(Premium) Gist of Yojana: January 2014

Premium Gist of Yojana: January 2014

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Measuring Poverty in India has a long and venerable tradition. In the
pre-independence period, Dadabhai Naoroji sought to measure poverty with a view
to describe the consequences of colonial rule in India.

His book Poverty and Un-British Rule in India drew attention
to the enormous drain on wealth caused by colonial policy and was the foundation
to many intellectual arguments for independence. Subsequently, during the
freedom struggle the Congress Party, the Planning Commission and many eminent
scholars have worked on this issue. Srinivasan (2007) has a detailed review of
this background.

In fact, it would not be an understatement that this
discourse has been one of India’s major contributions to the field of
development studies. It is not a merely a scholarly exercise. The World Bank has
stated that fighting poverty is at the core of its work. The United Nations when
it outlined the millennium development goals stated that the first goal is to
eradicate extreme poverty and hunger. Poverty is at the heart of almost all
discourses on development policy.

In this context, when we seek to measure poverty, there are
at least three distinct types of objectives: (i) to build awareness on poverty
and to keep it in the agenda of discourse; (ii) to design policies, programs and
institutions to alleviate poverty; (iii) to monitor and evaluate these policies,
programs and institutions that are associated with it. Each of these objectives
imposes very different requirements on data and the methodology of measurement.
In particular it could easily be argued that the latter two are not single
objectives but are in turn composites of multiple objectives.

In so far as the first is concerned, the objective is easily
understood and is in fact the basis of Dadabhai Naoroj its book published in
1901, the purpose of which was to influence British public opinion about the
consequences of colonial rule on India. It was principally to bring poverty in
the political discourse and influence policy with that in mind. An objective
repeated by the National Planning Committee of the Congress and the authors of
the Bombay Plan before independence and by the Planning Commission in more
recent times. What is common in all these approaches is to state a normative
criteria of what constitutes socially acceptable minimum” necessary for the bare
wants of a human being, to keep him in ordinary good health and decency” (Naoroji
1901). Having done so, the aim is to estimate the proportion of people who on
average in some defined period of time over some region do not meet this
criteria. This estimation is then achieved usually through a survey which
canvasses (usually) households with a view to assess the proportion of those who
do not meet the desired criteria. These results, based on the design of the
survey are described by geography, communities as may be feasible. In India,
this has been done since the 1970’s using the household consumer expenditure
survey, based on criteria established by the Planning Commission task force in
1979. The estimates are generated for rural and urban areas separately in each
state of the union. This profile has them been the basis for our discussions on

Turning now to the second objective, the principal objective
is to design programs and policies so as to better target their objective. Thus
the authoritative World Bank handbook (2009) states “Clearly, one cannot help
poor people without knowing who they are”. The principal objective is to seek to
design the program so as to allocate resources in a manner most likely to reach
the intended beneficiaries. This targeting can be very broad or coarse or very
fine. In the former case the poverty profiling done under the first objective is
used to allocate resources to regions or programs consistent with the orderings
in poverty profile. Alternatively, the finer targeting can be sought to locate
beneficiaries directly as in the targeted Public Distribution System or the
Indira Awas Yojana, where caps on numbers of beneficiaries are reached based on
the estimates of the profile. It is clear that while both forms of targeting use
the profile developed for the first objective, the finer the targeting, the more
intensive is the use of the data generating the poverty profile. This then leads
to the question as to how appropriate is this? To answer this question we need
to understand the statistical properties of the profile generated for the first

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