Poverty through varied prisms

Mahatma Gandhi, writing in 1925, called poverty as the moral collapse of society and likened it to be the worst crime committed by any civil society. While much has been done to alleviate poverty over the planning period, there are still large numbers of rural and urban poor in India. Just like unemployment, which we discussed in the last two articles, poverty is a complex concept and has many ways in which it can be defined and measured. The meaning of poverty in a developed country like the US would mean providing a ‘reasonable standard of living’, while in India it means providing a ‘basic minimum standard of living’. In this two-part article on poverty, we will look at various measurements of poverty and how poverty has been addressed in the five-year plans. In this first part, we will look at various concepts and measurements of poverty.

Concepts and measurement of poverty

Two concepts of poverty are referred to commonly: absolute and relative standards. Absolute standard converts the minimum quantity of food grains required for a subsistence level into monetary terms and arrives at a number for per capita consumer expenditure. The population whose level of expenditure is below this level is considered below the poverty line. Relative standard compares the income or consumption levels of various fractile groups: say, the top 5 per cent with the bottom 5 per cent. For India, the absolute standard is more relevant because of the existence of mass poverty. In addition to the absolute/relative standards, there is also a distinction between income poverty (related to low income levels) and non-income poverty (related to low access to education and health).

The earliest measure of poverty was undertaken by Dadabhai Naoroji in his book, ‘Poverty and the Un-British Rule in India’. According to him, the poverty line should range from Rs 16 to Rs 35 per capita per year, based on 1867-68 prices. The poverty line proposed by him was based on the cost of a subsistence diet consisting of ‘rice or flour, dhal, mutton, vegetables, ghee, vegetable oil and salt’. The National Planning Commission, in 1938, also suggested a poverty line ranging from Rs 15 to Rs 20 per capita per month. This poverty line was also based on ‘a minimum standard of living perspective in which nutritional requirements are implicit’

After independence, Mr P.D.Ojha estimated poverty for the year 1960-61. He took the cut-off as 2,250 calories per capita per day, which translated to Rs 15-18 in urban areas and Rs 8-11 in rural areas at 1960-61 prices. He found that 184 million persons in rural areas (51.8 per cent of total rural population) and 6 million persons in urban areas (44 per cent of total urban population) were below the poverty line. In all, 190 million, or 44 per cent of total population, were below the poverty line in 1960-61. Ojha calculated the numbers for 1967-68 and found a rise in poverty, wherein he found that 289 million people, or 70 per cent of the population, were below the poverty line.

Dandekar and Rath’s study on poverty, based on National Sample Survey (NSS) data, is perhaps the most cited and most well-known early study. They took 2,250 calories per capita per day, and Rs 180 per capita per annum for rural areas and Rs 270 per capital per annum for urban areas as the cut off (at 1960-61 prices) for 1971. This translates to Rs 324 and Rs 486 for rural and urban areas at 1968-69 prices. As per these cut-offs, 166 million (40 per cent) people in rural areas, and 49 million (50 per cent) people in urban areas were below the poverty line. Minhas and Bardhan also made estimates on roughly similar lines as Dandekar and Rath. However, Bardhan used only the agricultural labor price deflator (as opposed to the National Income deflator used by Minhas), as a result of which Minhas found that poverty had decreased in the 1960s, while Bardhan’s estimates indicated a rise in poverty.

Montek Ahluwalia’s study of 1977 looked at the incidence of rural poverty from 1956-57 to 1973-74. He took Rs 15 per month per capita for rural areas and Rs 20 per month per capital for urban areas as the cutoff, though he admitted that this income level was a bare minimum and may not guarantee a basic nutrition. His estimates showed that rural poverty levels fluctuated, declining from over 50 per cent in the mid-1950s to around 40 per cent in the mid-1960s, and then rising sharply in 1967-68 before falling again.

The seventh finance commission suggested a more inclusive poverty line and called it the ‘augmented poverty line’. This was arrived at by adding public expenditure on health, water, education, roads, social welfare and general administration to private consumption expenditure. As per this estimate, there were 277 million people below the poverty line in 1970-71, which worked out to 52 per cent of the relevant population.

The World Bank also suggested a poverty line, based on the procedure suggested by the Planning Commission: basically, the monetary value of the minimum calorie intake. The planning commission estimate put the poverty line at Rs 49.1 per month per capita for rural areas and Rs 56.6 per month per capita for urban areas in 1973-74. The World Bank used a different deflator series developed by NSS and Indian Statistical Institute, and arrived at these poverty line numbers: Rs 55.2 for rural areas and Rs 68.6 for urban areas in 1977-78; Rs 89 for rural areas and Rs 112.2 for urban areas in 1983. As per these cutoffs, 52.4 per cent of the population was below the poverty line in 1970, 42.5 per cent in 1983 and 39.6 per cent in 1988.

The Lakdawala Committee was constituted by the Planning Commission in 1993 to review the estimation of poverty levels. The committee made the following suggestions: i) consumption expenditure should be calculated based on calorie consumption as earlier; (ii) state-specific poverty lines should be constructed and these should be updated using the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas

and Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas; and (iii) discontinuation of ‘scaling’ of poverty estimates based on National Accounts Statistics (This was based on the assumption that CPI-IW and CPI-AL reflect the consumption patterns of the poor).

As per Lakdawala’s Task Force, Rs 49 per month per capital for rural areas and Rs 57 per month per capita for rural areas at 1973-74 prices was to be taken as the poverty line. This changed from year to year as follows for rural and urban areas: Rs 57 and Rs 72.50 in 1977-78; Rs 89.45 and Rs 117.64 in 1983; and Rs 115.43 and Rs 165.58 in 1987-88. This translated to the following percentages below the poverty line: 55 per cent in 1973-73, 51.8 per cent in 1977-78, 44.8 per cent in 1983 and 39.3 per cent in 1987-88.

Tendulkar Committee, set up in 2005, suggested the following changes in the estimation of poverty: (i) a shift away from calorie consumption-based poverty estimation to a uniform poverty line basket (PLB) across rural and urban India; (ii) a change in the price adjustment procedure to correct spatial and temporal issues with price adjustment; and (iii) incorporation of private expenditure on health and education while estimating poverty. As per Tendulkar’s method, the all-India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas. This translated into the following percentages of people below the poverty line: 45.3 per cent in 1993-94; 37.2 per cent in 2004-05; 29.8 per cent in 2009-10; and 21.9 per cent in 2011-12.

Another Expert Group to look at poverty estimates was set up in 2012 under the Chairmanship of Rangarajan. The committee’s terms of reference included: to suggest alternate ways to measure poverty, examine the divergence between NSS estimates and National Accounts numbers, and look at the international ways to measure poverty. Rangarajan’s estimate of poverty for the year 2011-12 stood at 29.5 per cent. This translates to 363 million people below the poverty level: 260.5 million in rural areas and 102.5 million in urban areas.

Finally, there are a number of estimates at the international level, the most well-known being the USD 1 a day set by the World Bank. This has since been revised to USD 2.15 a day (at 2017 prices). This basically means that anyone living below this income in the world is considered to be in extreme poverty.

Poverty is now measured by the Niti Aayog, and it measures poverty using a multi-dimensional index (MPI). As per the latest numbers (2022-23), the current poverty line is at Rs 1,059.42 per month per capita for rural areas and Rs 1,286 per month per capita for urban areas, which translates to 32.75 per cent and 8.81 per cent below the poverty line in rural and urban areas, respectively, and 25 per cent for the country as a whole.

Conclusion

The estimation of poverty is important because it determines how poverty has to be addressed, what level of finances have to be committed and what different approaches need to be taken in rural versus urban areas. We have seen various measures and how they have evolved over the years. We will now turn to a discussion of the causes and consequences of poverty.

To be continued next Sunday...

The writer is Addl. Chief Secretary, Dept of Mass Extension, Education and Library Services, Govt of West Bengal.