Assessing which families are ‘poor’ and which are not was always a tricky business; a number of reports on the extent of poverty in India have widely varying estimates, even if their numbers were compiled at different times. The World Bank’s estimate — based on people living on $1.25 a day in 2005 dollars — puts the proportion of the population living in poverty at around 42 per cent. The National Commission for Enterprises in the Unorganised Sector, then chaired by Arjun Sengupta, said in 2007 that 77 per cent of India’s population lived on less than Rs 20 a day. The N.C. Saxena committee, set up by the ministry for rural development to advise on the methodology for a below-the-poverty-line census (but not to estimate actual poverty itself) said that 50 per cent of the population lived below the poverty line. The Suresh Tendulkar committee (on which the Planning Commission based its affidavit presented to the Supreme Court) puts the number at 37 per cent. Other estimates thrown into the mix include those by the Oxford Poverty and Human Development Initiative and the United Nations. Little wonder, then, that a controversy would erupt over the Planning Commission’s submission to the Supreme Court, which said the ‘poverty line’ was Rs 26 per person per day in rural India and Rs 32 for people living in urban areas. It has taken the issue out of the academic world of social scientists and economists and into a charged political and public environment.
But activists and others who are up in arms about this issue should perhaps pause for a moment and look at the Planning Commission’s estimates again. Using purchasing power parity — or calculating the rupee equivalent required to buy the same goods that $1.25 would buy in the United States of America — the World Bank’s international poverty line is actually Rs 22 a day in urban areas and Rs 14.30 in rural areas. All the Planning Commission appears to have done is update those numbers using consumer price indices’ changes from 2005 till date. The controversy is over distributional consequences; most believed that the poverty line of Rs 32/26 would be used as a basis for social welfare payments and food subsidies for the poor, a misconception that both the Planning Commission deputy chairman, Montek Singh Ahluwalia, and the minister for rural development, Jairam Ramesh, clarified on October 3: state governments and the Union government would not be using this as a basis for welfare programmes.
Mr Ahluwalia also made clear that the poverty line number of Rs 32 assumed that education and healthcare benefits would be provided free of cost. However, this much is clear: it is high time current methodologies for estimating poverty were overhauled. These methods have been used for nearly 40 years. They are out of date, irrelevant in today’s context and a legacy that has become a social and political burden.