Suresh Tendulkar panel on poverty
Conventional wisdom holds that poverty is more widespread in India than the government cares to admit. And so, when the Planning Commission suggested that poverty had declined sharply to 27.5% in 2004-05 from 36% in 1993-94, it was greeted with a lot of scepticism. After all, the economy’s growth in the decade up to 2004-05 had not been that much better than in the decade prior to that. Agriculture continued to suffer, save for sharp growth in some years. The expert group to review the methodology for estimation of poverty chaired by Suresh Tendulkar has now suggested that the poverty ratio at the all India level was actually 37.2% in 2004-05. Rural poverty was projected at 41.8% and urban at 25.7% by the committee, as against official estimates of 28.3% and 25.7% for rural and urban population, respectively. Sure enough, the response has been mixed. So how did the expert group arrive at a figure that is at variance with the official estimates? In the past, the poverty line was defined in terms of per capita consumer expenditure at 1973-74 market prices and adjusted over time and across states for changes in prices keeping unchanged the original 1973-74 reference poverty line baskets of goods and services. The all-India rural and urban poverty line baskets were derived separately, assuming per capita daily calorie intake of 2,400 for rural people and 2,100 for urban population. The Tendulkar panel made four major departures from the past practices. It moved away from the calorie intake criteria for determining poverty line. Instead, it tests for adequacy of actual food expenditure near the poverty line to ensure aggregate nutrition, rather than just calories. Two, it has recommended adoption of uniform PLB for the urban and rural population, breaking away from the past practice of two separate baskets. This has been done to get rid of the problem of outdated PLB, a major criticism of the existing poverty line. Three, it has suggested a new price adjustment procedure based in the same data set as the one used for poverty estimation, rejecting the earlier practice of using price indices that are generated externally, specific to population segments and were outdated. And four, it incorporates explicit provision in the price expenditure on health and education, which in any case has been rising. The official poverty estimate, in contrast, assumes basic health care and education services would be provided by the state, and although the 1973-74 base takes note of the private expenditure on these items, it does not take into account the increase in the proportion for total expenditure over the years. The Tendulkar panel has also recommended that 365-day mixed reference period be used to collect data instead of the past practice of using 30-day uniform reference period. The advantage of using MRP is that data integrity is better when respondents are asked about their expenditure in the 365 days prior to the survey, particularly on items of low frequency consumption such as clothes, footwear and durables, than when they are questioned on expenditure on the preceding 30 days.