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Planning Commission's formula
Plan panel sticks to old formula to define poor
Mahendra Singh, TNN | Jul 24, 2013
NEW DELHI: People spending more than Rs 27.2 per day in villages and Rs 33.3 in cities are not poor, according to latest data released by the government.
The proportion of the poor has come down to 21.9% of the country's population in 2011-12 from 37.2% in 2004-05, a decline of 2.18 percentage points every year during seven years of UPA rule.
The absolute number of poor declined by nearly 137.4 million between 2004-05 and 2011-12 and by around 85 million between 2009-10 and 2011-12.
However, there are still 269.7 million poor — 217.2 million in villages and 53.1 million in cities — across the country as against 407.3 million in 2004-05.
The percentage of persons below the poverty line in 2011-12 has been estimated at 25.7% in rural areas and 13.7% in urban areas.
The sharp decline in poverty levels across the country is based on the benchmark of a fresh poverty line. But the timing and the methodology for estimating poverty is questionable as the fresh estimates are based on the Tendulkar methodology, which was junked by the Planning Commission last year after a huge public outcry.
The plan panel's earlier figures showed that poverty was declining by 1.5 percentage points from 37.2% to 29.8% between 2004-05 and 2009-10, but the data was disowned after it was criticized for pegging the poverty line too low at Rs 22.42 per person per day in rural areas and Rs 28.65 in urban areas.
After intervention from the UPA's top leadership, the government set up another committee headed by C Rangarajan to look at a methodology for determining poverty lines and estimating poverty.
The commission justified the release of the data using the old methodology saying the data from the National Sample Survey (NSS) 68th round (2011-12) was now available and the Rangarajan committee recommendation will only be available in mid-2014 so it had updated the poverty estimates for the year 2011-12 as per the methodology recommended by the Tendulkar committee.
After the controversy, a special survey was conducted by the NSSO to determine poverty, an exercise which taken up after a gap of five years.
The official argument is that whatever be the poverty line, there will be a decline in poverty in percentage terms.
The commission argued that it is important to note that although the declining trend is based on the Tendulkar poverty line, which is being reviewed and may be revised by the Rangarajan committee, an increase in the poverty line will not alter the fact of a decline. "While the absolute levels of poverty would be higher, the rate of decline would be similar," it said.
Definition of poverty in 2011-12
According to the [Planning] commission, in 2011-12 for rural areas, the national poverty line by using the Tendulkar methodology is estimated at Rs 816 per capita per month in villages and Rs 1,000 per capita per month in cities.
This would mean that the persons whose consumption of goods and services exceed Rs 33.33 in cities and Rs 27.20 per capita per day in villages are [below the poverty line].
The commission said that for a family of five, the all India poverty line in terms of consumption expenditure would amount of Rs 4,080 per month in rural areas and Rs 5,000 per month in urban areas. The poverty line however will vary from state to state.
2014: McKinsey’s definition
McKinsey pegs poverty line at 1,336 per month
Prabhakar Sinha | TNN
A Global consultancy firm pegged a new level for poverty or empowerment line — at Rs 1,336 per month per person as against the poverty line prescribed by the government at around Rs 870 per month per person.
McKinsey, in a report, said the empowerment line determines the level of consumption required for an individual to fulfill his/her basic need for food, energy, housing, drinking water, sanitation, health care, education and social security at a level sufficient to achieve a modest standard of living.
According to the report —From poverty to empowerment: India’s imperative for jobs, growth, and effective basic services — 56% of the population lacks the means to meet essential needs as consumption level falls below Rs 1,336 per person per month or almost Rs 6,700 per month for a family of five. This translates to 680 million people whose consumption levels across both rural and urban area of the country fall short of this mark.
SIGNS OF POVERTY
The Times of India 2013/08/10
Deprivation indicators for poverty survey
One-room kuchcha households No adult member (in the family)
Women-headed households without any [presumably male] adult
Households with disabled member and without any able adult
Households without literate adult
Groups for automatic inclusion
Primitive tribal groups
Legally released bonded labourers
Decline in 2011-12: I
Odisha, Bihar show biggest drop in percentage of poor
Mahendra Singh, TNN | Jul 24, 2013
Odisha and Bihar
Odisha and Bihar have registered the sharpest decline in poverty levels between 2004-05 and 2011-12, although the proportion of the poor in these states remains well above the national average.
Latest data released on Tuesday revealed that in Odisha, the proportion of people below the poverty line (BPL) in total population came down from 57.2% in 2004-05 to 32.6% in 2011-12, a decline of 24.6 percentage points.
In Bihar, which logged the fastest growth rate during the 11th five-year plan (2007-12), the share of BPL in total population was estimated at 33.7% in 2011-12, compared to 54.4% in 2004-05, a reduction by 20.7 percentage points.
At the all-India level, the share of the BPL population was estimated at 21.9%, which is almost 270 million. This means that roughly every fifth Indian lives below the poverty line. The government has set the bar low, defining anyone earning Rs 27.20 or less in rural areas as BPL, while those earning up to Rs 33.30 a day in urban areas are classified as poor, though these benchmarks vary from state to state.
Although things seem to looking up in the poor states, especially Bimaru, they still remain home to the maximum number of poor people in the country. While Uttar Pradesh has just under 30% of its population in the BPL group, the number adds up to almost 60 million. Bihar, despite the improvement, still has 35.8 million poor, and ranks second, followed by Madhya Pradesh where 23.4 million or 31.6% of the population is BPL.
Among the Bimaru states, only Rajasthan has managed to do better than the national average with the share of BPL in total population estimated at 14.7% in 2011-12, compared to 34.4% in 2004-05. In fact, the state now is a better performer than Gujarat, famed for its rapid growth and good infrastructure. The state ruled by Narendra Modi had 16.6% people below the poverty line.
Rural India has seen faster improvement than urban centres
The other important trend coming from the latest poverty estimates, which have traditionally created controversy, is the fact that rural India has seen faster improvement than urban centres. The decline in poverty was steeper in rural areas as BPL population came down to 25.8% (2011-12) from 42% (2004-05), around 17 percentage points, as against around 12 percentage points in urban areas.
On an all-India basis, there were 217 million poor in rural areas and 53 million in urban areas in 2011-12, as against 326 million and 81 million, respectively, in 2004-05.
The final figures for 2011-12 are likely to be revised once a government-appointed committee under C Rangarajan submits its report on a new methodology for fixing the poverty line, but the Planning Commission in its press release pointed out that this would only change the numbers, not the declining trend.
Decline in 2011-12: II
This article contains many points given in the article above.
Poverty declines to 21.9% in 2011-12: Planning Commission
According to the commission, in 2011-12 for rural areas, the national poverty line by using the Tendulkar methodology is estimated at Rs 816 per capita per month in villages and Rs 1,000 per capita per month in cities.
PTI | Jul 23, 2013
NEW DELHI: Poverty ratio in the country has declined to 21.9% in 2011-12 from 37.2% in 2004-05 on account of increase in per capita consumption, Planning Commission said.
The poverty ratio in 2011-12
The percentage of persons below poverty line in 2011-12 has been estimated at 25.7% in rural areas, 13.7% in urban areas and 21.9% for the country as a whole, a commission's press statement said.
The percentage of persons below poverty line in 2004-05 was 41.8% in rural areas, 25.7% in cities and 37.2% in the country as a whole.
In actual terms, there were 26.93 crore people below poverty line in 2011-12 as compared to 40.71 crore in 2004-05.
Suresh Tendulkar committee’s methodology
This ratio for 2011-12 is based on the methodology suggested by Suresh Tendulkar committee which factors in money spent on health and education besides calorie intake to fix a poverty line.
The commission said the decline in poverty is mainly on account of rising real per capita consumption figures which is based on 68th round of National Sample Survey on household consumer expenditure in India in 2011-12.
Earlier, a committee was appointed under Prime Minister's economic advisory council chairman C Rangarajan to revisit the Tendulkar committee methodology for tabulating poverty.
The committee is expected to submit its report by mid 2014.
Best and worst states
State-wise, the commission said the poverty ratio was highest in Chhattisgarh at 39.93% followed by Jharkhand (36.96%), Manipur (36.89%), Arunachal Pradesh (34.67%) and Bihar (33.47%).
Among the union territories, the Dadra and Nagar Haveli was the highest, with 39.31% people living below poverty line followed by Chandigarh at 21.81%.
Goa has the least percentage of people living below poverty line at 5.09% followed by Kerala (7.05%), Himachal Pradesh (8.06%), Sikkim (8.19%), Punjab (8.26%) and Andhra Pradesh (9.20%).
Decline in 2005-12-III
Number of poor reduced from 407 million to 269 million
Why no applause for 138 million exiting poverty?
Swaminathan S Anklesaria Aiyar
The Times of India 2013/07/28
When China reduced people in poverty by 220 million between 1978 and 2004, the world applauded this as the greatest poverty reduction in history. Amartya Sen, Joseph Stiglitz and all other poverty specialists cheered.
India has just reduced its number of poor from 407 million to 269 million, a fall of 138 million in seven years between. This is faster than China’s poverty reduction rate at a comparable stage of development, though for a much shorter period. Are the China-cheerers hailing India for doing even better?
No, many who hailed China are today rubbishing the Indian achievement as meaningless or statistically fudged. This includes the left, many NGOs and some TV anchors. The double standard is startling.
The Tendulkar Committee determined India’s poverty definition. The Tendulkar poverty line in 2011-12 came to Rs 4,000 per rural and Rs 5,000 per urban family of five. Critics say this is ridiculously low. But it is roughly equal to the World Bank’s well-established poverty line of $1.25 per day in Purchasing Power Parity terms (which translates into around 50 cents/day in current dollars). This is used by over 100 countries, by the United Nations and many other international agencies. When the whole world uses this standard, why call it statistical fudge?
When China claimed to have lifted 220 million people out of poverty, guess what its poverty line was? Just $85 per year, or $0.24 per day! Whatever statistical adjustments you make for comparability, it was far lower than today’s Tendulkar line. Did today’s critics of the Tendulkar line castigate China for fudging? No, they sang China’s praises.
Defining extreme (Tendulkar) and moderate poverty (Rangarajan)
The World Bank actually has two lines — $1.25 denoting extreme poverty, and $2 denoting moderate poverty. India can also adopt two lines, the Tendulkar line for extreme poverty and a new Rangarajan line for moderate poverty, at around $2/day.
But this will in no way diminish the great achievement of slashing the number of those historically called poor — we can call them the “extreme poor”— by 138 million in seven years. Allowing for rising population in this period, the number saved from extreme poverty is even higher at 180 million.
Given our rising GDP and expectations, we can rename the Tendulkar line as our extreme poverty line. But to condemn it as statistical fudge is ridiculous. The $1.25 line is a world standard, even if it is below the cynics’ line. Indian critics may not accept it, but the world will.
A higher poverty line is drawn
There is, of course, the separate issue of who should be entitled to various government subsidies, including food subsidies. Economists talk of targeting subsidies at those below the Tendulkar line. But for politicians, the aim of subsidies is to win votes. And clearly you win more votes by extending subsidies to two-thirds of the population, rather than the poorest one-third.
This spread of subsidies to those above the extreme poverty line was once called “leakages to the non-poor.” But it is considered good politics even if it is bad economics. This explains why the government chose to cover 67% of the population in the Food Security Bill, even though the poverty ratio at the time was 30%.
However, critics quickly exposed this as a double standard. They asked, if your Food Security Bill views two-thirds of the people as needy, how could you have a poverty line saying only one third are poor? The government found it difficult to say this was good politics even if it was bad economics. Instead, it appointed the Rangarajan Committee to devise a higher poverty line. This line will almost certainly be around the moderate poverty line ($ 2/day in PPP terms) of the World Bank.
Many critics and TV anchors will cheer at the prospect of freebies to two-thirds of the population. Yet here lie the seeds of fiscal disaster. India is poor because it has spent too much on ill-targeted subsidies, leaving too little for infrastructure and effective education that will raise incomes permanently. Total subsidies (mostly non-merit subsidies) exploded in the 1980s, reaching 14.5 % of GDP, almost as much as all central and state tax revenue. This ended in a fiscal and balance of payments crisis in 1991.
The risk of a new poverty line of $2/day is that it will create political demands for more freebies to twothird of the population. That will further erode limited funds for productive spending.
In theory we can limit subsidies to the poorest and cut out unworthy subsidies. In practice, the combined pressure of vote banks and TV anchors threatens to raise subsidies beyond all prudent limits. There lie the seeds of another 1991-style disaster.