ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

On Some Contentious Issues of the New Poverty Line

Controversy continues to haunt the Tendulkar poverty line. It may be better if the poverty line is defi ned in terms of an "exogenously fi xed" monthly per capita expenditure.

COMMENTARY

-

-

- - -

On Some Contentious Issues of the New Poverty Line

G C Manna

--

---

much higher than the corresponding official estimates released for 2004-05 (Manna et al 2009).

In the recent years many discussions have taken place about the need to redefi ne the PL. The major arguments in favour of the same3 include (a) change in

Controversy continues to haunt the Tendulkar poverty line. It may be better if the poverty line is defined in terms of an “exogenously fixed” monthly per capita expenditure.

Views are of the author and not of the organisation to which he belongs. The author is grateful to Dipankar Coondoo for his suggestions on a draft of this article.

G C Manna (gc.manna1@gmail.com) is with the Central Statistics Office, New Delhi.

1 Introduction

T
here has been a growing concern on the estimates built on the offi cial poverty lines (PLs) which were originally derived for the base year (1973-74) based on calorie norms and suitably indexed by taking care of changes in the price level to derive PLs for the subsequent years. We have earlier demonstrated by analysing the National Sample Survey (NSS) data of household consumer expenditure for two alternative base years, viz, 1972-73 and 1971-72 based on much larger sample sizes1 that base year PL was rather underestimated (Manna 2007). And the same must have led to underestimation of PLs as well as headcount ratios (HCRs) offi cially made available for the subsequent years till 2004-05 based on the earlier methodology.2 This fact of underestimation of PL and HCR as per the earlier methodology is also supported by our fresh analysis based on the NSS 61st round (2004-05) data set of household consumer expenditure, which results in the PLs and HCRs

Economic & Political Weekly

EPW
april 14, 2012 vol xlviI no 15

the consumption behaviour since 1973-74 breaking the original link with calories,

  • (b) the crude price adjustment levels,
  • (c) the need to raise the PL so as to refl ect rising income levels, and (d) inadequacy of the calorie norm criterion alone to defi ne the PL. In view of the above, the Planning Commission set up the Suresh D Tendulkar group to review the methodology for estimation of poverty and which recommended changes in the existing procedures of official estimates of poverty. We shall briefly discuss in Section 2 some of the salient features of the methodology of the new PL proposed by the expert group and raise some contentious issues. While defining the new PL, the expert group “moves away” from anchoring the poverty line to a calorie intake norm (Expert Group 2009). However, while suggesting the new PL, it observes that for those near the proposed new PL in urban areas, “actual observed calorie intake from (the) 61st round of NSS is 1,776 calories per capita” which is “very close to the revised calorie intake norm of 1,770 per capita per day currently
  • COMMENTARY

    recommended for India by the Food and Agriculture Organisation (FAO)”. The expert group also observes that the “actual calorie intake of those near the new poverty line in rural areas (1999 calories per capita) is higher than the FAO norm”. How far the quoted 1,770 calorie norm is valid for the Indian population is deliberated in Section 3 by utilising the FAO’s recommended energy requirements for various categories of persons and applying those norms to the population distribution by age-group and sex based on Census 2001 for which data were readily available.

    2 Methodology and Contentious Issues

    The salient features of the new PLs proposed by the expert group are:

  • (a) Moving away from anchoring the PL to a calorie norm (since calorie consumption based on NSS data set was not found to be well correlated with the nutritional outcomes observed from other specialised surveys as mentioned by the expert group);
  • (b) Adoption of the mixed reference period (MRP)4-based estimates of consumption expenditure as the basis for new PL (instead of uniform reference period-based approach corresponding to last 30 days prevalent so far);
  • (c) Acceptance of urban HCR of 25.7% for 2004-05 available as per the earlier methodology to be realistic on the ground of the same being “less controversial than its rural counterpart”; and
  • (d) Recommending MRP-equivalent of urban poverty line basket (PLB) corresponding to 25.7% urban HCR as the new reference PLB provided to both rural and urban populations in all the states after adjusting it for within-state urbanrelative-to-rural and rural and urban state-relative-to-all-India price differentials based on unit prices implicit in the same survey of NSS 61st round (2004-05).
  • Based on the above methodology, for 2004-05, the expert group placed the new PL (monthly per capita total expenditure) at Rs 446.68 for rural India and Rs 578.80 for urban India. The corresponding all-India HCRs were placed at 41.8% and 25.7% for rural and urban respectively. The expert group also suggested procedure for updating the PL for 2009-10 (being the year corresponding to NSS 66th round where household consumer expenditure data were collected based on a “large sample”) and beyond. Estimation of PLs for 2009-10 as per the suggested methodology first involves calculation of Fisher index of changes in state-level urban prices between 2004-05 and 2009-10 based on NSS data of household consu mer expenditure survey for the respective years. Application of the state-level indices of change to urban PLs for 2004-05 would result in state-level urban PLs for 2009-10. Thereafter, application of within-state rural-relative-to urban Fisher indices for 2009-10 to updated urban PLs for 2009-10 would lead to the updated state-level rural PLs for 2009-10. Finally, the HCR for 2009-10 is available from the MRP-based size distribution of persons by monthly per capita total expenditure class for 2009-10 as per the NSS. Based on this methodology, the PLs (monthly per capita total expenditure) for 2009-10 are estimated as Rs 672.80 for rural India and Rs 859.60 for urban India (Planning Commission 2012). And the all-India HCRs for 2009-10 are placed at 33.8% for rural and 20.9% for urban.

    After validation for checking the adequacy of actual per capita private expenditure near the new PLs (2004-05) on food, education and health by comparing them with “normative expenditures”, the expert group observes that “actual private expenditures reported by households near the new PLs on these items were found to be adequate at the all-India level in both the rural and urban areas and for most of the states”. The group also observes that when compared with the Food and Agriculture Organisation’s “revised calorie intake norm of 1,770 per capita per day” actual calorie intake (2004-05) for those near the new PL is close to FAO’s norm in the case of urban and higher than the FAO norm in the rural.

    As we see the new PL accepts 25.7% urban HCR as per the original methodology as the starting point/benchmark; bases the new base year (2004-05) PL as the MRP-equivalent of PLB corresponding to this HCR on the basis of the NSS 61st round and moves the base year PL further to 2009-10 based on a price rise during the intervening period measured by Fisher price indices. Although the above HCR has been argued to be “less controversial”, it is not free from the limitations of the corresponding old PL, with which the accepted HCR has its linkage in view of methodological issues relating to (a) base year selection,

    (b) relevance of the calorie norms used,

    Giri Institute of Development Studies, Lucknow and IASSI, New Delhi

    WORKSHOP ON PROJECT FORMULATION AND RESEARCH METHODOLOGY

    May 15-26, 2012

    Giri Institute of Development Studies, Lucknow in collaboration with the Indian Association of Social Science Institutions is organising a Training Workshop on Project Formulation and Research Methodology during May 15-26, 2012 at Lucknow. Preference will be given to students who have enrolled for Ph.D. recently or intend to enrol for Ph.D. and teachers who plan to submit research proposals to funding agencies. Persons desirous of attending the workshop may apply giving their full CV including academic record, topic of research, publications, etc. A proposal of about 1000 words on the topic on which the scholar would like to work should be submitted with the application. Applications should be addressed to Director, Giri Institute of Development Studies, Sector O, Aliganj, Lucknow 226 024. The last day of submitting application is 30th April 2012. For details visit our website: http/:gids.org.in or contact by e-mail at gids@sancharnet.in

    A.K. Singh

    Director

    april 14, 2012 vol xlviI no 15

    COMMENTARY
    and (c) method of price adjustments – Table 1: Weighting Diagram and FAO Recommended Daily Energy Requirements

    Age Male Female

    the former two being already deliberat

    (Completed Years) Wt Daily Energy Requirement Wt Daily Energy Requirement ed at length in Manna (2007). In fact, Diag Lowest Moderate/Average Highest Diag Lowest Moderate/Average Highest

    (1) (2) (3) (4) (5) (6) (7) (8) (9)

    the accepted HCR seems to have a seri

    0 0.843 518 649 775 0.771 464 600 712

    ous downward bias (Manna et al 2009).

    1 0.999 948 948 948 0.916 865 865 865

    Further, adoption of same reference PLB

    2 1.217 1,129 1,129 1,129 1.139 1,047 1,047 1,047

    for both urban and rural population is

    3 1.261 1,252 1,252 1,252 1.219 1,156 1,156 1,156

    another debatable issue given the age

    4 1.248 1,350 1,360 1,360 1.152 1,225 1,241 1,241

    sex-activity differentials between the

    5 1.386 1,350 1,467 1,467 1.242 1,225 1,330 1,330

    rural and urban population.

  • 6 1.332 1,350 1,573 1,800 1.243 1,225 1,428 1,650
  • 7 1.161 1,450 1,692 1,950 1.085 1,325 1,554 1,775
  • 3 Validity of Revised Norms

    8 1.577 1,550 1,830 2,100 1.448 1,450 1,698 1,950

    Now let us test the validity of the FAO’s

    9 1.050 1,675 1,978 2,275 0.984 1,575 1,854 2,125

    revised average calorie norm of “1,770

    10 1.749 1,825 2,150 2,475 1.551 1,700 2,006 2,300 calories” which is met by both rural and 11 0.927 2,000 2,341 2,700 0.836 1,825 2,149 2,475

    urban poor in 2004-05 as per the new 12 1.575 2,175 2,548 2,925 1.391 1,925 2,276 2,625

    methodology. We do so by considering 13 0.996 2,350 2,770 3,175 0.943 2,025 2,379 2,725

    the energy requirements (kcal/day) for 14 1.152 2,550 2,990 3,450 1.050 2,075 2,449 2,825

    various strata of population, as recommended based on expert consultation taken place during 17-24 October 2001 at the FAO headquarters in Rome,5 and applying these norms (we shall describe these as FAO norms for simplicity) to the number of persons by sex in various agegroups as per the Census 2001 which is readily available.

    FAO norms are available for each of the following groups: (a) infants of age less than one year for each completed month separately for boys and girls;

  • (b) persons in the age-group 1-18 years for each single year of completed age, separately for boys and girls, with different norms for light physical activity, moderate physical activity, heavy physical activity (light and heavy physical activity norms being applicable only for age-groups of 6-18 years) and also for average of all types of activities; and
  • (c) persons (separately for men and women) in the age-groups 18-29.9 years, 30-59.9 years, and 60 years according to various physical activity levels (PAL) and different mean body weights. The FAO norms for various categories of persons are summarised in Table 1. As our aim is to check the adequacy of the reported average calorie norm, instead of quoting energy requirements for all combinations of age-group and physical activity levels as discussed, we reproduce only the lowest, moderate/average, and highest norms (kcal/day) for various age-groups and sex. Basically the lowest and moderate/average norms applied to population
  • 15 1.192 2,700 3,178 3,650 1.003 2,125 2,491 2,875
    16 1.128 2,825 3,322 3,825 0.995 2,125 2,503 2,875
    17 0.783 2,900 3,410 3,925 0.669 2,125 2,503 2,875
    18-29 10.723 2,300 2,800 3,500 10.157 2,000 2,400 3.050
    30-59 15.753 2,250 2,750 3,450 14.683 1,950 2,350 2,950
    60 0.880 1,850 2,250 2,850 0.888 1,750 2,100 2,650
    60+ 2.802 1,850 1,850 1,850 2.899 1,750 1,750 1,750
  • (1) Col 2/6: Weighting diagram is as per percentage distribution of Indian population based on Census 2001.
  • (2) Col 3/7: Figures correspond to (a) children of age less than 1 month for age 0; (b) same norms as for moderate in case of ages 1-3 as no separate norms are suggested; (c) lowest norm (Physical Activity Level 1.45 as per FAO report) for age 6 in case of ages 4-5; and (d) light physical activity level in case of age 6 and onwards.
  • (3) Figures in cols 4 and 8 for ages 1 to 17 years are taken from Tables 4.2 (for boys) and 4.3 (for girls) of FAO’s report and those for age 0 correspond to average of energy requirements for completed months of 0, 1, 2,.., 11.
  • (4) Col 5/9: Figures correspond to (a) children of age 11 months for age 0; (b) same norms as for moderate in case of ages 1-5 as no separate norms are suggested; and (c) highest norm (Physical Activity Level 2.20 as per FAO report) in case of ages 6 and onwards.
  • (5) For each of age-groups 18-29, 30-59 and 60, figures correspond to mean weight of 60 kg.
  • (6) For age 60+, lowest norm for age 60 is repeated as no separate norms are recommended for this age-group.
  • of different age-groups and sex would suggest the threshold energy norms.

    Note that the lowest daily energy requirement indicated in Table 1 corresponds to “sedentary or light activity lifestyle” of a person. And as per FAO’s report, for such a lifestyle, time allocation of total 24 hours of a day would be as follows: eight hours for sleeping; eight hours for sitting (office work, selling produce, tending shop); two hours for light leisure activities (watching TV, chatting); and one hour each for personal care, eating, cooking, general household work, driving car to/from work, and walking at various places without a load. As against it, the moderate/average energy requirement mentioned in Table 1 corresponds to “active or moderately active lifestyle” with a time disposition of eight hours for sleeping; eight hours for standing, carrying light loads (waiting on tables, arranging merchandise); three hours for light leisure activities (watching TV, chatting); and one hour each for personal care, eating, commuting to/ from work on a bus, walking at various places without a load, and low intensity aerobic exercise.

    Thus application of the lowest norms to various strata of persons would result in the barest minimum threshold energy norm when all persons are assumed to pursue only the light activities. This is unrealistic (Swaminathan 2010) as it has a serious downward bias given the diverse nature of activities/occupations pursued by people living in threshold of absolute poverty, particularly those in the upper age-groups. Therefore, use of moderate/average norms may lead to a somewhat realistic picture. In this context, it is important to note that as per our analysis based on the NSS 55th round (19992000) data, according to our “proposed classification of work” (Manna 2007),

    Economic & Political Weekly

    EPW
    april 14, 2012 vol xlviI no 15

    COMMENTARY

    percentages of sedentary and heavy workers for both men and women are very close in case of urban India and the percentage of heavy workers far exceeds the percentage of sedentary workers for both men and women in the case of rural India. Thus even the use of moderate norms is also likely to result in a somewhat downward bias in the overall average norm arrived at after application of the weights as per the weighting diagram.

    Interestingly, the use of lowest norms coupled with the weighting diagram leads to an average norm of 1,904 kcal/ day which is much higher than the quoted FAO norm. Note that this is based on the lowest norms corresponding to mean body weight of 60 kg for each of the age-groups of 18-29, 30-50 and 60 years. Instead of this, if we adopt the lowest norms corresponding to the mean body weight of 50 kg for men and 45 kg for women (being the lowest mean weight for which norms are available in the FAO’s report) in respect of each of the above age-groups, the average norm works out to 1,781 kcal/day which is very close to quoted FAO norm of 1,770 kcal/day. However, the use of moderate/average norms in combination with the weighting diagram gives us an average norm of 2,241 kcal/day. This is much higher than the FAO norm and at the same time this derived norm is close to our proposed norm of 2,290 kcal/day for rural India and 2,250 kcal/ day for urban India as suggested in Manna (2007). With a gradual shift of the percentage distribution of persons over age-groups leading to a higher proportion of persons in the upper agegroups over time, the derived norms of 1,904 cal/1,781 cal/2,241 cal may be treated as the lower bound because we have used Census 2001 data for the weighting diagram.

    4 Concluding Remarks

    In conclusion, our analyses on alternative base years, calorie norms and poverty lines derived afresh based on NSS 61st round data as per the earlier methodology are clearly indicative of the fact of a downward bias even in the new PL, although the extent of problem seems to have been minimised in the case of rural poverty lines which are based on the same (better) PL basket corresponding to the urban. In our view, the major limitation of the new poverty line is its acceptance of 25.7% urban HCR based on the earlier methodology as the benchmark and proceeding further to arrive at the estimates of the poverty lines. The other problem is the use of the same (reference) poverty line basket for both urban and rural. Finally, the problem is of difficulty to defi ne the new poverty line in a straightforward manner. It would be advantageous if the new poverty line can be described in simpler terms. One plausible option could be to define it in terms of an “exogenously fixed” monthly per capita expenditure (MPCE) level at a constant price, which would be adequate to meet the cost of food associated with the revised calorie norm and also the normative expenditure levels on basic human needs namely clothing, housing, education and healthcare. As regards the component on cost of food, derivation of the lower confidence limit of average MPCE on food and also the average MPCE on food associated with the revised calorie norm as per the latest large-sample NSS data set by replicating our study based on MPCE (Manna 2009) would certainly be a valuable input.

    Notes

    1 Sample size for rural in 1971-72 survey was however somewhat smaller.

    2 As recommended by the Lakdawala Committee (1993).

    3 See Press Note on Poverty Estimates (January 2011) by Planning Commission for discussions at length.

    4 MRP-based approach uses 365 days as the reference period for low frequency items (namely, clothing, footwear, durables, education and medical-institutional) and 30 days for all other items of consumption.

    5 This was a joint FAO, World Health Organisation (WHO) and United Nations University (UNU) expert consultation. The recommendations are available in www.fao.org/docrep/007/y5686e/ y5686e00.htm, accessed on 13 February 2012.

    References

    Expert Group (2009): “Report of the Expert Group to Review the Methodology for Estimation of Poverty”, Government of India, Planning Commission, November.

    Manna, G C (2007): “On Calibrating the Poverty Line for Poverty Estimation in India”, Economic & Political Weekly, Vol XLII, No 30.

    Manna, G C, Samanta and Coondoo (2009): “What Does the Recent Indian Consumption Behaviour Tell?”, Economic & Political Weekly, Vol XLIV, No 32.

    Planning Commission (2012): Press Note on Poverty Estimates, 2009-10, 19 March.

    Swaminathan, Madhura (2010): “The New Poverty Line: A Methodology Deeply Flawed”, Indian Journal of Human Development, Vol 4, No 1.

    EPW 5-Year CD-ROM 2004-08 on a Single Disk

    The digital versions of Economic and Political Weekly for 2004, 2005, 2006, 2007 and 2008 are now available on a single disk. The CD-ROM contains the complete text of 261 issues published from 2004 to 2008 and comes equipped with a powerful search, tools to help organise research and utilities to make your browsing experience productive.The contents of the CD-ROM are organised as in the print edition, with articles laid out in individual sections in each issue.

    With its easy-to-use features, the CD-ROM will be a convenient resource for social scientists, researchers and executives in government and non-government organisations, social and political activists, students, corporate and public sector executives and journalists.

    Price for 5 year CD-ROM (in INDIA)

    Individuals - Rs 1500 Institutions - Rs 2500

    To order the CD-ROM send a bank draft payable at Mumbai in favour of Economic and Political Weekly.The CD can also be purchased on-line using a credit card through a secure payment gateway at epw.in

    Any queries please email: circulation@epw.in

    Circulation Manager,

    Economic and Political Weekly

    320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013, India

    april 14, 2012 vol xlviI no 15

    Dear reader,

    To continue reading, become a subscriber.

    Explore our attractive subscription offers.

    Click here

    Comments

    (-) Hide

    EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

    Back to Top