Thursday, December 21, 2006

A Dollar a Day Doesn't Keep Hunger Away

There is plenty of confusion about how the poverty level should be defined so that the percentage of people who are poor can be determined. The World Bank has introduced two measures: $1 and $2 per day per individual (though these are based on some earlier year’s purchasing power parity). By these definitions, 35 percent of the world population lives on less than $1 per day, and more than 50 percent on less than $2 per day. While these poverty definitions have been suggested by international agencies, they do not correspond with the definitions that individual governments might follow.

For example, at the higher end, the U.S. Census Bureau has set the poverty line for an individual at $9,500 per annum (which works out to $26 per day). For a family of four (with children below 16 years of age), the poverty line is set at $18,800 or $51 per day. At the other end of the spectrum, the Indian government chose to define caloric intake and its corresponding cost as the measures by which poverty is to be defined. It has adopted the ICMR (Indian Council of Medical Research) specification of 2,400 K-calories per day for an individual living in rural area, and 2,100 K-calories for an urban individual.

The problem with the Indian government’s approach is in the determination of the income needed to purchase food. The government assumes that only Rs. 327 ($7.25) per month is needed for an individual living in the rural area to buy enough food to meet the required calories. This works out to less than Rs.11 ($0.25) per day per person. (Note that the Indian official poverty level is only one-quarter of the World Banks’ lower standard of $1 per day.)

Anxious to prove that the economic liberalization measures that have been introduced since 1991 have produced good results, India’s Planning Commission estimated that only 18 percent of the population was poor in 1999. Faced with challenges and ridicule from the international community about the accuracy of this figure, the Indian government arbitrarily increased its estimate to 35 percent. It is not very clear how the discrepancy between the two figures was reconciled. Official estimates of this kind only undermine the public’s confidence in government’s pronouncements, as they reflect an effort to hide bad news from the world.

The real story is even worse. According to respected economists and statisticians in India, in the year 2000, the monthly income needed for a rural individual to consume 2,400 K-calories per day is not Rs. 327 ($7.25) but Rs. 567 ($12.60). At this income level, which amounts to $0.42 or less per day, nearly 75 percent of the rural population is poor. One can only imagine what percentage of the rural population is below the World Bank’s broader definition of $2 per day: probably more than 75 percent.

I can speak from my own experience of working with the people in the 17 villages around Baliganapalli in Tamil Nadu, a relatively prosperous state in India. We recently completed a house-to-house survey of the entire population in these villages. It shows that nearly 90 percent of the families (counted as at least 4 members on the average) earn less than Rs. 100 ($2.20) per day, or Rs. 25 ($0.55) per individual per day.

By any reasonable measures, at least 75 percent of India’s rural population is poor. Moreover, none of the poverty definitions take into account the cost of adequate housing, clothing, education, healthcare, and entertainment. Though some of these are provided for free by the government, the quality of life in rural areas remains deplorable. We need to offer definitions of poverty that are honest, reflecting the cost of adequate food intake and other basic necessities of life.

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