How do you define poverty? Is poverty being underestimated in India?

P.C. Mohanan: We had a stable definition of poverty from the late 1970s to 2005. We started with the expenditure required for sustaining a minimum calorie diet and that used to be updated every five years using the National Sample Survey Office (NSSO) data. When the NSSO started the whole exercise, its estimates of private expenditure and those of the National Accounts were very similar, so there was no controversy. But over the years, their estimates diverged so much that questions came up about the accuracy of the NSS data.

Then, the government appointed the Tendulkar Committee. At the same time, the NSSO also started experimenting with different methodologies to improve the collection of consumption expenditure and that meant using different recall periods. (A recall period is when a respondent is asked to recall their consumption expenditure over a specific time period.) After 2011-12, the government neither had official poverty estimates nor conducted a survey. People started using alternative estimates of expenditure and later, the multidimensional poverty index was used. So, using certain data sets, there have been claims that poverty has drastically come down. But that is questionable because it depends on the poverty line and the data.

N.R. Bhanumurthy: In the last two decades, the number of people below the poverty line has drastically come down, whatever line you take. But the delta between the two decades (the change in poverty estimation over a period of time) is very large for many reasons such as high GDP growth, increase in public expenditures through a number of flagship programmes introduced by the Union and State governments, and an improved public delivery system. In addition, we still have the National Food Security Act, which covers nearly 80 crore people. So, saying that people still live in extreme poverty would be counter-intuitive, if that is happening.

Initially, while defining poverty, we were talking about calorie consumption alone. Now, the definition has been broadened. And that is the way to go. If you use the Tendulkar line or the Rangarajan line, you might get different numbers, but the change between two rounds in both the methods would be more or less the same and close to 17% or 18%. Dr. Rangarajan himself estimated that poverty was close to 10% based on the 2022-23 survey. With the recent factsheet, I wouldn’t be surprised if poverty would have come down further to single digits.

What are your concerns with the HCES data?

PCM: Over the years, there has been a divergence between the NSSO per capita household consumption expenditure data and those from the National Accounts. Some of the issues were because of the recall period. The NSSO started experimenting with different recall periods. While it set a seven-day recall period for certain items, it set a 30-day period for others. But these estimates then could not be compared with previous consumption estimates, which had different recall periods. We had the uniform reference period (URP), where we had 30 days of recall for all items, and the mixed reference period (MRP) using 30 days (food) and 365 days (for other goods). Tendulkar estimated poverty based on MRP. Then we had the modified mixed reference period (MMRP) — seven days for food items along with 30 days and 365 days for other items. This gives you a higher estimate of expenditure because your recall is better. If you use the higher expenditure distribution on a lower poverty line, which is what many researchers have done, naturally your poverty goes down. Rangarajan had suggested a different methodology in his committee report, but the government did not accept that. In the last two years, the NSSO has made a further modification by visiting households in three sittings instead of one. This way, data reporting is better because respondents get more time and can recall better. The current methodology will still give us higher expenditure. But if you use this data on the older poverty line, your estimate will come down. Very few people have tried to create a new poverty line for the NSSO’s new methodology. This is a major gap.

NRB: We need to improve the methodology. We cannot go with a URP because some expenditures would not have been made in the last seven days or the last month. Right now we are looking at a slightly broader aspect of consumption. If you look at the factsheet, food articles constitute less than 50% of the total consumption basket. So, it shows that we are not spending on food items alone and are looking at other services required for the household. In that sense, there is a need for us to re-examine the old methodology. The present criticism is with the estimate that suggests a decline in poverty by over 17% between two rounds. I would say that whatever poverty line we use, the decline in the number of poor between 2011-12 and 2023-24 would be closer to 17% or more.

What do we know about poverty in rural and urban regions?

PCM: The data show that the rural-urban differential in consumption is actually coming down. Rural areas are doing better. But the idea of a rural area that we have is based on the 2011 Census, so a significant portion of the rural areas is basically urban or peri-urban in character. Earlier, food expenditure used to be the major component of rural consumption patterns. But the 2022-23 data show that a substantial number of items are the same in urban and rural areas now, which means rural consumption has actually changed in terms of diversity. We need to put a statistical base in place, including a Census, so we know what is rural and urban.

NRB: There should be clear-cut separation of what is rural and urban. If we decide to shift peri-urban to urban areas, I think urban poverty would have declined much faster than the preliminary estimates we have now. In any case, at the aggregate, we see a sharp fall in the number of poor, but in terms of consumption, we have to look at public policy interventions.

Where do you stand on an upward revision of the poverty line in India?

PCM: A research paper by the Foundation for Agrarian Studies used the Rangarajan methodology on the 2022-23 HCES data. They estimated around 25% poverty. I’m not clear that by just updating a poverty line in that fashion, we would have a definite estimation. But we need to have some agreement on a methodology and the government needs to stand behind that. That is unlikely to happen.

NRB: With the United Nations Development Programme (UNDP) laying down $2.15/day as a poverty line, even their estimates suggest poverty was just about 12.9% in 2019. So, I don’t agree with the 25% figure that Dr. Mohanan is quoting. NITI Aayog’s estimates also don’t really support that number. However, I agree with him that we need to have a clear-cut methodology for a poverty line estimation, but at the same time we need to stick to a single poverty line.

There have been some criticisms against Niti Aayog’s multidimensional poverty index. UNDP’s index has 10 indicators and India’s index has 12. Is this criticism valid?

NRB: The UNDP has one methodology for all countries. It is only a framework that suggests what needs to be part of your consumption basket. But it is left to the countries to customise that methodology. Broadening that basket is the right way to do it. We have rightly added bank accounts and maternal health to the 10 indicators that the UNDP includes in its index.

PCM: I am not sure about that because multidimensional poverty tells you whether you are deprived of that particular indicator or not. Now there are many indicators which may not be applicable to a household. When you don’t have a child, all those indicators related to a child are not relevant, so that household is not deprived of those things. Many of the indicators actually don’t go down. Once you have access to electricity, a bank account, etc., you don’t get deprived of those indicators in future. This index will never go up. Poverty estimates will continue to stay low because of the way the indicators have been selected. There is no scope for getting deprived in future. We don’t measure income vulnerability and we need to do that.

Listen to the conversation in The Hindu Parley podcast

Published – January 24, 2025 10:17 am IST