[Economic Survey] Ch13: Poverty Line Estimation- Tendulkar vs Rangarajan, Engel’s Law, MNREGA, Aajeevikaa, Urban Livelihood

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  1. Prologue
  2. Poverty line
    1. Tendu Leopard vs Ranga Khush
    2. Urban Poverty line
    3. Rural Poverty line
    4. Why Ranga NAA-KHUSH (unhappy)?
    5. How is 100 million poors increased?
    6. Calorie Expenditure
    7. Engel’s law & MPCE
  3. Centrally sponsored schemes (CSS)
  4. CSS classification
  5. Poverty removal schemes
    1. Scheme#1: MNREGA Act 2005
      1. MNREGA performance
      2. MNREGA Reforms already taken
      3. MNREGA: Economic Survey observations
    2. Scheme #2: NRLM / Aajeevika
    3. Scheme #3: National Urban Livelihood mission


links will be updated once I finish last (first) part on UNDP HDI-2014 report.

Poverty line

Cover Ch13 Poverty line schemes

Q. Who decides Poverty line?

Planning commission

Q. How does it decide poverty line?

  • Monthly per capita Expenditure.
  • Suresh Tendulkar designed its Formula.

Q. Who provides the data of monthly Expenditure?

  • NSSO- National sample survey organization
  • under Ministry of Statistics and Programme Implementation
Tendulkar’s poverty line
Area Monthly Expenditure per person (Rs.)
Rural 816
Urban 1000

According to Tendulkar formula, poverty has declined, as seen in following graph:

Poverty in India Tendulkar formula

Mugup the value of Total poors (%wise) & in crores

No. of Poors in India (Tendulkar Method)
Tendulkar 2004 2011
Poor % 37.2 21.9
Poor Cr. 41 27

Time for stupid census ranking:

State wise (Ref. Economic Survey 2013 page 238)
Highest rural poverty Lowest poverty
  1. tie: Odisha, MP
  2. Bihar
  3. Assam
  1. Kerala (7.1%)
  2. Himachal (8.1%)
  3. Punjab (8.3)%
highest rural unemployment highest urban unemployment
  1. Kerala
  2. Assam
  3. Bihar
  4. WB

….lowest in Gujarat (3/1000)

  1. Bihar
  2. WB
  3. Andhra
  4. Haryana

….lowest in Gujarat (34/1000)

Tendu Leopard vs Ranga Khush

Earlier Committees: Alagh ’77, Lakdawala ’89

Committees Tendulkar C.Rangarajan
Set up by Planning commission Planning commission
Set up in 2005 2012, May
Submitted report 2009 2014, July
Poverty estimation method Monthly per CAPITA Expenditure. Monthly Expenditure of family of five.

Urban Poverty line

Urban poverty line (Rs) Tendulkar C.Rangarajan
per day per person 33 46.90=~47
per person per month 1000* 1407
per family of five, per month 5000 7035

*this is their official recommendation. Rest numbers are “derived”.

Rural Poverty line

Rural poverty line (Rs) Tendulkar C.Rangarajan
per day per person 27 32
per person per month 816* 972
per family of five, per month 4080 4860*

*these are the official numbers recommended by them. Remaining figures are derived.

Why Ranga NAA-KHUSH (unhappy)?

Q. Why is Ranga unhappy with journalists and politicians? Inform “the nation” in 200 words.

Poverty line Why is Ranga Khush

Villain Ranga (Jogindar) is also unhappy because mainstream Bollywood directors also releasing vulgar movies & item-songs, thereby affecting his “SUSTAINABLE Livelihood”

  • C. Rangarajan has received lot of negative publicity because:
    • He kept poverty line to be ridiculously low – Rs.32 for rural and Rs.47 for Urban.
    • Therefore He is insensitive towards the poor.
  • But Ranga never gave those daily numbers. He had given combined poverty line for a family of five members- Rs.7035 (Urban), which is a plausible number. After all, if you live in a family of five, then some costs will get reduced per head (e.g. rent, lightbill, LPG etc.)
  • Besides, if a family spending >7000 per month = their income would be definitely above 7000. So in reality, Ranga has not “insulted” the poor. Infact, He has tried to cover more poor under BPL & Sarkaari schemes.
  • Media has derived those “insensitive” daily Expenditure figures (Rs.33, Rs.47) by dividing the monthly Expenditure of five people, then further dividing that number by 30.
  • If you objectively convert Ranga’s poverty line into purchasing power parity (PPP), it’s $2.44 per person, per day. And that figure even higher than World bank estimate. In other words, Ranga included more poor in BPL, than even World bank would!
  • Thus, journalists and politicians have misinterpreted the poverty line issue- just like they misinterpreted Anti-CSAT movement to be against those 8 easy English MCQs above Decision Making section!

How is 100 million poors increased?

Since Ranga raised poverty line, obviously more people would become “below poverty line”.

Rangarajan Poverty line 100 million increased

why does Hindu keep saying 100 million poors added?

Poverty in India: Year 2011
Formula # of BPL in crores
Tendu 27
Ranga 37
difference 10 crore = 100 million BPL increased.

anyways moving on

Calorie Expenditure

Tendulkar C.Rangarajan
only calorific value in Expenditure Calorie +Protein + fat. Explained below

In the Indian economy books writing during Adam Smith’s time, you’d have read poverty line = “2400 calorie in Rural areas and 2100 calorie in Urban areas.” That was Lakdawalla Committee (1989-1993).

Calorie Lakda Ranga
Rural 2400 2155
Urban 2100 2090

Observe that Ranga reduced the calorie requirement- why?

  • Because ICMR study report said so. Besides, over the years use of machinery and vehicles has increased, so today’s generation doesn’t require that much “calorie”. Besides, laborers can get extra energy by chewing calorie-free “Gutkha”.
Ranga also included Expenditure on protein & fats
gms / day Rural Urban
Protein 48 50
fats 28 26

Coming back to Original topic:

Tendulkar C.Rangarajan
Only counts Expenditure on food, health, education, clothing. food + nonfood items such as education, healthcare, clothing, transport (conveyance), rent. + non-food items that meet nutritional requirements.
  • Urban poverty increased on faster rate (40%) than rural poverty (19%)
  • This is obvious, because Ranga included non-food items like rent, education etc.
  • These items/services are more expensive in cities than in villages.
Ranga recommends that at any given point of time,

  • bottom 35% rural junta always be considered poor
  • bottom 25% urban junta always be considered poor.
  • Poverty ratios should be disengaged from entitlements under Government schemes.
  • e.g. cheap foodgrain quota under Food Security Act should not be based on BPL-ness, but social-caste census.

Engel’s law & MPCE

Monthly per capita Expenditure: NSSO 68th Round (2011-12)
area Average MPCE Highest in % food Expenditure
Urban Rs.2399 Haryana 38.5%
Rural Rs.1278 Kerala 48.6%
  • This indicates rural-urban disparity. Cityfolks have more money to spend than Villagers.
  • Engel’s law says: when income rises, % of overall income spent on food item decreases.
  • We can see this happening in urban areas. City folks spending ~39% while villagers spending ~49% of their income on food.
  • Among states: Kerala spends the least money on

Centrally sponsored schemes (CSS)

In June 2013, UPA-II revamped CSS
137 schemes 66 (list given in PRSIndia LINK)
States did not have any freedom to spend money on their discretion. 10% flexifunds
Some of the schemes directly gave money to NGOs and project implementation agencies like DRDA. Entire money will be transferred to Consolidated fund of the state Government. From there, everyone will get money
  • For every new scheme, states will have to contribution some money themselves. explained below:

The Union: state contribution ratio will be as following…

Area Union States
Special category states (JK, NE, Himachal & Uttarakhand) 90 10
other states 75 25

CSS classification

As per Economic Survey, we can classify all Sarkaari schemes, into following categories. And I’ve covered the schemes into the same format in my ch13 summary subparts.

  1. Poverty removal: we are here (MNREGA, Urban and Rural livelihood missions)
  2. Health, women and child
  3. Education & skill
  4. weaker section: welfare, protection
  5. Social security
  6. infrastructure: rural & urban

Poverty removal schemes

Budget and Economic survey discuss only three schemes under this category

  • (1) MNREGA
  • Livelihood missions: (2) Rural (Ajiveeka) (3) Urban

Let’s check’em one by one

Scheme#1: MNREGA Act 2005

  • under Rural Development ministry
  • Promises minimum 100 days of unskilled manual work
  • To each rural household. (not to each person)
  • In a financial year (1st April to 31st March)
  • 1/3rd women participation
  • Unemployment allowance, if you can’t get work within 15 days
  • State governments have to appoint district level ombudsman to hear complaints
  • Wages: Material ratio = 60:40
MNREGA Wages are linked with CPI inflation for Agricultural laborers
year MNREGA wages (CPI-AL)
2006 65
2013 132

MNREGA performance

for the year 2013, Average work days 46; women participation 52.9%

Time for another stupid ranking
BEST Worst
Workdays Tamilnadu Assam
women participation KERALA UP
Andhra Assam

MNREGA Reforms already taken

  1. Individual bank/PO accounts for All women
  2. Widowed, deserted, and destitute women identified and covered under MNREGA scheme.
  3. Designed “schedule of rates (SoR)” for physically handicapped laborers, so they get fair wages despite providing less output.
  4. Provided convergence with other schemes such as Nirmal Bharat Abhiyan, Panchayat Yuva khel Kendra, ICDS Anganwadi centres etc.

MNREGA: Economic Survey observations

  1. MNREGA was supposed to a “panchayat-centric and demand driven” program. But ground reality is different.
  2. Gram Sabha is unaware of its powers. Social audits not done regularly.
  3. Hardly any Gram Sabha using MNREGA for public works such as Playground, Anganwadi etc.
  4. Shortage of Technical staff => Delay in work measurement => delay in payment.
  5. At many places, males find higher wage-work in nearby towns. Therefore only a few women come at MNREGA site. Big projects cannot be taken up due to worker shortage.
  6. Suggested reform: Use MNREGA for tourism related infrastructure.
  7. Budget 2014: promised to use MNREGA for creating Agriculture related “more productive” assets.

Scheme #2: NRLM / Aajeevika

  • Who? Rural Development Ministry
  • 1999: Swarnjayanti Gram Swarozgar Yojana (SGSY). Later renamed to National Rural Livelihood Mission (NRLM). Finally renamed to Aajeevika.
  • Wants to lift rural families from abject poverty
  • How?
    • By 2024, get one person (preferably woman) from each household, into an income generating Self-help groups (SHG).
    • By Giving (Bank loans + subsidy + training) to those SHG.
  • Economic Survey observation:
    • Scheme worked fine for agarbatti, pottery, tailoring and other small business activities.
    • But at some places, Government made too much infrastructure investment compared to scope of the given business activity.

Aajiveeka: Budget 2014

  • Under Aajiveeka, Women-SHG in backward districts get loans at cheaper interest rate.
  • Budget 2014 increased the number of backward districts under this scheme.
More districts to get Cheaper SHG-loans
Loan interest rate Before 2014 after
4% In 150 most backward district +100 more added = 250
7% Remaining districts interest rate unchanged (7%)

Additionally, Budget 2014 also announced “Start Up Village Entrepreneurship Programme” for rural youth. but exact details yet to be worked out.

Scheme #3: National Urban Livelihood mission

  1. Who? Ministry of Housing & Urban poverty alleviation.
  2. Earlier called Swarnajayanti Sahari Swarojgar Yojana. Then renamed into National urban livelihoods mission, with following features
  1. self-help groups: bank credit + subsidies + skill training
  2. street vendors also get easy loans and skill training
  3. Shelters for the homeless.
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121 Comments on “[Economic Survey] Ch13: Poverty Line Estimation- Tendulkar vs Rangarajan, Engel’s Law, MNREGA, Aajeevikaa, Urban Livelihood”

  1. sir ,aapse ak req. h ki aap english medium ke jese hindi midium k student ki bhi kuch help kre pls………………………..

  2. useful ininformatio, clear my topic. Thak u

  3. Thank sir,
    This information is most important for all of student, we can understand easy, nice information about poverty. So….thank so much.

  4. Thank sir,
    This information is most important for all of student, we can understand easy.

  5. Sir incredible..Many many thnx..It explains the detail about the intricacies of the report

  6. sir please write a lucid article (like always) on foreign investments (factors, effects, analysis), policies for attracting FI.
    thank you.

  7. i salute you sir

  8. Thank you for the best information you provided for us.

  9. Respected Sir,
    Can you tell something about microfinance.with special reference to Delhi.
    As I got to know that Microfinance is for poor people.
    And in Delhi it is given through Joint Liability Group(JLG).
    Then how they judge Poverty before giving loan.as most people earn more than rs7000 already

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