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Steep drop in number of poor gifts UPA talking point, raises eyebrows

New Delhi, July 23: The Manmohan Singh-led UPA government can finally grab an official statistic to burnish its aam aadmi credentials.

The percentage of people living below the poverty line has fallen to 21.9 per cent of the population in 2011-12 from 37.2 per cent in 2004-05 — the year that the Congress-led UPA stormed to power.

The percentage of people below the poverty line has been estimated at 25.7 per cent in rural areas and 13.7 per cent in urban areas.

In absolute terms, the number of people surviving precariously on the edge of poverty had dwindled to 26.93 crore in 2011-12 from 40.71 crore in 2004-05.

But if the government was feeling chuffed about the decline in the poverty numbers, critics were quick to slam the Planning Commission, which released the figures, for a statistical sleight of hand made possible by using a formula that has been discredited and is due to be revised next year.

The so-called poverty meltdown meant that 13.7 crore people had crawled over the subsistence line in the seven-year period between 2004-05 and 2011-12. The Planning Commission said that this was three times better than the improvement that was witnessed in the 11-year period between 1993-94 and 2004-05.

poverty primer

Figures show poverty in per cent. Figures in bracket refer to the absolute numbers in lakh. Manmohan Singh took over as Prime Minister in 2004. The year 2009-10 is the so-called drought year

Another poverty estimate? Why now?

The poverty estimate is made every five years. The last one was made in 2009-10. Logically, the next one should have been in 2014-15. But 2009-10 was not a “normal year” because of a severe drought. That’s why the National Sample Survey Office (NSSO) decided to repeat the large-scale survey in 2011-12. Today’s report is putting out the poverty estimates for 2011-12

But wasn’t the formula for poverty estimation supposed to be changed?

Yes, it was. The Planning Commission had constituted a committee in June 2012 under the chairmanship of C. Rangarajan to review the methodology of poverty measurement. The Rangarajan committee is expected to submit its report by the middle of 2014

So, is this study using the old formula?

Yes, it is using the formula sggested by the experts group headed by Suresh Tendulkar submitted in November 2009

What was wrong with the Tendulkar formula?

Many economists believe that the Tendulkar poverty line underestimated the extent of poverty in the country. That is one of the reasons why the Rangarajan committee was set up last year. Since the Rangarajan formula will be available only a year later, the Planning Commission decided to go ahead with the Tendulkar methodology in this study

What are the key elements of the Tendulkar formula?

Tendulkar junked the old methodology that anchored the poverty line to a “calorie intake norm”. Rather than link the poverty line to how much people ate (originally fixed at 2400 calories in rural areas and 2100 calories in urban areas), the Tendulkar formula made four significant changes:
● It chose to test for actual food expenditure near the poverty line rather than adopt an arbitrary calorie intake norm
● It recommended a uniform poverty line basket (items of consumption) for rural and urban areas unlike before
● It suggested a price adjustment procedure to even out the kinks in population segment-specific price indices that are bedevilled by outdated price and weight bases
● It incorporated a provision for private expenditure on health and education

So, what are the new findings?

The poverty line has been estimated at Rs 816 per capita per month in rural areas and Rs 1000 per capita per month in urban areas. That translates into Rs 27.20 per day per individual in rural areas and Rs 33.33 per day in urban areas. A family of five living on the poverty line must subsist on Rs 4080 a month. In urban areas, this rises to Rs 5000 a month

How does Bengal fare?

The poverty line in Bengal is Rs 783 in rural areas and Rs 981 in urban areas — both below the all-India averages. The report says 141.14 lakh people (22.52%) in rural areas and 43.83 lakh in urban areas (14.66%) are below the poverty line. Overall, 19.98% of the people in Bengal (or 184.98 lakh)— roughly one in every five — live in poverty. The new figures pull down rural poverty in Bengal in percentage as well as absolute terms, compared with that in the drought year.

But the latest poverty estimate also tossed up some worrying facts: those who are desperately poor in the country have to subsist on just Rs 33.33 per day in urban areas and Rs 27.20 in rural areas. This is marginally higher than the figures tentatively announced last March of Rs 32 in urban areas and Rs 26 in rural areas.

The Poverty Line for 2011-12 has been estimated at Rs 816 per capita per month in rural areas and Rs 1000 in urban areas for the year 2011-12. That means a family of five living on the edge of poverty would have to survive on Rs 4,080 per month in rural areas and Rs 5,000 per month in urban areas, according to the Planning Commission.

But there were some sharp comments about the poverty figures.

“If the number of people below the poverty line has indeed fallen to 22 per cent of the population, why has the government moved a food security ordinance that seeks to provide cheap rice and wheat to about 65 per cent of the population? It can’t use one set of statistics to claim poverty has declined and use another to justify a controversial food security legislation,” said former Infosys director T.V. Mohandas Pai on a news channel.

The government was also under attack for bringing out the poverty estimate three years ahead of schedule, breaking with the tradition of bringing it out every five years.

The Planning Commission justified this on the ground that the early poverty estimates had been brought out in 2009-10 — a year that had experienced severe drought.

In 2009-10, the number of people below the poverty line was 35.46 crore, or 29.8 per cent of the population. What this means is that poverty declined by 7.88 percentage points in a space of two years — a statistical vault that stretches credulity.

“This was a period of high growth with the agriculture sector showing good progress. During this period, employment numbers also showed buoyancy. Whether one agrees with the methodology of Tendulkar or not, the trend that poverty declined is a certainty,” said Y.K. Alagh, Professor Emeritus and Vice-Chairman of Sardar Patel Institute of Economic & Social Research. Alagh was the first to define poverty on the basis of calorific value.

The formula used to measure poverty in the current report had been suggested in 2009 by Suresh Tendulkar. It had been widely criticised for underestimating consumption expenditure in the country.

Last June, the Planning Commission had appointed a committee headed by C. Rangarajan, chairman of the Prime Minister’s economic advisory council, to revise the poverty measurement formula. The committee is expected to submit its report in the middle of next year.

The new poverty estimates are based on the 2011-12 Household Consumption Expenditure Survey carried out by the National Sample Survey Organisation (NSSO).

Economists attributed the decline in the poverty figures to the sharp increase in wages under the Mahatma Gandhi national rural employment guarantee scheme, which is touted as the world’s largest welfare programme. Expenditure under the jobs programme this year has been projected at Rs 33,000 crore.

Poverty estimates in India have always been a topic of intense debate and economists have tended to cavil over the methodology that ought to be used.

Initially, the poverty was estimated based on how many calories people consumed. Originally, it was fixed at 2,400 calories in rural areas and 2,100 calories in urban areas. When Tendulkar changed the formula, he argued that the old formula did not take into account the fact that calorie intake in the urban areas had dropped to around 1,770 calories.

The N.C. Saxena committee had said in 2009 that about half of all Indians were poor. Two years earlier, the Arjun Sengupta committee had estimated that poor and vulnerable people made up 77 per cent of the population.

The World Bank has adopted a universal thumb rule: it says those living on less than $1.25 a day should be considered poor.