Poverty of Philosophy

The Planning Commission has once again embarrassed us with its claims of decline in poverty by 2011-12 to grossly unrealistic levels of 13.7 per cent of population in urban areas and 25.7 per cent in rural areas, using monthly poverty lines of Rs. 1,000 and Rs. 816 respectively, or Rs. 33.3 and Rs. 27.2 per day. These princely amounts will pay for one urban male haircut while they are supposed to meet all daily food and non-food living costs. The poverty decline claimed is huge, a full 8 per cent points fall in rural areas over the two years since 2009-10, and a 7 per cent points fall in urban areas. The logically incorrect estimation method that the Commission continues to use makes it an absolute certainty that in another four years, when the 2014-15 survey results become available, it will claim that urban poverty is near zero and rural poverty only around 12 per cent. This will be the case regardless of any rise in actual deprivation and intensification of actual poverty.
One Tendulkar makes the big scores. The other wrecks the averages. The Planning Commission clearly prefers Suresh to Sachin. Using Professor Suresh Tendulkar’s methodology, it declares that there’s been another massive fall in poverty. Yes, another (“more dramatic in the rural areas”). “Record Fall in Poverty” reads one headline. The record is in how many times you’ve seen the same headline over the years. And how many times poverty has collapsed, only to bounce back when the math is done differently.
 And so, a mere 29.9 per cent of India’s population is now below the official poverty line (BPL). The figure was 37.2 per cent in 2004-05. The “line” is another story in itself, of course. But on the surface, rural poverty has declined by eight percentage points to log in at 33.8 per cent. That’s down from 41.8 per cent in 2004-05. And urban poverty fell by 4.8 percentage points from 25.7 to 20.9 per cent in the same period. Millions have been dragged above the poverty line, without knowing it.
Media amnesia fogs the “lowest-ever” figures, though. These are not the “lowest-ever.”
“Kill me, I say,” said Prof. Madhu Dandavate in 1996, chuckling. “I just doubled poverty in your country today.” What that fine old gentleman had really done, as Deputy Chairperson of the Planning Commission, was to jettison the bogus methodology peddled by that body before he came to head it the same year. Even minor changes in methodology or poverty line can produce dramatically differing estimates.
The fraud he undid was “an exercise” bringing poverty down to 19 per cent in 1993-94. And that, from 25.5 per cent in 1987-88. These were the “preliminary results of a Planning Commission exercise based on National Sample Survey data”. Now if these figures were true, then poverty has risen ever since..
However, now Planning Commission numbers have achieved one thing. They’ve united most of Parliament on the issue. Members from all parties have blasted the “estimates” and called for explanations.
There’s also the Tendulkar report’s own fiddles. As Dr. Madhura Swaminathan points out, the committee dumped the calorie norms of “2,100 kcal per day for urban areas and 2,400 kcal for rural areas.” It switched to “a single norm of 1,800 kcal per day.” And did so citing an “FAO norm.” As Dr. Swaminathan observed: “the standards set by the Food and Agriculture Organisation for energy requirements are for “minimum dietary energy requirements” or MDER. That is, “the amount of energy needed for light or sedentary activity.” And she cites an FAO example of such activity. “…a male office worker in urban areas who only occasionally engages in physically demanding activities during or outside working hours.” As Dr. Swaminathan asks: “Can we assume that a head load worker who carries heavy sacks through the day is engaged in light activity?”
That the Planning Commission thought they could slip the present bunkum by sets a new benchmark for — and marriage of — arrogance and incompetence. First, they sparked outrage with their affidavit in the Supreme Court. There they defended a BPL cut-off line of Rs.26 a day (rural) and Rs.32 (urban). Now they hope to get by with numbers of Rs.22.42 a day (rural) and Rs.28.35 a day (urban).
The same year the government and planning commission shot themselves in both feet in 1996, a leading Delhi think tank joined in. It came up with the “biggest ever study” done on poverty in the country. This covered over 30,000 households and queried respondents across more than 300 parameters. So said its famous chief at a meeting in Bhopal.
This stunned the journalists in the audience. Till then, they had been doing what most journalists do at most seminars. Sleeping in a peaceful, non-confrontational manner. A veteran startled. “Did he mean they asked those households over 300 questions? My God! Thirty years in this line and the biggest interview I ever did had nine. That was with my boss’s best friend. And my last question was ‘may I go now’?” We did suggest to the famous economist that battered with 300 questions, his respondents were more likely to die of fatigue than of poverty. A senior aide of the think tank chief took the mike to explain why we were wrong. We sent two investigators to each household, he said. Which made sense, of course: one to hold the respondent down physically, twisting his arm, while the other asked him 300 questions.
 All official claims of low poverty level and poverty decline are quite spurious, solely the result of mistaken method. In reality, poverty is high and rising. By 2009-10, after meeting all essential non-food expenses (manufactured necessities, utilities, rent, transport, health, education), 75.5 per cent of rural persons could not consume enough food to give 2200 calories per day, while 73 per cent of all urban persons could not access 2100 calories per day. The comparable percentages for 2004-5 were 69.5 rural and 64.5 urban, so there has been a substantial poverty rise.
When the NSS released its nutritional intake data for 2011-12 we see the change up to that year, but given the high rate of inflation and sluggish job growth, the situation is as bad. The National Sample Survey Organisation’s newest set of consumption expenditure data for 2011-12 gives an insight into how those across the spectrum, from the poorest to the richest, live in different parts of India. An individual who spends over Rs. 2,886 per month in a rural area or Rs. 6,383 per month in an urban area is in the top 5% of the country (and this is using the modified mixed reference period, which gives the most generous expenditure estimates). This translates to spending Rs. 96.2 and Rs. 212.77 per day. The top 10% of the country includes anyone who spends over Rs. 2,296 per month in a rural area and Rs. 4,610 per month in an urban area.
Moreover, even though poverty rates are converging, massive inter-State differences remain. A person spending over Rs. 1,995 per head would be well into the top 5% of rural Bihar, but more than half of Kerala is spending at that level. Similarly, spending Rs. 1,710 per month would put a person in rural Jharkhand into the top 5% of her State, but over 60% of Punjab is spending at that level. In urban India, spending Rs. 3,400 per month in urban Bihar would put a person into the top 5% of that State, but only the top 30% of Delhi. Conversely, 30% of urban Chhattisgarh lives on a monthly per capita expenditure of Rs. 1,046, while less than 5% of Kerala lives at that level of expenditure. Then there is the question of what the rich and poor are spending their money on; absolute spending on food rises as one climbs the income ladder in both rural and urban India, even as its proportion in total expenditure falls.
What is the basic problem with the Planning Commission’s method which produces its low and necessarily declining estimates, regardless of ground reality? The Commission in practice gave up its own definition of the poverty line which was applied only once — to get the 1973-74 estimate. After that, it has never looked over the next 40 years even once for deriving poverty lines at the actual current spending level, which will allow the population to maintain the same standard of living in terms of nutrition after meeting all non-food costs — even though these data have been available in every five-yearly NSS survey.
The Commission instead simply applied price indices to bring forward the base year monthly poverty lines of Rs 49 rural and Rs.56 urban in 1973-74. The Tendulkar committee did not change this aspect; it merely altered the specific index.
Price indexation does not capture the actual rise in the cost of living over long periods. Those doing the poverty estimates would be the first to protest if their own salaries were indexed only through dearness allowance. A fairly high level government employee getting Rs.1,000 a month in 1973-74 would get Rs.18,000 a month today if the salary was only indexed. The fact that indexing does not capture the actual rise in the cost of living is recognised by the government itself by appointing decadal Pay Commissions which push up the entire structure of salaries — an employee in the same position today gets not Rs.18,000 but a four times higher salary of over Rs.70,000. Yet those doing poverty estimates continue to maintain the fiction that the same standard of living can be accessed by the poor by merely indexing the original poverty line, and they never mention the severely lowered nutritional access at their poverty lines which, by now, are destitution lines.
The fact is that official poverty lines give command over time to a lower and lower standard of living. With a steadily lowered standard, the poverty figures will always show apparent improvement even when actual deprivation is worsening. A school child knows that if last year’s percentage of students passing the annual examination is to be compared to this year’s percentage, the pass mark should be the same. The school principal cannot quietly lower the pass mark without informing the public, say from 50 out of hundred last year to 40 this year, and then claim that the school’s performance has improved because 80 per cent of students are recorded as ‘passed’ this year at the clandestinely lowered pass mark, compared to 75 per cent of students last year. If, at the same pass mark of 50, we find that 70 per cent of students have passed this year, we are justified in saying that the performance, far from improving, has worsened. If the school is allowed to continue with its wrong method, and lower the pass mark further next year, and again the next year, so ad infinitum, it is eventually bound to record 100 per cent pass and zero failure.
The case is exactly the same with the official poverty lines as with the pass mark: the poverty lines have been lowered continuously below the standard over a very long period of 40 years. ‘Poverty’ so measured is bound to disappear from India even though in reality it may be very high and worsening over time. The Commission’s monthly poverty line for urban Delhi state in 2009-10 is Rs.1,040 — but a consumer spending this much could afford food that gave only 1400 calories a day after meeting all other fast rising expenses. The correct poverty line is Rs.5,000 for accessing 2100 calories, and a staggering 90 per cent of people have been pushed below this, compared to 57 per cent below the correct poverty line of Rs.1,150 in 2004-05. Given the very high rate of food price inflation plus the rising cost of privatised medical care and utilities, it is not surprising that people are being forced to cut back on food, and the average calorie intake in urban Delhi has fallen to an all-time low of 1756. While a high-visibility minority of households with stable incomes is able to hire-purchase multiple cars per household and enjoy other durable goods, the vast working underclass which is invisible to the rich is struggling to survive. Fifty five per cent of the urban population cannot access even 1800 calories today, compared to less than a quarter in that position a mere five years earlier.
Why, it may be asked, do the highly trained economists in the Commission ignore reality and continue with their incorrect method? Surely they can see as we do, that their Rs.1040 poverty line gives access to a bare-survival 1400 calories. Part of the answer is that the ramifications of using the wrong method extend globally, for the World Bank economists have, for decades, based their poverty estimates on the local currency official poverty lines of developing countries, including India.
The World Bank claim of poverty decline in Asia is equally spurious. In reality, under the regime of poor employment growth and high food price inflation, poverty has been rising. To admit this would mean that the entire imposing-looking global poverty estimation structure, employing hundreds of economists busy churning out wrong figures, would come crashing down like a rotten termite-eaten house.
The media rarely mention that there are other methodologies for measuring poverty on offer. Also set in motion by this same government. The National Commission for Enterprises in the Unorganised Sector (NCEUS) saw BPL Indians as making up 77 per cent of the population. The N.C. Saxena-headed BPL Expert group placed it at around 50 per cent. Like the Tendulkar Committee, these two were also set up by government. While differing wildly, all three pegged rural poverty at a higher level than government did. Meanwhile, we will have many more committees on the same issue until one of them gives this government the report it wants. The one it can get away with.
However, even while the Opposition pillories the Planning Commission for using a formal definition of poverty that ensures the percentage of people below the poverty line is lower than what it ought to be, the government itself has begun moving to a broader and more realistic de facto definition that will include roughly 65 per cent of the population. This notional poverty line will stand at a per capita expenditure of around Rs. 50 per day in rural areas and Rs. 62 in urban areas.
 While Planning Commission-derived poverty lines and estimates have been all-important in the past because they are used to draw up BPL lists and allot entitlements, their inappropriateness today is demonstrated by the fact that the government itself is now moving away from using these numbers altogether. Following the Union Cabinet’s clearing of the National Food Security Ordinance, the Planning Commission has estimated that subsidised foodgrain entitlements will cover 67 per cent of the population. Simultaneously, economists advising the Ministry of Rural Development say that the exclusion criteria to be derived from the ongoing Socio-Economic and Caste Census are likely to leave out the top 35 per cent of the population while the bottom 65 per cent will be considered BPL.
“This is a step away from the narrow definition of poverty we have been using, where the line is really what I call a ‘kutta-billi’ line; only cats and dogs can survive on it,” said N.C. Saxena, member of the National Advisory Council, who headed a Planning Commission panel on poverty that recommended automatic inclusion and exclusion criteria. A World Bank study of India’s social protection schemes had shown that universal schemes were far better at actually reaching the poor than those targeted at the poor.
By covering 67 per cent of the population, the government is in effect drawing the poverty line 85 per cent higher than what it is currently drawn at,
BPL and APL, what is poverty line? Why so much debate over what is very visible? What is wrong with the economists working for the Planning Commission?
In response to Pierre-Joseph Proudhon’s 1847 book, The System of Economic Contradictions, or Philosophy of Poverty, Karl Marx in 1847 wrote the critique of Proudhon’s economic (part one) and philosophic (part two) doctrines and titled it as “Poverty of Philosophy”. Our pundits of the Planning Commission remind us of this brilliant work of
Marx.    r