- kewal sethi
the great poverty debate
the great poverty debate
in the millennium development goals, the first goal was to reduce poverty by fifty percent by 2015. the criterion for the poverty line was $ 1.25 per capita per diem. the sustainable development goals have further enhanced the target by saying that by 2030 poverty should be completely eliminated.
in india, some 55 years ago, the late prime minister indira gandhi gave that now famous “garibi hatao” call. the need to introduce poverty was felt all along but was mentioned in the plan documents ( the basis for development in india) only in the fifth five year plan.
in 2017, finance minister arun jaitley also spoke on poverty eradication while addressing students in a college in delhi. “india may become the third-largest economy by 2030 and poverty will fall below 10 per cent by 2025,” according to the 2011 census, nearly 22 per cent of india’s population is poor. jaitley “assumed” that this rate was already 17 per cent in 2019. in 2004-05, this was 37 per cent.
the poverty line for the 2011 figure was rs 816/capita/month (for rural) expenditure. or a person earning above rs 27 per day will be considered above the poverty line. this is far cry from $ 1.25 (about rs. 90 presently).
but then sustainable goals combine poverty and hunger into a single goal whereas government of india is talking about poverty only.
what is the difference?
well, that depends very much on how you define the poverty line. so let us first take up the definition. david cameroon, then prime minister of uk once remarked that “to be poor is to fall too far behind what most ordinary people in you society have. even if we are not destitute. we still experience poverty if we can not afford things that society regards as essential.” .
poverty in the united states is defined as the state of one who lacks a usual or socially acceptable amount of money or material possessions. (zweig, michael (2004) what's class got to do with it, american society in the twenty-first century. ilr press). it is cyclical in nature with roughly 13 to 17% of americans living below the federal poverty line at any given point in time, and roughly 40% falling below the poverty line at some point within a 10-year time span. ll those who make less than the federal government’s official poverty threshold... which for a family of four is about $25,700 per annum. these include people working at minimum wage, even while holding down multiple jobs. it includes seniors living on fixed incomes. according to the estimates, in 2018, 10.6% of men, and 12.9% of women lived in poverty (2020povertyusa.org acccessed on 17the may2020)
in uk, the widely accepted definition of poverty is having an income which is less than 60% of the national average (excluding the wealthiest members of society). on this measure, the proportion of the uk population defined as in poverty is roughly one in five. (julian knight bbc news personal finance reporter) (news.bbc.co.uk/2/hi/business/4070112.stm)
according to the world bank, "poverty is pronounced deprivation in well-being, and comprises many dimensions. it includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life". "poverty and inequality analysis". worldbank.org.. retrieved 2011-05-27
finally according to the united nations , "fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. it means lack of basic capacity to participate effectively in society. it means not having enough to feed and clothe a family, not having a school or clinic to go to, not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. it means insecurity, powerlessness and exclusion of individuals, households and communities. it means susceptibility to violence, and it often implies living in marginal or fragile environments, without access to clean water or sanitation".
what about hunger? the fao defines it as a “situation that exists when people lack secure access to sufficient amounts of safe and nutritious food for normal growth and development, and an active and healthy life. extending the definition to under nutrition, fao includes the lack of protiens and calories in it. it leads to wasting and stunting. according to fao in southern asia, which includes the countries of india, pakistan and bangladesh, the prevalence of undernourishment is rising again, increasing from 9.4 percent in 2015 to 11.5 percent in 2016 (fao et al., 2017). which defintion we use for poverty and/or hunger will be clear from this text.
what is the current position in india. opinions differ. according to one estimate “ there were 36.4 crore poor individuals in india in 2015-2016. the period 2005 to 2015 saw a reduction in multidimensional poverty with 27 crore individuals, including the poorest, coming out of poverty”. but according to another opinion, in all probability, poverty might not be eradicated from india, the next generation of the current poor indians has high probability of remaining poor as well” (downtoearth.org.in accessed on 17.5.2020).
according to the niti ayog, “the conventional approach to measuring poverty is to specify a minimum expenditure (or income) required to purchase a basket of goods and services necessary to satisfy basic human needs. • this minimum expenditure is called the poverty line” .however there is no change in the criteria yet. since 2007, india has set its official threshold at rs. 26 a day ($0.43) in rural areas and about rs. 32 per day ($0.53) in urban areas. while these numbers are lower than the world bank's $1.25 per day income-based definition, the definition is similar to china's us$0.65 per day official poverty line in 2008.(from wikipedia). in 2009, tenduljar committee revised the figures upwards but not significantly further, government set up ranagarajan committee to reexamine the poverty line criteria and its measurement. in 2012. reporting in june 2014, the committee recommended raising further both the rural and urban poverty lines. • decision is yet to be taken on the rangarajan committee recommendations. a comparison of people below the poverty line according to report given by rangarajan, the monthly poverty line is proposed to be raised fron rs. 816 to rs, 972 for the rural areas and from rs. 1000 to rs. 1407 for the urban areas (nit.gov.in).
looking to these various definitions, the economists have evolved a new term viz. 'absolute poverty' or 'destitution' which refers to being unable to afford basic human needs, such as clean and fresh water, nutrition, health care, education, clothing and shelter. about 1.7 billion people are estimated to live in absolute poverty today. others are covered under the definition of "relative poverty". it refers to the lacking a usual or socially acceptable level of resources or income as compared with others within a society or country. (poverty (sociology) - www.britannica.com/ ebchecked/topic/473136/poverty. retrieved 2010-10-24).
by now, in india, the public debate about poverty line has become a pantomime. the poverty lobby (if we can call it by that name) insists that number of poor (and destitute) is going up. "oh no," the other side knows (mainly government economists or pseudo economists) "the percentage has been falling over the past many years". but then it does not have the heart to give up the schemes which have solved the problem. so they change the definition periodically basing it on calorie intake sometimes and wages at others. according to expert committee of planning commission under the chairmanship of suresh tendulkar,, " the all‐india rural headcount ratio using the recommended procedure is 41.8 per cent in comparison with 28.3 per cent earlier (p5 of the report), "its basis being very old and out-dated 1973-74 poverty line basket (plb)". (p11 ibid)
according to filip spagnoli's "the government of india uses a method to measure poverty that is different from the standard type of measurement (the “$1 a day” measurement, according to which 42% of india’s population is poor): given that an average adult male has to eat food representing approximately 2000-2500 calories per day in order to sustain the human body, how much would it cost to buy these calories? those who don’t have an income that is lower than this cost, are poor".
how this basis, of living on less than a dollar a day, was evolved, is not known but it was a convenient way of calculating the number of poor. a variation was provided by saying that the rural persons need less money to get the same goods and, in their case, the income level should be scaled down. with this definition in mind enakshi ganguly thukral says, "with a gross national product (gnp) per capita of us$440 in 1999, india continues to have the highest concentration of poverty of any country, accounting for almost one third of those with an income of less than one dollar a day. more than 360 million people—about 36 percent of the population—live below the official poverty line; seventy-five per cent of these live in the rural areas" (poverty and gender in india: issues for concern (asian development bank report).
amratya sen, the nobel prize winner economist (and therefore persumed to be authority) says in his book "the idea of justice" that income is not the correct parameter. based on this, the laureate gives precedence to one's capability or the capacity that people have of choosing and leading their lives. based on the capability approach, he says, "poverty will be much more intense than what can be deduced from the income data (rpt) data due to variations in the distribution of wealth within the family". (amratya sen (2009) the idea of justice p 258).
india, it is claimed was pioneer in surveying the poverty feature. mahalanobis, in indian statistical institute, kolkata, started these surveys in nineteen forties. this method was continued after independence also when it was made part of the exercise by national sample survey. it was based on the consumption by various households in the urban and rural areas. in addition the per capita on the basis of national accounting was also calculated. the two did not produce similar results and resulted in the debate about what is poverty and how it can be measured.
the alternate method, to which we have referred, was to fix the calories needed for a family (which included women and children) was fixed and the calculations made on the basis of money needed to buy the stuff and to cook it. a distinction was made between calories needed in the urban and the rural areas and the price prevalent in the urban and rural areas was also taken into account.
with the reform era ushered in 1991, the debate regarding the poverty line has intensified. the pro-reform party has stressed on the per capita consumption criterion and pointed out how india is growing at a fast pace. the gdp is the ultimate goal and almost every day someone from niti ayog, finance ministry, economic institutes (ncaer, ieg,) are publishing estimates of growth rate of economy. there is not much of coordination between them and, on some days, you may find one agency declaring it to be 9 % while other may be quoting 8.5 %.
meanwhile the surveys also go on and paint a different story. apart from the cost of goods producing requisite number of calories, a different approach was adopted which enquired about the expenses incurred on various items considered the basis of a sustainable life. it meant considering expenses on goods other than food items. generally the recall period was 30 days i.e. the expenses incurred and informed to the investigator in the previous 30 days. obviously this led to another set of figures which produced its own debate. lately there is an innovation in that while for most of the items, the recall period is 7 days for the fast moving items such as food, for durable goods it was a longer period of one year, while maintaining 30 days for other expenses. this was the basis of nss survey in 1999-2000. this led to another set of figures. expenses having increased (by considering expenditure previously not accounted), many households crossed the threshold fixed for poverty which led to a steep fall in those living below the poverty line. the pro reformers considered it a justification of the reforms. the other section pointed out that the figures are not comparable, the basis having changed. they also argued that such surveys were always suspect and this has been proved now.
a study conducted over five states in 2000 employed both the recall periods i.e. 7 days and 30 days. it reported that the figures for 7 days recall period were, on the average, 23 % higher than the results of 30 days recall period. obviously this would affect the poverty ratios, so the debate continues. which is better recall period has not been decided. the experience from other countries does not help because the circumstances are different. it is also felt by some economists that the higher consumption of the top 10 % bracket of people tends to push up the average consumption and nas is biased towards this aspect. scaling up the nss data to nas ratios will underestimate the poverty.
one of the main objections to these surveys is that they are generally conducted for administrative purposes and not for policy decision. in the united states, the surveys cover three functions viz. current conditions, long term trends and analyzing causal factors closely related to policy decisions. it is a decentralized process and the results are consolidated. in france, in contrast, the collection is centralized but the functional autonomy of the institute for statistics is ensured. the deficiencies in indian system are sought to be remedied and national statistical commission chaired by ranganathan went into this aspect. it has stated that india tends to depend upon the data collected through administrative records which are not fully accurate. it also points out lack of coordination between central and state governments with regard to data sharing. except for that, it has not suggested any radical changes except recommending that "to facilitate the building of models explaining the poverty status of individual households, the nss questionnaire should also record relevant characteristics of sample villages and blocks. in the past, such characteristics were not always recorded or made available”. following this, the survey results have been made more available to researchers and others.
it would be noted that the results from the nss and nas are close to each other in the fifties and sixties. the broad pattern of distribution between different commodities is the same. but the consumption under nas fell by between half per cent and one per cent par year and the difference between nas and nss went up to 30 %., deacon, in his book 'measuring poverty in a growing world' points out that this is happening all over. even us has the same phenomenon (garner -2003- the consumer expenditure survey in comparison'). minhas pointed out in 1988, the differential definition and coverage of nas and nss according to him. nas links many irrelevant quantities to relevant and also the other way around. the ratios derived from one survey are applied for years afterwards when they are no longer true. it is erroneous to apply ratios drawn from nss survey to nas.
this tinkering of the findings by nss results from a desire to show results. in democracy such influence by the politicians and government of the day are to be expected in the democratic set up. kulshreshta and others have found that the discrepancy is more in non-food items than food items especially in major cereals and oil seeds. but their conclusion is that nss results are quite dependable for measuring poverty (kulshreshta et al. - 2004 - estimates of food consumption expenditure from surveys and national account).
one of the reasons for the discrepancy is the inclusion in the nas of items like calculated rent of premises of owners, expenditure by non-profit organizations serving households, the expenditure of financial intermediaries, risk bearing expenditure of insurance companies etc. which are not included in the surveys.
one of the problems is the failure to calculate the district level estimates of poverty. the nss surveys are said to reflect the position up to regional level holding that below this level the samples are quite inadequate to give results. some economists hold that for large states, where the sample size is quite large, it may be possible to have district level estimates also. since technology is now available to analyse the data, it should not be difficult to do so.
the nss surveys are conducted every five years.. in between there are surveys on a smaller scale.
deaton has calculated the expenditure on the items where the recall period was 30 days both in the 50th and 55th nss surveys. these included items like fuel and light, non-institutional medical expenditure, miscellaneous services and goods which are used by almost all households. according to this calculation, the claimed decline in poverty is real to some extent, his estimates being 7 % fall compared to about 10.3 % fall claimed by the planning commission. sundaram and tendulkar, however, use employment, unemployment reports with consumer expenditure, and come to the conclusion that there is a fall in poverty ratio but less than that claimed by government and calculated by deaton. himanshu and sen reject both these calculations and the assumptions they are based upon. they rely on the mean expenditure on food items, mean from the employment unemployment sections and extrapolation form other round before and after the 55th round. their conclusion is that there is no appreciable change in poverty ratios in the nineties. it is to be pointed out that all these assumptions are untested.
from late 70s to mid-90s the planning commission used the base line of rs. 49 for the rural areas and rs. 57 for the urban areas as the poverty line. it was adjusted for inflation as given by the nas. it did not take into account variations between the states and also did not account for the fact that the inflation affects those near the poverty line more than the rich ones. an expert group was formed in 1993 and new poverty lines were set up which are still in use. it calculates the poverty lines at the state level, taking into account urban rural differences. however, the criticism is that differential between urban and rural poverty vary too much over the states. it is 1.7 % in andhra pradesh, maharashtra etc. but less than one in assam
an alternative is to calculate indexes directly from the survey data since it gives both the price and the quantity of consumption. using these indices over different states, deaton found that the percentage difference between urban and rural poverty level is almost 16 % in all the states which is closer to the planning commission figures prior to 1993. according to these calculations, the poverty has been declining consistently and the 1990s did not accelerate the process. however, the difference in questionnaire for 55th round has its own implications.
while some have worked with the 55th round data, others have looked beyond it. gaurav dutt et al. linked the forecasting of poverty measure with agriculture yields, non-farm growth, development spending and inflation. according to their calculations, poverty declined from 39 % in 1993-94 to 30 % in 1999-2000. it was slightly lower than the fall in eighties. the states like mp, up and bihar brought it down. but it is to be noted that these are predictions and not measurements
suman berry and r k shukla have based their calculation on the market information survey of households by ncaer. consumer expenditure on durables and other items of consumption are included in the survey. it suggests that poverty has fallen steeply in india. but this is based on annual income concept which is a difficult preposition where agriculture is concerned.
on the opposite pole of all these predictions is that of sujit bhalla who, basing his calculations entirely on nas, says that poverty is just about 15 % in india.
of late the determination of poor and poverty on the basis of income and consumption has been challenged. human development index has replaced it. basically it consists of three areas to be studied health (life expectancy at birth), education (mean years of schooling and expected years of schooling) and per capita national income. of late other considerations such as disparity in distribution of incomes, gender inequality and multi-dimensional poverty have also entered into picture. in the multi-dimensional poverty included items are poor health and nutrition, low education and skills, inadequate livelihoods, bad housing conditions, social exclusion and lack of participation. there are now ten indicators (up from four) viz. assets, floor, electricity, water, toilet, cooking fuel, children enrolled in schools, years of schooling, child mortality and nutrition. according to 2010 report, 55 % in india are below the poverty line as specified above. 42 % are living below income level of $ 1.25 a day some of the states like madhya pradesh have calculated their own hdi mainly these are set of figures and hardly any analysis has been done.
there are some asides which aim at determination of poverty. it is argued by meenakshi and vishwanathan that calorie intake pattern has changed, in the wealthier section, the trend is towards lesser calories and in poorer sections towards higher calories. the gap has been narrowed. in their view, aggregate consumption expenditure should replace the calorie intake measure. murgai et al have taken the path of looking at the agricultural wages, district domestic product, employment share in agriculture and non-agriculture activities. (for karnataka their estimate is 24.5 % poverty in urban areas and 18.2 % in rural areas).
presently, according to niti ayog report conventionally, poverty is measured by defining a threshold level of expenditure (or income) required to purchase goods and services necessary to satisfy basic needs at the minimal socially acceptable level. this threshold level of expenditure is called the poverty line and the proportion of population living below it is called the poverty ratio.
but it qualifies the statement by saying that “identification of poor is done by the state governments based on information from below poverty line (bpl) censuses of which the latest is the socio-economic caste census 2011 (secc 2011). allocation of expenditures on anti-poverty programs can also be done using instruments other than the poverty ratio.”.
this is the basis for not changing the tendulkar basis of calculating the people below poverty line because schemes can be based on other factors. the niti ayog also opposes rangarajan samiti criteria on the basis “if our objective is to assess whether we are making progress in bringing households out of extreme poverty, it makes sense to set the poverty line at a level that allows households to get two square meals a day and other basic necessities of life. put differently, if we set the poverty line at too high a level, we would be tracking how many people who had already achieved a certain level of comfort have been made yet further comfortable. (https://niti.gov.in/sites/default/files/2019-01/ summary_eliminating_poverty .pdf)
the net result is to keep the people below poverty line as a smaller percentage on the spacious plea that “it will tell us little about what is happening to households in abject poverty”. (https://niti.gov.in/sites/default/files/2019-01/summary_eliminating_poverty.pdf ).
the debate goes on.