When poverty doesn’t count

We need to offer realistic definitions of the poverty situation, if the issue is to be taken seriously by the Govt

By Abraham M. George

March 30, 2005

India can boast about its economic progress of the past decade or so. Its GDP growth, foreign direct investment and currency reserves are at an all time high. There are enough people in the country who have the purchasing power to enjoy the luxuries of life, from designer clothes to expensive cars.

However, there is also another reality. Much of the economic gain is confined to urban areas, in the information technology and industrial sectors of the economy. Rural India, with its heavy dependence on agriculture, has lagged behind as the benefits of globalisation and technology have failed to trickle down to a great majority of Indians.

Consider this fact: there are more people in poverty today in India, than a decade ago. With population increasing at over 2 per cent per annum, or with 20-25 million more people each year in the country, can India expect to bring down the poverty level any time in the foreseeable future?

India’s poverty level

What is the poverty level in India today? The answer to that question depends on who is counted as poor.

There is plenty of confusion about how the poverty level should be defined. The World Bank has introduced two levels of measurement: $1 and $2 per day per individual (though these are based on some previous year’s purchasing power parity). By these definitions, 35 per cent of the world’s population lives on less than $1 per day, and more than 50 per cent, on less than $2 per day. While these poverty definitions have been suggested by international agencies, they do not correspond with the definitions that individual governments might follow.

For example, at the higher end, the US Census Bureau has set the poverty line for an individual at $9,500 per annum (which works out to $26 per day). For a family of four (with children below 16 years of age), the poverty line is set at $18,800 per annum or $51 per day. At the other end of the spectrum, the Indian Government chose to define caloric intake and its corresponding cost as the measure by which poverty is to be defined. It has adopted the ICMR (Indian Council of Medical Research) specification of 2,400 K-calories per day for an individual living in a rural area, and 2,100 K-calories for an urban individual.

The problem with the Indian Government’s approach is in the determination of the income needed to purchase food. The Government assumes that only Rs 327 ($7.25) per month is needed for an individual living in a rural area to buy enough food to meet the required calories. This works out to less than Rs 11 ($0.25) per day per person. (Note that the Indian official definition of the poverty level is only one quarter of the World Bank’s lower standard of $1 per day).

Anxious to prove that the economic liberalisation measures that have been introduced since 1991 have produced good results, India’s Planning Commission estimated a few years ago that only 18 per cent of the population was poor in 1999. Faced with challenges and ridicule from the international community about the accuracy of this figure, the Indian Government arbitrarily increased its estimate to 35 per cent. It is not very clear how the discrepancy between the two figures was reconciled. Official estimates of this kind only undermine the public’s confidence in the Government’s pronouncements, as they reflect an effort to hide bad news from the world.

Real story worse

The real story is even worse. According to respected economists and statisticians in India, in the year 2000, the monthly income needed for a rural individual to consume 2,400 K-calories per day was not Rs 327 ($7.25) but Rs 567 ($12.60). At this income level, which amounts to Rs 19 ($0.42) or less per day, nearly 75 per cent of the rural population is poor. One can only imagine what percentage of the rural population is below the World Bank’s broader definition of $2 per day: probably well over 80 per cent.

I can speak from my own experience of working with the people in the 17 villages around Baliganapalli in Tamil Nadu, a relatively prosperous state in India. We recently completed a house-to-house survey of the entire population in these villages. It shows that nearly 90 per cent of the families (each having at least four members on the average) earn less than Rs 100 ($2.20) per day, or each individual earns about Rs 25 ($0.55) per day.

By any reasonable measure, at least 75 per cent of India’s rural population of 700 million is poor. Moreover, none of the poverty definitions take into account the cost of adequate housing, clothing, education, healthcare, and entertainment. Though some of these are provided for free by the Government, the quality of life in rural areas remains deplorable. We need to offer definitions of poverty that are honest, reflecting the cost of adequate food intake and other basic necessities of life. Only then will the general public as well as the Government begin to focus their attention on this most important human rights issue.

(The writer is the founder of The George Foundation).



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