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The poverty estimates published last week by the Planning Commission, based on a household survey of consumer expenditure carried out during 2011-12, have attracted enormous attention across the stakeholder spectrum. The main reason for the salience is that they show an unprecedented decline in poverty over just two years, the last comparable survey having been done in 2009-10. This article explores some regional dimensions of the decline.
Before getting into the numbers, I want to address two misconceptions that have made their appearance in the public debate. First, many people seem to believe that the reason why the poverty rate is what is because the bar - the poverty line - has been set so low. Of course, the level of the poverty line is subjective and a country can decide for itself where to set it. Different lines would obviously generate different poverty rates. However, in measuring the change in poverty over time, as long as the same line is used at the beginning and end of the period, there is no bias in the estimation. In other words, redefining the line would yield different poverty rate estimates, but not affect the magnitude of decline (or increase)
significantly.
Now, let's look at variations across states in terms of declines in poverty over this two-year period. The metric typically used is the poverty rate, or the percentage of people below the poverty line indicated for the state, separately for rural and urban areas. One drawback of the poverty rate is that it can decline even as the absolute number of people in poverty increases. I believe that it is more meaningful to look at the number of people who emerged from - or went into - poverty. As a backdrop, for the country as a whole, between 2009-10 and 2011-12, the number of poor people in rural areas declined by about 62 million (from 278 million to 216 million), about 22 per cent. People in poverty in urban areas declined by about 23 million (from 76 million to 53 million), about 31 per cent. In total, the country saw a decline of 85 million, about 24 per cent.
Looking first at the rural decline, the top three performing states were Andhra Pradesh, with a poverty reduction of 52 per cent (from 13 million to six million), Punjab with 47 per cent (from 2.5 million to 1.3 million) and Goa with 38.3 per cent. Among the large and relatively poor states, Bihar saw a decline of 36 per cent and Uttar Pradesh of 20 per cent. Between the two, about 30 million people emerged from poverty (18 million in Bihar and 12 million in Uttar Pradesh). Assam, Madhya Pradesh and Odisha were somewhat behind on this ranking, with declines of 13 per cent, 13 per cent and 12 per cent respectively.
Moving on to the urban decline, the top three states were Himachal Pradesh (67 per cent), Andhra Pradesh (65 per cent ) and Meghalaya (59 per cent). Among large and relatively urbanised states, Maharashtra (48 per cent) and Tamil Nadu (46 per cent) did relatively well, taking about five million and two million people over their poverty lines respectively. Bihar (16 per cent) and Uttar Pradesh (13 per cent) were ranked relatively low on this scale, but in absolute numbers, they took four million and 12 million people over their poverty lines respectively.
In the aggregate, Andhra Pradesh (65 per cent), Punjab (47 per cent), Haryana (42 per cent), Kerala (40 per cent) and Rajasthan (38 per cent) were at the top of the list in terms of percentage reductions in poverty. In terms of absolute numbers of people emerging from poverty, Bihar (19 million), Uttar Pradesh (14 million), Andhra Pradesh (10 million), Maharashtra (seven million) and Rajasthan (six million) were at the top of the list.
These variations will undoubtedly be subject to intense scrutiny and analysis, not just in regard to the variation over these two years but also as to how they fit in with the longer-term trend. I would like to draw some preliminary inferences from these patterns. First, while the whole country has seen what appear to be quite significant declines in poverty in a very short period of time, there is clearly wide variation in performance. On the basis of the percentage decline in poor people as a metric, many of the poorer states are in the bottom half of the ranking. This suggests a lack of "convergence", which implies that the poorest states are likely to, for some time at least, do better as they exploit the greater slack in their systems. If the more affluent states are doing better, it would suggest a "threshold" effect, which means that you have to first get to a certain level of prosperity in order to accelerate the process of poverty reduction. How to get the poorer states to this threshold is the challenge.
Second, notwithstanding the regional variations, the very rapid exit from poverty seen across the country in a short period of time suggests that there are large numbers of people still quite close to the line, even if they are above it for now. If the forces that got them there are transitory or fragile, there is every possibility that a large proportion of these people could slip back into poverty. We need to fully understand the nature of these forces in order to assess their robustness as poverty reduction mechanisms. Have safety nets played a significant role? Are rural wages, which, at an economy-wide level, have been growing by close to 20 per cent a year for the past five years, an important factor? If so, what are the prospects of this trend persisting and what are its larger macroeconomic implications?
In short, since reducing poverty is a critical goal of development policy, these numbers must be seen as an indication of success. However, they should not divert attention from or reduce emphasis on spread, sustainability and consistency with other policy objectives.
The writer is director of research, Brookings India, and former deputy governor of the Reserve Bank of India.
These views are personal
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