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On poverty, figure it out

Only the foolhardy would uncritically accept official estimates

My friend and fellow columnist Surjit Bhalla’s pieces are almost always provocative. Although his recent piece on poverty in India and China (‘China-India Poverty: a matter of record’, IE, August 7) hit the bull’s eye, I disagreed with his earlier piece on poverty (‘Poverty of thought’, IE, August 3), where he took on N.C. Saxena for saying that the poverty line was fixed in 1973-74, and has remained unchanged after adjusting for inflation. Bhalla dismissed this as “a conceptual (and ideological) error”. But Suresh Tendulkar was a very careful economist. He might not have made the same assumption of ideological error. The Tendulkar committee moved from a calorie-based poverty line to a food expenditure-based line. But he was also happy with the earlier urban poverty ratio of 25.7 per cent for 1973-74, established by the 1977 task force (which I headed) and periodically adjusted for inflation. In fact, Tendulkar laid down that this estimate should set the national poverty line — the expenditure required to meet its calorific goal should be the poverty line for both rural and urban areas. The exercise was fascinating, both for policy and in theory. The 1977 task force cast its shadow on the more recent exercise, possibly because Tendulkar had been one of its members. Bhalla needs to carefully peruse the Tendulkar Report before castigating Saxena.

But Bhalla’s well-researched piece on poverty in India and China makes some accurate observations. An important point he makes is that, in India, there is a big difference between private consumption as estimated by the National Sample Survey (NSS) and as reflected in national accounts data. The latter is derived from the production or commodity flow side, adjusted for stocks, government purchases, net imports and the use of commodities by industry. Moni Mukherjee, from the Indian Statistical Institute, said many decades ago that there are two estimates. Unfortunately, there is no way of saying which is better. Neither of the two has enough information to work out errors, never mind compare them. Of course, this does not stop some brave souls from championing one estimate or the other, depending on whether they are advising the treasury benches or sitting in the opposition. But Bhalla is above such chicanery. He works out that the difference between the two estimates has increased in recent years, a point he had also made almost a decade ago.

… contd.

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