New poverty line complicates issue

The revised poverty line, as suggested by the Rangarajan panel, is actually a two-edged sword, with both plus and minus points that sort out some of the problems in the our definition of poverty while entangling some others. The new poverty line essentially has been arrived at by changing the methodology of poverty calculations, with the earlier Suresh Tendulkar panel’s recommendations now reconfigured to push up the minimum spending limits in both rural and urban regions. From the previous subsistence levels of Rs 27 per day per person in rural areas and Rs 33 per day per person in urban areas, the bottomline has been moved up and the new level at has fixed at Rs 32 for rural areas and Rs 47 in urban regions. Under the new definition, three in 10 Indians can now be deemed poor, who are below the minimum subsistence level, and that is a significant notch above the figures estimated by the Planning Commission. Last year, the commission had published data saying that under the Tendulkar formula of poverty estimation in India, poverty levels had dropped to 21.9 per cent in 2011-12. Under the revised formula, over 29 per cent can be categorised as below poverty line (BPL), thereby extrapolating the domain of the definitional poor by another eight per cent. That is a significant jump, given the last regime’s constant emphasis on poverty alleviation and focusing on pro-poor legislations that fell through the cracks of systemic malimplementation.

    In Rangarajan’s defence, the new poverty line is ‘inflation-adjusted’ and takes into account the staggering stagflation of post-2010 times, when the great fiscal crisis triggered by the 2008 Wall Street crash had dealt a deathly blow to the global financial organism. Moreover, the poverty line also tries to take into account global standards of poverty definition, and achieves a balancing act of merging Western, Asian and African parameters. However, the problem with tinkering with the Tendulkar formula lies in the fact that it takes away from welfare schemes being designed keeping the poorest of the poor in mind and instead squandering the limited national revenue on providing comfort for those already above a certain (albeit debatable) economic bracket. Since impact of policy matters and poverty alleviation can only be measured if a tight and foolproof formula to calculate levels of destitution is in place, the Tendulkar methodology had helped the previous regimes to tweak their welfare schemes to facilitate relative emancipation of those belonging to the lowest of monetary brackets. Rangarajan formula increases the headcount of the number of people who would be beneficiaries of government’s welfare policies, but substantially dilutes the provision of having targeted policies that are aimed solely at the economically marginalised. Hence Rangarajan’s methodology would work well in a two-tiered situation, where there is a firm official distinction between the poor and the very poor. Without that differentiation, the new formula would fall flat on its face and become an international embarrassment.