Poverty in India


Senior Member
Aug 13, 2009
Re-estimating poverty

C. P. Chandrasekhar December 22, 2009

The incidence of poverty we are now being officially told is much higher than the government has been claiming thus far. The Suresh Tendulkar Committee set up by the Planning Commission has argued that a little more than 37 per cent of Indians live in poverty as compared with the officially estimated 27.5 per cent. The new figure is bound to further stretch the tiresome debate on poverty, in which the issues involved have been clear for some time now. From a political economy perspective the more interesting question relates to the motivation behind the government’s decision to revise its poverty estimate, especially since it has been maximising the political mileage it gets from the decline in poverty incidence indicated by estimates based on the current methodology.

A favourable answer would attribute the revision to the recognition that the earlier method was delivering faulty figures. In the never-ending dispute on the extent of poverty in the country, it has been increasingly accepted that the official estimates were erring on the lower side. There were indeed a few who used the National Accounts Statistics to argue that the National Sample Survey figures on expenditure tended to underestimate consumption and overestimate poverty in the country. But they were an unrecognised minority. For the rest, the problem was that the NSS figures on calorific intake per person, on which poverty estimates were ostensibly anchored, pointed to a significantly higher proportion of poverty then the estimates obtained by adjusting for inflation a set of 1973-74 nominal expenditure figures that were seen as adequate to deliver an average per capita per day calorie intake of 2400 calories in rural areas and 2100 calories in urban areas. Some analysts attempted to explain away the low calorific intake of those seen as being above the “poverty line” by arguing that actually needed nutritional requirements and changing consumption desires were responsible for the divergence.

However, these attempts at obfuscating the issue were challenged by the fact that the nominal expenditure of those who were seen as being at or below the poverty line was embarrassingly low in the rural areas, where it stood at Rs.356.30 per month or around Rs. 12 per day in 2004-05. What is more, the National Commission on Enterprises in the Unorganized Sector pointed out that going by consumer expenditure data 78 per cent of Indians were forced to manage with Rs. 20 or less per day—an expenditure figure which to many was low enough to identify three-fourths of the population as living in poverty.

Whether the Tendulkar Committee was expressly set up to deal with this anomaly or not, it was clear from the outset that it could not go with the low figures of poverty incidence that the government had been citing routinely for the last decade or more. But the Committee was walking a tight rope, since the options in terms of method and sources of data were indeed limited. If it opted for a method which used the direct calorie intake figures available from the NSS reports on consumer expenditure, the proportion of the population below the poverty line would have risen sharply at least in some states, inviting criticism from those who would use the sheer size of the increase to question its validity. On the other hand, if it anchored its estimates on the 1973-74 poverty lines and merely played with the conventionally-used price indices it would be stuck with embarrassingly low poverty incidence estimates.

In the circumstances the Committee has chosen a clever route to a compromise figure. It has accepted the currently prevailing nominal poverty line figure for urban areas on two grounds: first, that it permits in practice a calorific intake per person of around 1775 calories, which though below the 2100 calories urban norm, is close to the FAO calorific norm of 1800; and, second, that the nominal poverty line permits in addition to this a reasonable degree of expenditure on education and health and allows for a better definition of an above-poverty consumption basket.

Having thus defended the nominal 2004-05 poverty line for urban areas, the Committee has decided to use this nominal figure as the anchor for estimating a rural poverty line. This it does by arriving at a purchasing power parity (PPP) equivalent of this figure for rural areas, or a nominal expenditure figure that would allow the same basket to be consumed in rural areas after taking account of rural-urban price differentials. The net result of these exercises is a new set of poverty lines for 2004-05—Rs 446.68 for rural areas and Rs 578.80 for urban areas per capita per month—and a new set of poverty incidence figures that are more or less the same for 2004-05 in urban areas but higher at 41.8 per cent as compared with 28.7 per cent in rural areas.

These figures perhaps sound more “reasonable” in terms of magnitude, even though they are derived from an ostensibly “estimated” but unanchored nominal poverty line for urban areas for 2004-05. But the government appears to be accepting them without much protest. The reason appears to lie somewhere else. Poverty incidence figures matter now not merely because they reveal how many are marginalised in an India seen as “emerging” onto the world stage. They also matter because they provide the numbers of people to whom government schemes of various kinds aimed at addressing the worst forms of deprivation are to be “targeted”. Most social protection and poverty alleviation schemes are directed at the below the poverty line (BPOL) population, in a misguided effort at obtaining more bang for the rupee. If targeting is in fashion, a reasonable estimate of those who deserve the benefit of these schemes is necessary. That was what the earlier poverty estimate was not providing. Moreover, if the number of those targeted is kept small because of an inappropriate poverty incidence estimate, the social legitimacy the government seeks through these schemes would not be garnered. In practice therefore the numbers identified as BPL were much higher than those seen as below the poverty line as per the official poverty incidence figures. In fact, a report prepared by former Planning Commission member N.C. Saxena at the behest of the Rural Development ministry argued that the proportion of the population below the poverty line should be closer to 50 per cent, without specifying a clear method to arrive at that figure. This arbitrariness was obviously discomfiting. It also opened doors to poverty incidence figures that would require budgetary outlays for targeted schemes that would trouble a fiscally conservative government. Thus, since it has managed to legitimise targeting, a method that delivers a middling poverty figure suits the government. It also deals with the embarrassment of those who have to compute and put out poverty incidence figures. The result is a cosy convergence in which the poor are by no means left any better.

The Hindu : Columns / Chandrasekhar : Re-estimating poverty


Senior Member
Aug 13, 2009
Poverty is surely declining, but not fast enough: Manmohan Singh

Prafulla Das BHUBANESWAR, December 28, 2009

Prime Minister Manmohan Singh at the ceremony to lay the foundation stone for the National Institute of Science Education and research, in Bhubaneswar on Sunday. Among those looking on is Orissa Chief Minister MNaveen Patnaik. Photo: PTI

The decline in poverty has not been as fast as one would have wished and it remains a major challenge before the country because the poor are still too poor, Prime Minister Manmohan Singh said on Sunday.

Inaugurating the 92nd conference of the Indian Economic Association (IEA) at KIIT University here, Dr. Singh said much more needed to be done to improve the living standards of the poor.

The Prime Minister, however, claimed that the percentage of the population below the poverty line had certainly not increased after the opening up of the economy.

“In fact, it has continued to decline after the economic reforms at least at the same rate as it did before. It is true that the rate of decline has not been faster and I personally feel it should be. But that it has declined, there is no doubt.”

Raising poverty line

On the argument by some economists that the poverty line itself should be raised, Dr. Singh said if this was done the percentage of the population in poverty would obviously be higher. “But this does not mean that the percentage below the poverty line is not declining. If we apply a new poverty line to the past data, it will show the same decline in poverty.”

He emphasised that all discussions on trends in poverty were based on the NSS survey data, the latest of which was available for 2004-05. The next large sample estimate for 2009-10 was likely to be available in a year from now. “Since the period of rapid growth of the economy was largely after 2004-05, we will have to wait for a year or two to know its impact on poverty,” he said.

Dr. Singh said there was no evidence that the new economic policies had had an adverse effect on the poor. The economy had to grow fast enough to create new job opportunities at a rate faster than the growth of the labour force. “To achieve our objective of inclusive growth, we need to pay much greater attention to education, health care, and rural development, focusing on the needs of the poor — the scheduled castes, scheduled tribes and religious minorities.” He urged the IEA to respond to these challenges.

Issues arising out of climate change posed new challenges, Dr. Singh said. An optimal solution to this challenge was possible only if the world could find ways to reach a mutually satisfactory solution.

Orissa Chief Minister Naveen Patnaik and IEA president C.H. Hanumantha Rao also spoke.

Dr. Singh, who was on a brief visit, also laid the foundation for a new campus of the National Institute of Science Education and Research (NISER) at Jatni, a few km from the city.

The Hindu : News / National : Poverty is surely declining, but not fast enough: Manmohan Singh


Senior Member
Aug 13, 2009
Poverty reduction and creation

25 Jan 2010, 0618 hrs IST, Abusaleh Shariff & Anirudh Krishna,

Poverty measurement is an unsettled issue, both conceptually and methodologically. Since poverty is a process as well as an outcome; many come
The ebb and flow of poverty
out of it while others may be falling into it. The net effect of these two parallel processes is a proportion commonly identified as the ‘headcount ratio’ , but these ratios hide the fundamental dynamism that characterises poverty in practice.

The most recent poverty re-estimates by an expert group has also missed this crucial dynamism. Studies carried out by one of the authors of this article in parts of Andhra Pradesh, Gujarat and Rajasthan have, however, helped bring to light the essence of poverty dynamics: it is simultaneously both created and reduced.

Following up on these insights, we examined , for the first time in India, a nationally-representative panel data set for more than 13,000 households studied in 1993-94 and re-interviewed in 2004-05 . We found that while 18.2% of the rural population moved out of poverty, another 22.1% fell into it over these 12 years.

This net increase of four percentage points was seen to have a considerable variation across states and regions. In states such as Himachal Pradesh, Kerala, Rajasthan and West Bengal, where more people moved out of poverty than fell into poverty, there has been an overall decline in rural poverty. Conversely, rural poverty rose in Andhra Pradesh, Bihar, Gujarat, Haryana, Maharashtra, Madhya Pradesh, Orissa, Tamil Nadu and Uttar Pradesh, where descents into poverty were more numerous than escapes.

States as well as regions within states differ from one another. Some have high descent rates but low escape rates; in a few other states, both descent and escape rates are low. And, therefore, different combinations of poverty policies will be required for each region. A typology emerging from our analysis is presented in the accompanying chart.

Consider the upper-left cell that lists regions that have most successfully reduced poverty over the 12-year reference period , because a high escape rate went together with a low descent rate. Two small states, Kerala and Himachal Pradesh, and another group of states (Assam and the northeast) fall within this high-performing group.

The poor in India are best off living within some region of this cell: the probability is highest that her circumstances will improve over time. For a contrasting situation, consider the bottomright cell, characterised by low escape rates and high descent rates. Compared to other regions, the prospect for the poor in these regions is bleak; chances for further impoverishment are the highest.

Future efforts in these regions will do well to concentrate first on lowering the high rate of descent, and second on ramping up the low escape rate.

A more nuanced prognosis emerges for regions included within the off-diagonal cells. Consider, for example, the two regions belonging to the bottom-left cell (Karnataka-inland southern, and Madhya Pradesh-Vindhya ). A high escape rate within these regions has been compromised by a concurrently high descent rate.

Future poverty-reduction efforts in these regions should focus primarily on reducing the high rate of descent into poverty. It makes greater sense to raise the escape rate only after the high risk of falling into poverty has been reduced. The opposite policy prescription seems appropriate for regions of the top-right cell.

Thus, different policy mixes, combining different elements of prevention (against descents into poverty) and support (for escaping poverty), are required in diverse regions and states. A uniform national poverty policy will not be effective for entire states or the entire country.

We examined the escapes and the descents that have occurred in rural India between 1993 and 2005. A few factors are involved with both escapes and descents, but there is also another group of factors that affect only escape or only descent.

Factors significantly associated both with escape and descent: Age of household head, household size, household composition, households with telephones, change in the share of rural non-farm income, remittances , women’s media exposure and loan taken in last five years. Factors associated with escape but not with descent: A few other factors influence escapes but do not matter much for descents.

These factors include being a member of ‘minority other than Muslim’, presence of adult son during the previous period (1993), and that the household was located within 5 km of nearest town with the availability of bus stop. Sickness within households had an adverse effect.

Factors associated with descent but not with escape : An SC, ST or OBC household faced a greater risk of descent into poverty, whereas if the head of the household was educated to secondary level or higher, it reduced the risk of descent. Possession of land and other assets too reduced the risk. Significantly, such rural assets were not germane to escapes from poverty.

States with high and low growth rates have variously experienced high and low rates of escape and descent. No clear correlation exists at the level of states and regions between high growth rates and higher poverty reduction. Rather than waiting for growth to occur and work its putative magic, direct actions to reduce poverty are necessary.

Action along two fronts is simultaneously required : Descents into poverty must be prevented using context-specific measures even as escapes from poverty are promoted vigorously. Different escape and descent rates characterise diverse states and separate regions within states.

The reasons that matter for escape and descent also differ considerably across and within states. Considering only the aggregate results obscures these important differences . A uniform national policy does not, therefore, represent the best use of resources . State- and region-specific threats and opportunities must be separately identified and directly addressed.

(Shariff is with IFPRI, Asia, and Krishna works for Duke University, US)
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