The Hindu Business Line : Is `Bharat' shining more than `India'?

The Planning Commission's latest poverty estimates show a sharper reduction in rural poverty rates compared to that in urban areas in the post-reform era.

Moreover, the rural poor population has actually shrunk in absolute terms by over 2.3 crore between 1993-94 and 2004-05, while rising by almost 45 lakh in urban India.

But this seemingly incredible story of `Bharat' faring better than `India' does not stop there. The Plan panel's State-level poverty estimates — derived from the National Sample Survey Organisation's (NSSO) household consumer expenditure data as per the `mixed recall period' method — go a step further.

In 2004-05 (July-June), there were at least four States — Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu — where the number of urban poor exceeded the corresponding rural population below the poverty line. In other words, it is `Bharat' that is shining more than `India', with urban squalor posing greater problems than rural distress in these States.

How does one explain this trend that apparently defies common perception? One reason, some economists believe, has to do with the computation of the poverty line itself. The Planning Commission has basically employed the original State-specific poverty lines constructed by the Expert Group (under Prof D.T. Lakdawala, which gave its report in July 1993) for rural and urban areas. These have then been projected at 2004-05 prices using the official Consumer Price Indices (CPI) for agricultural labourers and industrial workers, respectively.

Here again, it is interesting that the rural poverty lines for Andhra Pradesh, Karnataka and Tamil Nadu work out lower than the all-India level. Simply put, a villager in Andhra Pradesh with a monthly spend of less than Rs 300 (Rs 10 daily) is not termed `poor', whereas the average rural poverty threshold for the country is about Rs 356.

By contrast, the urban poverty lines of all these States are above the corresponding all-India figure. In Maharashtra, an urbanite has to spend roughly Rs 130 more than the average poor urban Indian in order to officially escape poverty. While this is realistic — living costs in Mumbai, Chennai, Bangalore or Hyderabad are obviously higher than in other urban centres — it may not be so for the rural poverty lines, which appear to be pegged at artificially low levels.

To the extent that the poverty line — based on a standardised commodity basket and valued at State-specific price points — is kept low, there is a proportionate underestimation of rural poverty.