(Premium) Gist of Yojana: January 2014

Premium Gist of Yojana: January 2014

POVERTY MEASURE

Measuring Poverty in India has a long and venerable tradition. In the pre-independence period, Dadabhai Naoroji sought to measure poverty with a view to describe the consequences of colonial rule in India.

His book Poverty and Un-British Rule in India drew attention to the enormous drain on wealth caused by colonial policy and was the foundation to many intellectual arguments for independence. Subsequently, during the freedom struggle the Congress Party, the Planning Commission and many eminent scholars have worked on this issue. Srinivasan (2007) has a detailed review of this background.

In fact, it would not be an understatement that this discourse has been one of India’s major contributions to the field of development studies. It is not a merely a scholarly exercise. The World Bank has stated that fighting poverty is at the core of its work. The United Nations when it outlined the millennium development goals stated that the first goal is to eradicate extreme poverty and hunger. Poverty is at the heart of almost all discourses on development policy.

In this context, when we seek to measure poverty, there are at least three distinct types of objectives: (i) to build awareness on poverty and to keep it in the agenda of discourse; (ii) to design policies, programs and institutions to alleviate poverty; (iii) to monitor and evaluate these policies, programs and institutions that are associated with it. Each of these objectives imposes very different requirements on data and the methodology of measurement. In particular it could easily be argued that the latter two are not single objectives but are in turn composites of multiple objectives.

In so far as the first is concerned, the objective is easily understood and is in fact the basis of Dadabhai Naoroj its book published in 1901, the purpose of which was to influence British public opinion about the consequences of colonial rule on India. It was principally to bring poverty in the political discourse and influence policy with that in mind. An objective repeated by the National Planning Committee of the Congress and the authors of the Bombay Plan before independence and by the Planning Commission in more recent times. What is common in all these approaches is to state a normative criteria of what constitutes socially acceptable minimum” necessary for the bare wants of a human being, to keep him in ordinary good health and decency” (Naoroji 1901). Having done so, the aim is to estimate the proportion of people who on average in some defined period of time over some region do not meet this criteria. This estimation is then achieved usually through a survey which canvasses (usually) households with a view to assess the proportion of those who do not meet the desired criteria. These results, based on the design of the survey are described by geography, communities as may be feasible. In India, this has been done since the 1970’s using the household consumer expenditure survey, based on criteria established by the Planning Commission task force in 1979. The estimates are generated for rural and urban areas separately in each state of the union. This profile has them been the basis for our discussions on poverty.

Turning now to the second objective, the principal objective is to design programs and policies so as to better target their objective. Thus the authoritative World Bank handbook (2009) states “Clearly, one cannot help poor people without knowing who they are”. The principal objective is to seek to design the program so as to allocate resources in a manner most likely to reach the intended beneficiaries. This targeting can be very broad or coarse or very fine. In the former case the poverty profiling done under the first objective is used to allocate resources to regions or programs consistent with the orderings in poverty profile. Alternatively, the finer targeting can be sought to locate beneficiaries directly as in the targeted Public Distribution System or the Indira Awas Yojana, where caps on numbers of beneficiaries are reached based on the estimates of the profile. It is clear that while both forms of targeting use the profile developed for the first objective, the finer the targeting, the more intensive is the use of the data generating the poverty profile. This then leads to the question as to how appropriate is this? To answer this question we need to understand the statistical properties of the profile generated for the first objective.

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