Tuesday, December 15, 2009

An honest measure of poverty

Josy Joseph / DNA

Monday, December 14, 2009 0:26 IST

New Delhi: The growing inequalities between urban and rural India are clearly spelt in the poverty estimates drawn up by the Suresh Tendulkar Committee, which has found a new and more robust method to measure poverty. If it is accepted by the government, the below poverty line population would jump by nearly 10 crore from 27.5% to 37.2%.

The committee, chaired by renowned economist Suresh Tendulkar, was set up to make a more realistic assessment of poverty after the government faced criticism about its official estimates, which experts believe suppressed rural poverty.

According to the Tendulkar committee, 41.8% of people in rural areas live below the poverty line as against 25.7% of urban residents. The officially accepted level for rural poverty was 28.3%. It hasn't changed for urban areas.

The committee has also revised the poverty line in terms of money spent per person per month. From Rs356.30 a month, this has increased to Rs446.68 in rural areas. In urban areas it has risen from Rs538.60 to Rs578.8.

At present, the Centre measures poverty by measuring calorie intake. But the Tendulkar committee has moved away from that to a broader definition that includes spending on food as well as education, health, and clothing. It has also proposed the abolition of different criteria for rural and urban India.

The Tendulkar committee report says the National Sample Survey Organisation, which estimates the minimum household consumption, would move to a mixed reference period for its surveys in future -- meaning 365 days for low-frequency items such as clothing, footwear, durables, education, and health; and 30 days for the rest.

"The expert group decided to adopt the MRP based estimates of consumption expenditure as the basis for future poverty lines as against the previous practice of using uniform reference period estimates of consumption expenditure," the report says.
The present official poverty line baskets (PLB) were defined in terms of per capita total consumer expenditure at 1973-74 market prices and adjusted over time and across states. The government had drawn out separate PLBs for urban and rural areas, tied to the calorie intake -- 2,400 per capita calories for rural areas and 2,100 calories for urban areas. Meaning this was the calorie standard for a typical individual. The cost of food to attain this calorie level is calculated, and poverty line is estimated in rupees. According to the official data, this was Rs356.30 in rural areas and Rs538.60 in urban areas in 2004-05. Experts said that consumption patterns used to define PLBs were formed in 1973-74 and are dated.

In 1993-94 rural India had 50.1% people living below poverty and urban areas had 31.8%. The country as a whole had 45.3% people below the poverty line. The report points out that the flawed official method helped the government suppress the real picture by projecting just 37.2% poverty in India.

Today, 37.2% of people, that is over 37 crore, live below the poverty line. If the report is accepted, the government's poverty estimates would be closer to those made by the World Bank, which said 42% of Indians lived below poverty line in 2005. The bank's poverty line is pegged at $1.25 a day, or at India's PPP rate Rs21.6 a day in urban areas and Rs14.3 a day in rural areas.

According to the Tendulkar committee, the poverty line for rural India would work out to Rs446.68, while for urban areas it would be Rs578.8.

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