Should we measure poverty differently? This was the question raised by the chairperson of the Economic Advisory Council to the Prime Minister a few weeks ago. The answer to this depends on what we are measuring it for. In a country where welfare benefits are available only to those “eligible”, defining and measuring eligibility becomes important.
Poverty in this context may be different from poverty when it is seen as a general reflection of how our politics and economics are performing. It is important that we allow for heterogeneity in the definition of poverty, and invest in statistical machinery that can capture the definition of poverty we agree on.
Poverty thresholds in India
The typical measure of poverty is whether a household (or an individual) has enough to make ends meet. This is not as simple as it sounds, for you would ask, what does it mean to make ends meet?
Different committees in India have taken different approaches to answer the question.
Until 2009, our view was that the poverty line should be based on calorie intake – how much money does an individual need to consume around 2,000 calories per day? The Tendulkar committee expanded this definition in 2009 to include non-food expenditures like health and education. According to this committee, poverty translated to measuring whether an individual had less than or equal to Rs 447 per month in rural areas and Rs 579 in urban areas. This was later revised to Rs 816 per person per month in rural areas and Rs 1,000 per person per month in urban areas in 2011. The assumption was that if you have this much, then you are not technically “poor”. Since then, there have been other committees (such as the Rangarajan committee, and the Socio-Economic Caste Census) that have addressed this question. The official thresholds, however, continue to be those suggested by the Tendulkar Committee.
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Measuring poverty for welfare transfers
There are three issues to bear in mind as we redefine poverty for the use-case of welfare benefits. First, we should be careful to not judge the numbers with our urban lens. Many of us will most likely have spent more than Rs 1,500 on a single meal in an upscale restaurant at some point. This makes us scoff at such a minimalist definition of poverty, and the current thresholds do seem to be very low benchmarks.
The reality across the country, however, may be very different. There is a standard concept of purchasing-power-parity when comparing nations across the world. The same $1 buys very different things in the United States and India. This concept needs to be applied to measuring the threshold that a standard basket of goods will buy across different parts of the country. Perhaps a single definition cannot encompass the regional economic heterogeneity in India.
Second, it is not trivial to arrive at an appropriate basket of goods. One way to think about this is that poverty is often relative to everyone in society. If India’s GDP per capita were to magically increase by 10 times, we would still have a “bottom of the pyramid” that finds itself left out. One conceptualisation of a poverty threshold is an income that is less than some per cent of the median income of the society in which the person lives. In either conception of poverty, thresholds should vary by region. It should also be up to local governments to determine eligibility for the schemes that are designed and administered by them.
Third, and most important, is the question of measurement. The exercise of measuring poverty requires a statistical machinery that can capture household expenditures and incomes – regardless of the definition one uses. It requires a Census that gives us a sampling frame so that appropriate samples can be drawn. India shows no sign of conducting a Census, so we don’t even know how many people exist in India, and what our population growth or rural-urban composition is. In the absence of this basic machinery, it is hard to imagine how the best-crafted conceptual approaches to poverty measurement are going to get translated on the ground.
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An expansive definition of poverty
One of economist Amartya Sen’s contributions was to frame development as a process that expands the freedoms of people. The substantive question of poverty should be seen in the same way. In this scheme of things, people are poor when they have limited agency to even aspire for a life different from the status quo.
In India especially, this translates as the freedom to check out of the Indian state. The true marker of escaping poverty today is the extent to which you can ignore the state in your daily life. This means building private islands with one’s own security, sports clubs, schools, water, air-purifiers, and doorstep services ranging from groceries and food to banking. This means “knowing a guy” who can get things done. Roads will cave and roofs will fall, but at least the police is more likely to be polite, and a private hospital with lower wait times and cleaner beds will be available.
Assuming that state capacity in India shows no signs of improvement, a reasonable question to include in poverty measurement exercises would be the extent to which a person can carve out a life outside of the tentacles of the Indian state. There are two questions that household surveys should consider.
First, in the last few months, how many times have you had to deal with the Indian bureaucracy to obtain what was legally yours? Second, in the last five interactions with any government office, was the government employee rude to you? The responses to these questions will tell us the status of poverty in India. The greater the ability of people to check out of the state, the greater their prosperity. Of course, we will have truly emerged out of poverty when these questions will no longer be relevant. That is the goal we should aspire for.
Renuka Sane is managing director at TrustBridge, which works on improving the rule of law for better economic outcomes for India. She tweets @resanering. Views are personal.
(Edited by Zoya Bhatti)