India is redefining poverty. In the latest update from the Former Chairman of the Economic Advisory Council, Chakravarthi Rangarajan, an urban family living on under 47 rupees (78 cents) a day, or a rural family living under 32 rupees (53 cents) a day, would be deemed poor. These values are up from 27 and 33 rupees, respectively, on the definition of poverty in India, and would deem 94 million more Indians as poor. However, the new poverty level is still low compared to the World Bank’s cutoff for extreme poverty: $1.25 a day. The line in India has been criticized many times before, and people have even challenged previous prime ministers to live on less than a dollar a day.

According to the new definition of poverty, 29.5 percent of the Indian population was poor in 2011-2012. The cutoff for poverty in India has never been so high before, but, when applied to past years, it reveals a decrease in the number of Indians living in poverty. In 2010, under the current standard, 38.2 percent of Indians were poor.

In coming up with the new poverty line, Rangarajan’s committee studied government statistics on the ability of households to pay for food that provides the minimum nutrition an individual needs, as well as the ability of individuals to obtain education, health care, housing, electricity, transportation and clothing.

The poverty line is significant because social sector programs are directed toward those who fall below it. But, that might change too. The Rangarajan panel suggested that entitlement to social security programs should be disconnected from poverty ratios. Instead, entitlement to the programs may be better linked to social and caste census. Either way, the new definition will factor into Finance Minister Arun Jaitley’s budget-making.

India’s government released a new budget focused on curbing, borrowing and reviving growth this week. This seems like good news, but critics are not sure how the new spending will reduce the fiscal deficit plaguing the country.

Different parts of the country have dealt with finances differently and to varying results. Recently elected Prime Minister Narendra Modi bragged frequently about the way he ran the state of Gujarat as Chief Minister since 2001 – its per capita income was among India’s highest. But he neglects to include the fact that the state’s poverty rate in 2011-12 was only a little below the national average, and its rural poverty rate was actually higher than the national average. While Gujarat focused on industrialization and ignored welfare programs, the state’s income inequality continued to grow.

Meanwhile, in southern state Kerala, industrialization has fallen by the wayside. But, social indicators are highest in the nation because of the state’s practice of investing heavily in social welfare. Under the new definition of poverty in India, Kerala’s poverty rate in 2011-12 was only 11.3 percent, and only 7.3 percent of the rural population would be considered poor. Because Kerala chose to invest mainly in education and health care, everyone, including the poor, has increased an access to opportunities.

– Rachel Reed

Sources: New York Times, Slate
Photo: Owni