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Even those above poverty line require Govt subsidy

Source : BUSINESS_STANDARD
Last Updated: Thu, Jul 25, 2013 20:31 hrs
India's poverty numbers: How poor are we, really?

The Planning Commission's recent press report claiming that the overall number of poor households declined from 37 per cent in 2004-05 to around 22 per cent in 2011-12 has invited criticism from several quarters.

Civil society is not happy with the low poverty cut-off line of Rs 27 per day per capita for rural areas and Rs 33 for urban areas at 2011-12 prices, as it is difficult to meet one's basic expenses and survive on such an inadequate income. Economists are questioning the need for subsidised food for 67 per cent of the population if poverty levels are really so low.



Opposition parties are accusing the Planning Commission of fudging the figures so as to help the Congress in its electoral propaganda.

The present methodology for determining poverty based on consumption expenditure is certainly flawed, and leads to under-reporting of the actual number facing acute deprivation.

For instance, in Mumbai and Delhi the number of poor (according to the existing definition) is only 6 and 10 per cent of the total city population respectively, whereas the slum population alone in these districts is 53 and 30 per cent respectively. Therefore, the estimates for the number of poor should be reworked by taking into account their deprivations and living conditions, such as access to basic services, shelter, public health, and education.

Estimating the scale of poverty with respect to a fixed poverty line - which was Rs 1.63/1.90 per capita per day for rural/urban populations in 1973-74, and since then has remained unchanged after adjusting it for inflation - is still relevant for many purposes, including judging whether the development process is helping the poor and how fast poverty is declining over time.

It also helps to assess which states are doing better in poverty eradication. Any line that we choose would be arbitrary and the number below that line would certainly go up if the threshold is increased. For instance, if in place of Rs 27 per day per capita as the rural cut-off line we choose Rs 40, the rural poverty figure would jump from 26 to 50 per cent. The present cut-off is surely too low, it could be called the destitute or starvation line; still, 270 million people are surviving on such a meagre amount. One should worry more about them rather than attack the line itself.

The critics of the Food Ordinance do not realise that being above the poverty line does not mean that these people are well off and, therefore, do not deserve government subsidy.

According to the latest data from National Sample Survey Organisation (NSSO), in urban India only 10 per cent of the people spent more than Rs 155 a day, whereas 50 per cent spent more than Rs 70. Since subsidised food would be given to 50 per cent of the urban population, anyone spending more than Rs 70 a day (or about Rs 10,000 per month for a family of five) would be deprived of cheap grain from the public distribution system.

Right-wing economists grudge the additional subsidy of Rs 30,000 crore a year on implementing the Ordinance, but they were completely silent when a subsidy of Rs 57,000 crore was given to gold importers in the last Budget.

It should be kept in mind that after the promulgation of the Food Ordinance, out of about 150 centrally sponsored schemes, only one scheme of old age pension is linked to the below poverty line (BPL) categorisation.

Many centrally sponsored schemes, such as the National Rural Employment Guarantee Act, Integrated Child Development Scheme, Mid-day meal, National Rural Health Mission, and Sarva Shiksha Abhiyan, are universal, whereas some others such as the Indira Awas Yojana use a more complex formula. The subsidy on the construction of toilets is also not linked to the household's BPL status.

Therefore, reduction in poverty will not reduce the government's obligation to allocate money for the social sector. Civil society's fear on this count is unfounded.

To sum up, in the entire debate the Planning Commission's role is limited to only conceptualising how to define poverty.

One could criticise the Commission for linking poverty with consumption only, and not with basic services, or for fixing a low cut-off. But the cut-off has remained unchanged since 1973, and rightly so. The Indian line compares well with the international line of $1.25 a day, taking the purchasing power parity value of the dollar to Rs 22.

The data on consumption is the responsibility of NSSO, which enjoys very high credibility. If one accepts NSSO's figures, there is no ground then for questioning the Planning Commission's figures. NSSO has documented that there has been a faster increase across all deciles in per capita expenditure during 2004-2012 as compared to the earlier period of 1993-2003.

This may be because of better growth or pro-poor policies or better delivery in many states, such as Gujarat, Bihar, and Chhattisgarh. The exact causes for declining poverty for each state could be a subject matter of another study.

The author is a member of the National Advisory Council

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