How To Measure Poverty

A neat separation of poverty estimates and entitlements won’t pass muster.

There wAS much hope about the work that Arvind Panagariya was mandated to do on the measurement of poverty. I, for one, have held from the 1980s that the official poverty line that emerged from a taskforce I chaired in 1976-77 should be shelved. Panagariya has reportedly suggested that the Tendulkar Committee’s report should be accepted for poverty estimation but socio-economic indicators, say, as collected by the Socio-Economic Caste Census, should be used to determine entitlement for benefits, an approach suggested earlier by N.C. Saxena. This is important because while earlier Centrally sponsored schemes have been curtailed, a large number of new schemes have been announced in the Union budget. The Panagariya Panel on poverty has separated the two exercises — entitlement for schemes and poverty estimates, the latter to be used for assessments of economic performance.

The Tendulkar Committee had, in fact, used the official poverty line or the Alagh poverty line, based on cut-off points defined in terms of calorie consumption. Happy with the existing urban poverty ratio or head-count ratio of 25.7 per cent derived from the Alagh taskforce — as adapted for price adjustment from time to time — it suggested that the expenditure required to meet this goal should be the poverty line for both rural and, of course, urban areas. We are critical of the official poverty line, but they “found it desirable in the interest of continuity to situate it in some generally acceptable aspect of the present exercise”. Like Banquo’s ghost, the Alagh taskforce cast its shadow, possibly since Tendulkar was a member.

But the Tendulkar report had many advantages. For one, it shifted the emphasis from calories to food demand. In its logical structure, the Alagh taskforce permitted this but the focus then was on foodgrains, with price elasticities calculated separately for the rich and the poor, leading to dual pricing. The Tendulkar Committee framework calculates the food purchasing power and then lets the poor substitute between food items.

It works in a framework where the state will not have the responsibility for the education and health needs, or for that matter drinking water needs, of the poor. Here, the Tendulkar Committee was one-sided in stating that “the earlier poverty lines assumed that basic social services of health and education would be supplied by the state”. It did not clarify that the taskforce stated that the state must have a “basic needs plan” and give it the highest priority.

The Tendulkar report had a concept of inclusive growth where the state does not take on itself such pro-poor responsibilities but provides income supplements. It shows that with these supplements, the new poverty line would correspond to standards that would lead to physical nutrition norms being met on an average. Statistically, this part of the report, overlaying averages of nutrition norms with food expenditure is creative. A more serious issue is that if expenditures on education and health are included in the poverty line calculations, how do we account for public expenditures on them — or are we happy with double counting?

But will the present standard dividing the poor and the rich, and that too based on the 1979 line in urban areas, be acceptable as a norm?

I have been making the point that following nutrition norms does not require policy to go overboard. Here, the Saxena Committee for defining concepts for the next BPL census goes overboard and comes out with very high numbers. Food security can be achieved at much lower costs than Saxena suggests, but he scores in his emphasis on access to social facilities and asset and education opportunities, for which he suggests a system of deprivation points based on many indicators, including caste, asset positions, educational achievements, and so on. Saxena recognises that different entitlement systems will be required for different facilities — a valid point but a real-world nightmare.

There are, therefore, many debatable issues. In the excellent technical note to the BPL report, K.L. Datta has explained at length the complexity of the relationship between calorie consumption and poverty, and P. Sainath the issue that some facilities have to be universally provided. Saxena takes on the issue of entitlements head-on, but Tendulkar sidesteps it. Panagariya will have to cope with all this and it is likely that a neat separation of poverty estimation and entitlements won’t pass muster.

The writer, former vice chancellor of Jawaharlal Nehru University, Delhi, is professor emeritus, Sardar Patel Institute, Ahmedabad.

Source: Indian Express, 26-04-2016