Poverty estimation is a veritable industry, worldwide. Two decades ago, in his book Lords of Poverty, British journalist Graham Hancock pointed out that the development aid industry, the guardian angel of efforts to “remove” poverty, was more powerful than many multinational corporations. In India, apart from the gigantic amounts of money this industry can allocate (it has great influence in government), it also vets poverty numbers: Low poverty counts are ruled out, the higher the better. The fracas over the Suresh Tendulkar committee’s poverty estimates is one recent example.
Here is an astringent: Two scholars, Gaurav Datt and Martin Ravallion, have in a paper in the 13 February issue of the Economic and Political Weeklypointed out that poverty has declined in the post-reform (that is after 1991) period. While they are careful in arriving at that conclusion (they add some caveats), their results are likely to be greeted with scepticism. They should not be.
For starters, Datt and Ravallion estimate the headcount poverty (the number of poor below poverty line) decreased by close to 0.8 percentage point per year, post-1991. This is in contrast to the 0.5 percentage point in the pre-1991 period. The Tendulkar report, that has been criticized, had concluded that poverty headcount ratio had gone up to 37.2%. Earlier, in March 2007, the Planning Commission had estimated this number at 27.5%.
The two important findings of the paper are: one, much of this decline has come due to the falling numbers of poor in rural areas. Two, the effect of urban economic growth on poverty has seen a shift. Urban growth is no longer inimical to rural poverty (as many Leftist scholars believe). After 1991, urban growth continued to reduce urban poverty and rural growth made a dent in rural poverty. But, crucially, there is evidence of a feedback effect at work—one ensuring that urban economic growth contributes to reducing rural poverty.
Much of this work is in its initial phases. There is much that is not clear. For example, the data on consumption from the various rounds of the national sample survey and national accounts statistics paints a confusing picture. Can further work along Datt and Ravallion lines square this? There are many other empirical puzzles. But this is a good, non-ideological contribution to a contentious subject.
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