Planning Commission drops Tendulkar Committee poverty indicators - Atasi Das

The news….
Public outrage and staunch opposition from political parties forced the Planning Commission to revisit the latest poverty indicators submitted by it before the Supreme Court- the estimates were prepared on the basis of the Tendulkar Committee report. The Planning Commission had informed the apex court that the poverty line for urban and rural areas in India could be provisionally placed at Rs. 965 per capita per month and Rs. 781 per capita per month respectively. This means that those who are earning over Rs. 32 a day in urban areas and over Rs. 25 a day in rural India respectively would be barred from the Below Poverty Line (BPL) benefits. The Suresh Tendulkar Committee’s recommendations on calculating poverty were reportedly based on the Food and Agriculture Organisation (FAO) norm, which specifies that 1,700 calories are enough to sustain an individual. The Planning Commission’s submission was with respect to a Supreme Court directive to devise a proper criterion for getting a Below Poverty Line (BPL) card.

The Tendulkar Committee recommendations have received widespread flak from experts in the field, as it has apparently failed to capture a host of ground realities like soaring inflation, rising per head energy and protein consumption needs of our burgeoning population. Some experts opine that poverty estimates should ideally be based on nutrition requirements.

Politically the new poverty estimates bring into light a completely different ballgame of a government, which is committed to fiscal consolidation but is also under the compulsion of introducing the Food Security Bill to rake up its vote bank ratings. Sensing adverse public opinion Members of the Sonia Gandhi-led National Advisory Council (NAC) has come down heavily on the recent Tendulkar Commission poverty estimates. Early estimates put that around 28 per cent of the population currently qualifying as BPL might be excluded from the category under the new parameters.

The current weaknesses in identification of poor households under the BPL scheme will reportedly be corrected by introducing eligibility for the priority category under a new scientific Socio-Economic and Caste-Economic Census, which is currently underway. This census will tentatively wind up by January 2012. Planning Commission Deputy Chairman Mr. Montek Singh Ahluwalia and Rural Development Minister Mr. Jairam Ramesh have assured that an Expert committee will be appointed to ensure that the new methodology is consistent with the provisions of the Food Security Bill. Mr. Ramesh reiterated that the government will take into account multiple dimensions of deprivation for arriving at specific entitlements for rural households under different central government schemes.Defining poverty is a tricky issue and once an Expert Panel is successful in determining an appropriate poverty line the Central government will pitch in with a multi-thronged approach to poverty eradication by offering targeted households subventions for food, housing and health insurance. The scheme can however roll in only after it gets the desired clearance from all state governments-once again an arena, which can prove to be a sticky wicket for the ruling UPA. Bihar for instance has staunchly opposed the central government’s numerical assessments of the extent of poverty.

The technicalities
“A poverty line is a monetary value that represents some predetermined threshold standard of living” defines CIA. While there are alternative approaches for determining the appropriate standard of living for creating poverty lines, World Bank’s World Development Report1990 introduced “$1-a-day” poverty line had been fairly popular for making inter country poverty comparisons. Purchasing power parities (PPPs) have played an important role in the construction of this $1-a-day poverty line. The Big Mac index, for example, is a PPP based on only one commodity, the Big Mac hamburger. The index is calculated by comparing the price of a Big Mac across countries. In contrast, PPPs compiled in the various rounds of the International Comparison Program are based on the comparison of prices of big basket of goods and services across countries.

The flip side is that the usage of consumption PPPs for international poverty comparison may not be full proof. These PPPs are derived from a list of products and their associated prices, that may not be representative of the products consumed by the poor and the prices paid by them in particular. The consumption patterns of the poor are often radically different from the other sections of the population in terms of the quality and quantity of products. Intra group variation in consumption patterns is also evident. The poor cannot also be expected to leverage the price advantage of big sized retail buys. Ultimately it is a matter of empirical analysis and economic model building to properly capture the ground realities for the poverty stricken people. It may be noted that the “Asian poverty line” is also constructed in the spirit of the original $1-a-day poverty line developed by the World Bank economists. The World Bank has now revised its poverty benchmark from $1 per day to $1.25 a day. At a poverty line of $1.25 a day, the revised estimates find 1.4 billion people live at the new poverty line or below. The chart below shows that the percentage of people living below $1.25 a day has fallen in every region except in Europe and Central Asia in the period from 1990 to 2005.


Source: World Bank

The Way Forward
A World Bank study has observed that though India has made steady progress in reducing poverty as measured by consumption, there remains considerable room for improvement. In 2004–05, 28 percent of the people in rural areas and 26 percent of people in urban areas lived below the poverty line, which were 47 percent and 42 percent, respectively, in 1983. The three pathways relevant for fostering inclusive growth and poverty reduction in the country include urban growth which stimulates rural economy based poverty reduction, rural diversification away from agriculture (read non farm growth), and containing social exclusion.

India’s robust economic growth story even in the face of the global economic meltdown has failed to wipe out certain structural entitlement inequalities in the country on the basis of specific caste, creed and gender. Performance of the country in the arena of health and education also leaves much to be desired. Last but not the least, economic growth should also spur the human development index of the country to respectable levels-poverty eradication will follow suit with people’s empowerment and proper government strategizing.