Poverty incidence in India since 1993: Another view

Type Working Paper - DEV Working Paper 08
Title Poverty incidence in India since 1993: Another view
Publication (Day/Month/Year) 2008
URL http://www.uea.ac.uk/polopoly_fs/1.85860!wp08.pdf
Angus Deaton has recently revised the method of calculating poverty relevant Consumer Price Indexes from the Unit Values and Average Budget Shares that can be calculated from the Consumer Expenditures Surveys of the National Sample Survey (Deaton, 2008). He also changes the way he calculates urban poverty lines, and uses a different base year; both these changes alter the poverty counts that arise compared to his former method. He applies the new CPIs to the 55th and 61st Rounds (1999/00 and 2004/5 respectively) and concludes that poverty rose over this period. This is quite different to the trends suggested in other papers published in this journal (Himanshu, 2007; Dev and Ravi, 2007). Some of Deaton’s changes are not novel in that they are similar to our earlier work (Dubey and Palmer-Jones, 2005c, b & c); other changes, and other aspects of his methods, are questionable. Perhaps the most significant problem is that Deaton seems to compare poverty counts using the Mixed Recall Period in the 55th Round with the Uniform Recall Period in the 61st Round. This clearly biases the trend against poverty reduction. In this paper we draw attention to problems with Deaton’s new work, rehearse and update our own calculations to the 61st Round, suggest what can reasonably be concluded from the trend in poverty using our calculations, and draw conclusions about the practices of poverty measurement in India. We find, using the MRP welfare aggregate, that poverty probably decreased significantly between the 50th and 55th Rounds and may have increased slightly between the 55th and 61st Rounds. But it is likely that we have overestimated the downwards trend in poverty to the 55th Round, so that there may well have been some money metric poverty reduction in both periods, perhaps more in the earlier than the later period. This does not support the idea that poverty reduction has disconnected from agricultural growth which shows a similar pattern. It is important not to rush to judgement using unreliable methods and flawed data, no matter how ingenious the manipulations to which they have been subject.

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