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Poverty
Lines and Poor Minds*
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3rd 2011, Himanshu |
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A
controversy has been triggered by the recent affidavit
of the Planning Commission (PC) in the Supreme Court
on the poverty line used to estimate the number of poor
persons in the country. The affidavit, which only reproduces
the S.D. Tendulkar committee report, albeit selectively
and sometimes out of context, has become a rallying
point for criticism against poverty lines recommended
in the report. Unfortunately, emotionally charged critics
have missed the larger issue that was raised by the
court. But even those who understood the larger point
have not been careful in their interpretation of the
Tendulkar committee report.
The Planning Commission is responsible for boxing itself
into a corner. It filed an affidavit that is not only
insensitive but does not even directly respond to the
issues raised by the apex court. The court wanted to
know whether the commission applies ''caps'' (limits)
on the number of below poverty line (BPL) households
and the rationale for any such caps. The Commission,
instead, responded on how poverty ratios are estimated
in the country. By doing so it tried to justify its
arbitrary and unjust use of caps in allocation of resources
to state governments for targeted social assistance
schemes. The Commission has been putting a cap on the
number of BPL households in each state, based on poverty
estimates; this is not an appropriate use of such estimates.
Neither the Tendulkar committee nor the previous expert
group on poverty estimation headed by D.T. Lakdawala
recommended using poverty lines in this manner. In fact,
most members of expert groups have voiced reservations
against using the poverty estimates to limit the number
of BPL households.
The question then is, if they are not used for targeting
social assistance, what is the purpose of these poverty
lines? In the context of estimation of poverty, their
primary purpose is not to determine how many persons
should be provided social benefits but to arrive at
a comparable benchmark to measure progress over time.
This was the reason why poverty estimates were generated
and it is not the first time that a committee has come
out with the notion of a poverty line. This has been
in existence since the 1960s with successive committees
using different yardsticks to suggest a poverty line.
The Tendulkar committee was asked to arrive at a poverty
line that corrected the limitations of existing poverty
lines and make it comparable over time. To do this,
the committee accepted the existing urban poverty line
based on the Lakdawala committee in 2004-05 to anchor
a new set of poverty lines across states. It only used
new spatial price indices to update poverty lines across
states and sectors (rural/urban). By this exercise,
the urban all-India poverty line remained the same but
the all-India rural poverty line was raised by 30%.
And if these are starvation lines even after raising
the poverty line by 30%, then surely, the old poverty
lines were suicidal lines.
To say if poverty lines are low or high, however, one
needs a normative reference line. Frankly, there is
no such reference norm available that is acceptable
to everybody. This was accepted by the Tendulkar committee
when it repeatedly said that the lines are arbitrary
and are only meant to serve as a yardstick.
Having said this, let’s also compare it with other poverty
lines. The weighted average of Tendulkar committee rural
and urban poverty lines for 2004-05 turns out to be
Rs.16.25. This is only marginally lower than the Rs.20
used by the Arjun Sengupta committee that claimed that
77% of Indians live under below this poverty line. But
can one really say that Rs.16.25 is low but Rs.20 is
adequate as a poverty line? The World Bank uses a poverty
line of $1.25 per day in Purchasing Power Parity (PPP)
terms. The current poverty line, as claimed by the Planning
commission in its affidavit, is Rs.26 for rural areas
and Rs.32 for urban areas. The weighted average turns
out to be Rs.28 in 2009-10 prices. Using the current
PPP exchange rate of Rs.19 to a dollar, the Indian poverty
line is higher than the World Bank poverty lines.
What about other countries and their poverty lines?
Most developed countries don’t use an absolute poverty
line but use a relative poverty line pegged at 60% of
median income/expenditure. The current Indian poverty
line mentioned by the Planning Commission is 97% of
the median in rural areas and 69% of the median expenditure
in urban areas. That is, the Indian poverty line is
considerably higher than poverty lines used either in
international comparisons or comparable poverty lines
in other countries.
But does it then justify using these poverty lines to
restrict benefits to the BPL households, particularly
for basic rights such as food and health? The answer
is an emphatic no. This column has consistently argued
for universal provisioning of these basic rights without
recourse to any targeting.
The debate should not focus on what the poverty line
is but on who is eligible for social benefits. On this
issue there is wide ranging acceptance that this must
be completely delinked from estimates of poverty based
on expenditure norms. Poverty lines are benchmarks for
policymakers and economists to understand how the country
is progressing and cannot be used for inclusion and
exclusion from government programmes.
*This article was originally published
in the Livemint on September 30, 2011
(http://www.livemint.com/2011/09/29220533/
Poverty-lines-and-poor-minds.html?atype=tp)
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