Poverty has truly fallen: it\’s no statistical fudge

The government is corrupt and incompetent. People are, quite rightly, sceptical of its integrity. But it has not fudged the poverty data to exaggerate the fall in poverty, as alleged by innumerable politicians and TV anchors.

I have long criticized government statistics as too often being misleading or plain wrong. But those critics of Montek Singh Ahluwalia, deputy chairman of the Planning Commission, who claim he has “rigged” the poverty line downward, are more wrong than any statistical department.

The commission is surely guilty of gross incompetence. It said in an affidavit to the Supreme Court last year that the poverty line for 2009-10 was Rs 32 per day in urban and Rs 26 in rural areas. Barely six months later, it now says those were merely back-of-the-envelope estimates, and that detailed state-wise data on inflation now show that the poverty line was actually Rs 28.65 in urban and Rs 22.40 per day in rural areas. The Commission may think it’s okay to release provisional data and later revise them, but it was truly daft to submit a figure to the Supreme Court which it knew could be wide off the mark. If it was unsure of its figures, why did it not tell the Supreme Court to wait for the hard data?

When the initial poverty line estimate of Rs 32/day in urban areas came out last year, TV anchors and politicians screamed that nobody could live on so little. Last week’s downward revision of the poverty line rural areas has produced an even greater howl of outrage. The outrage is entirely justified on the ground of Planning Commission incompetence. But it is quite unjustified on the ground of fudging. Abhijit Sen, the Planning Commission’s left-wing member-economist, would never tolerate fudging to exaggerate the fall in poverty, and he has certified the accuracy of the new poverty line.

Let’s do a reality check on what the standard dal-roti diet costs the poor. Opposition politicians, NGOs ,and TV anchors have challenged Montek to show one can live on Rs 28.65 per day, at a time when a litre of milk costs Rs 37 and six bananas may cost up to Rs 30. They have castigated Montek for sitting in an ivory tower, totally out of touch with ordinary folk and reality.

Sorry, but the facts show otherwise. Those out of touch with reality and prices are the critics, not Montek. Politicians and TV anchors are well-off, and consume tandoori chicken and fried fish plus milk and fruit. But poor folk live essentially on dal-roti.

Any housewife will tell you that wheat costs up to Rs 20 per kilo and chana dal up to Rs 45 per kilo. A standard daily calorie intake of 2,000 calories can be met by 400 gm of wheat (1,600 calories, cost Rs 8) and 100 gm of chana dal (400 calories, cost Rs 4.50). The total cost comes to just Rs 12.50.

Labourers doing hard physical work may need 3,000 calories/day, but even that implies just Rs 18.75 worth of dal-roti, well below official poverty lines.

The World Bank has a global poverty line of $1.25 terms, adjusted for low prices in poor countries through purchasing power parity (PPP). The leftist star of Jawaharlal Nehru University, Prof Himanshu, estimated last year that the PPP dollar was worth Rs 19. So, the World Bank poverty line of $1.25 translates into Rs 23.75 per day. This is slightly above the government’s rural poverty line of Rs 22.40 but far below the urban Rs 28.95, and roughly equal to the all-India average poverty line of Rs 24.25.

The World Bank poverty line has been accepted globally for decades, so it is somewhat ridiculous for Indian critics to suddenly declare—quite erroneously—that people cannot live on so little. The harsh reality is that hundreds of millions across the globe are living on half as much. That is a tragedy. But it does demonstrate that neither the World Bank nor Montek Ahluwalia is setting poverty lines below starvation level.

The Planning Commission says the proportion of poor Indians has fallen from 37.2 % in 2004-05 to 29.8% in 2009-10. Sceptics say the fall is too sharp to be true. I would argue the very opposite—that the fall in poverty is actually even sharper than indicated by the 2009-10 survey. That year was a terrible drought year, and this would have artificially inflated the poverty rate.

Another NSSO survey is being done in 2011-12, and i am willing to bet that this will show a big fall in poverty over 2009-10—because the 2011 monsoon was normal. Any takers?

4 thoughts on “Poverty has truly fallen: it\’s no statistical fudge”

  1. Dear Mr Swami

    In that case, Montek should ask for reduction on defence allocation for armed force food supplies. I believe that Yogi in Himalaya can stave for months. Hence Montek, You and World Bank should declare all the people who having access to two square meals as filth rich. I am sorry to say that I have never come across a such a lame and daft support logic of WB and Govt Of India.

    I really find it equally interesting that someone can extend his support to such logic and remain sane.

  2. Mr Swaminathan,

    I really respect you for the way you present the topics and the way you make the readers to nod to your opinion. But Even after reading down your explanation, I still feel that 26 Rs is far from reality.

    You have waged Roti and Chenna but you have to consider the other entities like the oil,the fuel etc. And thanks to the inflation, we never know what would be the rates of Wheat.


  3. How will people move around and pay bus charges?? An average bus charge for a day costs around Rs25 in cities like Bangalore. Hugely disappointing article. You also don’t seem to have taken the cost of kerosene, and Wheat/Rice/Jowar, etc cost around Rs 40 a kg, with dal around Rs 70 / kg. Food for a day should cost around Rs 50. I doubt anyone can survive in the big cities on less than Rs 120 per day. This seems to be the poverty line in the big cities.

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