Reality of Poverty

Statistics, Economics and Politics of Poverty

Two days ago, the Planning Commission (PC) submitted an affidavit to the Supreme Court. It proposes new estimates of the poverty line in India. Ever since then, we have witnessed a huge wave of outrage from all socio-political classes. In continuation of the recent trends, the Congress led UPA government has been slandered for coming up with such impossible figures. On the forefront of this assault have been social activists and political leaders of the opposition parties. Even the self-proclaimed 'apolitical' youth has something to say about this essentially political issue. ‘Faking News’- the rising social media sensation- did not miss to cash-in on this ludicrousness either! A barrage of sarcastic comments and denigrating status updates followed, which somehow found a way to ridicule Munaf Patel’s rugged beard and Rahul Gandhi’s ‘poor’ IQ.  Yes, it was all really funny... but looking at the reaction of the general public and the quality of FB updates, I couldn’t help but wonder- how many of us really know the actual process of estimating the 'poverty line' and its larger implications? And why does it attract such diverse reactions from different social sections... So, I’m writing this post to discuss this multidimensional issue and to invite your comments on the same. 

Just for the reference, I have compiled this table based on PC’s affidavit. It shows the breakdown of expenditure on various essential/necessary commodities for urban areas-

Category	Commodity	Urban (Rs. per capita)
		Per day	Per month
Food	Pulses	1.20	36.0
	Cereals	5.50	165.0
	Milk	2.33	69.9
	Green leafy vegetables	1.95	58.5
	Cooking oil	1.55	46.5
	Fresh fruits	0.44	13.2
	Sugar	0.70	21.0
	Salt and spices	0.78	23.4
	Cooking gas	3.75	112.5
Shelter	House rent	1.64	49.1
Clothes	Clothes	2.04	61.3
	Shoes	0.32	9.6
Education	Education	0.99	29.7
Health	Healthcare	1.32	39.7
	Personal items	0.96	28.8
Others	Entertainment	1.30	39.0
	Other goods and services	5.39	161.7
Total		32.16	964.9

Even at the first glance, the figures quoted here seem really absurd. Can you buy fresh fruits for just 44 paise a day!? Really!? But as my Bio-stat professor always says, “numbers can be deceiving”. So, let’s try to look beyond these numbers. Let’s see how are they calculated & what are the assumptions and precedents involved?

Defining Poverty, Poverty line

First of all, defining Poverty is a complex issue owing to its subjective nature. The most common way of interpreting poverty is by calculating how much a person owns- in currency or in material possessions. Thus, it is seen as a ‘relative term’. A person is termed poor if they have less money compared to the majority of population. But this would lead to intra-regional differences. That is, a person who is considered poor in USA will be filthy rich in Sub-Saharan Africa. Similarly, we have many mini-Indias within our India. There are rich states like TN, Maharashtra and Karnataka and poor states like UP, Odisha and WB. This same heterogeneity, which we proudly flaunt as our strength becomes a weakness while performing economic analyses. So, is there a better way to define poverty? The answer is 'of course'.

We can say that if a person does not earn enough to access essential/necessary items for daily living, he/she is impoverished. It’s the ‘basic minimum requirement’ for survival that we are calculating here. This can become an estimate of the ‘absolute poverty’ that includes sheer destitute. The Planning commission has recognised certain goods and services as 'essential' based on their impact on the quality of life. Market rates of all these essential items can be used for claculations. The combined total of all these expenditures- basic minimum and essential good & services - should be termed as ‘Poverty line’. This line (or threshold) can then keep changing over time owing to variables like economic stability, agricultural productivity, natural disasters, population growth rate, family size, etc.

That’s precisely why the planning commission has to revise this estimate before every 5 year plan.  The last revision of this estimate was due in 2007-08 but somehow we missed it. The old estimates of 2004 were considered to be valid for all practical purposes. So, it won’t come as a surprise that until recently, Poverty line was considered as Rs. 20 and Rs. 15 for urban and rural areas, respectively.

Poverty line has important repercussions at the policy level. GoI is constitutionally obliged to provide the basic right of ‘living a dignified life’ to all its citizens. The Public Distribution system (Rationing system) is installed so that the government can fulfil this obligation in an equitable manner. If the poverty headcount is too high, the government will have to spend more percentage of the GDP on welfare of the poor and thus, economic progress may be compromised. This is precisely why the poverty estimates are scrutinised most scrupulously by economists, social scientists and researchers.

Defining Urban and Rural areas

Here’s how an ‘Urban area’ is defined-

1. All statutory places with a municipality, corporation, cantonment board or notified town area committee, etc.
2. A place satisfying the following three criteria simultaneously:

• a minimum population of 5,000; 
• at least 75 per cent of male working population engaged in non-agricultural pursuits; and
• a density of population of at least 400 per sq. km. (1,000 per sq. mile).

Just one look at this definition and it becomes obvious that even small towns are included as urban areas. We know for a fact that the cost of living in such smaller setting is generally lower than that in metropolitans like Mumbai and Delhi. This is the main reason why the figures quoted in the above table appear to be diluted.

I don’t doubt the statistical integrity of the conclusions provided by the Planning Commission. What we should question are the assumptions, and the methods employed to reach these conclusions. We also must understand that the PC has a huge responsibility of directing the ‘growth’ of this country without compromising ‘development’. It’s a tightrope walk and the members of PC are under tremendous political pressure.

There are many such limitations of employing this methodology to calculate poverty line- disregarding social status, caste, opportunity cost and regional differences, to name a few.  All these have a major impact on the poverty line, and hence, need to be analysed in detail. But, may be in some other post...

So here are my concluding remarks... The entire nation is experiencing a new wave of awakening. And to grab this window of opportunity, the government must face the reality and stop brushing important issues under the carpet. At the same time, we, the people, must fill our knowledge gaps. We must strive to be empowered and take active part in building this nation. 

Question the numbers, debate the opinions and seek clarifications. For knowledge cannot acquire you, you must acquire knowledge.