The Planning Commission’s spurious method shows a decline in poverty because it has continuously lowered the measuring standard
The Planning Commission has once again embarrassed us with its claims of
decline in poverty by 2011-12 to grossly unrealistic levels of 13.7 per
cent of population in urban areas and 25.7 per cent in rural areas,
using monthly poverty lines of Rs. 1000 and Rs. 816 respectively, or Rs.
33.3 and Rs. 27.2 per day. These princely amounts will pay for one
urban male haircut while they are supposed to meet all daily food and
non-food living costs. The poverty decline claimed is huge, a full 8 per
cent points fall in rural areas over the two years since 2009-10, and a
7 per cent points fall in urban areas, never mind that these two years
saw the aftermath of drought, poor employment growth and exceptionally
rapid food price rise. The logically incorrect estimation method that
the Commission continues to use makes it an absolute certainty that in
another four years, when the 2014-15 survey results become available, it
will claim that urban poverty is near zero and rural poverty only
around 12 per cent. This will be the case regardless of any rise in
actual deprivation and intensification of actual poverty.
Substantial rise
All official claims of low poverty level and poverty decline are quite
spurious, solely the result of mistaken method. In reality, poverty is
high and rising. By 2009-10, after meeting all essential non-food
expenses (manufactured necessities, utilities, rent, transport, health,
education), 75.5 per cent of rural persons could not consume enough food
to give 2200 calories per day, while 73 per cent of all urban persons
could not access 2100 calories per day. The comparable percentages for
2004-5 were 69.5 rural and 64.5 urban, so there has been a substantial
poverty rise. Once the NSS releases its nutritional intake data for
2011-12 we can see the change up to that year, but given the high rate
of inflation and sluggish job growth, the situation is likely to be as
bad, if not worse. Our figures are obtained by applying the Planning
Commission’s own original definition of poverty line. Given the rapidly
rising cost of privatised health care, education and utilities
(electricity, petrol, gas), combined with high food price inflation and
exclusion of the majority of the actually poor from affordable PDS
grain, it is hardly surprising that the bulk of the population is
getting more impoverished, and its nutritional level is declining faster
than before.
What is the basic problem with the Planning Commission’s method which
produces its low and necessarily declining estimates, regardless of
ground reality? The Commission in practice gave up its own definition of
the poverty line which was applied only once — to get the 1973-74
estimate. After that, it has never looked over the next 40 years even
once for deriving poverty lines at the actual current spending level,
which will allow the population to maintain the same standard of living
in terms of nutrition after meeting all non-food costs — even though
these data have been available in every five-yearly NSS survey.
The Commission instead simply applied price indices to bring forward the
base year monthly poverty lines of Rs 49 rural and Rs.56 urban in
1973-74. The Tendulkar committee did not change this aspect; it merely
altered the specific index.
Price indexation does not capture the actual rise in the cost of living
over long periods. Those doing the poverty estimates would be the first
to protest if their own salaries were indexed only through dearness
allowance. A fairly high level government employee getting Rs.1,000 a
month in 1973-74 would get Rs.18,000 a month today if the salary was
only indexed. The fact that indexing does not capture the actual rise in
the cost of living is recognised by the government itself by appointing
decadal Pay Commissions which push up the entire structure of salaries —
an employee in the same position today gets not Rs.18,000 but a four
times higher salary of over Rs.70,000. Yet those doing poverty estimates
continue to maintain the fiction that the same standard of living can
be accessed by the poor by merely indexing the original poverty line,
and they never mention the severely lowered nutritional access at their
poverty lines which, by now, are destitution lines.
Worsening deprivation
The fact is that official poverty lines give command over time to a
lower and lower standard of living. With a steadily lowered standard,
the poverty figures will always show apparent improvement even when
actual deprivation is worsening. A school child knows that if last
year’s percentage of students passing the annual examination is to be
compared to this year’s percentage, the pass mark should be the same.
The school principal cannot quietly lower the pass mark without
informing the public, say from 50 out of hundred last year to 40 this
year, and then claim that the school’s performance has improved because
80 per cent of students are recorded as ‘passed’ this year at the
clandestinely lowered pass mark, compared to 75 per cent of students
last year. If, at the same pass mark of 50, we find that 70 per cent of
students have passed this year, we are justified in saying that the
performance, far from improving, has worsened. If the school is allowed
to continue with its wrong method, and lower the pass mark further next
year, and again the next year, so ad infinitum, it is eventually bound to record 100 per cent pass and zero failure.
The case is exactly the same with the official poverty lines as with the
pass mark: the poverty lines have been lowered continuously below the
standard over a very long period of 40 years. ‘Poverty’ so measured is
bound to disappear from India even though in reality it may be very high
and worsening over time. The Commission’s monthly poverty line for
urban Delhi state in 2009-10 is Rs.1040 — but a consumer spending this
much could afford food that gave only 1400 calories a day after meeting
all other fast rising expenses. The correct poverty line is Rs.5,000 for
accessing 2100 calories, and a staggering 90 per cent of people have
been pushed below this, compared to 57 per cent below the correct
poverty line of Rs.1150 in 2004-05. Given the very high rate of food
price inflation plus the rising cost of privatised medical care and
utilities, it is not surprising that people are being forced to cut back
on food, and the average calorie intake in urban Delhi has fallen to an
all-time low of 1756. While a high-visibility minority of households
with stable incomes is able to hire-purchase multiple cars per household
and enjoy other durable goods, the vast working underclass which is
invisible to the rich is struggling to survive. Fifty five per cent of
the urban population cannot access even 1800 calories today, compared to
less than a quarter in that position a mere five years earlier.
Why, it may be asked, do the highly trained economists in the Commission
ignore reality and continue with their incorrect method? Surely they
can see as we do, that their Rs.1040 poverty line gives access to a
bare-survival 1400 calories. Part of the answer is that the
ramifications of using the wrong method extend globally, for the World
Bank economists have, for decades, based their poverty estimates on the
local currency official poverty lines of developing countries, including
India.
The World Bank claim of poverty decline in Asia is equally spurious. In
reality, under the regime of poor employment growth and high food price
inflation, poverty has been rising. To admit this would mean that the
entire imposing-looking global poverty estimation structure, employing
hundreds of economists busy churning out wrong figures, would come
crashing down like a rotten termite-eaten house. The rest of the answer
is that since the method automatically produces numbers showing spurious
poverty decline, it is convenient for arguing that globalisation and
neo-liberal policies are beneficial for people. Truth will always out,
however.
(Utsa Patnaik is Professor Emeritus, Jawaharlal Nehru University)
