[Economic Survey] Ch13: Poverty Line Estimation- Tendulkar vs Rangarajan, Engels Law,

MNREGA, Aajeevikaa, Urban Livelihood

1. Prologue
2. Poverty line
1. Tendu Leopard vs Ranga Khush
2. Urban Poverty line
3. Rural Poverty line
4. Why Ranga(unhappy)?
5. How is 100 million poors increased?
6. Calorie Expenditure
7. Engels 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
Poverty line

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

Tendulkars poverty line
Area Monthly Expenditure per person (Rs.)
Rural 816
Urban 1000
According to Tendulkar formula, poverty has declined, as seen in following graph:

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.

C. Rangarajan has received lot of negative publicity because:
o He kept poverty line to be ridiculously low Rs.32 for rural and Rs.47 for Urban.
o 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, 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 Rangas poverty line into purchasing power parity (PPP), its $2.44
per person, per day. And that figure even higher than World bank estimate! Thus, 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.

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.
Calorie Expenditure
Tendulkar C.Rangarajan
only calorific value in Expenditure Calorie +Protein + fat. Explained below
In the Indian economy books writing during Adam Smiths time, youd 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 todays generation doesnt 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.
food + nonfood items such as education, healthcare, clothing,
transport, rent

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.
Static, fixed line-
only calorie Expenditure.
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.
Engels law & MPCE
Monthly per capita Expenditure: NSSO 68
th
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.
Engels 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
BEFORE AFTER
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 Ive
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
Lets checkem 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 (1
st
April to 31
st
March)
1/3
rd
women participation
Unemployment allowance, if you cant 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
KERALA Punjab
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?
o By 2024, get one person (preferably woman) from each household, into an income
generating Self-help groups (SHG).
o By Giving (Bank loans + subsidy + training) to those SHG.
Economic Survey observation:
o Scheme worked fine for agarbatti, pottery, tailoring and other small business
activities.
o 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.