Setback to claimants of ‘Gujarat model’: New Rangarajan committee report on BPL suggests Gujarat has slipped in rural poverty

poverty3By Counterview Desk

Prof Bibek Debroy, an economist who is known to have taken a leading role in “authoring” the concept what came to be known as “Gujarat model”, said in his book “Gujarat: Governance for Growth and Development”, released in 2012, that the real growth in Gujarat could be found in rural areas, where poverty reduction has come about as a “trickle-down effect.” Quoting National Sample Survey (NSS) figures, he said, “In rural Gujarat, there has been a very sharp drop in poverty, significantly more than all-India trends. In 2004-05, the below poverty line (BPL) number for rural Gujarat was 9.2 million. That’s still a large number, but is significantly smaller than the 12.9 million in 2004-05.”  Based on this, he said, the poverty in Gujarat had gone down during that period by 12.4 per cent, which was one of the highest in India.

It seems, however, that in just about two years of his drastic observation, which Prof Debroy kept repeating at several forums, things appear to be looking a little gloomy for Gujarat. Latest Government of India study report of the Expert Group, headed by former Reserve Bank of India (RBI) governor C Rangarajan, on measurement of poverty, has found that Gujarat has slipped in rural poverty rank. According to the study, in 2009-10, Gujarat’s rural poverty was 9th highest in a group of 20 states, which in 2011-12 became 8th highest. Worse, if in 2009-10, the BPL in rural Gujarat (37 per cent) was below the national average (39.6 per cent), in 2011-12, the BPL in rural Gujarat (31.4 per cent) was higher than the national average (30.9 per cent).

poverty4The slip in rural poverty, if the Rangarajan committee report is to be believed, has been made up by a somewhat better performance in urban Gujarat. Thus, in 2009-10, there were 35.6 per cent BPL in urban Gujarat, making the state 11th most poor, in 2011-12, the ranking improved to 12th, with 22.2 per cent poor. However, this improvement has failed to get reflected in the overall ranking of Gujarat. The state continues to remain the 9th most poor state of India with the total BPL of 27.4 per cent in 2011-12. The ranking was the same (ninth most poor state out of 20 major states) in 2009-10, when the total BPL were 36.4 per cent.

The new poverty line, worked out by Rangarajan, fixes the rural poverty line for each state separately. For Gujarat, it has fixed it at Rs 1,103 for rural areas and Rs 1,507 for urban areas per capita per month consumption expenditure. At the all-India level, the Rangarajan committee fixed poverty line at monthly per capita consumption expenditure of Rs. 972 in rural areas and Rs 1407 in urban areas. “This implies”, the report states, that at the all-India level, poverty line is drawn as  the “monthly consumption expenditure of Rs 4,860 in rural areas or Rs 7,035 in urban areas for a family of five at 2011-12 prices”, the report says, adding, “This has to be seen in the context of public expenditure that is being incurred in areas like education, health and food security.”

poverty5Based on this, the report states,  at the all-India level, “the Expert Group (Rangarajan) estimates that the 30.9 per cent of the rural population and 26.4 per cent of the urban population was below the poverty line in 2011-12. The all-India ratio was 29.5 per cent. In rural India, 260.5 million individuals were below poverty and in urban India 102.5 million were under poverty. Totally, 363 million were below poverty in 2011-12.” It adds, “The poverty ratio has declined from 39.6 per cent in 2009-10 to 30.9 per cent in 2011-12 in rural India and from 35.1 per cent to 26.4 per cent in urban India. The decline was thus a uniform 8.7 percentage points over the two years. The all-India poverty ratio fell from 38.2 per cent to 29.5 per cent. Totally, 91.6 million individuals were lifted out of poverty during this period.”

As for absolute numbers in Gujarat, in 2011-12, there were 10.98 million people in rural areas and 5.89 million people in urban areas below poverty line (total 16.88 million BPL). As against this, in 2009-10, there were 12.71 million people in rural areas and 8.87 million in urban areas below poverty line (total  21.58 million BPL).

Considering that poverty line should be “based on certain normative levels of adequate nourishment, clothing, house rent, conveyance and education, and a behaviorally determined level of other non-food expenses”, the report states, adding, “The Expert Group (Rangarajan) computed the average requirements of calories, proteins and fats based on Indian Council for Medical Research (ICMR) norms differentiated by age, gender and activity for all-India rural and urban regions to derive the normative levels of nourishment. Accordingly, the energy requirement works out to 2,155 kcal per person per day in rural areas and 2,090 kcal per person per day in urban areas. The protein and fat requirements have been estimated on the same lines as for energy. These requirements are 48 gms and 28 gms per capita per day, respectively, in rural areas; and 50 gms and 26 gms per capita per day in urban areas.”

poverty6The report states, “A food basket that simultaneously meets all the normative requirements of the three nutrients defines the food component of the poverty line basket proposed by the Expert Group (Rangarajan).” Other calculations taken into account include “clothing expenses, rent, conveyance and education expenses, basic non-food expenses of clothing, housing, mobility and education.” All of it together has led to the committee working out the new poverty line – which is “monthly per capita consumption expenditure of Rs 972 in rural areas and Rs.1,407 in urban areas in 2011-12”.

The report also states that the estimations of the poverty line are not just based on the National Sample Survey Organisation (NSSO) data collected by the Government of India’s data collection department, Ministry of Statistics and Programme Implementation. It has simultaneously relied on an independent large survey of households by the Centre for Monitoring Indian Economy (CMIE). It observes, the CMIE results “are remarkably close to those derived using the NSSO data. This provides additional evidence in support of the poverty line derived by the Expert Group (Rangarajan).“

The report further states, “The national rural and urban poverty lines computed as above were used to derive the state-wise poverty lines by using the implicit price derived from the quantity and value of consumption observed in the NSSO’s 68th Round of Consumer Expenditure Survey (2011-12) to estimate state relative to all-India Fisher price indices. Using these and the state-specific distribution of persons by expenditure groups (NSS), state-specific ratios of rural and urban poverty were estimated. State-level poverty ratio was estimated as weighted average of the rural and urban poverty ratios and the national poverty ratio was computed again as the population-weighted average of state-wise poverty ratios.”

— Rajiv Shah

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