ON “Planning Commission’s on Poverty estimate”:
The necessity/essentiality of ‘poverty line’ comes from a need to estimate number of ‘poor people’. This is primarily for providing assistance (resource allocation) to poor.
There has been huge debate over Planning commission’s adopted definition for poverty line which states “37% of Indian population (40.74 crore) is below poverty line (according to Rs. 32/26-a-day definition of poverty line for urban/rural)”[1]
There’re two parts to it—a) Appropriateness of estimation procedure to represent the actual poverty, b) Effectiveness of estimate to be used for welfare schemes.
Effectiveness of estimate to be used for welfare schemes:
Proposition: Irrespective of the methodology adopted to measure poverty, the number of poor people (requiring external assistance) remains unacceptably large. Therefore, it is not acceptable to link these official poverty estimates to basic entitlements of the people. The argument is over entitlements of beneficiaries under various schemes for poor.
Argument: Poverty line is defined as minimum level of income deemed necessary to achieve an adequate standard of living.[2] This is always a fuzzy area and Jean Dreze[3] considers it as ‘divisive and open to manipulation’.
There have been some efforts to define it considering multiple dimensions of deprivation (Multidimensional Poverty Index MPI defined by Oxford Poverty and Human Development Initiative (OPHI) UNDP). According to MPI estimate, 55% indian population are below poverty line, which far exceeds Planning Commission estimates.[4] The multiple dimensions of deprivation can only be collected through some detailed socio-economic census for arriving at specific entitlements. These estimates also donot reflect specificity in deprivation which results in non-optimal allocation of resources.
Appropriateness of estimation procedure to represent the actual poverty:
Proposition: The income based (PPP household consumer expenditure) cannot be a true indicative of poverty.
Argument:
There has been no consistent uniform official measure of poverty. A mere nutritional indicator of poverty (calorie intake) will be too insufficient to capture correct figures and on the other hand income based indicator will not capture the ‘needed’ people. Based on official surveys of nutritional intakes and outcomes indicate that under-nutrition is much more widespread than income poverty (Gini coefficient is 0.32 and Global hunger index rank 67).
Moreover, this income-definition (based on Purchasing power parity) is an aggregate approach to estimate poverty. There should be a detailed assessment at individual level (MPI captures it!). Poverty estimates in India are derived from the household consumer expenditure data collected by the National Sample Survey Organisation (NSSO) every whose exclusion rules have been considered unfair and arbitrary. [5]
In present situation when inflation is over-riding, Inappropriateness of this threshold can be best captured by in this statement by a NAC (National advisory council) member “People who are spending below Rs. 32 (a day)… they are poorest of the poor. You can call them destitute; you can call them people living in sub-human level”[6].
Conclusion:
The ‘flaws’ in appropriateness of Planning Commission’s metric is undisputed and it’s been accepted by Montek Singh, Deputy chairman of Planning Commission. But basing welfare schemes on this estimate is certainly unreasonable.
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