People's Democracy

DEEPENING POVERTY DURING 2004-5 TO 2009-10

But Planning Commission Continues

To Claim Poverty Decline

Utsa Patnaik

OVER the last five years, the country has seen the impact of global recession since 2008 and a sharp rise in global primary prices, a severe drought year 2009-10 and high rates of inflation, raising the cost of living at a rate never seen before. Foodgrains output per capita which had been falling steeply in this century up to 2007, improved a bit after that, but foodgrains availability per capita continues to fall owing to large net exports and additions to public stocks.  The 2002-03 drought year story was virtually repeated by 2009-10, with massive stocks build up to 65 million tons as more people went hungry; even before the drought, 14 million tons of foodgrains were exported in 2008, the largest in any single year and 17 million tons added to stocks, bringing the domestic per head consumption down to a level below that of the least-developed countries.

The fact that despite already lowered grain consumption per capita for all purposes (as food, as feed for obtaining animal products, and for processing) it continues to fall to this day,  is a telling indicator of massive demand deflation, namely large scale loss of purchasing power among the mass of the people. The employment data confirm that the rate of employment growth slowed drastically during 2004-5 to 2009-10.

The 66th Round, 2009-10 National Sample Survey Reports on consumer expenditure gave the basic spending statistics in August 2011 while the nutritional intake data have been released in end January 2012. These data enable us to confirm that poverty has continued to rise and deepen in both rural and urban India compared to 2004-5. While 69.5 per cent of rural Indians spent too little on all goods and services, to obtain 2200 kilocalories energy per day (the accepted nutrition norm) from their food consumption, 75 per cent by 2009-10 fell below this level; the corresponding urban percentage of persons unable to access 2100 calories per day, (the urban nutrition norm) are 64.5 and 73.

Table 1 giving the long-term trend, shows that while poverty fluctuated in a narrow band of 56 to 59 per cent in the period before economic reforms up to 1993-4, it has risen sharply thereafter under the regime of fiscal contraction and trade-openness characterising neo-liberal reforms. Rural poverty rose faster for a decade after 1993-4 owing to severe cuts in public expenditures, withdrawal of credit concessions, dismantling of price stabilisation measures, and exposure of farmers to global price volatility. All these combined served to raise unemployment, deflate mass demand and plunged the agrarian population into distress. Where farmers producing cash crops were exposed through trade liberalisation to global price volatility, the distress turned to crisis expressed in a high incidence of debt-driven suicides which continue to this day as the government continues to sign free trade agreements. The top 5 per cent of rural landowners gained land at the expense of all other groups.

Urban poverty was also rising throughout the reform period, though at a slower pace. Over the last five years however, urban poverty has been rising even faster than rural poverty under the twin impact of high price inflation and declining employment opportunities. Our detailed analysis shows a phenomenal rise in the cost of living in the states containing the large cities particularly the capital, Delhi, and the pushing down of a majority of persons to lower food intake and nutritional levels. Between1993-4 and 2004-5 urban Maharashtra saw the proportion of persons not able to afford 2100 calories intake, shoot up from 52.5 to 85 per cent while by 2009-10 it stabilised at 83 per cent. Urban West Bengal saw poverty rise from 49 to 67.5 per cent over the same period, with a further steep rise to 82 per cent by 2009-10, completely wiping out the entire urban poverty reduction record of the first 15 years of Left Front rule. Most remarkable is the steepest rise in poverty in India, seen in the national capital, urban Delhi: from 35 per cent below 2100 calories in 1993-4, it rose to 67.5 per cent by 2004-5 while by 2009-10 as high as 92 per cent of all persons had been pushed below 2100 calories intake.  Protein intake per head too continues to fall. Families are forced to sacrifice food not only because their money incomes are not rising enough to keep pace with food price inflation, but also owing to the steep hike in essential medical, educational and utilities costs as these are increasingly privatised. Only Tamilnadu, with the highest initial urban poverty level, has fared relatively better among the four states.

With such absolute and rapid worsening of living standards, it is not surprising that the peoples’ anger is rising. The open and hidden votaries of neo-liberal reforms in this country who have a high visibility in the media, in government and in academia, come exclusively from the topmost 5 per cent of the population. This high-income upper caste elite has been cornering all the gains of growth, and benefiting from the cheap services provided by those displaced from productive activities into the so-called ‘informal sector’ which is but another term for the unemployed.  It refuses to face up to the reality of mass immiserisation and continues to be obsessed with GDP growth regardless of questions of distribution. The most intellectually pathetic section of this elite indeed justifies falling food consumption and declining energy and protein intake levels by saying that it is all a matter of voluntary choice, in effect that people choose to be hungry, and that in any case labourers  in a more modern mechanised society need less energy intake. They do not explain why the most mechanised and automated societies in the world also have the highest nutritional intake: the USA consumes 890 kg of grains per capita yearly for all purposes, compared to 174 kg in India and its normalised calorie intake per capita is at present two and a half times the falling Indian level.

Note: The official Planning Commission monthly All-India poverty line is Rs 860 (Rs 28.7/day) which only 1700 calories intake is observed. For Delhi the official line is Rs1040 ( below Rs 35/day)  at which only 1400 calories intake is observed. 

The ‘poverty line’ relates to spending on all goods and services, not just food. The reason for taking 2200/2100 calories per day as the norms for estimating rural/urban poverty lines, is that these were the actual norms applied by the Planning Commission when it first started making poverty estimates. The precise definition of the poverty line adopted by the Commission and never officially altered, is the observed monthly spending per head on all goods and services by households, whose food spending part allowed an intake of  2400 calories daily energy intake in rural, and 2100 calories daily energy intake in urban India. The rural norm was lowered in practice to 2200 when making the first 1973-4 estimate. The basic data collected by the NSS from sample households, is the physical quantities of foods as well as the quantity/number as applicable, of other goods and services actually consumed, and this includes not only purchased items but also consumption out of own-produced output as with farmers.

From the quantities recorded, two sets of data emerge – the quantities are multiplied by prices to give the expenditure on the one hand, and the same quantities as regards food items, are multiplied by the standard calorie, protein and fat values per unit weight, to give the monthly nutritional intake per household which is then expressed on a per capita per day basis by dividing through by the number of family members and further dividing by 30. The NSS Reports give the data by12 groups ranked by monthly per capita spending (reduced to 10 groups in the latest Reports). The higher the per head spending, the higher is the intake of energy, protein and fat. Energy intake ranges from 1300 calories for the poorest group to 2800 calories for the richest. This clarification is being given because even qualified economists sometimes say that calorie intake cannot be obtained from expenditure. This is a misconception: the nutritional data are the hardest and most reliable, since they are obtained from recorded physical quantities actually consumed, by applying a schedule of nutrient values which by definition does not change over time – obviously the energy or protein content of a kilogram of wheat or litre of milk is the same today as 50 years ago.

The Planning Commission released its poverty estimates last March and predictably claimed decline in poverty in the following words:

The all-India HCR (head-count ratio) has declined by 7.3 percentage points from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-10, with rural poverty declining by 8.0 percentage points from 41.8 per cent to 33.8 per cent and urban poverty declining by 4.8 percentage points from 25.7 per cent to 20.9 per cent.

This claim is false both as regards the numbers and as regards decline, because the condition of comparability over time has been violated owing to continuous lowering of the standard against which poverty is being officially measured. The Commission quietly abandoned its own definition of poverty line after the first correct 1973-4 estimate and has been, for the last 40 years, merely updating the 1973-4 poverty lines by price indices without bothering to check whether its own nutrition norms continued to be met. In fact, official poverty lines became cumulatively underestimated, because price indices used over such long periods do not capture the actual rise in the cost of living. The successive official poverty lines allowed lower and lower energy and protein intake. By 2004-5 the Commission’s rural/urban poverty lines were lowered to Rs12/18 per day whereas the true, nutrition –invariant poverty lines were about double these levels. The Tendulkar Committee merely tinkered with the problem, raising the rural poverty line alone marginally from Rs12 to Rs13.8 but otherwise continued with the wrong method of price indexation and never looked directly at the current cost of obtaining minimum nutrition. The official revised rural/ urban poverty lines for 2009-10 are Rs 673/860 or Rs 22.4/ 28.7 daily at which 1890/1700 calories only, are accessible. The sole reason for the official result of ‘poverty reduction’ is its steady lowering of the standard over time. If the pass mark in a school is continuously and substantially lowered over time, then it is not surprising if the recorded percentage of failures shows decline, but any claim of improved academic results is clearly spurious, since valid comparison requires that the same standard be applied. Maintaining the same nutrition standard over time – the only valid method – indicates sharp rise in poverty under reforms, as Table 1 shows.  The official poverty line for urban Delhi, 2009-10 is a mere Rs1040 per month (below Rs 35 per day) allowing only 1400 calories daily intake – a near starvation level. The actual cost of accessing the nutrition norm is Rs 5200 per month, five times the official line. By now two years on, this cost is higher still.

Those who deal in ideas must give up toadyism to government and other power structures and speak the truth. It is not consistent with any set of ethical values to whitewash the adverse effects of neo-liberalism, for example by giving no reference at all in academic writings on poverty to the facts and criticisms detailed above for the best part of a decade, and instead uncritically reproduce misleading official estimates. The people of this country, suffering under the present crisis want, above all, intellectual honesty and effective action; the latter can only follow if the former is practiced. The share of wages in GDP has been falling everywhere but especially sharply in India. Activists of the trade union movement should note that even price indexation will not maintain the purchasing power of wages. It is very essential to continuously monitor the true rise in the cost of living in such a situation of actual immiserisation of the masses in order to effectively mount resistance and combat these trends.