The Problems with the Poverty Numbers

The Planning Commission has once again tied itself in knots by releasing poverty estimates for 2011-12 even before the storm over the 2009-10 numbers has died down. The new estimates show an all-India fall of 7.9 percentage points over two years compared to the 7 percentage point decline over five years between 2004-05 and 2009-10. According to the Planning Commission, the poverty headcount ratio in 2011-12 was 25.7% in rural areas, 13.7% in urban and 21.9% for the country as a whole, as against 33.8%, 20.9% and 29.8%, respectively, in 2009-10. The pace of the recent decline has surprised many, especially since it has taken place at a time when the concern has been about a deceleration in the Indian economy. The timing of the press release on the 2011-12 estimates just before the general elections next year has been seen as a political ploy of the ruling combine.

A large part of the responsibility for general scepticism on poverty reduction must be laid at the door of the Planning Commission, which in recent years has shown a great deal of immaturity on this matter. It was wrong for the Planning Commission to implead itself in 2011 on a Supreme Court matter regarding caps set on how many people could be treated as below the poverty line (BPL) for the public distribution system (PDS) and other schemes. And since then it has repeatedly shown incompetence in not fully and properly explaining who are entitled to all such schemes and how this relates to the arcane issues of norms and methodology that govern the estimation of poverty. All that it has done so far is to appoint another committee to look at the poverty methodology and while this new committee is still deliberating the issue, the Planning Commission has been quick to release numbers based on the Tendulkar methodology, obviously because they look so good.