A universally accepted poverty line…

…does not exist

So says the United Nations.

One needs to be careful while making assertions (via Desipundit). The one-dollar-a-day measure just measures the number of people who earn less than one US dollar a day.

Gujarat has found a simple way of showing a decline in poverty figures. It has redefined poverty lines for both rural and urban areas. So you would be counted as poor in a Gujarat town if you earn Rs 541.16 a month ($0.45 a day) or less. In a Gujarat village, the figure is even lower — Rs 353.93 a month or 30 cents a day. Most of the other states, including the poor ones like Jharkhand, keep the poverty net wider. The internationally accepted figure is a dollar a day. This removes large numbers from the BPL list and prevents them from receiving the benefits of poverty alleviation and development programmes. [Shivam Vij/Tehelka]

There is nothing irregular about different figures for rural and urban poverty—all Indian states follow this practice. Also, according to the Planning Commission’s report dated March 2007, the equivalent national figures determining the poverty line are Rs356.30 per month (rural) and Rs538.60 per month (urban). That too is below the ‘internationally accepted figure’. Shivam does not tell his readers that no state in India follows the ‘internationally accepted figure’.

In addition to the academic & policy debate over the right place to draw the poverty line, there are political considerations. The latter lead to some interesting results—like 91% of families in Karnataka declaring themselves below poverty line.

Update: BOK discovers that “Poverty Lines for States are set by the Planning Commission and not by the States”. And Mint has a report on (the confusing) poverty lines.

07 Nov 2007 | Concerning Economy, Public Policy

15 Responses

Sriram November 7th, 2007 at 18:11

Using the market exchange rate of the dollar for such computations is not only funny but also fakery. I am sure the picture would be much better if you consider purchasing power parity of the rupee.
The Acorn » Selective Tehelka and public health in Gujarat November 7th, 2007 at 19:12

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Chandra November 7th, 2007 at 20:01

Apparently we suddenly have an economist in a socialist?

Sriram, with the falling dollar, rupee can actually buy more, if one wanted to use international standard.

Also, official measure of inflation are different for villages and cities. Economies of the two lives are simply different.
B.O.K. November 7th, 2007 at 21:05

Good thing you called this one out. Such stupidity needs to be pointed out.

BTW, can someone throw some light on this “internationally accepted” figure of $1/day? How was it arrived at? It looks good in print.. but what does it mean?

Poverty is about lack of purchasing power. But the power to purchase what? Obviously, the basic necessities of life. So I can understand if one were to criticize the Government of India (and/or the State Governments) for the ridiculously low figure of Rs. 10/day or so. But having another equally arbitrary figure of Rs. 44 (oops.. 42 now.. oops 40 now.. oops 38 now) doesn’t make much sense to me.
Nitin November 7th, 2007 at 21:40

BOK,

You should read this paper by Banerjee and Dufflo. It starts off this way:

In what turned out to be a rhetorical master-move, the 1990 World Development Report from the World Bank defined the “extremely poor” people of the world as those who are currently living on no more than $1 per day per person, measured at the 1985 purchasing power parity (PPP) exchange rate.¹ Even though there have always been poverty lines indeed one dollar per day was chosen in part because of its proximity to the poverty lines used by many poor countries²this particular one has come to dominate the conversations about poverty in a particularly stark way.

² For example, the “All India Rural” poverty line used by the Indian Planning Commission was Rs 328 per person per month, or $32 in PPP dollars in 1999/2000. [Banerjee & Dufflo/ MIT]
Nitin November 7th, 2007 at 21:52

Chandra & Sriram,

The dollar a day line is adjusted for purchasing power parity when it is compiled. It means that the person’s spending power in local currency is the same as the spending power of a person who earns US$1 in the US. I don’t think it captures current exchange rates though.

That’s another problem with the measure: the PPP bit gets lost in the popular debate. I’m not sure what the PPP adjusted rate in India is, but it’s certainly not as high as Rs40 per US. It’s probably closer to Rs15/dollar.
Chandra November 7th, 2007 at 22:23

Nitin, the PPP rate to market exchange rate is close to 4 to 1 – $850bil in 2006 translates to $4+tri in PPP (Link).

You right about PPP, of course, for official calculation of poverty rates by international orgs. But that’s not what these newly minted economists use to get their muddled point across.
The Acorn » Is Gujarat’s rural-urban gulf really widening? November 7th, 2007 at 23:51

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The Acorn » Why Gujarat’s farmers want to quit November 8th, 2007 at 01:06

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B.O.K. November 8th, 2007 at 01:32

Nitin,

Thanks for that paper.

I did some searches as well, and this thing came up:

It turns out that Poverty Lines for States are set by the Planning Commission and not by the States.

The Planning Commission has been estimating the incidence of poverty at national and state level using the methodology contained in the report of the Expert Group on Estimation of Proportion and Number of Poor (Lakdawala Committee) and applying it to consumption expenditure data from the large sample surveys on consumer expenditure, conducted periodically by the National Sample Survey Organisation (NSSO).

The article has data pertaining to 1999-2000, and the historical data can be seen at:

I don’t think Mr. Vij was interested in fact-finding at all.

But I don’t want to question his motives, because that is the politically incorrect thing to do these days, so I’ll just put a big question mark on his competence and journalistic integrity.
The Acorn » An electrified state of affairs November 8th, 2007 at 08:45

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The Indian Economy Blog » On Tehelka’s dissing of “Vibrant Gujarat November 8th, 2007 at 16:41

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Gaurav November 8th, 2007 at 20:29

Nitin, don’t be so harsh on poor Shivam. These aren’t his ideas. At the beginning of the article he mentions Avinash Kumar. The whole article is a paraphrasing of this article by Kumar – http://www.pragoti.org/pragoti/news_detail.php?news_id=312

Take your issues to Avinash Kumar.

The Acorn