The Indian Economy Blog

September 3, 2007

Indian Roulette

Filed under: Growth,Human Capital,Media & Economics — Neelakantan @ 7:17 pm

This is a game that is being played out in the media for a while now. Pick a number, preferably in percentages, below 93 and above 0. Then, say that number, is the percentage of people who live in dire (or choose your adjective) poverty.

Read this post to see how this game has progressed so far. Choose fast, because there don’t seem to be too many numbers left.

1 Comment »

  1. Torture numbers, and they’ll confess to anything.(Attributed to Gregg Easterbrook)

    Comment by Pragmatic — September 3, 2007 @ 7:30 pm

  2. I am not sure how relevant the the figure of $1/day is to india. For a westerner, of course it would look really low. But if you actually consider a family of four with each getting $1 per day, that translates to about 5K pm of family income. Of course, 5K is not really a huge some of money, but i really wonder if a family with income of about 4K can be said to be living in abject poverty.

    Comment by sai aravindh — September 4, 2007 @ 5:18 pm

  3. Does this number matter?

    I have not seen any policy in India that actually depend on Income of families. Most policies we have are based on things like Caste, Religion, Language etc… The only policy that has some income level taken into account is for subsidised food distribution via Ration shops. Most folks who are in middle to lowest income level qualify, also food is not the only thing family needs to live.

    Some time ago I went to one of the MHADA complex developed in Mumbai for providing affordable housing. To my surprise a large number of residents owned cars, which proves the point that whatever little stock is created for poor is siphoned off to rich folks by corrupt babus & politicians.

    Sai mentioned that it may be that many families earn Rs 5K per month but still can classify as poor. That may be true but not for large number of poors. You are indirectly also assuming that kids also are working and not going to schools. Also $1 a day in city like Mumbai will not be able to afford even rent of bed.

    Comment by Shailesh — September 4, 2007 @ 7:00 pm

  4. “You are indirectly also assuming that kids also are working and not going to schools.”
    No Shailesh, Neelakanthan is not assuming that. Coz that figure is per capita not per laborer.

    Guys in general:
    1. firstly 1 dollar means crap. lets call it 41 rupees. coz if we dont a Westerner thinks – 1 dollar. Jeez. But actually for him, it should be more like 4 dollars (PPP adjustment). But then we have to be careful not to convert that back to 164 rupees !!!

    2. the average family size is towards 5+ for the poor, and around 4-5 for the non-poor (generically speaking)
    so yes 5x30x41=6150 rupees in India per month for a family is not bad. But it is for the people who are exactly AT the poverty line, not BELOW it. Again living in Mumbai and Rampur is different (not counting Gabbar Singh)

    3. If we go by the FM’s number (I dont, see later) – so right now those living below 41 rupees a day (not 1 dollar) should be even less than 20% (not 25 percent because when Chidambaram commented it was 45 rupees to a dollar, this factor being over and above actual poverty reduction)
    THAT IS BY RUPEE APPRECIATION ACTUAL POVERTY DID NOT CHANGE BUT BY THISE ARBITRARY GLOBAL STANDARD OF 1 DOLLAR, RELEVANT POVERTY DID.
    Because real price changes take time to adjust to currency movements etc.

    4. Poverty was decreasing 1 percent a year in the 90s, I have a feeling that its 2 percent now.

    5. India’s vast underground unbanked cash economy is now disproprtionately in the unorganized labor recruiting sectors. I dont know whether NSSO takes this into account.

    6. Obviously all this is just income poverty, not wealth poverty – and forget social poverty (health services, education etc). When land deeds etc will be computerized fully in rural India, and when slums will either be legalized or else transferred (with improvements, I hope) – then crdit offtake will shoot and poverty will go away a lot quickly then we think. Private and public social expenditures are rising like never before and this will show.

    7.
    a. But if we want to derive a figure, we can try with some statistics and assumptions. IF the top 150 million Indians earn 30% of India’s 1 trillion dollar GDP – then it turns out to be 8,000 dollars per family of 4 annually yielding 3.2 lakh rupees (this 150 million is broadly all public and private organized labor + medium and large non-farm entrepreneurs and obviously their families). Now 700 billion dollars income (I am sorry I am reverting to dollars here but I am used to billion dollars and not crores arabs rupees etc) will be divided amongst the remaining 1 billion odd people – that is 700 dollars per capita

    b. anyways 700 / 365 = almost 2 dollars per capita. Since the end/tail effects of the statistical distribution have been taken care by separately treating the 150 million “cream”. Then about 500 million people are still below 1 dollar a day. If this seems simplistic, then the figure can only be more because the mean tends to be more than the median generally (and I think that my assumption of Rs. 3.2 lakh annual family income per 4 member “average family” for top 150 million individuals’ assumption is rather conservative)

    Temporary conclusion (critiques of this 2 minute 2 cent analysis invited):

    People living below 41 rupees a day are definitely definitely more than 25 percent according to this analysis. But more than 1 dollar (as the Western/Japanese world would interpret 1 dollar) – definitely less than 20 percent as a PPP multiple of atleast 4 applies immediately (the multiple being even more efficacious at the lower economic strata where food etc is the main basket good and not cars/iPods etc)

    PS: Savings reduction for living standards (actual consumption) hasnt been done as most of the savings (government debt, equity etc) is anyways done by the top 150 million (which included the Public Sector employees too)

    Comment by Harsh — September 4, 2007 @ 8:45 pm

  5. it is $1 ppp ~ 5 rs in 2000 $s. not a lot of money.

    Comment by carp — September 5, 2007 @ 7:20 am

  6. Neel,

    To add to the muddle, let me quote from K@W http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4219

    “According to the Indian government and the World Bank, less than 30% of the nation is poor, and 70% of the poor (225 million) live in the villages. These official statistics are based on a per capita consumption expenditure of Rs. 356 ($8.70) per month, or Rs. 11.70 ($0.28) per day. This low yardstick grossly undercounts the number of poor people in rural India, and certainly does not reflect the living conditions for most of them.

    For example, The George Foundation’s recent survey of nine villages in Hosur Taluk in Tamil Nadu state showed that more than 80% of the people live on a daily income of less than one dollar, the internationally accepted definition for poverty. Given the proximity of the surveyed villages to the rapidly growing city of Bangalore, this estimate reflects a more prosperous picture than what is true for most of rural India.”

    Comment by Pragmatic — September 8, 2007 @ 9:31 pm

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