Planning Commission and Poverty



I wish press releases by Planning Commission were better drafted.  I am referring to poverty estimates for 2009-10.  First, the big picture story – all-India poverty ratio (head count ratio or percentage below poverty line) has declined from 37.2% in 2004-05 to 29.8% in 2009-10, with a drop from 41.8% to 33.8% in rural India and a drop from 25.7% to 20.9% in urban India.  A drop of 1% per year (or marginally below) is par for the course, because of growth alone.  The drop for rural India is therefore sharper than expected and needs to be probed about the reasons. To state the obvious, this is percentages and absolute number of poor is a different issue.  

Declines have been marked in HP, MP, Maharashtra, Orissa, Sikkim, TN, Karnataka and Uttarakhand, marginal in Bihar, Chhattisgarh and UP and there have been increases in Assam, Meghalaya, Manipur, Mizoram and Nagaland.  At a broad level, non-Congress States perform better in poverty reduction than Congress States and this should raise some questions about efficacy of inclusive growth and delivery and implementation of anti-poverty measures.          

But consider the way this was reported in the media.  When poverty estimates were done for 2004-05 earlier, there was a poverty line.  And when poverty estimates have been done for 2009-10 (and redone for 2004-05), there is a different poverty line.  The nominal poverty line seems to have declined.  Logically, given inflation, that is impossible.  The reason is buried in Planning Commission’s press release.

“The Tendulkar Committee for the first time recommended use of implicit prices derived from quantity and value data collected in household consumer expenditure surveys for computing and updating the poverty lines. Tendulkar Committee developed a methodology using implicit prices for estimating state wise poverty lines for the year 2004-05. Using these poverty lines and distribution of monthly per capita consumption expenditure based on mixed reference period (MRP), the Tendulkar Committee estimated poverty ratios for the year 2004-05. In its Report, Tendulkar Committee recommended a methodology for updating 2004-05 poverty lines derived by it.”  

In other words, the methodology has changed.  Earlier, inflation indices were used to move the poverty line up.  Now, prices are deduced from household consumption surveys.  Given the sensitive nature of poverty estimates, one would have expected Planning Commission to be clearer about what is being done.  There has been a subsequent clarification, but the damage has been done.           

There is a completely separate issue about what this poverty line measures, since it is based on food and clothing and poverty is a multi-dimensional concept and why Planning Commission should be computing it all.  

Planning Commission needs it to figure out funds transfer to States on anti-poverty measures.  Discretionary transfers through Planning Commission should be stopped and only should only have transfers through the Constitutionally-mandated Finance Commission.  That apart, decentralized identification of poverty is best left to States.  If this is done, Planning Commission will avoid unnecessary embarrassment and controversy, whether it is before the Supreme Court, or otherwise.



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