Because poverty looks different now….Rajesh Shukla , SL Rao
Income and expenditure data are imperfect ways to identify the poor, we need nuanced social and economic profiling.
Income and expenditure data are imperfect ways to identify the poor, we need nuanced social and economic profiling.
The uproar over the Planning Commissions decision about how many are really poor, and who will be supplied free (or cheap) grain, points to the need for better data for identifying the poor.
The poor are also consumers of manufactured goods. Approximately one-fourth of the around 14 million officially-designated poor urban households own a two-wheeler; one-third own a colour television; and almost two-thirds own a pressure cooker. Almost one in five urban official poor households has at least one well-educated member, a graduate or above. The 56 million-strong rural BPL population too exhibits varying degrees of consumption. While every tenth household has a two-wheeler, every fifth BPL village has a kitchen, and about 6 per cent of rural poor households have a colour TV. There is thus clear ambiguity about what poverty, urban or rural, is.
Periodic income surveys could dispel many of the ambiguities and provide useful information, as the National Council for Applied Economic Research (NCAER) has shown. Almost 50 years ago, V.M. Dandekar and N. Rath used calorie intake to determine the numbers below the poverty line. Much has changed since for the Indian economy and its society. There are five estimated poverty ratios: 21.8 per cent and 27.5 per cent from the Planning Commission under different assumptions; 78 per cent from the Arjun Sengupta Committee; 42 per cent from the World Bank; and 37.2 per cent from Suresh Tendulkar.
They were applied to the per capita income data from NCAERs 2004-05 income-expenditure survey, to estimate the socio-economic characteristics of poor households.
We find that poor households spend about 61 per cent on food out of their total expenditure, irrespective of whether the poverty ratio is that of the Planning Commission, the World Bank or Tendulkar. However, if the NCAER poverty ratio is applied, the corresponding figure is around 56 per cent. Expenditure on healthcare is almost the same (around 5 per cent of the total expenditure) for all the poor, irrespective of the poverty ratio applied for identifying them.
Expenditure on education by poor households was 5.7 per cent of total expenditure as measured by the poverty ratios estimated by the Planning Commission, the World Bank and Tendulkar; the poor classified by the poverty ratio given by the NCAER, spend a little more on education (6.2 per cent). The argument that education and health for the poor is free is a specious one. Many surveys have established that the rural poor spend on private tuition to supplement the low quality of teaching in most government schools; and that using primary health centres involves expenditure on medicines, bribes and so on.
The percentage share of illiterate chief earners in the total number of households increases with a decrease in poverty ratio. On the other hand, the percentage share of the graduate chief earners in the total number of households decreases with a fall in the poverty ratios. Again, as expected, the main occupation (in terms of the major source of income) of a majority of the poor households is labour.
It was found that the major source of income of 10 per cent poor households is salary while for the others, the corresponding figure is around 2-3 per cent.
Out of the 78 per cent poor, as recognised by the NCAER, about one-fourth own a two-wheeler and another one-fourth own a colour television. Also, 41 per cent of them possess pressure cookers and 8 per cent own refrigerators. This data makes it difficult to draw a line between the poor and the non-poor.
Again, in accordance with the World Banks figures, more than 12 per cent of the poor own two-wheelers, 10 per cent own a colour TV, more than 2 per cent have a refrigerator, and around 25 per cent were found to own a pressure cooker. Though the World Bank and Suresh Tendulkar present different poverty ratios, the estimates of ownership of two-wheelers, TVs, pressure cooker and refrigerator are more or less the same for both. On the other hand, the Planning Commission poverty ratios suggest that poor households own fewer assets, as compared to the estimates given by the NCAER, Tendulkar and the World Bank.
NCAER income data suggests not only that inequality is increasing but that inequality levels in rural areas are disconcertingly close to those in urban areas, and are rising almost at the same rates. The inequality level in India is now comparable to several developed and middle-income countries, such as China, Hong Kong, Singapore, and the US. Our calculations suggest that the vulnerable proportion of the population is significantly lower than estimated by the Sengupta Committee, more so in the urban areas.
The comparable results from NCAER on a variety of indicators reported encourage the belief that it is possible to collect household income data in Indian conditions. The relevance of income-based measures of inequality highlights the vast gap that exists between income and expenditure inequality. It is time for efforts to be intensified in strengthening income surveys. While official data collection agencies like NSSO have been mandated to collect household welfare indicators to monitor the progress in access to consumption of the basic necessities, the collection of household income data is useful for identifying the inequalities which exist in various forms in a multi-religious and multi-cultural country like India.
There have been three BPL censuses, conducted in 1992, 1997 and 2002, respectively and as the pilot for the 2011 BPL census is underway, we need research on other reliable sources to enhance the process used to pick the multi-dimensionality of poverty in India rural, urban, regional, etc. This will have a strong bearing on the political economy of the country while governments, both at the Centre and the states go about implementing their inclusive development mandate. This could lead to a nuanced and better informed debate on the BPL population. It will have a bearing on the governments subsidies directed at the vulnerable sections of Indian society.
Our analyses suggest that one needs to assess the socio-economic characteristics of households to identify the real poor rather than simply drawing a line between the poor and the non-poor on the basis of income and expenditure to allocate resources for poverty reduction, and to monitor progress against a clear benchmark.
Shukla is the director of the NCAER Centre for Macro Consumer Research. S.L. Rao is an economist and former director of NCAER