Efforts to estimate poverty from 2011-21 are commendable, given absence of data

What does the poverty index measure or attempt to capture? Its construction involves complex calculations — to identify a poverty basket of consumption, working out price indices for updation of the poverty line and then applying it to the income or consumption of households for determining their poverty status. The computation becomes far more challenging in the absence of data on consumption expenditure as is the case in India and several developing countries. Intending to provide inputs for policy making, researchers have evolved ingenious methods of estimating the data, using past datasets and those that have not been designed to get robust expenditure estimates.

One must compliment the researchers who have taken up this challenge and consider these seriously to examine the extent to which these maintain temporal and cross-sectional comparability and, more importantly, what exactly they can convey to policymakers. A nine-member working group set up by the Planning Commission proposed the poverty line at Rs 20 per capita per month in the early Sixties, loosely ensuring the adequacy of minimum requirements. Dandekar and Rath (1970) went into detail about minimum calorie needs, based on the average consumption pattern. During the Eighties and Nineties, it was realised that this linkage is getting blurred due to changes in the consumption pattern, microenvironment for living, etc. Sukhatme argued that the emphasis on calories and nutrition is misplaced as the absorption of nutrients depends on physical health, particularly the presence or absence of gastrointestinal diseases. Water and sanitation facilities were noted as important in determining the poverty line. Minhas’s exhaustive work too suggested that calorie/nutrient requirements are largely socially and culturally determined and even biological needs vary within a household. It was accepted that the state, through poverty interventions, cannot and should not try to guarantee adequate nutrition to people. The Tendulkar Committee formally announced delinking of nutritional norms from poverty in 2010.

As the transition was taking place, Lakdawala beseeched Minhas at a seminar “not to remove the pegs on which the whole poverty debate hangs”. He thought that poverty has a special punch and force in policy discourse at the national and global levels because people associate it with suffering. If it is reduced to a number that is temporally and cross-sectionally comparable but lacks in the content of misery, it will cease to be an instrument to pressure the government for appropriate welfare policies.

Bhalla, Virmani and Bhasin (2022) in their IMF Working Paper have done a commendable job in developing a method of interpolation and extrapolation of the consumption expenditure of the NSS 2011-12 and building a series up to 2019-20. They use the growth rate of private final consumption expenditure (PFCE) but bring in the distributional changes by allowing household consumption to grow as per the nominal per capita income in each state. Rural-urban price differences are also introduced through separate poverty lines. The method is reasonable except that it assumes the distributions to remain unchanged both within the rural and urban segments in each state over 2014-20. One wonders if they could use other multipliers for updating, for example, the growth rate of income in the economic activity with which the household is associated. Also, the growth rates of different commodities in the PFCE are significantly different and hence commodity-wise adjustments can be done to give higher weights to the items of consumption by the poor.

The most significant contribution of the study is its bringing in the differential engagement of the state in the provisioning of the essentials to the poor into poverty calculations. This opens up the possibility of changes in the level of state engagement in poverty estimation, including free gas cylinders, etc. However, this must be supplemented by an assessment of the disengagement of the state in social sectors such as education and health

The paper by Roy and Weide (2022) for the World Bank explores the possibility of using CMIE in poverty calculations after correcting for the unrepresentative character of its panel data by modifying the weightages of households for aggregation. Indeed, the asset position and level of basic amenities are generally higher in CMIE samples than in more robust national sources. Happily, these adjustments carried out to remove the non-convergence of the CMIE data with other macro statistics have resulted in a poverty figure of 12 per cent. People find this more acceptable not because of the methodology but the magnitude. One does not know whether the poverty estimate would be a bit higher had the adjustments been carried out for a few other parameters and also at the state level.

The writer is senior fellow at the World Resources Institute, New Delhi