CorporateHow many mouths to feed?
Business Standard / New Delhi December 17, 2009, 0:56 IST
It used to be a quip in the 1970s that estimation of poverty in India is stymied by the poverty of estimation. The other joke was that far too many economists and statisticians had prospered trying to estimate poverty! So, we have yet another estimate of poverty in India. Rural poverty numbers for 2004-05 are up from the earlier estimate of 28.3 per cent to 41.8 per cent — with no change in the urban poverty estimate of 25.7 per cent, the all-India poverty estimates are up from 27.5 per cent to 37.2 per cent. However, the Planning Commission report on new estimates of poverty in India, prepared by a committee chaired by the renowned economist Suresh Tendulkar, cannot be compared with any previous estimate. This is because the reference basket of goods and services is different. Indian poverty estimates are based on consumption, not income, since the latter is notoriously difficult to measure. Since the early 1960s, Indian poverty numbers have been based on a calorie norm, i.e. a person is deemed to be poor if his calorie intake is less than 2,400 kcal per day for rural areas, and 2,100 kcal for urban areas. This norm has remained unchanged, even though the actual consumption pattern has changed vastly. Various NSS surveys have confirmed that Indians have moved away from coarse to fine cereals, from cereals to non-cereals (including dairy, meat and poultry) and indeed from food to non-food. Hence the consumption basket, the basis for the unchanged calorie norm, is very different from that of the 1960s. Clearly, this was the motivation behind the decision of the Planning Commission to seek a reassessment of poverty numbers.
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In recent years, there have been numerous attempts at poverty re-measurement, with different views being expressed. Indeed, a celebrated study published five years ago by renowned Princeton economist Angus Deaton was called the “Great Indian Poverty Debate”. Deaton commented that the debate was often more about dogma rather than data, and the various claims more political than statistical. That debate is linked to the bigger debate on whether economic reforms have dented poverty or not. The earlier official estimate of a reduction in overall poverty from 1993 to 2000 had detractors from both sides, i.e. too little or too much reduction. Hence, not surprisingly, we have independent expert estimates ranging from 70 per cent (Arjun Sengupta committee on small and unorganised sector), to 11 per cent (Surjit Bhalla in his book Imagine there is no country). But, despite the disagreement, there is a remarkable consensus on two things: that there has been a reduction in poverty rate from 1993 to now (whatever your starting point); and that the official numbers still underestimate vulnerability of the poor, whether it is to illness, malnutrition, illiteracy, social insecurity or any other calamity. Hence those hovering just above the poverty line can easily drop below due to an unexpected family emergency. We will not even try to go into the other debate on inequality — regional as well as across income classes, and between Forbes billionaires and the rest. The present Tendulkar estimates may spark yet another debate, but implications for policy-making remain largely unchanged — more social security, emphasis on education and health, employment generation in non-farm activity, industrial and infrastructure development, and policy reform aimed at opening new economic opportunities.