Economic Times, July 18, 2011

The multitude of data on poverty generated by various panels wont help till suitable action is taken

There was an Internet-based debate on growth versus poverty. Using some of this material and adding more, the Consumer Unity and Trust Society (CUTS) put together a volume that was recently released in Delhi by Montek Singh Ahluwalia. From his talk there, one learnt that using the Tendulkar methodology, the poverty ratio in NSS 66th Round of 2009-10 would have been around 32%. But because that was a drought year, NSS was redoing the survey and one would, therefore, not have poverty numbers till 2014.

There are too many red herrings floating around on poverty numbers. Poverty is a multi-dimensional concept. It is no one’s case that the minimum level of income or consumption expenditure is the sole criterion for identifying someone as below poverty line (BPL) or above poverty line (APL). Since the Alagh Committee of 1979 and Lakdawala Committee of 1993, Planning Commission used NSS large samples and calorie norms to work out poverty numbers. In 2004-05, using this old Planning Commission methodology, national poverty ratio was 27.5% and poverty was concentrated in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Uttar Pradesh and Uttarakhand. The Tendulkar Committee moved away from calorie norms and computed all-India poverty ratio of 37.2% in 2004-05. If one does an apple-versusapple comparison, poverty declined by around 1% a year.

To muddy waters further, the National Commission for Enterprises in the Unorganised & Informal Sector (NCEUIS) created a new poverty line of . 20 per person per day — compared to official poverty line of around . 12 per day — and using same data for 2004-05, estimated that 77% of the country’s population was BPL, and poor and vulnerable. There are also international poverty lines of $1.25 per person per day and $2, at constant 2005 prices. About 37% of India’s population lives on less than $1.25 per day and 75.6% on less than $2 per day. Since poverty isn’t only about income or expenditure poverty, there are Millennium Development Goals (MDG) too. This has a system of goals, targets and indicators, and an MDG report for 2011 has just been published.

On reducing poverty ratios by half by 2015, it states, “India has also (China being the other country) contributed to the large reduction in global poverty. In that country, poverty rates are projected to fall from 51% in 1990 to about 22% in 2015.” In the same vein, there is HDI, based on education (literacy and gross enrolment ratio), health (life expectancy) and PPP per-capita income. Human Development Report (HDR) makes the point that, so far, India’s improvement in HDI has been driven fundamentally by income growth. That is, we haven’t done that well on education and health.

There are also state-level HDRs and from these, we know that backward states are Bihar, Uttar Pradesh, Madhya Pradesh, Orissa, Rajasthan, Chhattisgarh and Rajasthan. In recent times, HDRs have also introduced a multi-dimensional poverty index (MPI), and this tells us that problem states are Bihar, Jharkhand, Uttar Pradesh, West Bengal, Maharashtra and Madhya Pradesh. There are intra-state divergences too. Consequently, if one pins down backward districts, one will find most of these are in Bihar, Madhya Pradesh, Jharkhand, Chhattisgarh, Orissa, Rajasthan and Uttar Pradesh. But all these are mere numbers. We should ask several questions. First, are people willingly poor? At best, there can be a qualification for the old, disabled and households where head of the household happens to be a woman. These apart, people in working-age groups do not wish to be poor. Income growth and liberalisation ensures such people are no longer poor. As a minor statistical point, income and expenditure distributions aren’t symmetric.

They are log normal, with a thick part towards the left. As soon as this thick part of the distribution passes above the poverty line, however that happens to be defined, there will be sharp drops in poverty. This has already begun to happen for India and will continue, assuming we can ensure that growth continues. In states that have grown, there have been such sharp drops in poverty: Punjab, Haryana, Kerala, Tamil Nadu, Gujarat, Andhra Pradesh and Assam. Second, even if people do not wish to be poor, they may be stuck because they do not have access to education and skills, health services, market information, technology, financial products, roads, electricity, water, sewage and sanitation. This is the poverty trap. But then, the answer is to efficiently provide these public goods or collective private goods. If such people continue to be poor, that is because in more than 60 years, these goods and services haven’t been efficiently provided, notwithstanding colossal amounts of public expenditure.

People may also be poor because they are stuck in subsistence-level agriculture and have no other employment opportunity. If such people are poor, that is because in more than 60 years, we haven’t been able to reform agriculture and the rural sector. Nor have we efficiently provided skills. Third, poverty results from lack of integration. There are sections in the Constitution that prevent this: Articles 370-371 and Schedules V-VI. Fourth, are scheduled castes, scheduled tribes, other backward classes and Muslims deprived because they belong to these collective categories, or are they deprived because they lack access to public or collective private goods? Poverty is an individual household characteristic. It is imperfectly captured by such collective identities. Fifth, in the intervening period, we might need to subsidise the poor. But unless we recognise the household nature of poverty and decentralise identification, we will go round and round in circles, notwithstanding Aadhaar. That is the reason we will have plenty of numbers and precious little on policy.

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