Rural Poverty Falls In Orissa, Urban Poverty Rises In Gujarat

India's 'poverty rate' has been debated ad infinitum ever since Montek Singh Ahluwalia, Deputy Chairman of India's Planning Commission announced the fixing of the poverty line at Rs 26 per day for rural areas and Rs 32 per day for urban areas. Those behind the uproar argued that these limits were too low.

IndiaSpend's Dhritiman Gupta puts the spotlight on the poverty debates from a different angle; by looking at how states have performed individually in reducing both rural and urban poverty.

For the uninitiated, the findings might surprise. First, states like Orissa, Maharashtra and Tamil Nadu lead the rural poverty reduction charge in the period 2005-09.

On the other hand, the number of poor in urban areas went up in Gujarat, Assam, Bihar, Jharkhand, Uttar Pradesh and West Bengal in the same period.

Bihar might sound particularly surprising since this is a state that has also shown rapid economic growth in this period.

The top-line is encouraging. The number of rural poor in India has fallen from 325 million in 2004-05 to 278 million in 2009-10. While the number of urban poor fell from 81.4 million in 2004-05 to 76.4 million in 2009-10.

Poverty Lines During 2009-10

In 2009-10, there were 354.6 million or 29.8% of India's total population classified as poor. Approximately 278 million people in rural areas were surviving with lesser than Rs 22.4 a day while 76 million people in urban areas had to do with less than Rs 28.6 per day.

In fact the poverty lines of different states are set at different levels, to calibrate it with the price levels there. Let's look at poverty lines of states in 2009-10. Only states with more than 10 million (classified) poor people have been taken.

Table 1: Rural & Urban Poverty Lines

Source: Planning Commission Data

BPL- Below Poverty Line

[NOTE: IndiaSpend is referring to the latest available Planning Commission data]

Many Survived Below Prescribed Poverty Lines

As you can see from the table, all the states had poverty lines below Rs 26 per day for rural areas and Rs 32 per day for urban areas in 2009-10. In fact only Maharasthra came close to matching those lines. The rural poverty line in Orissa was as low as Rs 18.9 per day and urban poverty line was Rs 24.5 per day in 2009-10.

So, the Planning Commission had actually revised the poverty line upwards in 2011. The question which did the rounds was whether a person could survive with such meagre amounts. The fact is that 354.6 million people were doing so with even lesser amounts in 2009-10.

Rural Poverty Rates

Let's look at the poverty rates and number of poor people in the states. First we will look at rural areas and then go on to urban.

Table2: Rural Poverty

Source: Planning Commission Data

Poverty Rate- Number of people living below poverty line as a % of total population

Orissa Leads Rural Poverty Reduction

As can be seen from the table, 278 million of rural people were poor living with less than Rs 22.4 a day in 2009-10. Bihar and Uttar Pradesh account for 109.8 million of the total number of rural poor.

If we look at the performance in reduction of rural poverty, Orissa leads the table with a 21.6 percentage point reduction in poverty rates over 2004-09. Maharashtra and Tamil Nadu have also done well, reducing rural poverty rates by 18.4 percentage points and 16.3 percentage points respectively.

What is worrying is the performance of Assam, Bihar and Chhattisgarh. In Assam rural poverty rates rose from 36.4% in 2004-05 to 39.9% respectively. Over the same period, rural poverty rates rose from 55.1% to 56.1% in Chhattisgarh. Bihar reduced its rural poverty rates but only marginally from 55.7% in 2004-05 to 55.3% in 2009-10.

If we look at absolute numbers then the good news is that the number of rural poor in India has fallen from 325 million in 2004-05 to 278 million in 2009-10.

All states except Assam, Bihar, Chhattisgarh and Uttar Pradesh contributed to this decline. While the number of rural poor in Uttar Pradesh has remained unchanged at 60 million, in the 3 other states the number of rural poor increased.

Urban Poverty Rates

Let's now take a look at urban poverty.

Table 3: Urban Poverty

Source: Planning Commission Data

Poverty Rate- Number of people living below poverty line as a % of total population

Urban Poverty Rises In Gujarat

The number of urban poor fell from 81.4 million in 2004-05 to 76.4 million in 2009-10. The urban poverty line was Rs 28.6 per day.

If we look at poverty rates Madhya Pradesh and Orissa did well in bringing down urban poverty rates by 12.2 percentage points and 11.7 percentage points respectively over 2004-09. However, in Assam and Jharkhand urban poverty rates went up over the same period.

The number of poor people in urban areas, however, went up in Assam, Bihar, Gujarat, Jharkhand, Uttar Pradesh and West Bengal over 2004-09.

Hence, most states except Bihar and Assam have done well when it comes to poverty reduction over 2004-09. However, the question is whether judging poverty reduction performance based on poverty lines of Rs 22.4 per day for rural areas and Rs 28.6 per day for urban areas is justified.

This report is not going into the reasons for some states showing either rising or falling urban/rural poverty rates. But it's clear from the data that a dissected state-wise view is critical to understand where the gains and losses are happening; in the context of the larger 'growth story'.

Now to return to the poverty debates; the number of poor and poverty rate is bound to rise under this new elevated poverty line which we referred to at the outset. What is a justifiable poverty line is however a different question altogether.