Global reports on multidimensional poverty which do not factor in measurement of India’s wealth in terms of land and value of agricultural land, housing and informal sector is geopolitics and all junk, Arvind Virmani, noted economist and full time member of NITI Aayog tells The Sunday Guardian. Excerpts:
Q: How is multidimensional poverty, a current buzzword, different from thetraditional concept?
A:I think it is important to start with the traditional definition of poverty before going to multidimensional which is a new concept. We have had poverty discussions on poverty for 75 years and the concept of Multidimensional Poverty is less than a couple of decades-old. In the 60s the US was one of the first countries to do surveys on poverty and we were almost the second or third. India was an early adopter of statistical measure of poverty. Of course the difference is that while they focused on income, India focused on the yardstick of consumption because it was easier to measure in a country which had a large illiterate population and income is a slightly more difficult concept for just a common man. Hence the focus was on consumption.
Q: So when did India make the shift to the new idiom?
A:Somewhere around 2004-05 when I was actually heading the development policy in the Perspective Planning Division, the statistical people used to do consumption surveys and the PPD used to translate that into poverty estimates. The poverty estimates were always done by the PPD of the planning commission. In that period roughly I am mentioning around 2006, I was principal adviser of both the divisions, which is at the secretary level. At that time a few consumption surveys were done under my division. I approved them but what I argued, based on my experience of dealing with poverty for decades before, that was that we should shift over from what is called the unit record period (URP) to a multiple record period (MRP).
And this is critical. In URP they used to measure everything over a 30 day period. So the interviewer would go and ask every family household what they consumed of 100 items in the last 30 days. Who remembers 100? What I had argued was that you have divide it into 3 parts—ask about common consumption items for seven days, because that is easy to remember. Then I suggested 30 days is a reasonable period for other items—which are semi durables. So essentially I divided it into non-durables, semi durables like footwear and durables like TV. This was discussed, the members got involved and eventually this was adopted. There were a lot of experiments with this, as over the years, experts tried two periods and sometimes three periods. Now they call it MMRP but this is the MRP I had recommended. We said that in future poverty will be measured by this MMRP because that is a better measure, it is a better survey and there are a lot of international experience we have reviewed which also supports this concept.
This shift occurred over the next 10 years but international organisations have stick with the URP and that is why you see these big differences. All that they talk about is just wrong and I can argue that because I have been involved in this for decades.
Q: Though India has taken its place as one of the fastest developing countries with high income, there are studies like the UNDP 2024 Asia-Pacific Human Development reports which suggest India is seeing an increase in inequality.
A: As far as we are concerned, that is those of us who dealt with poverty estimation, we are very clear that India has switched to the right thing model and the world is lagging. Those estimates are useless for India. I am willing to go on record to say that those are useless. We adopted the change consciously. It’s not about this government or that government. These are the experts in the planning commission, including the member responsible for poverty, the member who is a leftist. All of them agreed that this is a better method. The world has refused to switch to MRP, including the multilateral institutions etc. I think that’s wrong and I say it bluntly. The estimate based on MRP is right.
Let me put this clearly that this is authentic data, largely from National Family Health Survey (NFHS) and those for financial inclusion are of course from RBI and other data. These reports are looking at the wrong number on poverty and are also wrong in their approach to poverty both in the consumption income sense and because they are still going on the URP numbers. Besides the reports don’t reflect the latest household consumption survey which came out recently. There was a gap and we don’t have to rehash the data. Now they have the data and this shows that the Gini coefficient of the distribution of consumption has improved. There have been studies on this and shows this perception is not right. The consumption distribution is improving. Then there are indirect indicators.
If you don’t have full faith in the consumer income measures for multi-dimensional poverty, there is also the fact that it has improved the most in the most backward states and this makes sense because when you are down there, it is easy to rise than when a state has already gone up. The multi dimensional indicators have improved the fastest in the states which were behind. So I disagree on this hypothesis both on the consumption side and the MDI side.
Q: What else is missing in these reports?
A: The other element is the wealth factor which they tom-tom. In that context, let us look at the only thing which is commonly available and that is the equity market which is such a small part of this economy. This is a tiny portion of India’s wealth. What is India’s wealth? What are the major elements of wealth? Have they ever looked at it? There is land. Has anybody looked at value of agricultural land? That is most widely distributed. Have they measured it or done a survey? How can they compare India with some country in Africa? We have a growing middle class which has more personal housing than rental unlike in US a large part is rental.
So land is missing, house is missing and the third element which is not present in a large number of countries —a large informal sector. What about the wealth of their businesses? Not measured. So what are you talking about? They have no idea of the wealth in India nor the distribution of wealth. You have not factored in three of the most important measures of wealth in India. This is geopolitics! It is all junk actually!
Q: There have been further revisions right? The multidimensional poverty index has other new indicators.
A: There were arguments earlier also that certain basic things are missed, which are called quasi-public goods which affect the quality of life. This concept of consumption poverty or income poverty is based on the fact that there are market goods you are buying, so higher your income, more the market goods you buy. It’s your choice. However, it was pointed out that there are social or public goods or even quasi-public good like basic education and basic health that is treated like a public good and does not need the kind of strict criteria which economists used to have.
Hence the thought was that we must adjust the poverty line and it should not be just based on consumption. There were a number of committees like the Tendulkar committee which added an extra amount of indicators to the numbers. The view was, for instance that everyone should have to spend on ordinary high education in private or healthcare which is basic. So the lines were adjusted, the opinion was well considered and accepted. To question them now is completely wrong.
Then there was deliberation on the matter of access—like access to electricity. Thatis where the multi-dimensional aspect came in, encompassing the idea that there are things that people must have access to. It was decided to measure those separately and bring in basic things like health, education, clean drinking water and electricity. So that is multidimensional poverty and certain indices were identified and accepted by everybody.
What Niti Aayog has done is, added a couple of more indicators like financial inclusion which is not in the global concept of multidimensional. This is not included among global indicators. We have added maternal health and bank accounts. Maternal health is also not there in the international and who can object if India has added it. I don’t know what’s the problem since the West keeps talking about gender equality. Take bank account. For years we were criticised that people don’t have access. When we start giving this access, it is unacceptable as an indicator.