An Urgent Call For Poverty Estimates

An Urgent Call For Poverty Estimates

by Balwant Singh Mehta and Arjun Kumar - Thursday, July 4, 2019 07:06 PM IST
An Urgent Call For Poverty EstimatesSlum dwellings surrounding a newly-built flyover in Mumbai. (SEBASTIAN D’SOUZA/AFP/GettyImages)
  • Various methods and committees have been instituted to estimate poverty in India thus far.

    But data collected over the years has not been very accurate.

    It is important that the government, before launching more welfare schemes, obtains exact poverty estimates so that evidence-based action is seamless.

Exacerbated by the unemployment rates and looming poverty in India, the incumbent government sensed the urgency and constituted a high-level Cabinet Committee on Employment and Skill Development, soon after assuming office. While this is an important step in the positive direction, targeting of eligible beneficiaries and provision of monetary benefits or direct benefit transfer to the poor households remains an issue.

However, it is very unfortunate that there is no official single up-to-date methodology that provides the accurate number of poor in the country.

The Poverty Estimates Conundrum

The estimation of poverty line has been done on minimum level of consumption requirement; wherein those below this line are eligible for a majority of government welfare schemes. Policy makers and the government have used different methods to estimate the number of poor households in the country. It is evident from the 2019 election manifestos of two major national political parties. While the BJP manifesto outlined plans for poverty alleviation by promising proper housing for those living in mud huts or lacking shelter, and piped water connections to every village household by the next four to five years, the Congress promised a minimum income guarantee to the poorest 20 per cent households.

Furthermore, the former finance minister of the NDA government stressed that the number of Indians who live in poverty would drop to below 15 per cent over the next three years and to a negligible level in the 10 years after that. However, these promises and predictions appear to have been made without any base value of the number of poor and without any plan to identify poor families as beneficiaries.

There is no naysaying that the identification of eligible families is crucial as the welfare schemes should benefit the deserving population, and that people in need must not be excluded. The latest available poverty line is based on the Tendulkar Committee methodology that includes a poverty line basket of both food and non-food items, which was estimated Rs 4,050 a month for a five member household in rural areas and Rs 4,950 in urban areas for the year 2011-12. The committee estimated that there were 21.9 per cent poor people (270 million) in the country from consumer expenditure survey data collected by the National Sample Survey Organisation (NSSO) in 2011-12.

These estimates faced widespread criticisms that the line was too low. In response, a new committee chaired by C. Rangarajan was constituted in 2012 to recalculate the poverty line, which submitted its report in July 2014. This report estimated the new poverty line for the year 2011-12 as Rs 4,800 a month for a five-member household in rural areas and Rs 7,050 in urban areas.

The revised estimate increased the poverty level in the country to 29.5 per cent and the number of poor people to 363 million, which was 93 million more than Tendulkar Committee estimates. However, the revised estimate of the committee was not accepted and discussed much by the government, and the Tendulkar poverty line is still in use to estimate poverty in the country.

The last NDA government used a new approach based on household level Socio-Economic and Caste Census (SECC) survey data collected in 2011 to identify beneficiaries for many welfare schemes such as PM Ujjwala Yojana and Pradhan Mantri Awas Yojana. The households are ranked in three stages in this approach as

1. Households meeting exclusion criteria (like motorised vehicle, Kisan Credit Card etc.) are automatically excluded.

2. Households satisfying inclusion criteria are included (manual scavengers, households without shelter etc.), and

3. The remaining households are identified through a seven-item binary scoring criterion using deprivation indicators like households with only one room, female-headed households with no adult male member between 16 to 69 years of age.

Need For Updated Poverty Estimates

It must be underscored that since there is no specific indicator (like income or consumption) available in the SECC data that suggests a family falls under the Below Poverty Line category, therefore, there is no single number that captures all of India’s poor. Rather, households are categorised according to multi-dimensional deprivation indicators like absence of a proper roof.

This allows welfare schemes to be targeted for each of the inclusion criteria of deprivation indicators.

There are some major drawbacks in estimating poverty from the SECC data: it is old and not updated; several genuine beneficiaries were left out in the survey, and new claimants now fall under the margin after the data was released. Due to these problems, the government has changed their identification mechanism now.

Apart from some anecdotal evidences, only the latest poverty estimates are provided by the 2018 global Multidimensional Poverty Index (MPI) published by the United Nations Development Program (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI).

These noted that remarkable progress was made by India in tackling poverty. The poverty rate has reduced drastically from 55 per cent in 2005-06 to 28 per cent in 2015-16. However, India still had 364 million poor in 2015-16, the largest for any country, although it is down from 635 million in 2005-06.

The MPI looks at how people are being left behind across three key dimensions namely health, education and living standards and lacking things such as clean water, sanitation, adequate nutrition or primary education. Thus, this only validates the point that the multi-dimensional approach has many drawbacks as mentioned above in case of SECC data.

The outdated Tendulkar poverty estimates based on NSSO consumption expenditure survey for 2011-12 continue to remain the basis for the last estimate of poverty, which is used as a reliable benchmark for most welfare schemes and other fiscal transfers in the country as well as for international comparisons (based upon global poverty recommendations). Therefore, the consumer expenditure survey is not only a crucial database on which poverty is estimated but also the only database for estimating inequality.

Unfortunately, unlike the employment-unemployment survey, there is not much discussion on availability of data as per the latest consumption expenditure survey of NSSO, which was completed in July 2018 or used for estimating the number of poor. The re-elected Modi government is planning to launch many new welfare programmes for the poor, which would be identified only from 8-9-year-old data.

Considering the prevailing conundrum and the need to identify the target population who would receive assured access to welfare schemes, there is an urgent call to release the consumer expenditure survey data as soon as possible with new poverty estimates.

These will not only help in regional and important analysis, planning and policymaking, but also provide a true picture of poverty and inequality in the country. In turn, it will contribute towards evidence-based action towards achieving the vision of New India and Sustainable Development Goals 2030.

Dr Balwant Singh Mehta and Dr Arjun Kumar are associated with the Institute for Human Development (IHD), Delhi and Impact and Policy Research Institute (IMPRI), New Delhi.

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