My Blog List

  • Tiger's Lunch. - “D.Rajkumar” was the first thing I noticed on the waiter’s breastplate when I called him to my table for ordering the desert. And don’t forget this is fiv...

Sunday, 31 March 2013

Poverty Line or Starvation Line?

In every country the poverty line is set to measure poverty in accordance to the expectations of what it costs to meet the basic human needs. Basic human needs include the ‘minimum necessitates of merely physical efficiency needed for existence”. In United Kingdom poverty is defined objectively and applied consistently only in relative terms.
According to Adam smith’s wealth of nations the poverty in absolute terms is defined as follows:
Adam Smith wrote: “By necessaries I understand, not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, nobody can well fall into without extreme bad conduct....Under necessaries therefore, I comprehend, not only those things which nature, but those things which established rules of decency have rendered necessary to the lowest rank of people"
Determination of poverty is has always been a matter of debate amongst the economists. In 2010 surprising stats were published by Govt. of India stating, that India’s poverty declined from 37.2% to 29.8% in the matter of 5 years. 7.4 % decrease in poverty stricken population would mean that 8.51 crores of population has miraculously are able to satisfy their basic necessities of food water and shelter. Comparing this figure to the prior year’s declining figure looks erroneous estimate for a country whose GDP increased merely by 3.0% in last four years (i.e. from 2008-2011) and moreover the inflation rates increased from mere 4% to 10.36% in the same period. The change in the poverty stats was the result of political overhaul played by the then planning commission by decreasing the daily consumption expenditure of Rs. 28.65 to Rs. 22.42 the figures were very much unrealistic before the decrease but it created an outcry amongst the civil society. It generated an atmosphere amongst policy makers of the country to establish poverty standards which are realistic and free from political biases. Efficient measurement of poverty will not ensure the prudence of the figures but will also result in effective disbursement of cash subsidy and better targeted social services.
The methods used to set poverty lines differs radically between rich and poor countries. Poverty in the developing world is typically measured using absolute lines, which aim to have the same real value at different dates and places. Virtually all developing countries use such lines and, at the global level, the World Bank’s “$1-a-day” line is an absolute line, aiming to have the same purchasing power in different countries and at different dates. This difference in how poverty lines are set matters greatly to the properties of the resulting poverty measures. Using an absolute line, such a poverty measure automatically falls when all incomes grow at the same rate, while any measure based on strongly relative lines will be unchanged.
 So it is hardly surprising that this choice has been found to matter greatly to assessments of how poverty is changing over time, as well as to cross-sectional poverty comparisons.
Experimenting with this idea some of the European countries have adopted Relative poverty measure which not only answers the question that who is poor? But also measures by how much he is poor? This magnitude of poverty is an important component which shall be measured in the developing countries like India as the nature of disbursement of economic resources is biased which leads to inequality of income. Contemporary concept of relative poverty doesn’t have a constant base unlike absolute poverty model wherein we have fixed standards in this model every variable determining the magnitude is derived from a single base which can be GDP of country, Heath Index of UNDP or education level. Moreover this model of poverty is a multi-factor model which takes factors like health facilities, educational contribution, and migration attributable to the lack of employment opportunities in the state of residence. This model quantifies the loss of income due to different variable and assign the weights to them and then these weighted average of the two variables gives us a negative figure which is then compared within the region and then inter region this method of determining poverty on the basis of multiple factors gives an explicit view of the factors which are contributing most to the cause of poverty in a particular region. This regime of poverty determination will pin point the problematic areas of social service schemes of government. The detail of the relative poverty is explained below:
The proposal of the model stratifies the given Indian population into 5 stratus:
1. Rich
2. Upper middle class
3. Lower middle class
4. Marginally poor/poor in present terms or standards
5. Very poor or poorest of the poor
The major emphasis lies on the estimation and the basis for estimation of the poverty, what all factors shall be taken into consideration while measuring the extent of poverty. The factors are discussed here under on the basis if the coefficients will be determined which will be the key factors for deciding the extent of poverty.
The model is based on the assumption that the economy will not develop economically till the time the purchasing power of the consumer is increased. The increase of salary/wage does not guarantee the economic contribution (i.e. buying of consumer and durable goods and asset creation), as this increase in salary/wage may inflation tied i.e. the salary increases when the inflation increases this income remains constant in real terms as the inflation set off the increase in the wages. The proposition in this study is to increase the purchasing power that this the portion of income which is left after the consumption of food (form Public Distribution System), the salary left after the deduction of food consumption expenditure defines the purchasing power of the person with which he buy the durables-i.e. which lead to the asset creation. The differentiating feature of the definition of purchasing power in traditional economics terms is that the purchasing power unlike absolute poverty standards which aims at satisfying the needs and necessities but also concentrates on the satisfaction of wants and desires. Buying behaviour of a person is affected by the factors and these factors measure Magnitude of Disadvantage.
1.      Number of children in a family.
2.      Employment level
3.      Disease/infection level      
4.      Hygiene conditions
5.      Education level (Higher Education)
The psychometric factors contributing to the poverty will be considered. Extending the concept of opportunity cost, a concept of the cost of disadvantage. The cost of the disadvantage is the economic loss of to the economy due to uneven distribution of resources or lopsided growth amongst the social classes. Quantifying the above given factors in numerical terms and the converting them again into relative terms firstly intra class and then into interclass will indicate the exact number how poorer is a poor . And from the coefficient of disadvantage calculated area wise concerned authorities come to know which problem is contributing the economic loss to the society.
The economic contribution of the mean income of a district is calculated and an index is formed which can be used to do a comparison at inter/intra state level.
.




No comments:

Post a Comment