There is constant confusion in India over BPL (below poverty line) figures proffered by different agencies. The latest is the debate over the Rangarajan Committee’s estimates, as against the assessment of the Tendulkar Committee. The difference in their estimates is due to variation in the parameters adopted.
In other words, the definition of poverty differs from person to person, and from country to country. In many European countries, a person with a net disposable income of less than 60 per cent of median net disposable income (a broad measure of national average income) is considered poor.
In the UK, a person would be poor if net income is less than £9 (about ₹805) a person a day. In the US, poverty level was computed at about $15.60 (approximately ₹767 at the prevailing exchange rate) a person a day in 2011. This also takes into account a minimum expenditure on non-food items. These thresholds are adjusted for inflation every year.
In India, the definition of poverty line has changed over time. In the late 1970s and early 1980s, economists Yoginder Alagh and DT Lakdawala defined poverty based only on spending on food that could provide 2,400 Kcal and 2,100 Kcal a person a day in rural and urban areas respectively. They did not consider housing and clothing. In 2009, Suresh Tendulkar defined poverty more comprehensively by adding expenditure on clothing, housing, health, fuel, light conveyance and entertainment, among other things, besides food. The calorie requirement was reduced to 2,100 Kcal and 1,776 Kcal for rural and urban areas, respectively, due to lifestyle changes.
The Rangarajan Committee has worked out the average requirements of calories, proteins and fats according to the norms set by the Indian Council of Medical Research to be 2,155 Kcal in rural areas and 2,090 Kcal in urban areas a person a day. These are higher than Tendulkar’s estimate but lower than those of Lakdawala. For essential non-food items such as education, health, clothing, shelter and conveyance, Rangarajan recommended that average observed expenditure by households in the median fractile (45-50 percentiles) be taken as normative private consumption.
Based on these new assumptions, Rangarajan raised the minimum requirement of daily per capita expenditure to ₹33 (from ₹27) for the rural poor and ₹47 (from ₹33) for the urban poor. In terms of purchasing power parity (PPP), ₹47 is equivalent to $2.44, which is higher than the World Bank defined poverty line of $2.
One more committeeIn view of all this, the moot question is: How does one evolve a rational definition of poverty? In this connection, it is worth considering a few points.
First, a new and final committee of experts should be set up. It should take the Rangarajan Committee’s reports as a reference point and remove any lacunae in its methodology. It should cover items such as eggs and milk, besides basic needs such as public school education (the poor already get free education and mid-day meals in government schools) and healthcare in non-government hospitals.
Second, the new Committee should simultaneously look into the methodologies of developed nations; after necessary modifications these could be adapted to our social structure.
Third, once the methodology is finalised, we should stick to it, update various cost factors every year for inflation, and review the poverty line accordingly. This would also provide a basis for comparing BPL figures over time.
Fourth, as aspirations for a better quality of life grow with our economy, we should also revise costs by moving up from public to private schools, and from government hospitals to private hospitals.
These changes are necessary to set the controversy to rest once and for all. Prime Minister Narendra Modi should save our worthy economists and statisticians of this embarrassment over poverty numbers, which is a very important parameter for driving social schemes.
The writer is a former director of the Central Statistical Organisation