Poverty figures: Does it make any difference to the poor?

Angus Deaton's Nobel Prize should spark off more research on the measurement and usefulness of poverty percentages, notes Nitin Desai.

A recent report prepared for this year’s annual IMF-World Bank meeting gave a much lower figure for the incidence of poverty in India than what is commonly cited - 12.4 per cent in 2011-12 rather than the official figure of 21.1 per cent.

The bank’s poverty line works out to roughly Rs 32,000 per capita per year, which is 1,000 to 2,000 times Dadabhai Naoroji’s 150-year-old estimate of Rs 16 to Rs 35 per capita per year based on the diet of  “emigrant coolies during their voyage living in a state of quietude”.

The flourishing academic industry of poverty estimation has produced many estimates of the poverty line and the poverty percentage in between these two landmarks.

This award of this year’s economics Nobel to Angus Deaton, who made major contributions to this debate, will undoubtedly inspire a fresh round of researchers on this measurement issue.

Is this poverty percentage really useful?

If a painstaking survey establishes that village “x” has a poverty incidence of 30 per cent and village “y” of 20 per cent, will it make any difference to the development actions in these villages?

Do we identify poor households by trying to find out what their consumption level was in money terms, or do we use more directly observed criteria as is the case 13 criteria as is the case below-poverty-line (BPL) identification in government schemes which require it?

Has it ever been used for monitoring the impact of specific anti-poverty schemes?

Frankly, the only practical use that has been made of these numbers, outside the sphere of academic discourse, is for propaganda by political parties when the number shows a significant drop during their period in office.

This obsession with poverty estimation does reflect a major concern for public policy. Our Constitution made the bold move to have universal suffrage in a poor, largely illiterate, culturally diverse, and profoundly hierarchical society.

The repeated exercise of this universal suffrage and the spread of mass communication have empowered the poor and the disadvantaged.

It has compelled all governments to recognise the need to address exclusion from the growth process (poverty), from new work opportunities (unemployment), from the mainstream of politics (marginalisation), from social intercourse (discrimination) and from safety nets (vulnerability).

However, the outcome of public policy in terms of inclusion is disappointing because investment for growth and expenditures for poverty reduction have proceeded on parallel tracks that never met.

We need to recognise that growth is a necessary but not a sufficient condition for addressing poverty and unemployment.

Trickle-down is slow and the scale of the required increase in income in lower income groups is such that relying on trickle-down without redistribution would involve a large increase in higher incomes and widen disparities between rich and poor households — and, more dangerously, between rich and poor regions.

We need development interventions and political engagement that address all the dimensions of exclusion more directly.

A recent report on chronic poverty (1) contains a longitudinal analysis of poverty based on panel data for the socialist 1970s and for the next two decades, which saw a clear transition to free market capitalism.

In both periods, about 25 per cent of the panel households remained in poverty and around 40 per cent were not poor either at the beginning or the end.

The remaining households had either gotten out or slipped into poverty over this period.

The interesting part is that in the ’70s, this third group crossing the poverty line consisted of one-third who had slipped into poverty and two-third who got out.

The split in the more capitalist 1980s and 1990s was less favourable in that a more than half the crossover group – more precisely 20 per cent of all households –  had slipped into poverty.

Public policy to help poor households must focus not just on BPL households but also on those who run the risk of slipping into poverty if they are hit by some major crisis.

The support must be organised on three tracks — widening income and employment options for poor households and stagnating regions, investing in quality public services, particularly for health, education, skill development and environmental services, and providing a security net for the vulnerable households.

About 80 per cent of the households counted as poor belong to socially disadvantaged Scheduled Castes and Scheduled Tribes, have little or no asset base and few skills.

Opportunity for them and their children means occupational mobility and migration that allows them to tap into employment opportunities thrown up by the growth process.

This will not happen without public policies to provide skill development, financial inclusion and other measures that will facilitate occupational and geographical mobility.

Nor will it happen if the current tolerance of violence against outsiders, dissenters and minorities continues.

Delivering assistance to households and individuals is not enough. The provision of quality public services, (and the key word here is “quality”) for education, health and water supply is as important.

Inequalities in the access to these are far worse than income inequalities. As for vulnerability, the state must provide safety nets for poor and near-poor households, facing a sudden burden, say of health expenditure or an unexpected loss of income because of a drought or market turbulence.

All this is well-known and anti-poverty goals and programmes have figured in all Five-Year Plans, but more as add-on palliatives except briefly in the 1970s.

As the prime concern of policy shifts towards the “Ease of Doing Business”, “Make in India” and attracting foreign direct investment, the subsidiarity of anti-poverty strategies to other goals will be even more pronounced.

This is where a rights-based approach can help.  Some of the development-centred rights are enshrined in specific legislation, and some are protected by the generous interpretation of the right to life by the Supreme Court.

Today the only available path to social democracy is the combination of civil society organisations championing the rights of disadvantaged individuals and communities and an activist judiciary enforcing them. 

Hopefully we will in time get what we really need: A social democratic party rooted in mass movements of the underprivileged.

(1) - India Chronic Poverty Report, Aasha Kapur Mehta, Andrew Shepherd, Shashank Bhide,  Amita Shah, Anand Kumar, Indian Institute of Public Administration, New Delhi, 2011.