Nearly one in three Indians was poor in 2011-12, according to a new report that was commissioned following widespread criticism two years ago that the government grossly underestimated the number of poor in the country by choosing an unrealistic poverty line for such estimates.
The panel, headed by former RBI governor C Rangarajan who also was the chairman of the prime minister's economic advisory council in the UPA government, estimates there were 363 million people, or 29.5% of India's 1.2 billion population, who lived in poverty in 2011-12. The number is significantly higher that the official estimate of 269 million and the difference – of about 94 million – is attributed primarily to a change in the definition of the poverty line.
The Rangarajan panel considers people living on less than Rs 32 a day in rural areas and Rs 47 a day in urban areas as poor. In contrast, the official estimate- based on recommendations made by late economist Suresh Tendulkar -- defines people living on less than Rs 27 a day rural areas and Rs 33 a day in urban areas as poor. These figures, ever since they were adopted by the UPA government during its first term, have been criticised for being unrealistic and artificially seeking to lower the poverty numbers. The official estimates in use put the poverty ratio in 2011-12 at 21.9%, almost 8 percentage points lower than Rangarajan's estimates.
The new estimates were submitted to the NDA government last week. It is not clear whether these would be adopted as new official estimates on poverty.
The sharp revision in the poverty line is partly a result of a change in methodology. For sustenance, the new methodology includes all such expenses on account of basic amenities that are often covered by public expenditure. The new numbers mean that 363 million Indians would have struggled to survive if there was no public spending," said a member of Rangarajan panel, who did not want to be named.
Although the new estimates push up the poverty numbers compared to the earlier methodology, what may come as a relief for the UPA is that the number of poor steadily declined during its rule, no matter which methodology is chosen. According to Rangarajan, the number of poor declined from 454.6 million in 2009-10 to 363 million in 2011-12 and the poverty ratio from 38.2% to 29.5% in the same period.
India's poverty estimates are based on consumption expenditure surveys done by the National Sample Survey Office.