The Planning Commission’s updated poverty estimates for the year 2011-12 based on the National Sample Survey’s 68th round survey on monthly per capita expenditure (MPCE) throws new light on poverty reduction in India. The timing and comparative presentation of estimates turned out to be an occasion to unsettle the debate on poverty and its dynamics in India once again. Several economists and activists, including some public representatives have already commented. A crowning comment came from the potential Prime Ministerial candidate, Rahul Gandhi, when he said, “ poverty is just a state of mind. It does not mean scarcity of food, money or material things.” This single instance is sufficient to understand how the government and its think tanks perceive the meaning of poverty and its implications on the aam admi.
According to the revised estimates, the percentage of persons below the Poverty Line in 2011-12 has been estimated as 25.7 % in rural areas and 13.7 % in urban areas and 21.9 % for the country as a whole. The respective ratios for the rural and urban areas were 41.8% and 37.2% for the country as a whole in 2004-05. It was 50.1 % in rural areas and 31.8% in urban areas and 45.3% for the country as a whole in 1993-94. In 2001-12, India had 270 million persons below the Tendulkar Poverty Line compared to 407 million in 2004-05, that is reduction of 137 million persons over the seven year period.
The press note issued by the Planning commission surmised its conclusions by saying, “The decline in poverty flows from the increase in real per capita consumption. The clear inference is that ( a) the real monthly per capita expenditure increased by much more in the second period ( 2004-09 to 2011-12) as compared to the first (1993-94 and 2004-05), (b) that the increase was fairly well distributed across all deciles of the populations, and (c) the distribution was particularly equitable in rural areas”.
The first national poverty line was computed by YK Alagh committee in 1978 followed by Lakdawala committee in 1993 and the last in that series is Suresh Tendulkar committee, which although recognized multidimensionality of poverty, decided to base its estimates only on private household consumer expenditure collected by the National Sample Survey. Also this committee deviated from the calorie norm while computing the poverty figures to compute the poverty line basket which includes expenditure on food, cloths and health concluding that a person who spends Rs. 32/- in urban areas and Rs. 25/- in rural areas can not be treated as poor. The Planning Commission which spent Rs 35 crores to renovate just two bathrooms in its building decided that a person can live with Rs. 32/- in urban India ! Why would India rank 60th in the world hunger index when a person near the poverty line can survive with the amount calculated by the planning commission ?
The poverty estimates, beginning from the 1970s are being revised and updated once in every five years based on the NSSO’s household consumption and expenditure survey. Against this practice, the UPA –II government ordered an interim survey stating that it can not rely on the 2009-10 survey results as it was a severe drought year. Perhaps this is the first time for the Planning Commission, the premier policy guidance body of the Indian establishment to work blatantly to boost a government’s prospects. On the first reading of the estimates, one will get an impression that the magnitude of poverty reduction is only possible because of the economic reforms. And particularly the findings are designed to suit the UPA-II’s political objectives as it is about to go on an election campaign in which these findings may be flanked as its achievements. Because of the seriousness of the criticism none other than the government’s chief statistician TCA Anant came out with a rejoinder denying this. The findings also want us to believe that the economic reform induced growth finally trickled down and translated into increasing the per capita consumption of individuals. Also the pink press wrote editorials celebrating this decline and some even went to the extent of saying that the political establishment is worried because of poverty reductions. On the other hand, the estimates met with such stiff objections that a Planning Commission member had to come out in open to say that these poverty estimates have nothing to do with the allotment of entitlements which are under pipeline. He even claimed that for the first time in India the poverty estimates and fixation of entitlements are de-linked to serve the poor better.
The estimates are questionable on multiple grounds. The government is yet to come out with satisfactory explanation on the doubts raised over the Suresh Tendulkar formula for computing the poverty line, which basically dealt with methodological issues. The reading of the figures doled out from the NSSO computations followed by the Planning Commissions conclusions confirms that the unprecedented, uninterrupted intensive growth that India experienced from 2004-05 to 2010-11 helped to uplift 137 million people above the poverty line. Even after such a tremendous achievement, India accounts for 269.3 million people, nearly half of the total poor in the world. Several commentators including those from the Planning Commission attributed this achievement to the economic reforms to justify the clamor for accelerated reforms, towards “ further unleashing the animal spirits in the economy”, in the words of the Prime Minister himself.
According to the data, the rate of poverty reduction stood at 7.4 % per year during 2004-05 and 2009-10, when the average growth rate of economy stood at 8.5 % per year where as the rate of poverty reduction increased to 7.9 % during 2009-10 and 2011-12, when the average rate of growth of economy reduced to less than 6 % ! That means lower growth also led to poverty reduction, according to the neoliberal argument ! The estimates claim a secular trend in accelerated poverty reduction. The essence of the reformists’ argument is that the people are able to spend more than the poverty line basket standards which implies that their incomes are shooting up to the sky. Some even commented on the changed dietary patterns with an inference to the increased cost of expenditure on account of fruits and milk. There is a fundamental problem with this assumption.
Let us validate this assumption of accelerated poverty reduction in case of two states. These estimates shows , in case of Bihar, it took nearly 17 years – from 1993-94 to 2009-10, to uplift 7 % of people above the poverty line where as in just two years between 2010-11 and 2011-12, there is nearly 20 % poverty reduction from the level of 53.5 % to 33.74 % which means 10 % reduction per annum ! Similar case is Chattisargh. The poverty levels are at 48.7 % in 1993-94, hovered around that level till 2009-10 but between 2010- 11 and 2011-12 a sudden decline in poverty levels to 39.9 %, a near ten per cent decline just in two years ! There must be some thing here that can not be captured even by rigorous statistical analyses which resulted in such steep declines in poverty levels in predominantly agriculture based states of Bihar and Chattisgarh or it might as well be a particular ‘state of mind’ at work, as proposed by Rahul Gandhi!
In any economy, if people are employed in regular income generating activities or the government is increasing its social welfare spending, then their incomes may rise, subject to inflation effects. But in India except the ever increasing burden on consumer price rise due to inflation, neither people are continually employed on sustainable basis nor the government is increasing spending on social welfare front. The poverty line considers only the spending on food articles. Let us consider the social welfare spending – the Congress MPs themselves calculated that during 2003-04 and 2013-13, the share of food subsidy decreased from 57% of GDP to 39%, a clear 22% down from its 2003-04 levels. Hence the increase in the expenditure on food articles can not be attributed to welfare spending by the government.
Let us assume that the capacity to spend by the aam aadmi went up as they enjoyed gainful employment during this period. But the assumption is negated by none other than the Government’s own NSSO survey. According to the latest NSSO survey on employment, the man days generated reduced from 2.83 billion in 2009-10 to 2.16 billion in 2011-12 – the economy lost about 67 billion man days and therefore the potential income generated by these man days. Not only that, according to Mint columnist Manas Chakravarty, the employment elasticity of Indian economy has gone down from 0.44 in 1999-2000 and 2004-05 and to 0.01 during the period 2004-05 and 2009-10, ruling out the possibility of providing gainful employment. The employment elasticity of manufacturing sector has gone down from 0.76 between 2000-2004 to negative of – 0.31 between 2004 and 2009, which are the years of high average growth. During this decade, the 14 million farmers lost their source of income, land and joined the ranks of agricultural workers. For better part of the UPA regime, the employment potential of economic activity in rural India has gone down enormously which forced the government to come up with the MGNREGA to resume basic economic activity. According to the government’s own statistics, the total person days of work under the scheme declined from 2.83 billion in 2009-10 to 2.16 billion in 2011-12. When all the identifiable indicators are confirming the trend of lack of income generation, how can the Planning Commission assume that the increased expenditure on account of monthly per capita expenditure is due to increased incomes?
Another important factor is the average rate of inflation. According to one analyst, average annual growth in inflation is at 12% during this period which contributed to the rise in cost of living. A person who bought one liter of toned milk for Rs.26/- in 2009 is now buying the same for Rs.32/- in 2013. Similar trend can be found in case of any other food articles. Still the people are buying as they have to sustain their energies to live and work the next day. This does not mean that their incomes are rising. This can even be met through rising hand loans through non-formal channels, which would mean that the rising expenditure on food articles and basic needs such as health and shelter are financed by debts rather than by increase in income. We have so far only discussed the uni-dimensional aspect of poverty. Had we gone into multi-dimensional poverty, our standing will be on the lowest bottom as it reflected in the annual human development index. Without taking this into consideration, the policy makers’ enthusiasm to showcase the glory of globalization and economic reforms using the deflated poverty estimates reveals nothing more than the UPA-2’s stunted state of mind.