India’s Planning Commission fixed the poverty-line at Rs. 29 per person per day (around ½ USD at today’s rate) attracting severe criticism that the amount is unreasonably low. The Commission’s Vice Chairperson, Montek Singh Ahluwalia, mounted a spirited defence of the poverty-line in CNN-IBN recently. He argued that the poverty line is used only to measure the trends in poverty over time, and it does not indicate the level of poverty, and so the level of poverty-line does not really matter. In other words, this number is only a benchmark based on which we can find out whether the number of people at that level has gone down or up over time, giving us a clue to how policies over this period have performed. There is a merit to this argument.
Courtesy: The Hindu
He also argued that the number of people below poverty line has gone down over the last five years, and attacked those who criticise this assessment. Specifically, he said that these people are not contributing to an intelligent debate on poverty and are instead just bent on making the political point that poverty has increased with Economic Reforms. I agree with him that there are such people. I also agree that income levels of the poor have gone up, and even though it has gone up only by a small measure, it makes an important difference to people’s lives. My agreement with him stops there.
The level of comparison
In arguing that the level of the line does not matter for comparing over time, he implicitly makes an argument that the trend of income change is the same for all income groups. This is problematic. A low poverty line helps us understand the net change in the number of people who slipped above or below the line – nothing else. It gives us no information about people who are poor by any reasonable standard but are above the poverty line, which is problematic given the number of people about whom this gives us no information. To take an extreme hypothetical example, if the line is fixed at zero, we will estimate that there is zero poverty, and this will be the case every year making the estimates uninteresting and meaningless. While the current level does give us some information, much is missed by keeping the level so absurdly low.
Why revise the benchmark?
His defence of the estimate is all the more problematic if we consider the fact that the criticism is to the revisedestimate of the level of poverty made by the Tendulkar Committee. Montek argued that the poverty line is analytically useful only if it is held constant because it enables comparison. If that were the case, why appoint the Tendulkar commission, spend all that money and effort into revising the poverty line? The point of that exercise was to arrive at a more reasonable measure of poverty.
Not any expert’s business
He also argued that the estimate should not be criticised because the measure is not arbitrary and it was arrived at by experts. If the mandate of the ‘experts’ was only to estimate the number of people who are poor based on a level of poverty that was given to them, I would agree with such an exercise. While economists are trained to do that, they have no expertise to arrive at what is a level about which one could deem a person to be not poor. For that matter, no ‘expert’ is qualified to make that judgement. It is an exercise in human values and the only correct way to arrive at the level would be through a public debate by which we can arrive at a broad agreement. The commission and its experts can assist in this process and participate in it, but to say that a group of experts can do it in isolation, and that it should not be criticised is bogus.
The acceptable amount argument
On a related note, after arguing that Rs. 29 figure is not useful as a measure of poverty per se, he goes on to argue that it is a reasonable amount if we see it not as a daily level per individual and instead look at it as a monthly income per family; a cleaver way of arguing that it is an acceptable level. Similarly while arguing that the poverty line is not useful as a level, he emphasised again and again that “poverty” has declined over the last five years. A more accurate statement would be that the number of people making less than Rs. 29 per day in urban areas has gone down over the last five years. It is not surprising given that he states that POVERTY has reduced, after all that way of putting it can help in getting political support for Reforms that he has been a champion of over the years.
Do we need a level?
He has also argued that the poverty line will not be used in order to identify people who are poor for government programs, and that he is happy to use an arbitrary figure for the purpose. In my view, this is nothing but an attempt to distract attention on the level, since public attention to the level will force the commission to revise the poverty line upwards, which will in turn increase the number of people who we estimate to be poor. This will raise demands for greater state engagement in combating poverty, which goes against his politics.
Intelligent apolitical debate
He has argued that we have to have an intelligent debate on the poverty line and we should not compromise intellectually in order to score political points. There are at least two key issues under debate here: what a reasonable level of poverty is, and how poverty has changed over time by this estimation. In my opinion, he has played a useful role in arguing that things have changed for the better over the years. I believe in this and the NSS data backs this claim.
The criticism on the revised estimate poverty by the Tendulkar commission is another part of the debate, where his role has been to confuse the public and attack those who criticise without taking a stand on what this level should be. I believe that his reason for doing so is very political, and has to do with his vision for the role of government in public welfare. Thanks to his politics, while arguing for an intelligent apolitical debate on the issue, he has acted as a master obfuscator himself.