Poverty in India: Am I Poor? Where is the Poverty Line?
Poverty in India
India has two things in abundance: People and Poverty. On these two counts, it sure invites envy of all other nations of the world!
There are people who call India HRRC – human resource rich country! With a population of 1.25 billion, India is the world’s largest democracy and is set to become the most populous country by 2022 if the latest population growth trends continue. We can also call it PRC – poverty rich country! There are poor everywhere – one-third of world’s poor live here. Add to this the poor of Pakistan and Bangladesh (which were earlier part of unified India during colonial time) and you can discover almost half of global poverty only in this region of South Asia. Only the sub-Saharan region – which is the next big concentration of poverty – can offer some real competition.
Economic growth got a boost since the early 1990s when economic reforms and liberalization were undertaken. It pushed India forward to emerge as the global player with the world’s fourth largest economy in purchasing power parity (PPP) terms. But the economic expansion did little for the vast masses of poor because it remained limited to urban pockets and among educated class only. Rural India where 70% of country’s poor live failed to see any sensible change living standard.
Population growth is another factor that serves to negate the fruits of economic development. Although the rate of population growth is slowing but the sheer numbers are staggering – around 18 million people at the rate of around 1.4% are added each year. Compare it with the Chinese population growth rate of about 0.50% which adds less than 7 million people each year. China has made significant progress in the past two decades in poverty reduction. It has only less than 6% people living in extreme poverty compared with India’s 25-30% as counted in official figures.
India's First Poverty Line
In 1962, independent India made its first attempt to define poverty line. A Working Group of eminent Indian economists and social thinkers along with 1958 - Nutrition Advisory Committee of Indian Council of Medical Research (ICMR) recommended a national minimum for a rural Indian as Rs 20 per month at 1960-61 prices and for an urban Indian as Rs.25 per month; ensuring energy requirements for an active and healthy life. This did not include expenditures on health and education, which were to be provided by the state according to the Constitution.
India’s Poverty Line is Very Low
In June 2011, the Indian Planning Commission stated in the Supreme Court of India that the poverty line for the urban area is Rs 32 per day and Rs 26 in rural area. But in March 2012, it lowered it to Rs 28.65 for the urban area and Rs 22.42 for the rural area. Now after Rangarajan it is Rs 33 a day for rural areas and Rs 47 for urban areas. One can of course justify every change!
India’s poverty line is abysmally low when compared with other poor countries: Rs 860 (now Rs 1407) in urban area and Rs 673 (now Rs 972) in rural area. For instance, South Africa has three poverty lines — food, middle and upper — and all three were higher than that of India. Converting in Indian rupees, the food poverty line was Rs. 1,841 per capita per month in 2010, middle poverty line was at Rs.2,445 and upper poverty line at Rs. 3,484.
Even Rwanda appears better in the poverty number game. Using the national consumption survey of 2011 at the prices of October 2011, the rural poverty line in Rwanda in Indian currency were estimated to be about Rs. 892 per month, somewhat larger than Rs. 860 per person in urban India. But it must also be mentioned that food prices in Rwanda are lower than in India.
Where to Draw the Poverty Line
“Poverty is easy to spot, but hard to define.”
Whoever said this must have struggled hard to define poverty, which is very true.
There are different ways to look at poverty. Tradition teaches us to see poverty as just a lack-of-income issue. You guess some minimum income number based on your wisdom, knowledge or expert status – and make it the poverty threshold. People below this line are poor, else they are non-poor (of course, you won’t call them rich for your own safety because some smarter fellow might start giving you hard time!).
Here we are talking about subsistence poverty where people are struggling to survive when the food intake gets the top priority. That gave rise to the idea of measuring poverty in terms of how much people eat.
This poverty line philosophy was recommended by an exert group called the Alagh Committee in 1979. It told that people consuming less than 2100 calories in the urban areas or less than 2400 calories in the rural areas are poor. Why discriminate? Because rural people do more physical work – as per its logic. So, food consumption became the prime criterion for India’s poverty line determination. Needless to say it was more like a starvation or under-nutrition line.
This methodology has been improvised by the Expert Group (Lakdawala) in 1993 and then by the Expert Group (Tendulkar) in 2009. The improvisations have led to a firmer reliance on the NSSO’s sample surveys on consumption expenditure by households, a much better method to adjust for inter-state and inter-region differences in price changes over time, and the use of the better recall period introduced in the NSSO’s surveys.
The Suresh Tendulkar Committee in 2009 had recommended to broad base the poverty line idea on the line of the basic needs approach and added other essentials of life like education, health and transport into the food consumption model. It also recommended a new method of updating the poverty lines, adjusting for changes in the prices and patterns of consumption looking at the consumption of people living close to the poverty line.
This method made some people happy because it somewhat broad-based the calculations, but was still far too inadequate. Many critics still wanted to call it a “starvation line’ instead of the poverty line. The most important input for poverty measurements come from the consumer expenditure surveys of the National Sample Survey Organization (NSSO) which on large sample is done every five year.
Poverty Declined in the Past Decade
If official figures are to be believed, poverty in India has witnessed a consistent decline in the past decade: regardless of the methodology used. However, it is also equally clear that only a tiny fraction of the economic gains has reached the poor.
First 269 Million, then 363 Million People became Officially Poor!
Using the Tendulkar method, the poverty line was fixed at daily per capita spending of Rs 28.65 for the urban areas and Rs 22.42 for the rural areas. [1 USD = Rs 63]. Based on a survey of 2011-12, 269 million people (22%) are reported to live below the poverty line – net result of 25.7% rural and 13.7% urban poverty. Of the 269 million poor, 216.5 million live in the rural India. This unprecedented fall from 407 million (37%) estimated for 2004-05 to 22% poverty was widely ridiculed and criticized. So, a new expert group (Rangarajan committee) was set up to revisit the poverty line philosophy.
Such committees are the standard trick to delay and divert public attention in India. By the time the committee gives its findings or recommendations, public debate has already subsided and people have already forgotten the issue.
So, now what does the new expert group decide on poverty level?
It said that those spending over Rs 32 a day in rural areas and Rs 47 in towns and cities should not be considered poor. For 2011-12, the Rangarajan committee now estimates 29.5% (363 million) people to be poor. So let’s discard the 21.9% (269 million) poverty figure of the earlier methodology. On its new poverty scale, for the year 2009-10 India’s poverty should be pegged at 38.2% rather than 29.8% in the previous formula.
How convenient! Isn’t it?
In fact, we can eliminate all poverty by simply scaling down the numbers to “Zero” level!! Why need experts?
Poverty Level in India: 1993 - 2012
UN Definition of Poverty
The Copenhagen Declaration at the “World Summit on Social Development” describes poverty as “a condition characterized by severe deprivation of basic human needs such as food, shelter, safe drinking water, sanitation, health, education, and information”.
A rich man is nothing but a poor man with money.
– W.C. Fields
The trouble with being poor is that it takes up all your time.
– Willem de Kooning
The poor are poor because the rich are rich.
In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.
Other Estimates of Poverty in India
The World Bank uses $1.25 per person a day benchmark for "extreme poverty:. It is based on the average of the national poverty lines of the world's 15 poorest countries. The Asian Development Bank (ADB) uses somewhat higher benchmark of $1.35 per person a day, based on the surveys from 16 Asian countries. Respectively, they estimated 42% and 55% poverty in India in 2010. A $2-a-day benchmark estimated over three-fourth of the Indian population to be poor. It is clear that slight change in the line can give widely different estimation of poverty.
The basic problem with such over simplistic one-dimensional poverty measures is that they tell nothing about the nature and extent of poverty. Another drawback is that when poverty is seen as an income issue, the only option left to eradicate poverty is economic growth. However, experience tells that economic growth – assuming that by some magic it starts happening in the poorer countries on its own – alone can’t eliminate all poverty. In fact, a new thinking has emerged particularly in last 2 decades which says that poverty must be seen in a more comprehensive manner as a lack of human development and its elimination must be seen in this perspective. Economic growth is certainly important, but only as a tool and not as an end in itself.
The Multidimensional Deprivations in India
The Multidimensional Face of Poverty
Multidimensional Poverty Index (MPI)
As oppose to the one-dimensional income based poverty measures, the UNDP has a different philosophy; it views poverty as a state of multiple deprivations and measures it with a multidimensional poverty index (MPI). This approach recognizes that the poor experience several forms of deprivation – such as poor health, lack of education, inadequate living standard, lack of income (as one of several factors considered), social exclusion, disempowerment, poor quality of work and lack of security from exploitation and violence, and so on. It assesses three vital dimensions of poverty – education, health, and living standard – through ten indicators and provides both the extent and nature of simultaneous deprivations people are facing. The latest MPI analysis put the multidimensional poverty at 53.7% in India – over 650 million poor people [much higher than 363 million of most recent Rangarajan formula].
The 2011 MPI analysis reveals the nature and extent of deprivations people face in a very graphic manner in the bar chart and the pie chart here. The bar chart shows the proportion of the population which is poor and deprived in each indicator.
Each piece of the pie chart represents the percentage contribution of each indicators to the overall MPI. As the figure shows the largest contribution to multidimensional poverty comes from the indicators of nutrition (23%), child mortality (13%), school attendance (12%) and years of schooling(10%).
Latest Multidimensional Poverty Analysis
Millennium development Goals (MDGs)
Poverty is one of the 8 Millennium Development Goals (MDGs) of the United Nations. Its aims to cut the world poverty (in percent terms) to half by 2015 compared to the 1990 level. In 1990, almost half of the population in developing regions lived on less than 1.25 dollars a day. This rate dropped to 22 per cent by 2010, reducing the number of people living in extreme poverty by 700 million. Despite a 59 percent increase in the developing world's population, there were significantly fewer people (1.2 billion) living on less than $1.25 a day in 2010 than there were three decades ago (1.9 billion). So, the global goal of halving the extreme poverty by 2015 was already achieved by 2010, although the success level for other goals has been quite low. The Global Monitoring Report (a joint IMF-World Bank report) expects the number of people living in extreme poverty to drop to about 880 million by 2015.
The MDGs provide framework for eradication of poverty by eliminating extreme poverty hunger, promoting education and gender equality, reducing child mortality, improving maternal health, combating HIV/AIDS, malaria and other diseases, etc.
India was able to reduce its poverty rate from 49% in 1994 to 42% in 2005 and 29.8% in 2010. It is aiming to reach around the 24% poverty level by 2015. If the latest estimates of Rangarajan committee are taken into account poverty stood at 29.5% in 2011-12, it might reach the desired 24% level by 2015 although it lags behind in other targets.
It can be said fairly easily that the bottom half of Indian people lives in poverty. They are not just income short but also deprived of many other essentials of life. The official poverty estimates are no more than number games of retired bureaucrats in which no one believes. They at best allows the governments to judge the general impact of its policies on the welfare programs of the poor. The one-dimensional poverty line concept appears obsolete in today's world where modern research is converging on the idea of multidimensionality of poverty.
Clearly, poverty is not an income issue alone; it is a state of multiple deprivations coming from many factors – socio-economic and political – that put people in hardship. Therefore, the OPHI and UNDP's multidimensional approach offers a much better policy tool in terms of eradicating poverty. It might be a good idea for India to adopt the MPI or its suitably modified version in place of the outdated income approach.
- Poverty Line in India: Changing Discourses and Policy Implications
Redefining poverty line by Rangarajan Committee report 2014 has set a fresh debate on India’s policy implications.
- A brief history of poverty counting in India
Poverty has indeed fallen in India, declares the Planning Commission from time to time, opening up the debate on poverty measurement all over again.
- 2010 Global Hunger Index
As the world approaches the 2015 deadline for achieving the Millennium Development Goals (MDGs) the 2010 Global Hunger Index (GHI) offers a useful and multidimensional overview of global hunger.