Poverty in India since Independence

Venkatesh Athreya
 Poverty: Some Conceptual Issues

• Absolute and Relative Conceptions

• Multidimensional Nature of Poverty

• Norms in the definition of an absolute poverty measure

• ‘Incidence’ and Depth of Poverty

• The Head Count Ratio

 Poverty as a policy concern in India
• The political economy context of the 1960s and 1970s

• The pioneering contribution of Dandekar and Rath: Minimum nutrition

level expressed in terms of a norm of daily energy intake in calories
required for working health

• Definition of poverty in terms of the inability to access a minimum

nutrition level

• Dandekar and Rath proposed norm 2250 kilocalories per person per
day

• Task Force on Minimum Needs 1979 proposed separate norms for rural
and urban areas taking into account age and gender composition of
population and the activity profile

• 2400 kilocals per capita per day in rural areas and 2100 in urban areas
as the norm

• Measurement of the ability or otherwise to access this minimum

nutritional norm in terms of per capita consumer expenditure
Source of Data for measurement of poverty in terms of
Head Count Ratio

• The NSS reports present the distribution of persons and

average expenditure on food and non-food, by monthly per
capita expenditure groups

and

• The NSS Reports also present the calorie intake per

capita per diem by expenditure groups, though the latter
tabulations are released after a time lag.
 Poverty Line Expenditure
• The particular total monthly per capita expenditure whose food
expenditure part met the calorie norms, was identified from the
28th round NSS data relating to 1973-74.

• This expenditure was defined as the poverty line expenditure.

Based on this, economists talk of “income poverty,” though we have
no information on income, only on expenditure.

• It is possible that observed expenditure at or below the poverty line is

higher than income and is met through borrowing or asset- depletion
by some households.
 Problems with official poverty figures
• The Planning Commission has not been applying its own original
nutrition norm to the available current data on nutrition by expenditure
groups after the initial 1973-74 estimate, which was its first and only
direct estimate, but has been simply bringing forward the rural poverty
line for that year by using the Consumer Price Index for Agricultural
Labourers (CPIAL).
• Inability of price-adjusted poverty lines to meet the current cost of the
nutrition norm is well known
• Increasing divergence between official poverty estimates using monthly
per capita consumer expenditure and those using the direct data on per
capita calorie intake
• 1999-2000: proportion of persons in rural India consuming less than 2400
kilocalories was 74.5 % whereas planning commission estimate of HCR
was 27.4 % (Urban: 45 % and 23.4 %)
 Increasing divergence between nutritional
norm and poverty line from mpce data
• The poverty lines derived by bringing forward the 1973-74 rural
poverty line of Rs 49 using the CPIAL, came to Rs 56 in 1977-
78, Rs 86 in 1983, Rs 206 in 1993-94 and Rs 328 in 1999-2000. The
official poverty line for 2004-05 is Rs 356.3.

• Poverty percentages using these lines were 53.1 in 1977-78, 45.7 in

1983, 37.3 in 1993-94, 27.4 in 1999-2000 and 29.5 in 2004-05

• At the official poverty lines giving these poverty percentages, the

maximum calorie intake accessible per diem was 2170 in 1977-78 , 2060
in 1983, 1990 in 1993-94, 1890 in 1999-2000 and 1820 in 2004-05

• Thus: the poor are being counted not as all those below an invariant
nutrition standard but as all those below a standard which is being
continuously lowered over time. -
 Utsa Patnaik’s Critique
• The direct estimate of the poverty line required to access 2400
calories in 2004-05 is Rs 795 and an all-time record high, 87 per
cent of the population is below this level

• In Utsa Patnaik’s words:

The actual estimation procedure has meant giving up not just
these particular nutrition norms, but has meant giving up any
nutrition norm whatsoever. The question of nutrition has been
rendered irrelevant in the official method. There is not even any
lower bound which is set to the fall in the energy intake
corresponding to official poverty lines.
 Utsa Patnaik’s Critique
• Further, “Sub-human to very low energy intake levels of 1450
to1700 calories however, by 1999-2000 are associated with the
official poverty lines for many states (Andhra Pradesh, Gujarat,
Kerala, Tamil Nadu), while Punjab and Haryana are very close
with 1720 calories or less being accessible at their official
poverty lines.”
AND
• “The lack of comparability arising from alteration in the recall
period, however, is of relatively small importance, compared to
the fundamental problem of lack of comparability arising from
the unstated alteration in the consumption standard inherent
in the indirect method.”
 Sen Himangshu Critique
• NSS 55th round (1999-2000) controversial. Methodology
changed, rendering comparison with earlier rounds difficult

• Unadjusted comparison of the 55th with the 50th round shows

very large poverty reduction: by 10 percentage points of
population or about 60 million persons.

• Comparison of adjusted 55th round counts with the 50th

round MRP shows that poverty ratios declined at most by 3
percentage points (less than between rounds 43 and 50) and
the absolute number of poor did not reduce. Thus the 1990s
were a relatively lost decade for poverty reduction
 Some Implications of S-H Critique
• This is not just an intellectual matter. Poverty counts influence fiscal
allocation, determine inter-state distribution of anti-poverty funds, and
fix the number of households entitled to Below Poverty Line benefits
(access to food subsidy, anti-poverty schemes, and increasingly to
subsidised health care and education). All of these are under review
and identification has begun of those entitled to targeted benefits.

• The 1990s were the first post-independence decade when

economic inequality increased sharply in all its dimensions.
Inequalities had increased in the initial decade of the “green
revolution” also. But, with urban gaps reducing, inequality increase in
that period was largely confined to rural areas. Moreover, this was
accompanied by a tendency for relative food prices to fall and was
followed after the mid-1970s by a period of about one and a half
decades when rural inequalities declined.
 Some Implications of S-H Critique
• Another important finding is of a large 1990s shift in spending
from food to non-food (e.g. fuel, medicines and conveyance)
even among the poor.
• This means that disjuncture between income poverty and
nutrition intake has widened, so that trends in income poverty
understate the worsening in the nutrition situation

• There is thus no warrant at all to cut the number of those

entitled to subsidised food.
 Arjun Sengupta et al
Criteria for classification of Households

• Extremely Poor if MPCE<=0.75 times poverty

line (PL)
• Poor if 0.75 PL<MPCE<= 1PL
• Marginal if 1 PL<MPCE<=1.25 PL
• Vulnerable if 1.25 PL<MPCE<=2.0 PL
• Middle class if 2.0 PL<MPCE<=4.0 PL
• High Income Group if MPCE>4.0 PL
 Arjun Sengupta et al
• As of 2004-05, 21.8 per cent of the people can be regarded as
extremely poor or poor.

• There has been some decline in the percentage of people belonging to

these groups of poor in the last 10 years of high economic growth
from 31 to 22 per cent.

• However, almost 41 per cent of people, consisting of the extremely

poor, poor and marginal groups, survived on an average expenditure
of less than Rs 15 per day per capita consumption in 2004-05, which
by all counts should be regarded as affording no more than a
miserable existence.
 Arjun Sengupta et al
• The vulnerable group, whose average DPCE was Rs 20 (or Rs
21 as per CES) could be described as people just above the
poverty line with some bare minimal additional consumption
over subsistence.

• They are vulnerable because one exogenous shock of death

or accident or major hospitalisation or even a temporary loss
of job or earnings can drive them to destitution. They
constituted about 36 per cent of the population in 2004-05.

• These four groups of people – extremely poor, poor, marginal

and vulnerable – constituted about 77 per cent of the
population in 2004-05. Most of them are living with an average
DPCE below the international level of poverty of $ 2 per day
Trends in Poverty in India Under Globalization, 1991 to 2008

• It is now certain that economic inequality increased

sharply during the 1990s in all its aspects and, as a result,
poverty reduction deteriorated markedly despite higher
growth. It is most likely that the number of poor increased
during the decade. This has implications for policy, and
lessons for future survey design.

Himangshu and Sen, EPW 2004

 Trends in Poverty in India Under Globalization 1991 to 2008
• Using a direct poverty estimation route of inspecting and calculating
from current National Sample Survey data the percentage of persons
not able to satisfy the nutrition norm in calories, the author finds that in
1999-2000 nearly half of the rural population who are actually poor
have been excluded from the set of the officially poor. For 2004-05, while
the official estimate of rural poverty is 28.3 per cent, the author’s direct
estimate of persons below the poverty line is 87 per cent.

Utsa Patnaik, Neoliberalism and Poverty in India, EPW 2007

 Trends in Poverty in India under Globalization, 1991-2008

• Our estimate that a little more than three-fourths of

the Indian people are poor and vulnerable in 2004-05,
based on a value that is double the official poverty
line, is consistent with other estimates. For example,
the World Development Report 2006 of the World
Bank reports 35 per cent of the Indian population as
living below the extreme poverty line of one PPP $
per day.

Arjun Sengupta and Others, EPW 2008

Most recent Estimates