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MEASURING POVERTY
A thin Indian line
The first step towards eradicating poverty is to understand just how many of us are poor, and what that means. Thus far the government's measurement of poverty has simply been a self-serving one, and it's time we adopted a more honest calculation, writes Dilip D'Souza.

17 March 2006 - The poverty line. You've heard that phrase so often. So many below it, so many have moved above it; 36 per cent below it once, 26 per cent now. The numbers fly about, the debates rage on. Yet what is the line? What does it mean to say someone is below the poverty line?

Let's start with what the line is. This page gives us the definition according to the Government's Ministry of Statistics and Programme Implementation: "The official estimates of the poverty line are based on a norm of 2400 calories per capita per day for rural areas and 2100 per capita per day for urban areas." This goes back to the 1970s; at that time, we decided to measure poverty levels by considering a minimum nutritional level. More accurately, the measure was the amount of money required to buy food equivalent to this nutritional level. If you earned more than this amount, you were above the poverty line.

Something important to note here: it's not that your expenditure on food - the portion of your earnings that you spend on food - had to be more than this amount for you to be recognised as being above the poverty line. No, the definition assumed that your entire earnings had to be more than the amount. That is, the official definition of the poverty line assumed that you spend all your money on food. Keep that in mind.

In the '70s, when our governments first began using this definition, the monthly cost of the "basket of food" required to supply these nutritional levels was calculated to be Rs 62 in rural areas, and Rs 71 in urban areas. With inflation, those numbers rose to Rs 328 and Rs 454 respectively, by the year 2000. As far as I know, we don't yet have available any poverty figures post that date. But according to this table, inflation was 3.8 per cent in 2001, 4.3 per cent in 2002, 4.1 per cent in 2003 and 5.5 per cent in 2004. (2004 is the most recent year for which I've been able to find inflation figures). Inflate Rs 454 by these amounts, and you get a 2004 figure of Rs 540: the price of our urban basket of food. (I'll focus on the urban basket for the rest of this article; the reasoning is similar for rural areas).

What are we talking about here? This much: In 2004, if you lived in an Indian city and you earned more than Rs 540 a month, you were considered above the poverty level. Remember again that this figure is the estimated cost of that basket of food on which you spend all your money. We are not talking here about whatever you need to spend on shelter and clothing and transport and such like.

Every fourth person around me is officially poor - and I don't know any of them. In contrast, every twenty-fifth Indian around me uses the Web. I know plenty of those Indians. Why am I so detached from an entire one-fourth of my country?  •  GDP number crunching won't do  •  Minimised by the law  •  Too little, for too long

So what we are saying is that if your total earnings amounted to more than Rs 540 a month, you were not considered poor. We are saying that if you earned, let's say, Rs 600 a month, out of which you paid Rs 540 for food, you were not considered poor. And it is by this calculation that we estimate that 26 per cent of India is below the poverty line; that we are pleased that that number has declined from 36 to 26.

It's worth some thought, the implications of these numbers and this method.

First thought, can you think of anyone you know who earns Rs 540 or less a month? I certainly don't. The woman who sweeps our house every evening, who is visibly poorer than most other people I know, takes home Rs 700 from us, and similar amounts from other homes she works in. She's nowhere close to this line.

Yes, I know nobody who lives below the official poverty line. Yet according to widely publicised figures, 26 per cent of India lives below it. That is, every fourth person around me, here in India, is officially poor - and I don't know any of them. In contrast, I recently ran into figures that show that only four per cent of India - or every twenty-fifth Indian around me - uses the Web. I know plenty of those Indians. Why am I so detached from an entire one-fourth of my country?

Second, consider again the meaning of the poverty line: that your entire income must be below the price of the basket of food for you to qualify as poor.

But how realistic is this? For all of us, food is just one of the things we spend our income on. What about shelter, clothing, transport, fuel, health care, education, putting something away for a monsoon day? What about paying off a loan I might have taken to buy seed, or a cow, or a motorbike? All these things need money, take chunks of our earnings.

To put this in perspective, let me arbitrarily decide for the purposes of this argument that people at the lower end of the economic scale spend one third of their earnings on food. Therefore, to be able to spend Rs 540 a month on that basic basket of food, such a person would need to earn Rs 1620 a month. Less, and she would be unable to afford those minimum nutritional standards. Less, and she would be poor.

Does this seem like a better way to measure poverty? To me it does.

So do you know anyone who earns less Rs 1620 a month?

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I do. And that leads me to this thought. If 26 per cent of India lives below the poverty line, earning less than Rs 540 a month, what fraction of India earns less than Rs 1620 a month? What does that say about our poverty levels?

Why all this calculation and reasoning? Because to me, it seems obvious that we need a more realistic way of measuring poverty in this country. At the Centre for Policy Alternatives Society in New Delhi, Ronald Abraham and Mohan Guruswamy have got to grips with that problem. They have just published a monograph called "Redefining Poverty: A New Poverty Line for a New India." (available here, PDF file). It looks at just the issues I've touched on here, though of course in much greater detail.

But theirs is not the first attempt at a better measure of poverty. Another such attempt came from the UNDP, who first used it in their 1996 Human Development Report. They called it the Capability Poverty Measure, or CPM. Here's a short extract from that Report:

"[We need] a more people-centred measure of poverty that recognizes that human deprivation occurs in a number of critical dimensions. Lack of income is just one dimension, and it is focused on means rather than ends. The CPM is a multi-dimentional index of poverty focused on capabilities ... Deprivaton is reflected in a lack of basic capabilities -- when people are unable to reach a certain level of essential human achievement or functioning. [My italics]"

So for any country, its CPM is calculated using three chosen factors: the percentage of children under five who are underweight; the percentage of births unattended by trained health workers; and adult female illiteracy. Why these? "Rather than trying to be comprehensive by reflecting deprivation in all human priority areas," says the 1996 Report, "the index emphasizes critical areas where progress is needed most.

And what did the CPM reveal about India?

According to the 1996 Report, 53 per cent of Indian children under five were underweight. 67 per cent of Indian births were unattended by health personnel. 64 per cent of Indian women were illiterate. Average these to get our CPM: 61.5. That made us 89th among 101 developing countries the HDR ranked that year by their CPM.

In other words, in 1996 about three of every five Indians were "capability poor" (as opposed to "income poor"). Of such people, that 1996 Report observes that they "lack basic, or minimally essential, human capabilities." It also makes this instructive point: "Poverty cannot be eradicated merely by boosting income."

Actually, the first step towards eradicating poverty is to understand just how many of us are poor, and what that means. That's the reason for these different ways to consider the poverty line. As Guruswamy and Abraham write: "The present unrealistically low poverty line only serves the purpose of making the Government and its development efforts - or the lack of it - look good." ⊕

Dilip D'Souza
17 Mar 2006

Dilip D'Souza writes regularly on the living conditions of India's downtrodden people. He is the author of two books Branded by Law: Looking at India's Denotified Tribes [Penguin 2001], and more recently, The Narmada Dammed: An Inquiry into the Politics of Development. He was a Scholar of Peace Fellow with WISCOMP (Women in Security, Conflict Management and Peace) in 2004-05.

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Comments (7)

• Posted by Sharad Jaiswal,

  Hi Dilip,

  According to the govt. 26% of the population earns less than ~ Rs. 550/pm. Any idea how they counted people in this survey - obviously it has to be done only amongst the earning members of the population (the very old and very young ought to be excluded). So how do they arrive at this number?

  1. By first measuring how much the earning population earns and then dividing by the number of people supported by each earning member to get the per capita number?

  2. Or just looking at the distribution of the earning members as is. If 2 is the case, then the current numbers are even worse, right?

• Posted by Pavan Nair,

  The international system as adopted by the UN in the Millenium Development Goals (MDG) project is an income of $1 per head per day. If we follow this norm then India has a population of 35% below the poverty line. This means that a family of four would have to have a combined earning of above Rs 5000 per month to be above the poverty line. This seems a realistic figure and should be adopted by the Planning Commission. In any case percentages do not show actuals. For example between 1988 and 1994, the percentage of poverty as defined by the Planning Commission came down from 39% to 36% but the absolute number of people below the poverty line increased from 307 million to 320 million! To achieve the MDGs by 2015, we will have to lift 150 million people above the $1 a day poverty line. This is a tall order.
  
  Another important aspect which needs to be highlighted is that the there is bunching at the bottom of the pyramid. This means that a large proportion of those below the poverty line are below even the half-way mark, the poorest of the poor. This has been mathematically represented by the Gini coefficient. Whilst it may be simpler to lift a smaller proportion of the population hovering around the the poverty line whichever way you define it, it will take a monumental effort to lift those who are at the bottom. So the Rural Employment Guarantee Scheme which will pay a poor family Rs 500 a month(Rs 6000 over 100 days)is not going to make much of a dent. It is however a beginning.

• Posted by meenakshi srinivasan,

  My definition of poverty is access to potable drinking water. The easier the access - open a tap at any time of day or nite to get "clear" water that is not red or rusty, then you are RICH! If that clear liquid is available parts of the day, then you are middle class. if you get it intermitently, then you are poor.

• Posted by Vispi Jokhi,

  As usual Dilip you have set the cat among the pigeons and punctured the India Inc. egoes by portraying the chilling reality. I always wondered as an undergraduate doctor how they arrived at a figure of family income less than Rs. 500 to qualify for free treatment in a Government hospital. It mattered little to the registration clerk who took Rs. 100 to allow the patient free treatment. I wonder if the 1996 indices quoted are so dismal because of globalisation or would have been worse in our erstwhile planned socialist economies. I know the inequalities between the haves and have nots have widened but are the poor better off today than say in the fifties and sixties. I suspect that nutritionally the per capita consumption of food grain for the poor has gone down drastically. Please comment and let us know your thoughts on the subject.

• Posted by Srilakshmi,

  I am working on a Community Indicators survey in the US. The federal Self-Sufficiency Index is a measure used to plan Welfare programs. These take into account family size(based on variations - # of adults, # of infants, preschooler, school age and teenage children in a house), cost of living in each area, cost of food, health care costs, taxes and minimum wages(revenue) earned. It calculates the number of people under the self-sufficiency index by finding the difference between the suggested minimum wage required to support the family and the actual wage earned. Food accounts for about 1/3rd of the total. How is it that we do not take into account any factor apart from food? Please let me know if the Govt. uses the same poverty line definition for all Aid programs.

• Posted by NIKHIL SAHAJPAL,

  This letter was indeed an eye opener.It has done an indepth analysis of the ground realities providing the readers with a sound perspective on an issue as abstruse as poverty.

• Posted by M. R. Katti,

  Sear Dilip,
  There are three types of poverties. Namely, mental , intellectual and physical. If all threes are in equilibrium, there will not be any poverty.
  However, it is not possible practically.If the 1st is taken care of ,others ( 2cd & 3rd ) will follow to a great extent. Further, unconcernity about others has increased with creeping of western style of living. Methods to eliminate poverty are need to be psycologically compatible with people for they are adopted.

  ( M.R. KATTI)

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