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The poverty estimates debate

The poverty estimates debate
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First Published: Sun, Dec 13 2009. 09 35 PM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Sun, Dec 13 2009. 09 35 PM IST
The report of the Suresh Tendulkar committee on the estimation of poverty in India is bound to engage academics and activists from all sides of the ideological divide in the days to come. Much of the debate, one suspects, will be around the poverty figure that Tendulkar and his colleagues have come up with. The estimate of poverty put forth by the committee is 37.2% for all of India (with 41.8% for rural areas and 25.7% for urban areas).
This figure is significantly higher than the current estimate of poverty of 28.3% (2004-05 estimates) used by the Planning Commission. It is also higher than the figure of 36% that has been mandated by the Supreme Court in the ongoing right to food case. An easy, albeit erroneous, conclusion from this would be that poverty in India has gone up in the interim years since the last estimate.
What is likely to complicate the debate even further is the fact that this interim period comprised the years of India’s shift to a high-growth, neo-liberal model of development. These were also the years of the greatest advance in inequity that has been seen since Independence. Even if these figures are dismissed as being an underestimation of poverty, critics of liberalization will still seize the opportunity to see the new poverty figures as a vindication of their stance that the poor have become poorer in the last 15 years.
Illustration: Jayachandran / Mint
While that may well hold true, it would be wrong to draw that conclusion from this report: The Tendulkar committee has fundamentally changed the way poverty has been measured so far in the country and, therefore, the current poverty estimate is not comparable with earlier estimates. In fact, if these estimates are applied to the earlier data, then the all-India poverty line would have been 45.3%. Therefore, even when the new standards are applied, poverty—by these estimates—has seen a marginal decline.
So what are these fundamental changes in the way poverty is measured that the Tendulkar committee has made?
First, and perhaps most controversially, the Tendulkar committee has abandoned the calorie-anchored estimates of poverty. All previous estimates of poverty in India had used the calorie consumption norm of 2,400 calories per day per capita for rural areas and 2,100 calories for urban areas. Data collected by the National Sample Survey (NSS) on actual consumption would then be used, among other things, to correlate the monthly per capita expenditure that was required to meet these calorie norms. However, there were problems with this approach.
One, many nutritionists and economists have been wanting to give this form of poverty estimation a decent burial for a long time now, since there were far too many contradictions in using this norm.
Consider that the United Nations Food and Agricultural Organization had revised the calorie intake to close to 1,800 calories per day per capita. The Indian Council of Medical Research has only now set into motion a process to revise the calorie norms for India, which is still likely to be quite contentious since, as a Left-wing nutritionist friend put it to me, none of the people who undertake these revisions has ever done a day’s worth of manual labour.
Two, when these norms were applied across the country, the calorie consumption in the southern states was found to be much lower than the poverty belt states of northern India. This is despite the fact that states such as Tamil Nadu and Kerala have had far better nutritional indicators. For instance, Kerala and Tamil Nadu have child malnutrition rates of 22.9% and 29.8%, respectively. Yet, average calorie consumption in both states is lower than, say, in Bihar, which has a child malnutrition rate of 55.9%.
Three, calorie intake has been going down in India even for better off households and many economists and nutritionists feel that there seems to be little correlation between an increase in calorie intake and household income.
The reason why dropping the calorie norm for poverty estimation is bound to be controversial is this last point—the fact that there exists a rich debate on the subject of declining calorie consumption among the poorer households, especially in the post-liberalization period. Economists who have been at the forefront of this debate would view the Tendulkar committee’s departure on using calorie norms to estimate poverty as yet another attempt to window dress the stark reality of poverty in India. Since these estimates continue to show a decline in poverty, even if it is not as rapid as in other emerging economies such as Brazil and China, it is bound to be treated with scepticism by activists working on the right to food campaign across the country. The timing of the Tendulkar report—in the midst of a global food crisis and spiralling food prices in India—is also likely to ensure that it is treated with even greater scepticism than it deserves.
The figure of poverty that is most widely regarded as the gospel truth by most activists and civil society groups in India is the one put forth by the National Commission for Enterprises in the Unorganized Sector (NCEUS). NCEUS had argued in its final report in 2009 that social sector benefits for unorganized labour should be extended to 77% of the population, based on a per capita per day expenditure of Rs20 or less. However, there was never consensus in academic circles whether this could be used as the basis of determining the poverty line. Moreover, this figure is unlikely to be accepted by the government to decide subsidies.
Second, the Tendulkar committee has rationalized the basket of goods and services that are consumed by households at the poverty line. This had been unchanged in poverty calculations since 1973-74. The poverty line basket has now been updated to reflect the expenditures on health and education that are incurred by the poor, rather than assume that these are largely services that are provided free by the State, as was done in 1973-74.
At one level, this is a much needed correction since it factors in expenditures that focus on capabilities. But whether this should come at the expense of completely delinking it from calorie consumption is what is likely to be the point of departure in most of the debates that will follow this report.
Third, the methodology used for the determination of the poverty line is now much more amenable to updating using changing prices over time, than the previous estimation surveys were.
The primary reason the poverty line is so contested is that many state benefits, including subsidized rations in the public distribution system (PDS), health insurance, education scholarships, subsidized housing, and so on, are available only for those people who fall below the poverty line (BPL). Consequently, funding from the Union government to state governments is based on this “quota” that flows out of the poverty estimation. Since state governments face the brunt of the exclusion errors in BPL identification—an all-too-common phenomenon—many of them have simply done away with the Planning Commission numbers and have used state budgetary support to supplement the Central quota and extend the benefits to a larger section of the population. These state subsidies could be as high as Rs1,800 crore for a small state such as Chhattisgarh to more than Rs3,000 crore for Tamil Nadu. Any increase in the poverty numbers, therefore, increases the Central food subsidy burden and reduces the fiscal burden on the states.
While the jury is still out on this report, what is clear is that even though this exercise remedies some of the maladies with previous estimates, it does not push the envelope far enough. The estimation of poverty by the Tendulkar committee does not factor in the multidimensional nature of poverty. The over-dependence on money metrics, which rely only on private household consumption expenditure, does not capture the political dimensions of being poor in India. This report, like all such preceding reports, does not take into account significant variables such as caste, gender and disability. In that sense, the government has squandered away yet another opportunity to take a multidisciplinary approach to the poverty question in India.
The bottom line from the current poverty estimate is that it pegs poverty at a per capita rural expenditure level of Rs15 per day and Rs19 for urban areas. While this is an improvement from the previous estimate of roughly Rs12 and Rs17 in the previous estimates, it still falls short of a minimum standard of consumption required for a life with dignity. Many would, therefore, argue that the Tendulkar committee poverty line still remains a “starvation line” rather than a poverty line.
The most immediate policy implication of this report is likely to be on the proposed national food security Act (NFSA); the government is most likely to use these estimates for determining food subsidies under the Act.
If the government does so, it would be yet another historic blunder, since NFSA is perhaps the best opportunity for India to replicate nationwide the Tamil Nadu model of a universal PDS that can replace the failed targeted PDS the Centre currently employs. A universal PDS would give every citizen access to subsidized foodgrains—and most people who do not need them would not take them from PDS shops. But what it also requires is very far-reaching governance changes to prevent leakages from the system, for which the political will just does not exist.
And that brings us to whether the poverty estimates should be used at all for targeting basic necessities such as food. For the second fastest growing economy in the world, India continues to have one of the worst track records in social indicators, especially child malnutrition and hunger. It is ranked 66th out of 88 countries in the Global Hunger Index drawn up by the International Food Policy Research Institute, and nearly half of the country’s children are malnourished—a track record worse than sub-Saharan Africa.
Yet, as the annual billionaire count in India has been relentlessly on the rise, the growing inequity, and the consequences that follow such high levels of inequity—including rising Maoist influence—should serve as a wake-up call for policymakers.
It is this reality that should drive the policy imperatives on food security rather than the numbers proposed by some government committee based on private household consumption expenditure data.
Biraj Patnaik is principal adviser to the Supreme Court commissioners on the right to food. The views expressed in this article are his own. Comments are welcome at theirview@livemint.com.
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First Published: Sun, Dec 13 2009. 09 35 PM IST
More Topics: Poverty | Economy | GDP | Rural | Urban |