THE BLOG

How to Keep Poverty Low

In a significant move, the Supreme Court in India has questioned the very basis of counting the poor in the country. Realising that the poverty line is a gross underestimation, the Supreme Court has done what economists had failed to see all these years.

By deliberately keeping the poverty line low, economists and planners had actually betrayed the poor. These faulty poverty estimates became the foundation of the entire development strategies and programmes. No wonder, 64 years after independence, poverty continues to be robustly sustainable, and is in reality increasing in a geometric proportion.

On top of it, there are so many estimates floating around that I have lost count. Most of these estimates are actually drawn on the same faulty assessment criteria, and therefore have failed to make any appreciable impact on mitigating poverty and inequality. Whether we like it or not, poverty has proved to be robustly sustainable.

Now take a look. The Planning Commission had worked out poverty at 27.5 per cent in 2004-05. An expert group set up by the Planning Commission again in 2009 to review the methodology for poverty estimates for the same year (2004-05) upped it to 37.2 per cent, which means a mere statistical readjustment added another 100 million people to the count. And if we go by the international poverty norms of people living on less than $ 1.25 per day than over 456 million Indians live in poverty. But if we go by the Arjun Sengupta commiteee report, which I am discussing later, even this estimate may turn out to be too short.

The National Advisory Council simply pegs poverty at 50 per cent. As if this is not enough, we now have the new Multi-dimensional Poverty Index (MPI) developed by the Oxford Poverty and Human Development Initiative for the United Nations Development Programme (UNDP) which pegs poverty in India at 55 per cent. It has added another ten indicators, including child mortality, school enrolment, drinking water, and sanitation.

Before you get lost, let me decipher the criteria that are used to first gauge the prevailing level of food insecurity and hunger. Previously poverty estimates were done using the calorie norms provided by the Indian Council for Medical Research. Accordingly, 2400 kcal in rural areas and 2100 kcal in urban areas formed the basis of the poverty estimates. This was the basis of earlier Planning Commission poverty estimates. I don't know why the UN Food and Agricultural Organisation (FAO) uses lower per capita calories consumption cut-off of 1770 kcal.

By keeping the food consumption norms low, the FAO probably succeeds in hiding its own inefficiencies in reducing global hunger. That is why I have always found the Millennium Development Goals action plan to achieve the eight-point poverty goals to be built on a shaky foundation. Current estimate of global poverty by the FAO for instance at 925 million is in itself an underestimation. A realistic poverty estimate for India alone would be around what the FAO projects. According to Arjun Sengupta committee report, 836 million people in India are unable to spend more than 50 US cents a day, and I am sure no one would disagree that these people are not living in poverty.

In India, what the Supreme Court finds astonishing is that as per the National Sample Survey Organisation (NSSO) 2004-05 report those spending less than Rs 12 (1 US $ = Rs 45.18) a day in rural areas and those spending less than Rs 17 a day in the urban areas were categorised as poor. This is what has baffled the Supreme Court. After all, how can the planners be so blind to the ground realities? How can they presume that someone can survive in such a paltry amount? Where in the world can they meet their minimum calories requirement by spending a mere Rs 17 a day?

Later, a panel headed by Suresh Tendulkar, formerly chairman of Prime Minister's Economic Advisory Council, reworked the formula by adding certain items like food, sanitation and education to the poverty criteria. It, however, used lower calorie consumption norms of 1999 kcal for rural areas and 1776 for urban areas. By lowering food expenditure and adding some new items to the daily expenditure list for the poor, it based its calculations on estimates of Rs 15 for the rural areas and Rs 19 for the urban centres.

This too is a grossly unrealistic estimate. You cannot bring up even a pet dog in the same amount.

It makes me wonder as to why economists fail to realise that the indicators adopted for measuring poverty are inadequate, and do not reflect the prevailing realities. Nor do economists stand up and challenge the flawed head count of the poor. I don't know why they feel that by hiding the number of poor they are doing a service to the nation. That is why the Supreme Court had to step in.

What makes all these poverty estimates look unrealistic is the 2007 Arjun Sengupta committee report that I talked about ealrier (officially the report of the National Commission on Enterprise in Unorganised Sector), which had estimated that 77 per cent of the population or 836 million people were unable to spend more than Rs 20 (less than 50 US cents) a day. This is more or less a correct reflection of the extent of prevailing poverty, and therefore needs to be accepted as the new poverty line. If India were to accept this as poverty line, the UN estimates of global poverty too would come under the scanner.

The recommendation of the Tendulkar committee, which estimates 37.2 per cent of the population living below the poverty line, is actually a reflection of acute hunger that prevails. Knowing that Rs 19 a day cannot feed a human being in urban centres, the Tendulkar committee estimate should constitute the food insecurity or the hunger line. It means 37.2 per cent of the population is seriously food insecure and needs emergency food aid programmes to meet the challenges of hunger.

In other words, India's existing poverty line is actually a euphemism for severe food insecurity. I only hope the Supreme Court directs the government to draw two estimates -- a poverty line at 77 per cent of the population as suggested by the Arjun Sengupta Committee, and a food insecurity line at 37.2 per cent, which comprise people faced with absolute hunger and living in abject poverty.

Well, will all these estimates make a difference to the poor? Mercifully, they don't even know which estimate they fit into. What they know for sure is that poverty is their destiny. Rest all is statistical jugglery.