The Planning Commission’s poverty estimates for 2009-10 would have been lower by around 17 percentage points, had it used the old methodology of bringing parity between consumption expenditure figures by the National Sample Survey Organisation (NSSO) and national accounts.
The expanding consumption basket led to a wide divergence between NSSO’s estimates of consumption expenditure and those of national accounts. The figures by NSSO are almost half the national accounts figures for 2009-10.
Pronab Sen, principal advisor to the Planning Commission, said increasing everyone’s consumption pattern on a pro-rata basis to bring NSSO figures in line with national accounts figures would reduce the number of people below the poverty line in 2009-10 drastically — from 29.8 per cent to 12 per cent.
Sen said it would be wrong to bring parity between NSSO and national accounts figures this way, since the latter did not account for the distribution of consumption under various income classes.
NSSO’s latest consumption expenditure survey shows per-capita expenditure stood at Rs 1,053.64 a month in 2009-10 for rural India, while the figure for urban areas stood at Rs 1,984.46. Juxtaposing this figure on a population of 1,089 million for 2009-10 and a rural-urban ratio of 2.2:1 would mean a monthly per-capita expenditure of Rs 1,312.37 for the entire country.
However, national accounts showed the per-capita expenditure in 2009-10 was Rs 31,812, or Rs 2,651 a month.
However, the gap has decreased a little from the 2004-05 levels, when NSSO figures were almost one-third of those in the national accounts, though much higher than earlier.
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Till the late 80s, the commission increased household consumption expenditure on a pro-rata basis to arrive at the same figures as those of national accounts, said Planning Commission member Saumitra Chaudhuri. In the 90s, however, the Planning Commission’s Lakdawala Committee recommended doing away with this practice, as increasing everyone’s consumption expenditure on a pro-rata basis hid inequalities, Chaudhuri said.
On the reasons leading to the huge difference between NSSO figures and those of national accounts, Sen said as the consumption basket increased, the discrepancy between the two figures was also magnified. This was because as income increases and the consumption pattern expands, a person usually forgets the items of consumption. However, fewer the consumption items, the more are the chances of the people surveyed remembering each item. Thus, data on consumption by the poor would usually be correct, compared with data given by the rich in an NSSO survey, he said.
He added till the 70s, the difference was not substantial, as the consumption basket, at eight per cent, was narrower. He added the two figures did not differ only in India, it was a worldwide phenomenon.
The difference between data by the NSSO and national accounts is the latter is aggregated, while the former is the actual survey figure for different classes in urban and rural India. Hence, the inequality could not be comprehended from the national accounts data.
Planning Commission deputy chairman Montek Singh Ahluwalia had said he would take up the issue with chief statistician T C A Anant. When contacted, Anant said the exercise to identify the sources of discrepancy between figures on consumption expenditure by the NSSO and national accounts was underway.