How little can a person live on?

UTSA PATNAIK, The Hindu, Opinion – Lead, September 30, 2011

The Planning Commission’s laughable estimates of the ‘’ follow from a mistake in method that it made 30 years ago and has clung to ever since.

The affidavit that the Planning Commission recently submitted before the Supreme Court stating that a person is to be considered ‘poor’ only if his or her monthly spending is below Rs.781 (Rs.26 a day) in the rural areas and Rs.965 (Rs.32 a day) in the urban areas, has exposed how unrealistic ‘poverty lines’ are. Some television channels assumed that the figures covered food costs alone and showed how they could not meet minimal nutrition needs at today’s prices. These paltry sums, however, are supposed to cover not only food but all non-food essentials, including clothing and footwear, cooking fuel, lighting, transport, education, medical costs and house rent. The total is divided into Rs.18 and Rs.14 for food and non-food items in towns, and into Rs.16 and Rs.10 in the rural areas, and includes the value of food that farmers produce and consume themselves.

Even a child knows that working health cannot be maintained, nor necessities obtained, by spending so little. Amazingly, however, 450 million Indians subsist below these levels. One cannot say that they ‘live’ in any true sense: their energy and protein intake is far below normal, they are underweight, stunted, subject to a high sickness load but without the means to obtain adequate food or medical treatment. The majority belong to the Scheduled Castes and the Scheduled Tribes. The official poverty lines do not measure poverty any more; they measure destitution.

The outcry against calling these destitution lines ‘poverty lines,’ is justified; for true poverty lines are much higher than these, and show 75 per cent of all persons in India to be poor. Per head energy and protein intake has been falling for the last two decades as the majority of the population is unable to afford enough food. With 60 million tonnes of public food stocks, far in excess of the buffer norms, remaining piled up by mid-2011, the sensible policy is to do away with targeting and revert to a universal distribution system, combining it with an urban employment guarantee scheme. Unfortunately, the neo-liberal policymakers today ask the wrong question: “How can we reduce the food subsidy?” and not the right question: “How can we lift the masses of India from the current level of the lowest food consumption in the world, even lower than the least developed countries?”

Members of the Planning Commission and the Tendulkar Committee are experts, so how have such laughable figures of minimum cost of living emerged from their statistical labours? The fact is that over 30 years ago the Planning Commission made a mistake of method, and the present Commission stubbornly clings to that mistake despite the fact having been repeatedly pointed out by many people including this author (The Republic of Hunger, 2004). The mistake was to change the definition of the poverty line and delink it from nutrition standards.

The original definition of ‘poverty line’ was a sensible one, based on an expert committee recommendation in 1979: using National Sample Survey (NSS) data on consumption spending, that in particular observed that the level of total monthly spending per person is to be called the ‘poverty line.’ The food spending part of the figure allowed a person to obtain 2,400 kilocalories of energy a day in the rural areas and 2,100 kilocalories a day in the urban areas. Later the rural figure was scaled down to 2,200 calories. The Commission accepted the expert committee’s nutrition-based definition but applied it only once, to the 1973-74 data, to obtain the correct monthly rural and urban poverty lines of Rs.49 or Rs.56 at which 2,200 or 2,100 calories were accessible, and found that 56 per cent of the rural population and 49 per cent of the urban population spent less than this, and so were poor.

Then the Commission, for reasons unknown, changed the definition in practice, and never again directly looked at the total monthly spending which permitted nutrition ‘norms’ to be maintained. This despite the fact that every five years the required information on this for every spending level was available — the physical quantities of food intake, and the corresponding daily average energy, protein and fat. The definition that the Commission actually adopted was that the 1973-74 poverty lines were to be adjusted for inflation using a price-index, regardless of whether the lines so obtained still allowed nutritional standards to be met. Price index adjustment is being followed for the last 30 years, producing the present absurdity of Rs.26 or Rs.32 as the rural or urban daily poverty lines.

Why these economists should have such faith in the ability of price indices to capture the rise in the cost of living is not clear. Price indices are needed for short period adjustment and are used for dearness allowance calculation, but they do not capture the actual rise in the cost of living over longer periods of time. In 1973, the starting gross monthly salary of an Associate Professor in a Central University was about Rs.1,000. It was adequate, since ration cards could be used; on this income one could even use a car. Applying the Consumer Price Index for Urban Non-Manual Employees, which has risen 17-fold by 2011, the equivalent monthly salary for an Associate Professor joining now should be Rs.17,000, by the Planning Commission’s logic. But this would not support the most modest middle-class lifestyle of four decades earlier. A newly appointed Associate Professor’s actual salary today is three times that figure, thanks to successive Pay Commission recommendations.

Yet, denying all experience and evidence, these economists assert that mere price-index adjustment is enough to obtain current poverty lines from those of 40 years ago. No wonder they have created a mess with their unrealistic estimates. An expressive, bucolic Bengali phrase is lyaje-gobare, or a ‘cow’s tail smeared with dung’ — this is a good description for official estimates. As time passed, the actual spending at which minimal nutrition could be accessed, the original definition accepted by the Commission, cumulatively diverged from the Commission’s calculations based on its changed definition. By 2005, a rural person needed Rs.19 a day to access 2,200 calories, while at the official figure of Rs.12, she could obtain only 1,800 calories. (The Tendulkar Committee merely tinkered with the problem, raising the figure of Rs.12 to Rs.13.) An urban consumer needed Rs.33 a day in 2005 to meet 2,100 calories, whereas the official figure of Rs.18 permitted less than 1,800 calories. Today at the current official poverty lines of Rs.26 and Rs.32 for the rural and urban areas respectively, the minimal cost of living is even more seriously understated: the consumer can access even less food. State poverty lines vary, and in a number of States the energy intake the official poverty line can command is below 1,500 calories a day.

The claim that poverty has declined is not true because the method of indexation that is actually used has not kept constant the nutritional standard against which poverty is measured, but has lowered it continuously. China’s official poverty lines are equally absurd, for the same reason. A nutrition norm was applied in 1984 to obtain a 200-yuan annual rural poverty line, which thereafter was merely indexed, giving 1,067 yuan by 2007, or below three yuan a day. This is supposed to cover all living costs but would not have bought even a kilogram of the cheapest variety of rice, selling then at four yuan, according to information provided by China’s residents. The actual extent of poverty in China is far higher than is claimed.

One wonders if we will ever see honest estimates from official sources anywhere, since, by now, hundreds of economists are closely imprecated within a vast global poverty-estimating structure with the World Bank at its apex, producing increasingly misleading estimates every year in glossy reports. The World Bank’s global poverty line is an equally large underestimate, for it is derived using “purchasing power parity conversion” from local currencies to the U.S. dollar, of these very same absurdly low local-currency official rural poverty lines of developing countries.

What are the realistic poverty lines today based on officially accepted nutritional norms? The current poverty lines allowing nutrition norms of 2,200 or 2,100 calories in the rural or urban areas to be met, are at least Rs.1,085 a month (Rs.36 a day) and Rs.1,800 a month (Rs.60 a day) respectively. Since each full-time worker needs to support nearly two dependants, these correspond to a minimum daily wage of Rs.108 and Rs.180 respectively. But this is inadequate: no margin exists for medical emergencies, life cycle ceremonies, or old age. From the 2009-10 NSS data at least 75 per cent of the total population is in poverty on this basis. This high level of deprivation is the rationale for going back to a non-targeted, universal food distribution system, but that will not be enough. The purchasing power of the poor has to be raised at the same time through employment generation schemes. Ironically, there has been a rise in unemployment rates according to the latest surveys.

(Utsa Patnaik has been a Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.)