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India's poverty statistics may be flawed: critics

India's government claims that poverty has been cut by a third since 2004, attributing the decline mainly to its vast welfare programs. But the figures have sparked a row over the accuracy of the data.

According to the latest data released by India's Planning Commission, 138 million people climbed out of poverty between fiscal 2004/05 (March-April) and 2011/12, leaving the official number of the poor at 269 million among a population of 1.2 billion.

India's ruling coalition, the United Progressive Alliance (UPA), in power since 2004, argues that the rapid economic growth in previous years combined with the government's welfare schemes contributed to the dramatic reduction in poverty in the world's second-most populous country.

"The reduction of the poverty level across the country is a clear manifestation and endorsement of the pro-poor policies and the policy of inclusiveness of the UPA regime," UPA spokesman Bhakta Charan Das was quoted as saying.

Shoeshine boys walk early morning before the start of the day's work in New Delhi, India, Saturday, June 11, 2011. (Photo: AP)

New Delhi set the poverty line at 33 rupees a day in urban areas

However, the methods employed by the government to calculate poverty have triggered heated discussions among economists and policy makers. A key issue of the debate is where the poverty line should be set. The Planning Commission counts anyone with less than 33 rupees per day ($1.72 in purchasing power parity terms) in urban areas, and 27 rupees per day in rural areas as living below the poverty line.

The current methodology has not only been criticized by social activists, but also by the Ministry of Rural Development, which is responsible for implementing anti-poverty schemes. Detractors say that a daily income of 33 rupees a day allows only a mere subsistence and that it therefore must be raised to a level that would allow an "acceptable" living standard. However, there has been no agreement between scholars and politicians of what an "acceptable" living standard should be.

A political move?

The recently published figures are especially controversial since they come ahead of an election year in which the ruling coalition government is seeking a third term. V. K. Srinivasan, chairman of the Hyderabad-based Indian Institute of Economics, argues that the numbers have been presented in such a way that they reflect positively on the government.

The economist points out that while the data earlier published by the Planning Commission had a defined frequency of four to five years, the hasty attempt by the Planning Commission to come up with data for 2011-12, has given rise to doubts that its officials have attempted to present data to "bolster the claims for achievement by the UPA government" as it prepares to go to the polls in 2014."What needs to be questioned is not the finesse with which experts calibrate the poverty line, but the intention with which some use statistics for political purposes," Srinivasan told DW.

Millions undernourished

Despite being an aspiring superpower, hundreds of millions of people do not have adequate access to food, clean water and basic sanitation. India ranked 65 out of 79 nations on last year's Global Hunger Index issued by the International Food Policy Research Institute.

A child in India lying on steps. (Photo: AP)

Nearly half of India's children under the age of five are chronically malnourished

The UN's Food and Agriculture Organization reported that an estimated 217 million Indians were undernourished in 2012. Moreover, nearly half of India's children under the age of five are chronically malnourished, according to the government's own estimates.

Nonetheless, many economists agree that India's strong economic growth along with long-term government welfare schemes have managed to reduce poverty. "First and foremost, growth has directly created employment opportunities at better wages and thus pulled up the poor into gainful employment," says Arvind Panagariya, economics professor at Columbia University in New York.

Secondly, the social scientist states that rising incomes have placed significantly larger revenues in the hands of the government, which, in turn, have allowed the government to begin new social schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MNERGA) and considerably expand existing ones.

Drawbacks of social schemes

One of the expanded programs is the so-called National Food Security Bill, arguably one the largest food aid programs in the world. The bill, which was passed by ordinance on July 3rd and still requires ratification by both houses of parliament, is set to provide subsidized food to nearly 67 percent of India's population.

Though the latest Planning Commission figures only place 22 percent of the population as actually living below the poverty line, the new proposal would give about 75 percent of the rural population and 50 percent of the urban population access to subsidized food, whereby the amount of subsidies received would vary from household to household. So-called "priority households" would receive the maximum monthly entitlement of one kilo of rice at three rupees (five US cents), wheat at two rupees and millet at one rupee.

An Indian farmer winnows rice at Milanmore village on the outskirts of Siliguri on November 23, 2011. India is the world's second-largest producer of wheat and rice. AFP PHOTO/Diptendu DUTTA (Photo credit should read DIPTENDU DUTTA/AFP/GettyImages)

India recently launched what is arguably one of the largest food programs in the world

Panagariya makes clear, however, that such government programs are a double-edged sword. Even though they enable households to spend less on, for instance, food items, the schemes are also characterized by "huge inefficiencies and corruption."

"They require a vast bureaucratic distribution system that is hugely leaky and are not ideal ways to address the poverty alleviation in the country."

New methods required

Many economists therefore emphasize that new methods are needed to both calculate poverty and win the fight against it. Srinivasan, for instance, advocates the use of a multi-dimensional poverty index, similar to the Human Delevopment Index employed by the United Nations Development Program, which also takes into account the intensity of deprivation in terms of living standards, health and education. "In other words quality of human development should not be judged in terms of income and expenditure only but should be done in terms of life expectancy and quality of education."

Kashmiri labourers carry fodder for cattle as they walk on the edge of Dal Lake on the outskirts of Srinagar on April 3, 2013. (Photo: AFP)

Economist Panagariya says structural reforms are needed to win the war on poverty

Panagariya, in turn, says he is convinced that structural reforms have to be implemented in order to resolve the poverty crisis: "India can today eliminate abject poverty in one stroke if it would replace the food distribution program and MNREGA by direct cash transfers."

He believes much more could be accomplished if the government did the same with various regressive subsidies such as those on food procurement, fertilizer, water, electricity, gas, kerosene and petroleum, which predominantly go to either large farmers or middle-class households.

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