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Is poverty declining in India?

March 27, 2007
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In India we keep harping on the growth rate (the Indian economy has grown at a clip of 8 percent plus from 2002 – 2006 and this year the figure is higher) but what about poverty? Well, figures show that there is an improvement.

A report in Forbes says that the percentage of Indians below the poverty line has dropped to 21.8%, quoting the latest Indian government data. And just at the turn of the millenium this figure was 26.1 percent.

How were these figures compiled? And are they reliable? Well, a measurement called the “mixed recall period, under which a consumer recalls spending in five categories, like durable goods, institutional medical expenses, clothing and education from a 365-day period” was used. As the Forbes article says:

In the past, international nonprofits have criticized the way the government measures poverty levels, saying the use of outdated standards led to an undercount of the poor. The official poverty line for an individual in urban areas is $6.78 in income per month; in rural areas it is $6.32. The government says this is enough to buy 2,200 calories per day of food. The World Bank’s definition of the poverty line for developing countries is $1 per day.

However, Indian standards are about half that (information given in comment in response to a query). But even if we assume that the Indian standard for poverty is a reasonable one and that 21 percent is an accurate figure, it still means that a large number of Indians are poor, because of our large population. About 240 million people are living below the poverty line. More of them in the rural areas. Just 68 million in urban areas.

The Planning Commission conducted a study which quotes even lower figures for poverty this year.

These figures seem too low, but anyway I am an optimist. Even if these figures underestimate the poverty, I feel that the situation is improving. That is what counts. Slower that they say, but the truth is that poverty is declining.

The reality check? An example:

A poor family I know well are above the poverty line that the government has laid down. Seven of the family live together in a small shack in a slum. They have intermittent access to water and can barely afford to pay the electricity bill even though all they use is a fan, a light and a second hand television. The 19 year old, her 17 year old younger sister and the 20 year brother are the earning members. There are two younger kids in the house and older parents, who are not earning. The elder girl earns around Rs 2400/- ($55) and the younger Rs 1400/- ($32) per month. The brother has intermittent contract work and when he earns he doesn’t earn too much more than the girls. Now, even by going by World Bank Poverty Line figures, these people are above the poverty line. But what kind of life do they lead?

They get two meals a day…but little else. None of them are educated beyond the eighth grade which means that they will be stuck in the rut forever. They have no money to educate their little brother beyond school level. They buy clothes once a year, but mostly survive on second hand clothes. They have no money to spend on health. They have never seen the inside of a movie theatre. They have no money to visit their village once a year. They cannot always afford vegetables. Fruits? Hardly ever. And they are in debt. A loan was taken for a wedding in the family which is still to be paid off. The elder girl feels that her future is bleak (meaning getting a good earning boy to marry) because a lot of money is required for the marraige which the girl’s side has to spend. So they scrimp and save and she hardly ever smiles. The parents are continually sick and have no money to take all the medication prescribed. The father, who is severly asthamatic, is covered by some ESI scheme for health, but cannot afford the medicines which are not given free. No one knows what is wrong with the mother, but she is physically weak. My guess is that after giving birth to so many children and that too at a young age, and also doing hard labour most of her life, this woman who is not even forty, has already aged. Hard labour, and no proper nutrition. But these people are above the poverty line. They are surviving because they manage to feed themselves. A little money that is left over goes for medicines. You can see the hopelessness in their eyes and bewilderment when they hear that India is progressing.

What they don’t know is that there were more people like them ten years ago, or even five years ago. Slowly, those families who have fewer children, and spend money on education, have access to a better life. You hear of these stories every now and then. The latest one I heard was of a poor paan-wala who broke with tradition and educated his three daughters and they are all earning well today.

Update: After a query by a reader I have decided to add the following from this site:

Indian official estimates of the poverty line are based on a norm of 2400 calories per capita per day for rural areas and 2100 per capita per day for urban areas…in the ’70s, when our governments first began using this definition, the monthly cost of the “basket of food” required to supply these nutritional levels was calculated to be Rs 62 in rural areas, and Rs 71 in urban areas. With inflation, those numbers rose to Rs 328 and Rs 454 respectively, by the year 2000. As far as I know, we don’t yet have available any poverty figures post that date. But according to this table, inflation was 3.8 per cent in 2001, 4.3 per cent in 2002, 4.1 per cent in 2003 and 5.5 per cent in 2004. (2004 is the most recent year for which I’ve been able to find inflation figures). Inflate Rs 454 by these amounts, and you get a 2004 figure of Rs 540: the price of our urban basket of food. (I’ll focus on the urban basket for the rest of this article; the reasoning is similar for rural areas)… Something important to note here: it’s not that your expenditure on food – the portion of your earnings that you spend on food – had to be more than this amount for you to be recognised as being above the poverty line. No, the definition assumed that your entire earnings had to be more than the amount. That is, the official definition of the poverty line assumed that you spend all your money on food.

Basically what this means is that as long as you can afford a basket of food you are not poor. You can live on the streets, possess only rags and have no access to education, but according to our government, you are not below the poverty line!

In conclusion however I would like to say that the situation is India is certainly improving, though not as fast as the government would like us to believe.

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2 Comments leave one →
  1. Lal permalink
    May 4, 2007 12:18 pm

    Hi, do you know the still used/ present poverty line in India for both the rural and urban areas in rupees or in calorie intake? thanks.

  2. May 4, 2007 12:40 pm

    According to the Wiki (2004 data)
    http://en.wikipedia.org/wiki/Poverty_in_India
    the poverty line was monthly consumption of goods below Rs. 211.30 for rural areas and Rs. 454.11 for urban areas per capita. Basically for a family of two it means a minimum income of about Rs 1000/-. This ofcourse is too low a figure, but its been kept low so that we can proudly say that we have fewer poor people. But I have added another quote from a more reliable source to the main post.

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