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How is poverty line defined by the planning commission?
Definitions of poverty and poverty line vary between organizations, governments and countries. Recently, Kapil Sibal, India’s Law Minister and Minister for Communications and Information Technology, criticized the Planning Commission of India for its definition of poverty.
According to the Planning Commission of India, only those who live on less than Rs 5,000 a month are below the poverty line. Based on the Planning Commission’s calculations, expenditure for a family of five in rural areas comes out to be Rs 4,080 per month and Rs 5,000 for those living in urban areas.
Also, the organization used the Tendulkar methodology to calculate the national poverty line at Rs 1,000 per capita per month in urban areas and Rs 816 per capita per month in rural areas.
Many political leaders, including the Secretary of the Communist Party of India, D Raja, have mentioned that the government should not constantly redefine poverty in the country.
Constant redefinition is an indication of the government’s inability and their incapability to come up with proper definitions and calculations for poverty line. The Planning Commission is led by well-known economists, Prime Minister Manmohan Singh and Mr Montek Singh Ahluwalia, but they are unable to understand that living expenses in every city in India are different.
When there is such a huge difference between the costs of meals in two leading cities in India, how can the Planning Commission define the poverty line so simply by placing all the cities under one umbrella?
The Planning Commission has estimated that the number of poor people has gone down from 37 percent in 2004-2005 to 21.9 percent in 2011-2012. This goes to show that 137 million people in the country have emerged from the shackles of poverty and are not considered poor by the government.
The income of these people in rural areas has increased by Rs 27.2 per day and Rs 33.3 for those staying in cities. This increase is insignificant compared to the rising inflation rate and the depreciation of the Indian currency.
One leading Media House conducted a survey and 58 percent of the participants noted that they require more than Rs 100 to purchase two full meals. A mere 2 percent of the people said they can manage full meals for a day within Rs 50. There is a vast difference between the Planning Commission’s understanding of the poverty situation in India and the reality.
The Planning Commission has made the assumption that those who are able to meet the minimum food requirements are able to meet the minimum level of non-food requirements too. And this assumption is incorrect.
According to Engle’s Law, there is an order of preference in which an individual allocates his expenditure. In that order, food is considered the most important requirement. Once an individual meets his food requirement, he tries to meet other requirements such as shelter, clothing, health and education.
This is not captured in the Planning Commission’s definition of poverty line. Emphasis has been placed on food and its cost in various cities. But there is no mention of the cost of accommodation and healthcare.
It is difficult to define the cost of accommodation and healthcare, as it varies greatly between cities. So, once the Planning Commission is able to incorporate all these factors, it will be able to come up with a better definition of poverty line.