The Planning Commission’s spurious method shows a decline in poverty because it has continuously lowered the measuring standard

The Planning Commission has once again embarrassed us with its claims of decline in poverty by 2011-12 to grossly unrealistic levels of 13.7 per cent of population in urban areas and 25.7 per cent in rural areas, using monthly poverty lines of Rs. 1000 and Rs. 816 respectively, or Rs. 33.3 and Rs. 27.2 per day. These princely amounts will pay for one urban male haircut while they are supposed to meet all daily food and non-food living costs. The poverty decline claimed is huge, a full 8 per cent points fall in rural areas over the two years since 2009-10, and a 7 per cent points fall in urban areas, never mind that these two years saw the aftermath of drought, poor employment growth and exceptionally rapid food price rise. The logically incorrect estimation method that the Commission continues to use makes it an absolute certainty that in another four years, when the 2014-15 survey results become available, it will claim that urban poverty is near zero and rural poverty only around 12 per cent. This will be the case regardless of any rise in actual deprivation and intensification of actual poverty.

Substantial rise

All official claims of low poverty level and poverty decline are quite spurious, solely the result of mistaken method. In reality, poverty is high and rising. By 2009-10, after meeting all essential non-food expenses (manufactured necessities, utilities, rent, transport, health, education), 75.5 per cent of rural persons could not consume enough food to give 2200 calories per day, while 73 per cent of all urban persons could not access 2100 calories per day. The comparable percentages for 2004-5 were 69.5 rural and 64.5 urban, so there has been a substantial poverty rise. Once the NSS releases its nutritional intake data for 2011-12 we can see the change up to that year, but given the high rate of inflation and sluggish job growth, the situation is likely to be as bad, if not worse. Our figures are obtained by applying the Planning Commission’s own original definition of poverty line. Given the rapidly rising cost of privatised health care, education and utilities (electricity, petrol, gas), combined with high food price inflation and exclusion of the majority of the actually poor from affordable PDS grain, it is hardly surprising that the bulk of the population is getting more impoverished, and its nutritional level is declining faster than before.

What is the basic problem with the Planning Commission’s method which produces its low and necessarily declining estimates, regardless of ground reality? The Commission in practice gave up its own definition of the poverty line which was applied only once — to get the 1973-74 estimate. After that, it has never looked over the next 40 years even once for deriving poverty lines at the actual current spending level, which will allow the population to maintain the same standard of living in terms of nutrition after meeting all non-food costs — even though these data have been available in every five-yearly NSS survey.

The Commission instead simply applied price indices to bring forward the base year monthly poverty lines of Rs 49 rural and Rs.56 urban in 1973-74. The Tendulkar committee did not change this aspect; it merely altered the specific index.

Price indexation does not capture the actual rise in the cost of living over long periods. Those doing the poverty estimates would be the first to protest if their own salaries were indexed only through dearness allowance. A fairly high level government employee getting Rs.1,000 a month in 1973-74 would get Rs.18,000 a month today if the salary was only indexed. The fact that indexing does not capture the actual rise in the cost of living is recognised by the government itself by appointing decadal Pay Commissions which push up the entire structure of salaries — an employee in the same position today gets not Rs.18,000 but a four times higher salary of over Rs.70,000. Yet those doing poverty estimates continue to maintain the fiction that the same standard of living can be accessed by the poor by merely indexing the original poverty line, and they never mention the severely lowered nutritional access at their poverty lines which, by now, are destitution lines.

Worsening deprivation

The fact is that official poverty lines give command over time to a lower and lower standard of living. With a steadily lowered standard, the poverty figures will always show apparent improvement even when actual deprivation is worsening. A school child knows that if last year’s percentage of students passing the annual examination is to be compared to this year’s percentage, the pass mark should be the same. The school principal cannot quietly lower the pass mark without informing the public, say from 50 out of hundred last year to 40 this year, and then claim that the school’s performance has improved because 80 per cent of students are recorded as ‘passed’ this year at the clandestinely lowered pass mark, compared to 75 per cent of students last year. If, at the same pass mark of 50, we find that 70 per cent of students have passed this year, we are justified in saying that the performance, far from improving, has worsened. If the school is allowed to continue with its wrong method, and lower the pass mark further next year, and again the next year, so ad infinitum, it is eventually bound to record 100 per cent pass and zero failure.

The case is exactly the same with the official poverty lines as with the pass mark: the poverty lines have been lowered continuously below the standard over a very long period of 40 years. ‘Poverty’ so measured is bound to disappear from India even though in reality it may be very high and worsening over time. The Commission’s monthly poverty line for urban Delhi state in 2009-10 is Rs.1040 — but a consumer spending this much could afford food that gave only 1400 calories a day after meeting all other fast rising expenses. The correct poverty line is Rs.5,000 for accessing 2100 calories, and a staggering 90 per cent of people have been pushed below this, compared to 57 per cent below the correct poverty line of Rs.1150 in 2004-05. Given the very high rate of food price inflation plus the rising cost of privatised medical care and utilities, it is not surprising that people are being forced to cut back on food, and the average calorie intake in urban Delhi has fallen to an all-time low of 1756. While a high-visibility minority of households with stable incomes is able to hire-purchase multiple cars per household and enjoy other durable goods, the vast working underclass which is invisible to the rich is struggling to survive. Fifty five per cent of the urban population cannot access even 1800 calories today, compared to less than a quarter in that position a mere five years earlier.

Why, it may be asked, do the highly trained economists in the Commission ignore reality and continue with their incorrect method? Surely they can see as we do, that their Rs.1040 poverty line gives access to a bare-survival 1400 calories. Part of the answer is that the ramifications of using the wrong method extend globally, for the World Bank economists have, for decades, based their poverty estimates on the local currency official poverty lines of developing countries, including India.

The World Bank claim of poverty decline in Asia is equally spurious. In reality, under the regime of poor employment growth and high food price inflation, poverty has been rising. To admit this would mean that the entire imposing-looking global poverty estimation structure, employing hundreds of economists busy churning out wrong figures, would come crashing down like a rotten termite-eaten house. The rest of the answer is that since the method automatically produces numbers showing spurious poverty decline, it is convenient for arguing that globalisation and neo-liberal policies are beneficial for people. Truth will always out, however.

(Utsa Patnaik is Professor Emeritus, Jawaharlal Nehru University)