Monday, March 26, 2012

An innovative method for reducing poverty

"I learned very early the difference between knowing the name of something and knowing something" - Richard Feynman. What about Government of India (GOI)?

Someone observed that, there are two ways to reduce poverty. Either you eliminate poverty or you eliminate the poor. This will enable you to show a reduction in the number of people living under poverty line. Government of India turned out to be much more innovative than that - alter the formula itself!!!

Every year adjust the formula to reduce the minimum amount a person required to earn to qualify as non-poor. By the way, don’t care about inflation, rising whole sale and retail prices, fuel rates, ballooning medical expenses, increasing house rent, water charges, electricity charges, transportation charges etc. Probably this invention is the easiest way to reduce poverty ever invented in the history of human race.

I am not saying poverty didn’t shrink in India. It certainly did. Now-a-days people are earning much more and able to use better medical facilities, communication channels like mobile phones, entertainment facilities like television etc. I am not saying all, but the number of people falling in to this category is steadily growing. Along with this expense is also drawing a steadily increasing pattern. When I was a kid, bus charge was 1.20 Rs for travelling to the near-by town now it is more than 6 Rs.
Even then, if planning commission says that the poverty line is 672.8 INR (monthly income) in rural area and 859.6 INR (monthly income) for urban areas it is very difficult to digest. For those who are familiar with dollar please note that 1 $ = 51.25 INR. Let us put this amount in daily basis. It is another matter that Planning Commission will argue that we should not put it in daily basis. Anyway take the risk, approximately the amount is 22.50/day in rural areas and 28.50 in urban areas.

Let us try one example, take the poverty estimates for urban areas of Karnataka (Please see table on the right for state-wise figures). The amount is 908/month or approximately 30.25/day. This means, if your income is more than 30.25 in a day in any of the urban areas of Karnataka (Including Bangalore) you are not poor.

Well, in Bangalore potato costs around 16/kg so as onion, carrot will cost you around 25 for a kilo. Moderate price for rice can be anywhere between 18-30/kg. Sunflower oil - depends on the brand - will cost you around 70-90/litre. Most of the time in urban areas you may not own your house so you have to pay rent, water and electricity charges. For our calculation assume that a poor person will not use electricity!!!

Let’s do a simple math. Here I am assuming minimum values only (for a single day for a normal person),

Rice (250g) - 5
Vegetables (250g) - 6.50
Water 2.5L - 4
Oil (100ml) - 7
Dal (100ml) - 6
Salt+Cumin+Chilli - 1.50

Now itself the total becomes 30. Where I will put the other minimum existential expenses like rent, cloths, transportation etc? What about dependents? E.g. what about small kids, fully dependant on parent’s income?

This method of pulling down the poverty barrier and bringing more people out of it is not an acceptable practice. Based on these numbers Planning Commission’s estimation of a decline of 7.4 percentage points in poverty (to 29.8%) is not acceptable. For a nation counting 1.2 billion heads for census can do much better than this.


PS: According to the latest reports "Government had also taken a decision to set up a Technical Group to revise/revisit the methodology for estimating poverty in a manner which is consistent with the current realities." I hope government will understand the difference between knowing the name of something and knowing something.

Photo courtesy: Planning Commission of India (later edited to suit this article)