Identification of Poor in the Eighth Five Year Plan (1992-97)

The BPL census in 1991-92 was conducted by making use of the rural poverty line derived by the Task Force in 1991-92, which was then used by the Planning Commission in bringing out the official poverty estimates. The task force rural poverty line was not used directly but was converted into per family basis by using the information on average size of rural household obtained from the NSS consumer expenditure survey data (observed as around 5 members per family). This family based poverty line, expressed in terms of monthly consumption expenditure, was further converted into annual consumption expenditure. Equating the savings propensity of the poor to zero, this consumption was treated as income. Thus the poverty line so derived is based on family rather than a person and income rather than consumption. This

national level rural poverty line was then applied uniformly to rural areas of all the states in the country to separate the poor families from the non-poor in the BPL census.

The identified poor families through the lenses of this census far exceeded the poverty ratio estimated by the Planning Commission. The number of poor identified in the BPL census was almost twice of that estimated from the official poverty ratio estimated by the Planning Commission.

The foremost problem with the 1991-92 BPL Census lies in the choice of income to track the level of living of the population. The Planning Commission had been using consumption expenditure in place of income as it had always considered the former as more appropriate for analysis of level of living than the later for two primary reasons. First, expenditure data reflect more accurately people's actual level of living while income data are more concerned with people's potential level of living. Second, expenditure data are considered more reliable than income data as the latter often underestimates people's potential level of living due to much longer reference period (one year) for recalling one's income correctly (especially in the case of poor people with no regular permanent source of income). The reference period for expenditure is usually one month, except for expenditures on consumer durables. Moreover, income in kind such as, the consumption of own-produce is often valued at producer prices which results in people's actual level of living being underestimated.

The complexity of computing the household income is well known. Household income estimates are universally considered as less reliable than consumption estimates. In India, even a specialized institution such as CSO and NSS with technically competent staff has not attempted the estimates of household income. On the contrary, BPL census is conducted by locally available staff of rural development agencies (such as village level workers, school teachers, etc.), who are not professionally qualified or experienced to investigate household incomes. Therefore, considerable non-sampling errors are inevitable. Besides, there is an inherent upward bias with the BPL census as people know beforehand that this census is going to decide the category of families as poor or non-poor for anti-poverty government assistance.

Despite the aforesaid complexity of computing income, the 1991-92 BPL Census used the income of the family, albeit the job of assessment of the income of poor families is much less cumbersome as compared to that of the rich families. Moreover, the problem of family based

fixed poverty line compounded the problems for large families with small income per head, and also for smaller families with large income per head. This may be illustrated with an example. Consider two families, A and B. Family-A consists of ten persons and each one earns Rs. 1,500. The family income is 10 x Rs. 1,500 = Rs. 15,000. Since the total income of the family (Rs. 15,000) exceeds the poverty line (Rs. 11,000), Family-A is considered as non-poor. From the family-based poverty line of Rs. 11,000 in 1991-92, the poverty line per person works out to Rs. 2,200 (= Rs. 11,000/5). Therefore, it would be a mistake to count this family as non-poor since the income of each person in this family (Rs. 1,500) is well below Rs. 2,200. Now consider the opposite case of Family-B, which has two persons, each earning Rs. 4,500 per year. The total income of Family-B during the year is Rs. 9,000. Since this is less than the poverty line (Rs. 11,000), Family-B is counted as poor. Again, a mistake is committed; as Family-B is not poor since its income per head (Rs. 4,500) exceeds the poverty line per head (Rs. 2,200). Thus, the above procedure of identifying the poor based on the family poverty line declares a person with monthly income of Rs. 1,500 as non-poor, but a person with monthly income of Rs. 4,500 as poor.

In other words, the usage of income for measuring the poverty line inherently led to a mix up of the non-poor and poor and the estimates of the percentage of BPL households obtained from the census of rural families in 1991-92 were found to be far more than that obtained from the rural poverty estimates made by the Planning Commission on the basis of NSS consumer expenditure data using the Expert Group method.

In order to eliminate the aforementioned problems the procedure of conducting the BPL census was changed in 1996-97 in substantial measure. First, the income concept was changed to consumption. Second, the poverty line was changed from the household to person basis. Third, before administering the questionnaire, a set of exclusion criteria was adopted to eliminate ineligible families.