POVERTY

Poverty

Providing basic minimum needs to the people and reduction of poverty

Antyodaya- Poorest of poor

Intergrating the poor into the main stream and achieving a minimum standard of living all.

• Poverty is the challenge for India.
• Starvation and hunger are the key features of the poorest households
• Poor people face unstable employment
• Mal nutrition is alarmingly high among the poor, ill, poor health, physically weak

How are poor people identified?

• To make sustainable strategies to address the causes of poverty and designing scheme to help the poor out of the situation.
• For the identification of the poor need to develop a scale to measure poverty that scale which determine the poor is called poverty line.
• In pre-independent India Dada Bhai Naoroji was the first to India discuss the concept of poverty.

Mechanism:

Planning commission:

Formed a study group in 1962 “Task forced on projection of minimum needs and effective consumption demand” was formed in 1979.

Expert group was formed 1989 for defining poverty

There are other methodology for the determination of poverty as

• Sen index
• Poverty gap index
• Square poverty gap

Head Count Ratio

When the number of poor is estimated as the proportion of people below the poverty line it is known as (Head count Ratio).

• Official date on Poverty is made available to the public by the planning commission (Now NITI Aayog)

• In 1973-74 about 55% population was below the poverty line.

Categorising Poverty

Graphical Representation

The poverty line

Different way to determine the poverty

• Monetary Value (Per capita expenditure)

Minimum Calori Intake     –    2400 (Rural)

• 2100 (urban)
• Rural- Rs. 328 per person per month
• For urban- Rs. 454 per person per month
• Accessibility to basic education, health care, drinking water and Sanitation
• Current mechanism for the determination of poverty line does not take social factors

Aim of poverty alleviation should be give above all parameters.

• In 1999-2000, it has fallen to 26%
• In 1973-74. More than 80% of poor resided in rural area and in 1999-2000 has come down to about 75%
• Three-fourth of poor in India. Reside in villages.
• In the 1990s, the absolute number of poor in rural area had declined whereas the number of their urban counter parts increased marginally.

• Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Orissa accounted about 70% of India’s poor during 1973-74

Aggregate poverty is just the sum of individual poverty poverty is also explained by general economic wide problems

Committee

Pre-Independence poverty estimation

• Dada Bhai Naoroji Through his book “Poverty and urbritish rule in India made the earliest estimation of poverty line (Rs.16 to Rs.35 per capita per year)
• The poverty line proposed by him was based on the cost of a subsistence or minimum basic diet.

National Planning committee’s (1938)

Poverty line (ranging from Rs. 15 to Rs.20 per capita per month) was also based on a minimum standard of living perspective in which nutritional requirement were implicit.

• In 1938, the national planning committee was set-up by Subhash Chandra Bose under the chairmanship of Jawaharlal Nehru for the purpose of drawing up an economic plan with the fundamental aim to ensure an adequate standard of living for the masses.

The Bombay Plan (1944)

• Proponents had suggested a poverty line of Rs. 75 per capital per year.
• The Bombay plan was setup of proposal of small group of influential business leaders in Bombay for the development of the post-independence economy of India.

Post-Independence Poverty Estimation

• Planning commission expert group (1962) working group constituted by the planning commission formulated the separate lines for rural and urban areas (Rs.20 and 25 per capita per year respectively)

VM Dadekar and N. Rath (1971)

Made the first systematic assessment of poverty in India, based on National Sample Survey (NSS) data.

• Unlike previous scholars who had considered subsistence living or basic minimum needs criteria as the measure of poverty line, VM Dandekar and N.Rath were of the view that poverty line must be derived from the expenditure that was adequate to provide 2250 calories per day in both rural and urban areas.

Expenditure based poverty line estimation

• Generated a debate on minimum caloric consumption norms.

Alagh Committee (1979)

• Task force constituted by the planning commission under the chairmanship of YK Alagh, Constructed a poverty line for rural and urban areas on the basis of nutritional requirement and related consumption expenditure.
• Poverty estimates for subsequent year were to be calculated by adjusting the price level for inflation.

Lokdawala Committee (1993)

Task force chaired by DT Lokdawala, based on the assumption that the basket of goods and services used to calculate consumer price index-industrial workers (CPI-W) and consumer price index agricultural (CPI-AL) reflate the consumption patterns of the poor, made the following suggestion.

• Consumption expenditure should be calculated based on calori consumption as earlier.
• State specific poverty lines should be constructed and these should be updated using the CPI-W in urban areas and CPI-AL in rural areas.
• Discontinuation in scaling of poverty estimates based on National Accounts Statistics

Tendulkar Committee (2009)

Expert group constituted by the planning commission and chaired by Suresh Tendulkar was constituted to review methodology for poverty estimation and to address the following short coming of the previous methods:

Obsolete Consumption Pattern:

Consumption patterns were linked to the 1973-74 poverty line basket (PLBs) of goods and services, whereas there are significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates.

Inflation Adjustment:

There were issues with the adjustment of prices for inflation both spatially (across regions) and temporally (across time)

Health and Education Expenditure:

Earlier poverty lines assumed that health and education would be provided by the State and formulated poverty line accordingly.

Recommendations:

• Shift from Calori consumption based poverty Estimation

It based its calculations on the consumption of the item like Cereals, pulses, milk, edible oil, non-vegetarian item, vegetables, fresh fruits, dry fruits, sugar salt & spices, other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional & institutional), entertainment, personal & toilets goods.

Uniform poverty line basket:

Tendulkar committee calculated new poverty line for rural and urban area of each states based on the uniform poverty line basket and found that all India poverty line (2004-05) was:

₹ 446.68 per capita per month in rural areas

            ₹ 578.80 per capita per month in urban areas

Private Expenditure:

In corporation of private expenditure on health and education while estimating poverty.

Price Adjustment procedure:

The committee also recommended a new method of updating poverty lines.

Adjusting for changes in price and patterns of consumption:

(To correct spatial and temporal issues with price adjustment) using the consumption basket of people close to the poverty line.

Mixed reference period:

The Committee recommended using mixed-reference period based estimates as opposed to uniform reference period estimate that used in earlier method estimating poverty.

• Tendulkar Committee computed poverty lines for 2004-05 at the level that was equivalent, in purchasing power term to ₹33 per day.

Purchasing Power Parity:

The committee was setup in the backdrop of National outrage over the planning commissions suggested poverty line of ₹22 a day for rural areas.

Objectives:

• To review international poverty estimation methods and indicate-whether based on these a particular method for empirical poverty estimation can be developed in India.
• To recommend how these estimates of poverty can be linked to eligibility and entitlement under the various scheme of the government of India.

Recommendations:

Methodology used:

• The Rangarajan Committee estimation is based on an independence large survey of house holder by center for monitoring Indian-Economy (CMIE)
• It has also used different methodology where in a house hold is considered poor if it is unable to save.

Normative and Behavioural level

Poverty line should be based on

• Normative level of adequate nutrition ideal and desirable level of nutrition.
• Behavioral determination of non-food expenses:

What people use or consume as per general behavior

Nutritional Requirement

For normative level of adequate nutrition average requirements of calories, proteins and fats based on Indian Council of Medical Research (ICMR) norms, differentiated by age, gender and activity for all India rural and urban regions is considered:

Calori:         2090 Kcal in urban and 2155 Kcal in rural areas.

Protein:       For rural areas 48gm and for urban area 50 gram.

Fat:              Forurban areas 28gm and for rural areas 26gm.

Poverty Threshold:

Person spendingbelow ₹47 a day in cities and ₹32 in villages be considered poor.

• Based on this methodology, Rangarajan committee estimated using Tendulkar committee formula

Modified mixed reference period:

Instead of mixed reference period (MRP) it recommended modified mixed reference period (MMRP) in which reference period of different items were taken as:

• 365-days for clothing, footwear, educations, institutional medical care and durable goods.
• 7 days for edible oil, egg, fish and meat, vegetable, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants.

• 30 days for the remaining food, items, fuel and light, miscellaneous good and services including non-institutional medical, rents and taxes.

Criticism:

Rangarajan committee missed the opportunity to go beyond the expenditure based poverty rates and examine the possibility of wider multi-dimensional view of deprivation.

(Poverty Estimates by different committee)

India’s Poverty Analysis:

Poor as percentage of Indian population in 2011-12

Providing basic minimum needs to the people and reduction of poverty

Mechanism:

Planning commission:

Formed a study group in 1962 “Task forced on projection of minimum needs and effective consumption demand” was formed in 1979.

Expert group was formed 1989 for defining poverty

There are other methodology for the determination of poverty as

• Sen index
• Poverty gap index
• Square poverty gap

Head Count Ratio

When the number of poor is estimated as the proportion of people below the poverty line it is known as (Head count Ratio).

• Official date on Poverty is made available to the public by the planning commission (Now NITI Aayog)

• In 1973-74 about 55% population was below the poverty line.

Categorising Poverty

Graphical Representation

The poverty line

Different way to determine the poverty

• Monetary Value (Per capita expenditure)

Minimum Calori Intake     –    2400 (Rural)

• 2100 (urban)
• Rural- Rs. 328 per person per month
• For urban- Rs. 454 per person per month
• Accessibility to basic education, health care, drinking water and Sanitation
• Current mechanism for the determination of poverty line does not take social factors

Aim of poverty alleviation should be give above all parameters.

• In 1999-2000, it has fallen to 26%
• In 1973-74. More than 80% of poor resided in rural area and in 1999-2000 has come down to about 75%
• Three-fourth of poor in India. Reside in villages.
• In the 1990s, the absolute number of poor in rural area had declined whereas the number of their urban counter parts increased marginally.

• Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Orissa accounted about 70% of India’s poor during 1973-74

Aggregate poverty is just the sum of individual poverty poverty is also explained by general economic wide problems

Committee

Pre-Independence poverty estimation

• Dada Bhai Naoroji Through his book “Poverty and urbritish rule in India made the earliest estimation of poverty line (Rs.16 to Rs.35 per capita per year)
• The poverty line proposed by him was based on the cost of a subsistence or minimum basic diet.

National Planning committee’s (1938)

Poverty line (ranging from Rs. 15 to Rs.20 per capita per month) was also based on a minimum standard of living perspective in which nutritional requirement were implicit.

• In 1938, the national planning committee was set-up by Subhash Chandra Bose under the chairmanship of Jawaharlal Nehru for the purpose of drawing up an economic plan with the fundamental aim to ensure an adequate standard of living for the masses.

The Bombay Plan (1944)

• Proponents had suggested a poverty line of Rs. 75 per capital per year.
• The Bombay plan was setup of proposal of small group of influential business leaders in Bombay for the development of the post-independence economy of India.

Post-Independence Poverty Estimation

• Planning commission expert group (1962) working group constituted by the planning commission formulated the separate lines for rural and urban areas (Rs.20 and 25 per capita per year respectively)

VM Dadekar and N. Rath (1971)

Made the first systematic assessment of poverty in India, based on National Sample Survey (NSS) data.

• Unlike previous scholars who had considered subsistence living or basic minimum needs criteria as the measure of poverty line, VM Dandekar and N.Rath were of the view that poverty line must be derived from the expenditure that was adequate to provide 2250 calories per day in both rural and urban areas.

Expenditure based poverty line estimation

• Generated a debate on minimum caloric consumption norms.

Alagh Committee (1979)

• Task force constituted by the planning commission under the chairmanship of YK Alagh, Constructed a poverty line for rural and urban areas on the basis of nutritional requirement and related consumption expenditure.
• Poverty estimates for subsequent year were to be calculated by adjusting the price level for inflation.

Lokdawala Committee (1993)

Task force chaired by DT Lokdawala, based on the assumption that the basket of goods and services used to calculate consumer price index-industrial workers (CPI-W) and consumer price index agricultural (CPI-AL) reflate the consumption patterns of the poor, made the following suggestion.

• Consumption expenditure should be calculated based on calori consumption as earlier.
• State specific poverty lines should be constructed and these should be updated using the CPI-W in urban areas and CPI-AL in rural areas.
• Discontinuation in scaling of poverty estimates based on National Accounts Statistics

Tendulkar Committee (2009)

Expert group constituted by the planning commission and chaired by Suresh Tendulkar was constituted to review methodology for poverty estimation and to address the following short coming of the previous methods:

Obsolete Consumption Pattern:

Consumption patterns were linked to the 1973-74 poverty line basket (PLBs) of goods and services, whereas there are significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates.

Inflation Adjustment:

There were issues with the adjustment of prices for inflation both spatially (across regions) and temporally (across time)

Health and Education Expenditure:

Earlier poverty lines assumed that health and education would be provided by the State and formulated poverty line accordingly.

Recommendations:

• Shift from Calori consumption based poverty Estimation

It based its calculations on the consumption of the item like Cereals, pulses, milk, edible oil, non-vegetarian item, vegetables, fresh fruits, dry fruits, sugar salt & spices, other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional & institutional), entertainment, personal & toilets goods.

Uniform poverty line basket:

Tendulkar committee calculated new poverty line for rural and urban area of each states based on the uniform poverty line basket and found that all India poverty line (2004-05) was:

₹ 446.68 per capita per month in rural areas

            ₹ 578.80 per capita per month in urban areas

Private Expenditure:

In corporation of private expenditure on health and education while estimating poverty.

Price Adjustment procedure:

The committee also recommended a new method of updating poverty lines.

Adjusting for changes in price and patterns of consumption:

(To correct spatial and temporal issues with price adjustment) using the consumption basket of people close to the poverty line.

Mixed reference period:

The Committee recommended using mixed-reference period based estimates as opposed to uniform reference period estimate that used in earlier method estimating poverty.

• Tendulkar Committee computed poverty lines for 2004-05 at the level that was equivalent, in purchasing power term to ₹33 per day.

Purchasing Power Parity:

The committee was setup in the backdrop of National outrage over the planning commissions suggested poverty line of ₹22 a day for rural areas.

Objectives:

• To review international poverty estimation methods and indicate-whether based on these a particular method for empirical poverty estimation can be developed in India.
• To recommend how these estimates of poverty can be linked to eligibility and entitlement under the various scheme of the government of India.

Recommendations:

Methodology used:

• The Rangarajan Committee estimation is based on an independence large survey of house holder by center for monitoring Indian-Economy (CMIE)
• It has also used different methodology where in a house hold is considered poor if it is unable to save.

Normative and Behavioural level

Poverty line should be based on

• Normative level of adequate nutrition ideal and desirable level of nutrition.
• Behavioral determination of non-food expenses:

What people use or consume as per general behavior

Nutritional Requirement

For normative level of adequate nutrition average requirements of calories, proteins and fats based on Indian Council of Medical Research (ICMR) norms, differentiated by age, gender and activity for all India rural and urban regions is considered:

Calori:         2090 Kcal in urban and 2155 Kcal in rural areas.

Protein:       For rural areas 48gm and for urban area 50 gram.

Fat:              Forurban areas 28gm and for rural areas 26gm.

Poverty Threshold:

Person spendingbelow ₹47 a day in cities and ₹32 in villages be considered poor.

• Based on this methodology, Rangarajan committee estimated using Tendulkar committee formula

Modified mixed reference period:

Instead of mixed reference period (MRP) it recommended modified mixed reference period (MMRP) in which reference period of different items were taken as:

• 365-days for clothing, footwear, educations, institutional medical care and durable goods.
• 7 days for edible oil, egg, fish and meat, vegetable, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants.

• 30 days for the remaining food, items, fuel and light, miscellaneous good and services including non-institutional medical, rents and taxes.

Criticism:

Rangarajan committee missed the opportunity to go beyond the expenditure based poverty rates and examine the possibility of wider multi-dimensional view of deprivation.

(Poverty Estimates by different committee)

India’s Poverty Analysis:

Poor as percentage of Indian population in 2011-12