rs40 and Rs150 a day across most states. Sengupta was the chairman of the commission.
“I cannot comment till I have seen the report. Having said that, I feel Suresh (Suresh Tendulkar) is a good economist and if he says something, it has to be taken seriously,” said Sengupta, former chairman of NCEUS.
Y.K. Alagh, economist and former Union minister and also the person who had headed the earlier expert group on poverty that measured poverty in terms of calorific value, had a different perspective.
While maintaining that it was difficult to comment on the report without actually seeing it, he said: “The earlier theory was that the state should take care of food consumption of the poor under the basic minimum needs programme, and education and healthcare are anyway responsibility of the state. The 11th Plan also says that government should take care of necessities of the poor.”
“I don’t know whether Tendulkar has assumed that private sector is willing to take care of these facilities (education and health) or that government facilities are not up to the mark, but I am sure he has used some sound logic,” added Alagh.
Photo by Ramesh Pathania / Mint and graphic by Ahmed Raza Khan / Mint