Montek defends poverty line (sort of) and deflects critics

Montek Singh Ahluwalia explains why you can't have it all: high food subsidies and cheap kerosene and diesel. He also stands by his poverty line - sort of

R Jagannathan October 07, 2011 14:05:13 IST

Montek Singh Ahluwalia is fighting back. The Planning Commission Deputy Chairman, who was in the doghouse recently for telling the Supreme Court in an affidavit that the poverty line is Rs 32 per person per day for urban areas and Rs 26 in non-urban areas, is sticking to his guns - but subtly.

In two different interviews - one given to Karan Thapar of CNBC TV-18 and another to The Economic Times - he has managed to defend his poverty line with some ifs and buts, even while debunking the assumption that Rs 32 is the last word on it.

Speaking to The Economic Times, Ahluwalia pointed out the Indian poverty line was actually above global norms in terms of purchasing power. He said: "Our new poverty line, which is being criticised at home, is slightly higher than the global poverty line if we convert at purchasing power parity - which is what we should do."

The global poverty line is $1.25 a day, while the domestic figure is Rs 32. At current exchange rates, $1.25 will be around Rs 60. If in India you can buy twice as much for the rupee than you can abroad, Rs 32 would really by Rs 64 in terms of the price-adjusted global poverty line.

This is not to say that Ahluwalia is defending the poverty line fully. He has certainly backed off from claiming that Rs 32 of daily consumption should be the cutoff to determine who is poor and who is not for social security benefits - including cheap food.

He told Karan Thapar in the CNBC TV-18 interview (see video): "The public debate on whether you are still poor or not is really focused on whether you deserve to get certain benefits. Although this (Rs 32) is a poverty line, it's not the view of the government that benefits are going to be limited only to people below this poverty line. Some of (our schemes) are universal. In the case of food security, we have gone way beyond the poverty line in assuring what the benefits will be under the Food Security Bill."

But he held his ground in The Economic Times interview claiming that the poverty line is "relevant as a monitoring tool to see whether growth is bringing more and more people above the poverty line. We need a fixed poverty line for that."

Clearly, Ahluwalia is not planning on eating indefinite crow. In fact, when Karan Thapar asks him whether the poverty line is not something arbitrary, he agrees. "You can always argue because there is an element of arbitrariness in where you draw a poverty line and whether you really mean abject poverty or a little bit better. (But) the poverty line has to be drawn somewhere."

He then goes on to point out that the poverty line was not defined by him, but an expert committee (the Suresh Tendulkar Committee), and then challenges his detractors: "We appointed an expert committee. Now if you disagree with an expert committee you don't fiddle with its results. You would have to scrap them and appoint another expert committee." Aruna Roy, please make a note on that: ask for another committee.

Montek defends poverty line sort of and deflects critics

Planning Commission Deputy Chairman Montek Singh Ahluwalia. AFP

In The Economic Times interview, he challenges his detractors in the National Advisory Council - including Roy, who called for his resignation on the poverty line issue - by placing the choices before policy-makers more clearly. "When resources are limited, we have to choose how much to spend on helping poor people earn more income and how much direct subsidy to offer."

Translated, this means he is asking the jholawalas of the NAC they also have to choose. They can't eat their food security cake and have it, too. If they want an expensive Food Security Bill (FSB), maybe they should sacrifice high kerosene and cooking gas subsidies. The FSB will consume subsidies of nearly Rs 1,00,000 crore when fully implemented. But subsidies to keep kerosene and diesel prices down add up to nearly the same amount or more.

He said: "We have large subsidies on kerosene, where leakage is as much as 50 percent, and also diesel, which is consumed by the whole society."

The tradeoff Montek is offering is simple: if you want to help the poor, cut off the general subsidisation of the non-poor.

This is the real Montek speaking. And it's different from the penitent one we saw on TV the other day with Jairam Ramesh.

Watch video ....

Updated Date:

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