Debate over redrawing the poverty line—the product of reams of academic research, field surveys and mathematical modeling—might seem arcane but carries great consequence. Under a new formula proposed recently by a Government-appointed committee, nearly 30 per cent of India’s 1.2 billion people would be classified as poor, up from 22 per cent now, an increase of 94 million people…
India is wrestling with an important question: How do you count the poor if you can’t agree on the definition of poverty? Debate over redrawing the poverty line—the product of reams of academic research, field surveys and mathematical modeling—might seem arcane but carries great consequence. Under a new formula proposed recently by a Government-appointed committee, nearly 30 per cent of India’s 1.2 billion people would be classified as poor, up from 22 per cent now, an increase of 94 million people.
Decades of disagreement over how to measure the poor in countries around the world suggest there is something unquantifiable about poverty—that, like goodness and obscenity, it may be easier to recognise than to define. But devising a fair poverty definition matters for India, which suffers from widespread malnutrition and high infant mortality despite its economic rise. India’s era of fast growth has been dogged by questions about what the country owes its least fortunate and about how broadly the benefits of newfound prosperity are being shared.
The world’s best-known poverty line is the World Bank’s threshold of $1.25 a day, which is based on an average of the poorest countries’ national poverty lines. A United Nations report concluded that the proportion of the world’s population living on less than that amount halved between 1990 and 2010. One-third of the world’s 1.2 billion extremely poor are in India, but even there, progress has been enormous. The value of the World Bank line lies in its being a common yardstick. It doesn’t claim to be a precise assessment of the amount of money it takes to avoid destitution in every country. Still, some economists argue the world’s neediest are ill-served by focusing on an income level that still amounts to penury.
The $1.25 line has “defined development down,” says Lant Pritchett, a Harvard economist who has worked for the World Bank in India andIndonesia. Disputes over poverty measurement get equally heated at the national level. The U.S.’s official poverty line was first drawn in 1963, when a Government economist estimated the minimum a family of four needed to spend on food. Then she multiplied that number by three, because data showed one-third of families’ after-tax income went toward food. The total: $3,165 a year, which was rounded down to $3,000. Apart from annual adjustments for inflation, the line hasn’t changed since.
Economists have criticised the U.S. threshold as arbitrary and anachronistic. The Census Bureau began releasing a “supplemental poverty measure” in 2011, after a panel convened by former New York City Mayor Michael Bloomberg concluded that the official, “frozen-in-time” poverty lines “no longer represent a meaningful standard for identifying needy families.” In India, families’ living standards have arguably changed more in the past 20 years than they did in the U.S. over the past 100, even while the needs of millions remain unmet. “The kinds of contrasts we possess, no other country has,” said Himanshu, an economist at Jawaharlal Nehru University in Delhi who uses a single name. “And in a democracy, these things need to be questioned. That’s what the poverty lines do.”
June’s report, which the Indian Government commissioned but hasn’t formally endorsed, includes two major changes to the official methodology. Using updated medical research, it sets minimum requirements for protein and fat in people’s diets in addition to a baseline for mere calories. In addition to the cost of food, the new formula adds the median monthly expenditure, in a Government survey of 100,000 households, on four “essential” goods: education, clothing, shelter and transportation. An additional amount, for all other spending, is tacked on.
The result: You’re poor in India if you earn less than 972 rupees a month in rural areas or 1,407 rupees a month in cities. At market exchange rates, that is about $16 and $23, respectively. The current thresholds are $14 and $17. Those amounts go farther in India than in the U.S., but even inIndia’s rural hinterland, making it above either of these lines doesn’t guarantee much more than a wretched existence. In 2011, India’s Supreme Court asked the Government to re-examine its methodology because the poverty threshold was being used to determine eligibility for certain entitlements. How, the justices asked, could someone living on 30 cents a day not be considered poor? The Government eventually delinked India’s food-welfare program from the poverty line.
The new report’s higher overall threshold could help forestall more such disputes, even if it still tries to stipulate what a poor family needs. Anu Madgavkar, an economist with the McKinsey Global Institute, defends the idea of Governments setting poverty standards on grounds that it helps quantify the cost of bridging the gap between rich and poor. “The benefit of the line is to shape aspirations and Government policies,” she said.
In his 2013 book “The Great Escape,” the Princeton economist Angus Deaton argues that poverty measurement is ultimately a question of democratic consensus, not scientific calibration—a continuing exercise based on what is acceptable to policy makers and the public, including the poor themselves. “The truth is that we have little idea what we are doing, and it is certainly a mistake to let anything important depend on such numbers,” Mr. Deaton writes.