The Planning Commission's laughable estimates of the ‘poverty line'
follow from a mistake in method that it made 30 years ago and has clung
to ever since.
The affidavit that the Planning Commission recently
submitted before the Supreme Court stating that a person is to be
considered ‘poor' only if his or her monthly spending is below Rs.781
(Rs.26 a day) in the rural areas and Rs.965 (Rs.32 a day) in the urban
areas, has exposed how unrealistic ‘poverty lines' are. Some television
channels assumed that the figures covered food costs alone and showed
how they could not meet minimal nutrition needs at today's prices. These
paltry sums, however, are supposed to cover not only food but all
non-food essentials, including clothing and footwear, cooking fuel,
lighting, transport, education, medical costs and house rent. The total
is divided into Rs.18 and Rs.14 for food and non-food items in towns,
and into Rs.16 and Rs.10 in the rural areas, and includes the value of
food that farmers produce and consume themselves.
Even
a child knows that working health cannot be maintained, nor necessities
obtained, by spending so little. Amazingly, however, 450 million
Indians subsist below these levels. One cannot say that they ‘live' in
any true sense: their energy and protein intake is far below normal,
they are underweight, stunted, subject to a high sickness load but
without the means to obtain adequate food or medical treatment. The
majority belong to the Scheduled Castes and the Scheduled Tribes. The
official poverty lines do not measure poverty any more; they measure destitution.
The
outcry against calling these destitution lines ‘poverty lines,' is
justified; for true poverty lines are much higher than these, and show
75 per cent of all persons in India to be poor. Per head energy and
protein intake has been falling for the last two decades as the majority
of the population is unable to afford enough food. With 60 million
tonnes of public food stocks, far in excess of the buffer norms,
remaining piled up by mid-2011, the sensible policy is to do away with
targeting and revert to a universal distribution system, combining it
with an urban employment guarantee scheme. Unfortunately, the
neo-liberal policymakers today ask the wrong question: “How can we
reduce the food subsidy?” and not the right question: “How can we lift
the masses of India from the current level of the lowest food
consumption in the world, even lower than the least developed
countries?”
Members of the Planning Commission and
the Tendulkar Committee are experts, so how have such laughable figures
of minimum cost of living emerged from their statistical labours? The
fact is that over 30 years ago the Planning Commission made a mistake of
method, and the present Commission stubbornly clings to that mistake
despite the fact having been repeatedly pointed out by many people
including this author (The Republic of Hunger, 2004). The mistake was to change the definition of the poverty line and delink it from nutrition standards.
The
original definition of ‘poverty line' was a sensible one, based on an
expert committee recommendation in 1979: using National Sample Survey
(NSS) data on consumption spending, that in particular observed that the
level of total monthly spending per person is to be called the ‘poverty
line.' The food spending part of the figure allowed a person to obtain
2,400 kilocalories of energy a day in the rural areas and 2,100
kilocalories a day in the urban areas. Later the rural figure was scaled
down to 2,200 calories. The Commission accepted the expert committee's
nutrition-based definition but applied it only once, to the 1973-74
data, to obtain the correct monthly rural and urban poverty lines of
Rs.49 or Rs.56 at which 2,200 or 2,100 calories were accessible, and
found that 56 per cent of the rural population and 49 per cent of the
urban population spent less than this, and so were poor.
Then
the Commission, for reasons unknown, changed the definition in
practice, and never again directly looked at the total monthly spending
which permitted nutrition ‘norms' to be maintained. This despite the
fact that every five years the required information on this for every
spending level was available — the physical quantities of food intake,
and the corresponding daily average energy, protein and fat. The
definition that the Commission actually adopted was that the 1973-74
poverty lines were to be adjusted for inflation using a price-index,
regardless of whether the lines so obtained still allowed nutritional
standards to be met. Price index adjustment is being followed for the
last 30 years, producing the present absurdity of Rs.26 or Rs.32 as the
rural or urban daily poverty lines.
Why these
economists should have such faith in the ability of price indices to
capture the rise in the cost of living is not clear. Price indices are
needed for short period adjustment and are used for dearness allowance
calculation, but they do not capture the actual rise in the cost of
living over longer periods of time. In 1973, the starting gross monthly
salary of an Associate Professor in a Central University was about
Rs.1,000. It was adequate, since ration cards could be used; on this
income one could even use a car. Applying the Consumer Price Index for
Urban Non-Manual Employees, which has risen 17-fold by 2011, the
equivalent monthly salary for an Associate Professor joining now should
be Rs.17,000, by the Planning Commission's logic. But this would not
support the most modest middle-class lifestyle of four decades earlier. A
newly appointed Associate Professor's actual salary today is three
times that figure, thanks to successive Pay Commission recommendations.
Yet,
denying all experience and evidence, these economists assert that mere
price-index adjustment is enough to obtain current poverty lines from
those of 40 years ago. No wonder they have created a mess with their
unrealistic estimates. An expressive, bucolic Bengali phrase is lyaje-gobare,
or a ‘cow's tail smeared with dung' — this is a good description for
official estimates. As time passed, the actual spending at which minimal
nutrition could be accessed, the original definition accepted by the
Commission, cumulatively diverged from the Commission's calculations
based on its changed definition. By 2005, a rural person needed Rs.19 a
day to access 2,200 calories, while at the official figure of Rs.12, she
could obtain only 1,800 calories. (The Tendulkar Committee merely
tinkered with the problem, raising the figure of Rs.12 to Rs.13.) An
urban consumer needed Rs.33 a day in 2005 to meet 2,100 calories,
whereas the official figure of Rs.18 permitted less than 1,800 calories.
Today at the current official poverty lines of Rs.26 and Rs.32 for the
rural and urban areas respectively, the minimal cost of living is even
more seriously understated: the consumer can access even less food.
State poverty lines vary, and in a number of States the energy intake
the official poverty line can command is below 1,500 calories a day.
The
claim that poverty has declined is not true because the method of
indexation that is actually used has not kept constant the nutritional
standard against which poverty is measured, but has lowered it
continuously. China's official poverty lines are equally absurd, for the
same reason. A nutrition norm was applied in 1984 to obtain a 200-yuan
annual rural poverty line, which thereafter was merely indexed, giving
1,067 yuan by 2007, or below three yuan a day. This is supposed to cover
all living costs but would not have bought even a kilogram of the
cheapest variety of rice, selling then at four yuan, according to
information provided by China's residents. The actual extent of poverty
in China is far higher than is claimed.
One wonders
if we will ever see honest estimates from official sources anywhere,
since, by now, hundreds of economists are closely imprecated within a
vast global poverty-estimating structure with the World Bank at its
apex, producing increasingly misleading estimates every year in glossy
reports. The World Bank's global poverty line is an equally large
underestimate, for it is derived using “purchasing power parity
conversion” from local currencies to the U.S. dollar, of these very same
absurdly low local-currency official rural poverty lines of developing
countries.
What are the realistic poverty lines today
based on officially accepted nutritional norms? The current poverty
lines allowing nutrition norms of 2,200 or 2,100 calories in the rural
or urban areas to be met, are at least Rs.1,085 a month (Rs.36 a day)
and Rs.1,800 a month (Rs.60 a day) respectively. Since each full-time
worker needs to support nearly two dependants, these correspond to a
minimum daily wage of Rs.108 and Rs.180 respectively. But this is
inadequate: no margin exists for medical emergencies, life cycle
ceremonies, or old age. From the 2009-10 NSS data at least 75 per cent
of the total population is in poverty on this basis. This high level of
deprivation is the rationale for going back to a non-targeted, universal
food distribution system, but that will not be enough. The purchasing
power of the poor has to be raised at the same time through employment
generation schemes. Ironically, there has been a rise in unemployment
rates according to the latest surveys.
(Utsa Patnaik has been a Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.)
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