How UP and Bihar are skewing India's poverty estimates

The Planning Commission had released a report, yesterday indicating reduced poverty line to Rs 28.65 per capita daily consumption in cities and Rs 22.42 in rural areas, scaling down India’s poverty ratio from 37.2 percent to 29.8 percent in 2009-10.

Firstpost did an interview with Abhijit Sen, Member, Planning Commission. Here are excerpts from the interview:

When we say there is a 7.3 percentage points (from 37.2 percent in 2004-05 to 29.8 percent in 2009-10) drop in poverty, what is the context for this big reduction?

The question is whether it is ‘big’ reduction. If you look at the Eleventh Plan, we had said we aim to reduce poverty by 2 pecentage points a year. Over a five year period that should have been 10 percentage points.

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However, it is a considerable improvement from the 1993-2004 period, when the reduction was much less. So while it is an improvement in the rate of reduction, it doesn’t quite come up to our targets.

[caption id=“attachment_250262” align=“alignleft” width=“380” caption=“Bihar, Uttar Pradesh and the North-East, where again poverty has increased, are the places where there is no PDS reform. Reuters”]  [/caption]

What is this reduction a reflection of?

A number of things. I don’t think a proper analysis of the causes has been done yet. There are views that are floating around that are based on certain presumptions. For example, some will say that the rate of growth went up and therefore poverty declined. The problem with this is, if you disaggregate this-although papers on it are not yet available- it does show that a considerable part of the poverty reduction, probably a third or maybe even a half can be attributed directly to improved PDS (public distribution system), higher wages and such things. Higher wages would, of course, be related to growth but a significant number of people would say that part of it is to do with the NREGA (National Rural Employment Guarantee Act). Obviously, there is a growth component - which some people think is almost it - and then there is a distribution component, which from the numbers I have seen are probably in the region of 50 percent of the reduction story.

Could you elaborate on distribution component?

It is basically a combination of PDS and NREGA. With PDS, mid-day meal - on the food side- playing the major role, and NREGA playing the second role.

And on top of this, there is to some extent- not a large one- some reflection of better improvement in some poor states. However, this is not for all poor states. Glaring absences are in Bihar and Uttar Pradesh, where the poverty reduction rate is very low. In Bihar, it has happened despite the fact that the growth rate has picked up, in Uttar Pradesh growth rate hasn’t picked up all that much.

Bihar, Uttar Pradesh and the North-East, where poverty has again increased, are the places where there is no PDS reform. And the NREGA in this area didn’t do well.

So there is something on the regional composition that tends to bring this out.

There are mysteries as well. More academic work needs to come out. For example, one peculiar characteristic of this data is that generally in most states the rural poverty reduction is more than the urban poverty reduction. This is true for both, and true in almost every state. This tends to support the non-growth story.

Rural growth has not been as much as the urban growth. This could also point towards the impact of agricultural growth. In terms of acceleration, agricultural growth accelerated more than manufacturing growth.

The other thing is, not unexpectedly, you find that urban poverty reduction has been slower. Poverty has reduced more in those states which are more urban, for example Maharashtra. So there are mysteries.

If one were to take the example of Uttar Pradesh, where there has been only a marginal decline in poverty ratio, how does the money spent on poverty alleviation schemes compare to the number of people who have emerged out of poverty?

I don’t have the numbers before me right now. In case of UP, we don’t think they have done too well. Fall in numbers isn’t particularly large. On the other hand, consider a state like Orissa. It has seen a very substantial reduction in the number of poor. You might actually say that the money has been spent well. At least, much better than in UP. However, some people are quite committed to the idea that poverty schemes don’t affect anyone and others believe more money should in fact be pumped into them. Truth obviously lies somewhere in the middle. And the issue is how much in the middle. That is an academic question. The jury will be out till academic studies come out with their observations.

What is your analysis of the performance of the North-Eastern states - Assam, Meghalaya, Manipur, Mizoram and Nagaland - where poverty has increased?

With the exception of Assam, one should take the numbers from the North Eastern states with a pinch of salt simply because they are small and their sample sizes are low and they have a larger range of errors than the bigger states,statisticallyspeaking. Almost all North Eastern states, with the exception of Tripura, including Assam have done badly. It suggests that in those states they are not quite getting a combination of growth and poverty alleviation schemes, as you see in Orissa. Tripura is an outstanding case, it is an odd man out in the North-East. I would attribute that to Tripura having a much better public delivery.

You can read the Planning Commission’s poverty estimates for 2009-10 here.