Poverty in India declined to a record 22% in 2011-12, the Planning Commission disclosed on Tuesday. Over the last decade, poverty has witnessed a consistent decline with the levels dropping from 37.2% in 2004-05 to 29.8% in 2009-10.
The number of poor is now estimated at 269.3 million, of which 216.5 million reside in rural India.While the trend is not surprising, the extent of the decline has opened up a debate on the factors that have led to it. The numbers themselves may be debatable but they are reflective of a broader trend.One theory is that this is the outcome of the trickle-down impact of the record growth witnessed in the first decade of the new millennium.
This growth, though, has not been accompanied by a commensurate rise in employment, implying that its benefits have not really trickled down. Still, the growth did result in higher tax revenue, enabling the government to fund a large social sector spending programme.
This programme, which included schemes such as the rural job guarantee one, played a significant part in reducing India’s poverty levels, an alternative theory says.
The seven-year period between 2004-05 and 2011-12 saw the development expenditure of the government trending upwards, with its share increasing from 38% in 2004-05 to 45% of total expenditure in 2011-12.
The two theories, in some way, mirror the ongoing debate between Nobel laureate Amartya Sen and Columbia University economist Jagdish Bhagwati.
While Sen makes a case for integrating development expenditure with growth to combat poverty, Bhagwati argues that rapid growth should be the priority, with the resulting trickle-down taking care of the underprivileged.
According to the release from the Planning Commission, 25.7% of people in rural areas were below the so-called poverty line and 13.7% in urban areas. This is comparable with 33.8% and 20.9%, respectively, in 2009-10, and 42% and 25.5%, respectively, in 2004-05.
The poverty numbers are estimated on the basis of consumption expenditure captured in the five-year surveys undertaken by the National Sample Survey Office (NSSO). The decline in poverty numbers was first reported by The Hindu on 16 July.
The press release sought to show that the number of poor has declined faster in the period during which the Congress-led United Progressive Alliance was in power and that, in the same period, the monthly expenditure per person had increased more equitably, especially in rural areas. Nearly 20 million people were pulled out of poverty every year, the data showed.
The fresh estimates released by the plan panel are based on the Tendulkar methodology, which was criticized for fixing poverty lines that were too low at Rs.22.42 per person per day in rural areas and Rs.28.65 in urban areas.
Following this, the government set up another committee under the chairman of the Prime Minister’s economic advisory council, C. Rangarajan, to look at a methodology for determining poverty lines and estimating poverty.
The plan panel release said that since the new committee’s report is expected in a year’s time, it followed the Tendulkar methodology to derive the current estimates.
The release showed there would still be a decline in the poverty rates from 2004-05 levels even if a poverty line other than that derived using the Tendulkar methodology was used to determine the poverty line.