Poverty and inequality in India

THE QUINQUENNIAL consumption surveys by the National Sample Survey Organisation are the source of all estimates of the number of poor — defined according to how many people consume calories below a nutritional minimum. Major changes in survey design and the reference period for the NSS survey (55th round) in 1999-2000 have made the resultant poverty estimates incomparable with the earlier rounds. So it is difficult to say precisely how much poverty declined during the 1990s. That is why the initial hype about a 10 percentage point decline in poverty ratios (a 60-million decline in the number of poor) between 1993-94 and 1999-2000 was challenged by many and ultimately even the Planning Commission was forced to accept that the estimates were not comparable with the earlier rounds.

The basic problem was that the changes in the NSS survey led to an over-estimation of consumption, thus showing a sharper reduction in poverty than would have been the case had the NSS stuck to the original survey design and reference period.

Fortunately, it is now possible to arrive at the comparable estimates of consumption expenditure and thus, poverty estimates, using as few assumptions as possible because of the availability of the unit records (basic data) from NSS. One such exercise recently undertaken by Abhijit Sen of the Jawaharlal Nehru University along with this writer suggested that the official estimates overestimated the decline in poverty by more than 70 per cent. In brief, the exercise recalculated the 50th round estimates for 1993-94 to make it comparable to the 55th round data for 1999-2000. Further, over-estimation in food consumption was corrected by using information from other nearby annual NSS rounds. This simple exercise places the decline in poverty ratio between 1993-94 and 1999-2000 at a mere 2.8 percentage points.

In terms of the number of poor, while the official estimates showed a decline of 60 million, the revised estimates show an increase in the number of poor by 5-6 million.

By adjusting the 55th round consumption expenditure data, one is also able to get a more accurate picture of the trend in inequality. The picture (after adjustment for overestimation) suggests that inequality increased in rural areas as well as urban areas. Another way of looking at this issue is to compare the growth in per capita consumption of various groups. Between 1993-94 and 2000-01, the top 20 per cent of the urban and rural population, according to consumption expenditure, increased their per capita consumption by 40 per cent and 20 per cent respectively. This also happens to be the highest increase in per capita consumption of the upper income groups in independent India. On the other hand, the comparative figures for the remaining 80 per cent of the rural population involving some 600 million people witnessed a growth of per capita consumption of only 3 per cent over the same period.

Another dimension of the growing divergence in per capita consumption is the experience of those belonging to the Scheduled Castes and the Scheduled Tribes. Between 1993-94 and 1999-2000, the poverty ratios for the SCs declined in both rural and urban areas but at a slower rate than that for the general group. In terms of absolute numbers, the number of poor among the SCs increased substantially in the urban areas. But the distressing aspect is the increase in poverty ratios among the STs. In both rural and urban areas, the poverty ratio and the absolute number of poor both increased significantly. More important, there is also evidence to support that not only did inter-State inequality increase but disparities within States too widened. The inescapable conclusion that emerges after correcting for overestimation of consumption is that the 1990s were not only a lost decade for poverty reduction in spite of higher growth but that probably for the first time in independent India inequality increased in so many dimensions.

Poverty counts are sensitive not only to survey design and choice of recall period but also to how we define the poverty line. The present practice of using the old poverty lines based on a nutrition norm without taking into account the fact that the proportion spent on food declines as incomes rise might give misleading poverty counts. If we do so, then we would have to confront the paradoxical situation that nutrition poverty on existing norms has increased to about twice income poverty based on existing poverty lines. This paradox is partly explained by the evidence of a large 1990s shift in spending from food to non-food (e.g. fuel, medicines and conveyance) even among the poor.

Finally, the NDA Government used annual round estimates from the NSS to buttress its `Shining India' campaign on the employment front claiming an increase in employment by 8.5 million an year using 57th round data. However, the same campaign failed to make any mention of the corresponding figures for number of poor. This is understandable, given the fact that according to the official estimates using 57th round NSS (2001-02) estimates, the number of poor increased by nine million compared with 1999-00. Clearly, the increase in the number of poor by nine million in the first two years itself of the NDA rule would have blown the lid off the hype surrounding the `Shining India' campaign.

(The writer is a Research Scholar at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.)