Views | Poverty and the Planning Commission eyewash

Views | Poverty and the Planning Commission eyewash

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The Planning Commission last week told the Supreme Court that only villagers earning less than Rs26 per day and city dwellers earning less than Rs32 per day will be considered poor, and hence be eligible for government assistance.

These new poverty thresholds raised howls of protests from economists, social activists and political leaders. The recent debates have been yet another addition to the endlessly-heated arguments about the extent of poverty in India.

There is no one way to calculate a poverty line. Most governments calculate poverty thresholds based on how much money is needed to maintain a decent life. The first poverty estimates used in India were based on the money required to buy a minimum number of calories per day. A person was not considered poor as long as he kept hunger at bay.

This was when India was a desperately poor country. Since then, there has been a crying need to expand the consumption basket beyond food to other essentials such as education, clean drinking water and healthcare. The government has expanded its definition of poverty in more recent studies, such as the one presented by the late Suresh Tendulkar.

The Planning Commission numbers are ridiculously low because living on so little for a day will be impossibly difficult.

The more difficult question is how much the poverty threshold should be higher by. A closer look at the numbers is required. The urban poverty line is around 19% and the rural poverty line is around 15% of India’s per capita gross domestic product (GDP) in 2010-11.

Let us compare it with some other countries in the region. Terry McKinley of the School of Oriental and African Studies in London has helped the Asian Development Bank develop a social protection index. His research shows that the national poverty line was, on average, 28% of the gross domestic product (GDP) for 27 Asian countries.

In a power point presentation made earlier this year that is available online, McKinley notes that the Chinese national poverty line was only 8% of that country’s GDP, which is the lowest proportion in Asia. The comparable ratio was 25% in Pakistan and Vietnam, 35% in Mongolia, 40% in Bangladesh and over 50% in Cambodia. McKinley says the number for India is close to 20%.

The Indian poverty line estimated by the Planning Commission is way too low compared to the rest of the region (if one leaves China aside). The rural and urban poverty lines need to be at least double of the Planning Commission estimate --- or 52 a day for villagers and 64 a day for city dwellers.