Prof. Vinod Vyasulu
India's Rich Literature on Poverty
Recently, the OXFAM report released new statistics which show that just eight men own an equivalent wealth of the poorest half of the world. Research shows that while the world continues to grow and create wealth, it also creates more poverty and inequality, benefiting just the elite few who are at the top of the socio-economic pyramid while the millions of poor continue to suffer leading to a situation of ‘development of underdevelopment’. Prof. Vyasulu in this monologue, tries to capture the perception and the changing nature of poverty with respect to the Indian context from the times of pre-independence to its present neo-liberal economy.
Poor and poverty are distinct in quantity but connected in quality of life. Poor refers to an individual unit - for instance, a poor person or a poor family and so on. But when we talk about poverty, it is of a large society or a community. So poverty studies are not concerned with the individual but with the society. This is one of the distinctions and definitional variations that could be made between poor and poverty. However, these distinctions could be made in numerous other ways. Apart from quantification of its impact, Nobel laureate and economist, Amartya Sen has also pointed out about the ‘perception of poverty’. Do you think you are poor? A sadhu in the mountains probably doesn’t think he is poor. Catholic priests take a vow of poverty by their own will. It will probably mean that they will not own and inherit property. The question I am getting to is, is the meaning and definition of poverty as we use it becoming narrower and myopic? Let us see by understanding the story of poverty in India.
When it comes to the context of India, we have a rich literature on poverty. Ironically, the interesting part is, when I started thinking about ‘poverty’ when I was a student in the Delhi School of Economics during the 1960s - I had never heard of the word ‘poverty’. There was something called the ‘economics of underdeveloped countries’. Some people would refer to them as ‘poor countries’ in a more charitable frame of mind but the word poverty was not used. To some extent, everything that I have quoted is post-formal student days.
Diving into the annals of Indian history, dating back to the 17th century, the economy of the Indian subcontinent was thriving after the successful reigns of Vijayanagar empire, the Mughal regime under Akbar. The land was well-off with respect to macroeconomy, global trade and commerce so much so that the Indian and the Chinese geographies shared more than 1/3rd of the world’s GDP during that period. But in the 1800s and the 1900s, the same land was now suffering from famines and extreme poverty.There was some kind of a radical change that took place and the prosperity that the land enjoyed in the 1600s had somehow dissipated - to the extent that there were large scale famines with millions dying without any food to eat. How did this ‘riches to rags’ story come about?
Let us begin with Adam Smith, considered to be the Father of Modern Economics, he was also a student of modern philosophy. It was in 1776 that Adam Smith wrote his book ‘An Inquiry into the Nature and Causes of the Wealth of Nations’. This book happens to be one of the strongest critiques of the British East India Company. Why was Smith, who was an exponent of free markets and natural capacity of human beings, criticizing the policies and actions of the East India Company in India?This indicates that there was an underlying issue of ethics and justice concerning the British rule in India. While, Marx, held a different opinion concerning this issue. According to him, what the British were doing was good for they were forcing India into the modern era.
Dadabai Naoroji, ‘the Grand Old Man of India’, who was a part of the Indian intelligentsia in the 1800s, was conducting research and documenting the changes that was going on in the economy. He showed that there was a constant drain of wealth out of India flowing into Britain, absorbing the riches from the Ganges and draining it into the Thames which was basically the capital required to drive the industrial revolution in the UK. Quite interestingly his focus was on the very ‘Un-British’ rule in India. He was in England and was also a member of the British parliament. He documents in his work, called ‘Drain of Wealth’ that the British stood for some principles and followed them but their regime in India was violating all of them. He says that it was truly ‘Un-British’ of them. Romesh Chandra Dutt, was in the British instituted Indian Civil Service (ICS) and who resigned from the same in 1899. He brought out two volumes on the ‘Economic History of India’. It was another devastating critique - with great emphasis on how agriculture was destroyed in Bengal by the British. These are all precursors of what later Gunder Frank in time would call ‘development of underdevelopment’.
Ajay Kamdar, a Marxist, wrote about the economic changes in Indian history from a class perspective. These works of research may be different in their approaches but there’s a remarkable agreement among all of them on the facts from which they draw their common conclusions of drain of wealth. Fast forwarding to the post independence era, the Government of India’s Planning Commission and the Indian Statistical Institute (ISI) take centrestage in the poverty literature of independent India. There are many reliable sources and references where this information is available which includes Amartya Sen’s work, Economic and Political Weekly (EPW) articles over the last 40 years and other reputed journals. Now, what do these debates refer to? The economic planning in India adopted a model where it was decided to have a flat ‘poverty line’ for the whole country.The question that arises now is what is this ‘poverty line’ and how did it emerge in the first place? With the advent of the planning era in India, a Planning Commission committee was setup in 1952 which was headed by an economist and visionary, VKRV Rao who is responsible for establishing the Institute of Social And Economic Change (ISEC) in Bangalore. The mandate that was given to this committee was to do design ways to identify, measure and alleviate poverty in the country. The nature of the planning machinery was that it was highly centralized and top-down, controlled and executed by the Centre. The status quo didnt seem to change with regards to the structure, with the Crown holding the reins before independence and now it was the Indian State post independence. VKRV Rao committee said that the State promised to its citizens education, shelter and healthcare. Given that these things are provided by the State, how can poverty be defined? One thing that the State doesn’t promise is food. So poverty was linked to the inability to afford food. Housing, education and health are provided by the State - the Constitution promises these goods to its citizens and therefore the Government is responsible for its provision because of which it didnt deem necessary to come into any discussion or definition of poverty. When food was agreed as the basic norm to approach and measure poverty in the country, the committee surveyed the market prices and concluded that it will cost about Rs. 15 per person per month in order to buy food. So poverty came to be defined as per capita income falling below the threshold of Rs. 15 per month which essentially translates to deprivation of food. Interestingly, this was also the time when Rs. 30 was the average salary of a Government school teacher which gives us an idea on the nature of inflation and the cost of living during those times. The important thing to note here is that since then, the Indian model’s approach to poverty has always been food. The other goods were not included in the discussion at all. “You are poor if you can’t buy food - if you can buy food you are not poor”. It is as simple as that.
his development can be studied in some of the substantive debates that has been well documented in several EPW articles. For example, VKRV Rao’s debate on the definition of poverty with PV Sukhatme, a Pune-based biologist. Sukhatme was concerned about the definition of poverty being narrowed down to food alone and even worse was the idea of reducing it to just quantity, ignoring its quality. This also took a complicated turn and raised critical questions for example, whether the malnourished are poor or are the poor malnourished? And Sukhatme also wrote something which was not noticed for a very long time. What he said was that an individual may require a diverse diet - but with enough rice for example, the body may be able to convert it into other constituents that it may require for its normal functioning. So policymakers and planners could come up with a narrower idea saying that protein, vitamins and other essential requirements can be done away with while focusing just on having enough for the body, emphasizing on the quantity of food and neglecting the quality and diversity of the diet. He also showed that with an income even less than Rs. 15, an individual could satisfy this narrow definition but then, what definition would poverty now take? This issue was taken up in the 90s by various statisticians and economists like Gore and Sitaraman from the University of Pune, and T. Krishnakumar from the University of Hyderabad. They agreed that the basic idea was to see poverty as forms of deprivation. They came up with a multi-pronged definition which aimed at expanding the basket of goods that could be considered for the definition of poverty. It argued that planners have only been thinking about income poverty, using income as a proxy for food. But since data for other goods was available now, deprivation could now be extended to education, healthcare, employment and others. Their analysis also showed that it is possible to deal with the larger question of poverty by focusing specifically on the requirements of a particular group. Not all groups required all these goods. For example in Kerala, cost effective public education has been provided by the government and it does not share the same priority as other goods. In UP, infant mortality and healthcare mattered more. So, the priorities changed with region and the poverty basket was not uniform. This was also the first time that the ‘one solution, one size fits all’ was broken down into its nuances looking at the problem more closely instead of using the blanket approach. Now, the VKRV Rao committee’s ‘15 rupee poverty line’ was taken up for further research and discussion by Dandekar and Rath, who looked at the all the data that was available which resulted in the famous publication of 1970 - ‘Poverty in India’, by the Gokhale Institute in Pune, where they divided India into rural and urban areas to measure poverty. The poverty line got segregated and was also updated with the current prices, which approximately came up to Rs. 20 in rural areas and Rs. 25 in urban areas, but roughly aggregated to approximately Rs. 20 per person per day. Meanwhile, the Indian Statistical Institute (ISI) was conducting the National Sample Surveys and a discussion that emerged was the reliability of the income data. There were many reasons for this question to arise- If it is income, is it take home or after tax deduction? Or does it include allowances? The real income figure may not be revealed at all in the first place. On the other hand, they said that income can be indirectly extracted after collating consumption data. Extremely sophisticated surveys were conducted across the country with large samples to get a robust pan-India estimate, initially for 14 major states - all the big states. Once again state averages were generated and the first survey that was considered reliable and worth using was 1977. The Planning Commission setup a committee to update the poverty work under YK Alagh.
The Alagh committee kept the rural-urban distinction of Dandekar and Rath along with the poverty norm given by VKRV Rao. Once again, they updated the prices and came up with a figure of Rs. 30. The interesting thing that the Alagh committee did was, it used this data to define a basket of goods - with a mixture like different cereals, milk, etc. They said that it was important to have this basket because it can be compared over time for prices forming the basis for a policy around poverty. This was also a time just after emergency but Indira Gandhi had already started the Garibi Hatao campaign. The politics aligned well with this particular strategy and Garibi Hatao could be operationalised using the data provided by the Alagh Committee. In 1980 the process of economic liberalisation began in India and by the end of the 80s, the planning era numbers began to make no sense. The Planning Commission setup another Committee, headed by D T Lakdawala. What the Lakdawala Committee did was something very interesting. For the first time, they moved away from a pan-India poverty line and came to a conclusion that the data collected by the ISI has enough information for them to work out State-specific poverty lines, where the basket of goods would remain the same but the prices would be from the State, from the data that was available. Earlier, the price data was obtained from the Ministry of Commerce, Government of India. What the Lakdawala group did was it segregated and created State-level information and said that it will go to the States for implementation.
All of these methods and approaches were explored to arrive at near approximate estimates of what percentage of the population was below the poverty line. Everyone believed that it was more than 50 per cent around the 60s and 70s, but nobody really had an estimate based on thorough research. When the Lakdawala committee came, poverty had fallen to 36 per cent, according to its particular definitions. With state-level ratios, the data had become much more sophisticated too. There were many reforms and changes taking place simultaneously, affecting the studies on poverty along with data sophistication. The role of the Government was reducing while the Center-state relationship was in a state of flux, with the states increasing their demands and autonomy from the Centre which reduced the ability of the latter to push its agenda. Another common criticism was that the Lakdawala committee was good but it was not good enough with its inputs on poverty definition.But a question that warranted significant research was, did poverty increase or decrease as a result of these radical reforms? Another survey followed in 1999 but it was an unresolved exercise. A committee was further setup under Suresh Tendulkar from Delhi School of Economics. Tendulkar broke away from the tradition of just using the food basket and expanded it to other goods the government was mandated to provide to its citizens under the Constitution. The Committee critiqued that the promises made by the State were not kept. The committee further went into household consumption expenditure studies to find out the ‘minimum’ that is required for basic expenditure on school, health, and so on. If the total income happened to be less than the ‘minimum’, then it was considered to be below poverty line. So the result of the Tendulkar definition was an increase in the number of poor people. The data sources from the Planning Commission finally boiled down to the percentage of people below the poverty line of the total population of the respective states. But the states conducted their own surveys using their own criteria taking into account the local factors and demographics. The results from these surveys done by the Centre and the states conflicted with each other having significant variations and claiming different figures embroiling them into a statistical tug-of-war having political ramifications. There was a total disconnect between what was happening in the Planning Commission and what was happening in the States.
And many states showed improvements in poverty reduction not necessarily by the consumption expenditure survey, but by using other indicators. NL Joda, who later became an economist for the World Bank, did a lot of surveys largely in Rajasthan but the general findings perhaps applies to other states too. He said that the focus has been far too much on consumption at the time of survey. Over a period of time, many households build up assets that enables access to bank loans and other services. And therefore these households are income poor but not in absolute poverty. The definition of poverty started becoming sophisticated and more nuanced with the kind of discussions that were taking place introducing new ideas and concepts.
But the story of poverty saw another twist and now religion entered into the discussion making it communal. People and other religious institutions started looking at specific regions where there was a rapid reduction in poverty such as Kerala, Tamil Nadu, parts of Andhra Pradesh to name a few. The Christian Missionaries were accused of using poverty alleviation and charity as an excuse for mass religious conversions. This also attracted the RSS and other religious organizations into this debate, heating up the political atmosphere in the country. These Missionaries succeeded in organising the Dalit community and over a period, many Dalits got converted into Christians. But the Dalits were entitled to reservations under the reservation policy and because Christianity has no caste distinction, they would lose all their entitlements post conversion. But the Dalits came up with a justification that although religion can be changed, caste cannot which still enables them to retain their entitlements which became highly politicised. Where do we go from here? Studies by ISI, Vaidyanathan and Bhattaycharya, a whole series of poverty studies beginning from the 70s. Although there were differences in estimates, all of them agreed that there was a decline in poverty. Some would say that it began with 45 per cent and came down to 39 per cent. Some would say that it began with 36 per cent and came down to 34 per cent with the Planning Commission coming up with its own figures. The Planning Commission took the YK Alagh poverty line that was originally declared as Rs. 39 in 1979 which got converted to Rs. 42 in 1981 citing inflation as the reason, reducing the whole discussion on poverty to just money income. In the meantime, the society was also changing. Firstly, the prices of the individual commodities in the basket were varying at different rates. Secondly, the food habits and the diet also changed. New commodities were introduced into the food basket, for example the average consumption of eggs increased across the country. The consumption of milk, cheese and other dairy products which were not there in the original basket, were now added to the food basket. So what do the Planning Commission numbers mean? They have a number, a number that is not corresponding to nutrition, not corresponding to State realities, then what is this number? Well, some interesting work was done on this too. The survey that the Indian Statistical Institute conducted had two parts - Part 1 is what has been described until now. But in Part 2, the same samples and the households were asked what they actually ate and how much they ate. There was actual data across time at five year intervals of what they ate. There was another researcher called Utsa Patnaik from JNU, and she took the norm of 2400 Kcal as given by the ILO and said that Indians are no different from the rest of the world, and if that is the minimum requirement, the same applies to India as well. She looked at this data and published her findings. The National Institute of Nutrition in Hyderabad used the second part of the data to talk about the nutrition status of the Indian population. Thus began the discussion on the quality of the food basket which had been neglected by the political dispensation until now.
An interesting exercise was done by BP Vani and others from ISEC on this issue. She took the 1993 data and corroborated with the actual diet of the people based on their response, in the process converting their food consumption into a kilo-calorie number. Vani looked at this particular ratio and concluded from her studies that the poverty line calculated for India was below the poverty line estimated using the WHO’s basic norms which set off another political furore drawing the nutritionists and food experts into the discussion. They said that 2400 Kcal is for a man in a village doing hard manual labour every day. It will differ in an urban setting and calorie requirements are bound to change with change in lifestyles, region and nature of work. They also came up with a converse proposition that if such kind of a calorie diet was maintained for an urban lifestyle, people would suffer from obesity, which can be described as poverty of another kind.
Further, Vani then looked into the 2005 data and tried to find out the calorie equivalent of the money value assigned to the food basket using actual food consumption data. The study resulted in an interesting finding concluding that the calorie equivalent turns out to be 1800 Kcal and not 2400 Kcal. Many nutritionists agreed that 1800 Kcal is not bad and is fairly healthy as long as it is maintained in the regular diet. We don’t quite know where to go with this. The debate continued with all its technicalities. Questions arose on the various methods adopted to use expenditure as a proxy for food but the most important question was how does one deal with real data? Do rich people buy more food because of higher level of income expenditure? Here comes the Engel curve analysis, which postulates that as income increases, the proportion of income spent on food decreases and there’s some empirical stability to this relationship. The Engel curve analysis holds true for expenditure and validates this argument.
When the Indian Statistical Institute conducted these surveys, a number of pilot surveys were done to try and capture the reliability of responses. But the reasoning was, if someone asked you - what was the food you had last week? And last month? How much did you spend on your shoes? After a series of analysis, they found that the most reliable answers were coming within a timeline of one month. But what happened in the 1999 survey of NSSO is they changed the time metric. They changed the base from ‘last month’ to ‘last year’. Now questions arose whether people will actually remember and produce accurate data with the year as the base. But the ‘one year’ metric proves to be more stable which provided a trade-off for the policymakers and statisticians to choose last month or last year as the base.
The standard surveys were done using one month as the base, therefore they could be compared. The 1999 survey changed the metric and rendered the available data useless. Even though there was a lot of data, but it couldn’t be used. And the 1999 survey was 7-8 years after the economic reforms of 1991 an important landmark in India’s economic history, which actually claimed that poverty levels had dropped. But the data was contaminated because of this change making the results dilemmatic and inconclusive.The 2005 survey went back to ‘last month’ as its base. The World Bank then introduced what they called the ‘mixed reference period’ which was capable of considering multiple bases and giving the most reliable results according to them. But so far, the NSSO has done nothing about it. Before I conclude, what I want to talk about is the result of all this poverty research and the course ahead. Last year, the Nobel for economics went to Angus Deaton who has been working on poverty studies. The citation was for three different strands of research which proves to be significant for the measurement of poverty and in showing a direction for future research on the same. The first was the consumption patterns in the UK. Earlier the theory of consumption had largely been abstract. But he found the data and firmed it up, added important questions and made it more robust making it possible for more people to use functions to predict and detect the trend. He made the data more useful and usable for others to apply in different contexts. But his major contribution was the work using NSSO data on poverty in the Indian context using various indices.
Indices remind me of another important contribution from another economist.It was Amartya Sen who came up with what is now called the Sen index. The Sen index gives us information about the ‘depth of poverty’. If x per cent are poor and are below the average (poverty line), then the Sen index tells us how deep below the average - on the assumption that if you are very far below the poverty line, you are very poor. The Sen index raised many interesting questions and lead to further research. Now, many statisticians and researchers wanted to know how many are at which level of poverty? Sen did this work a long time ago and half a dozen other Indian economists also worked on it. But their work was on the surveys of 1979, 1980s and the 90s restricting the research to old data. But Angus Deaton’s work was on the 1995 and 2005 surveys involving all the sophisticated indices and tools using the latest data. His research says that poverty is linked to nutrition, to education etc. for which his work gets cited. He too worked as a consultant with the World Bank. He took the schedules of the Indian Statistical Institute and used it in 30 - 40 different countries. Poverty studies became a kind of an epidemic spreading its influence all over the world. The latest addition to this enormous literature is Angus Deaton’s contribution. The prize was merited because empirical work was recognised for the first time. But I also think that the entire work of collection of data over such a long period of time and some 30-40 countries that ISI was involved in should have been shared. It is another side of the story of the rich literature on poverty.
Now, what’s the goal? Acche din?...There’s a Kishore Kumar song - Aa chal ke tujhe men le ke chalun. It sort of defines what the situation is at the moment. But how do we get there? This is Research in Play - there’s another Kishore Kumar song - Eena meena dika. That’s the strategy. Meanwhile, there’s a lot of skepticism on the policy change because earlier it was aimed at poverty eradication. Today, we talk about poverty alleviation. In other words, it is a submission that poverty is inevitable and it will be there but the goal is to make it less with time. My friend Krishnakumar used to say that this is the correct thing because if we eradicate poverty, all economists would lose their jobs. Indira Gandhi called it Garibi hatao which translates to ‘eradicate poverty’. But if we closely look at the data and interpret it now, we can actually say that the policy was Amiri bachao. Marx in his theories talks about how the anti-thesis gets manifested from its thesis during the course of its time.
There is now credible data from Thomas Piketty’s work, ‘Capital in the 21st Century’ which focuses on the creation and the rise of inequality. Piketty and Abhijit Banerjee wrote a paper which shows that the pattern seen in Piketty’s book across so many countries, including India, from 1980 to 1999 is that inequality sharply increased after 1980 using categories like top 10 per cent, top 5 per cent and top 0.1 per cent of the income and wealth distribution. The paper was extremely influential, because after that, from the year 2000 onwards, the Government of India stopped publishing that data which was called All India Income statistics. The pointers from this year’s budget is the same as before. It is teetering a bit here and there, but if we listen to the speech carefully without looking at the TV screen, we could easily mistaken it for a Finance Minister from the Congress. Basically, it is the same thing with a few tweaks here and there, without many changes. It is like playing with Tweedledum and Tweedledee.
As far as this situation is concerned, I will summarise by saying that yes, absolute poverty has declined, with evidence from studies and data. The number of poor across the States, including the poor and backward States has declined compared to 30 years ago. But this is a country where numbers can be tricky. When India became independent, the total population was about 300 million. Today the population who are poor is about 300 million. It is small if we compare it with today’s total population of 1.2 billion looking just at the numbers. But if we closely look and introspect, this same number, 300 million is the total population of India of 1947 that is still poor, which makes it look huge. This is a country where numbers can be large and percentages can be deceptive. Should we take heart at the fact that the percentage has come down, or should we look at other issues like life expectancy, nutrition, literacy and so on?
Finally I would like to end by sharing some words of wisdom from Danny Kaye -
“Now some of you children may be very surprised to hear that the symphony is not only music, but that it always tells a story. Which has a beginning, a middle, and an end.
Except for the unfinished symphony, which has a beginning….”