India: Poverty Line at $0.14 per Day per Capita?

October 4th, 2011
in econ_news

by Sanjeev Kulkarni

Indian_farmer Econintersect:  A statement in September by the Planning Commission of India determined any expenditure above of Rs 32 per capita in urban areas and Rs 26 per capita in rural area is considered to be above poverty line.  This comes to Rs 11,680 per year or approximately $ 250 per year at approximately Rs 46 to a dollar.  The Planning commission had filed an affidavit with Supreme Court of India to this effect.  In a more bizzare twist Hindustan Times reports that "the panel says the expenditure should be considered for a family of five, instead of per capita".  This comes to $ 50 per year or 14 cents per day, an absolutely unbelievable figure.

Follow up:

As reported in Hindustan Times, top economists have termed the Planning Commission's benchmark -- per capita expenditure of Rs 32 in urban areas and Rs 26 in rural areas -- for measuring poverty as “unacceptable'.

Unacceptable is very diplomatic way of criticizing one of the most bizarre statement, ever to come from the Indian Planning Commission who seem to be living in their own cocoon far removed from reality.

According to a report October 3 by IBN Live, the commission has backed away from their earlier statement.  From that report:

Following the controversy, Ahluwalia met Prime Minister Manmohan Singh yesterday and discussed the issue to prepare for today's planned clarification.  He said that the Tendulkar poverty line was not meant to be an acceptable level of living for the 'aam aadmi' (common man) by the Planning Commission.  "It is actually the standard of living of those at the poverty line in 1973-74."

In a very frank admission Kamal Nath, Union Cabinet Minister of Urban Development, last year had remarked that both the Indian Planning Commission and the International Monetary Fund have lost their relevance and become virtually ineffective.

Is the latest episode one more example of the famous Indian babus or Bizarre Babu Economics?


Editor’s note: Babu is a term of respect and of derision, depending on the context.  From the Free Dictionary:

ba·bu also ba·boo

n. pl. ba·bus also ba·boos

1. Used as a Hindi courtesy title for a man, equivalent to Mr.
2.
a. A Hindu clerk who is literate in English.
b. Offensive A native of India who has acquired some superficial education in English.

[From Hindi, father.]


Sources:

Experts rap govt over poverty line:  Hindustan Times

Planning Commission needs structural change: Kamal Nath:  The Indian

Battling the Babu Raj:  The Economist

Hasty babu retreat:  IBN Live









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3 comments

  1. Clonal Antibody says :

    Sanjeev,

    Are you sure that Rs 32 per day was for a family of five and not per capita? Or is it the HT reporter making a hash of what he heard?

    It would make sense for the planning commission to take a stance that wages, and poverty levels should be considered from the perspective of a family of five. In that case, family income below Rs 5000 per month in an urban area would be considered on the threshold of poverty.

    The number 5000 is a direct extrapolation from the numbers you cite. This number would make much more sense from the observed income levels in urban areas.

  2. Clonal Antibody says :

    Also, my reasoning is much more in line with the current minimum wage in India of Rs 115 per day. Which is approximately Rs 14 per hour. This would be in the ball park for the Rs 5000 per month for a family of five, assuming that one member of the family works full time at minimum wage and another part time.

  3. Sanjeev Kulkarni says :

    Clonal,

    A minimum wage of Rs 115 per day, assuming 365 days of work comes to Rs. 41,975 or approximately Rs 3,500. The figure is too low considering the food inflation.

    The Planning Commission figure of Rs 5000 assuming 300 days of work per yer gives minimum wage of Rs 200.

    Minimum wages are normally fixed as per skill level and declared periodically.

    This link gives minimum for Mahrashtra
    http://www.paycheck.in/main/officialminimumwages/maharashtra

    Sanjeev








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