discussion
A Critical Look
at Some Propositions
on Consumption and Poverty
Utsa Patnaik
A comment to the analysis and
discussion in Angus Deaton and
Jean Dreze, “Food and Nutrition
in India: Facts and Interpretations”
(EPW, 14 February 2009).
Utsa Patnaik (patnaikutsa@yahoo.com) is at
the Centre for Economic Studies and Planning,
Jawaharlal Nehru University, New Delhi.
74
1 Consumer Price Index Is Not a
Cost of Living Index
D
eaton and Dreze (2009) have
argued that the NSS consumption
data show rising per capita real
expenditure in both rural and urban India,
over the same period that per capita calorie
intake has been declining. As they put it
(p 46), “…the decline in per capita calorie
consumption has been accompanied by an
increase in real average household per
capita expenditure”. They have posed as a
“puzzle” the steady “downward drift” in
calorie intake for all spending classes de-
spite this “rise” in real per capita expendi-
ture, saying “per capita calorie consump-
tion at a given level of per capita expendi-
ture has steadily declined over the last 20
years” (ibid, p 46, all emphases in original).
What do they mean by “real” expenditure
and by a “given level of expenditure”?
From the note to their Table 2 headed
“Real Mean Per Capita Expenditure on All
Goods and on Food”, they are deflating
nominal rural and urban spending by the
CPIAL and CPIIW, respectively, which is the
routine procedure that economists follow.
This is the same as using the implicit de-
flator from successive official poverty
lines, since these poverty lines have been
obtained by updating 1973-74 rural and
urban poverty lines using the CPIAL and
the CPIIW.
However, can economists confine them-
selves to routine procedures alone, and
continue to apply uncritically only the
conventionally accepted methods of de-
flating current to constant values, when
these methods have been shown already
to be increasingly inadequate? Using con-
sumer price indices over long periods of
time has led to absurd results by way of
grossly underestimating the required ex-
penditure for maintaining even a modest
february 6, 2010  vol xlv no 6  EPW   Economic & Political Weekly
consumption standard. The particular lev-
els of money expenditure in 1973-74 which
allowed official nutrition norms to be met,
when updated by price indices to 2004-05
permit only much lower nutritional levels,
sharply lower in many states by 600 to
1,000 calories daily . The questions pre-
cisely are, how “real” are these authors’
estimates of “real per capita expenditure”
calculated over two decades using con-
ventional indices, and to what extent is
their “given level of per capita expendi-
ture” actually given?
Economists generally tend to treat the
consumer price index as equivalent to a
cost-of-living index, and term as “real ex-
penditure”, spending levels deflated by
the consumer price index. It is clear by
now that such an identification is untena-
ble for time periods in excess of five years
or so, for we have been getting seriously
misleading results by treating price indices
and cost of living indices as the same.
Money incomes and expenditure should
be rising enough for working people to
permit both the maintenance of the mini-
mum nutritional standards as well as rea-
sonable spending on health and utilities,
and thus should be rising in tandem with
the cost of living in order to maintain real
purchasing power. But clearly that is not
happening, money expenditures are not
growing in tandem with the cost of living
and this is reflected in absolute decline
in the consumption of necessities like
foodgrains and cloth. Consumer price indi-
ces are increasingly understating actual
change in the cost of living, since the nom-
inal spending level which allowed a mod-
est nutrition norm of 2,100 calories per
capita to be accessed three decades ago,
when consumer price index adjusted, now
allows only 1,400 to 1,700 calorie intake in
most states. The actual nutrition-invariant
cost of living is more than double the
price-index adjusted poverty lines.
For urban employees, the consumer
price index alone has never served as the
sole basis for determining the cost of liv-
ing for fixing salaries. The author joined
her university as an associate professor in
1973, the base year for official poverty
estimates, at a gross pre-tax salary of
about Rs 1,000 per month. The Consumer

Price Index for Urban Non-manual Em-
ployees rose 10.55 times by 2004-05, so
applying this index the salary for an entrant
into the same post should be Rs 10,550 per
month. But no urban middle class profes-
sional could possibly maintain herself on
such a sum, which the University Grants
Commission considers adequate only for
the senior research fellowship awarded to
young doctoral scholars. The actual entry-
level salary for the same post in New Delhi
by 2005 was more than double the CPI-
UNME index adjusted base year salary and
close to the multiplier value of 2.6 yielded
by taking the ratio between the 2,100 cal-
ories poverty line and the official poverty
line in 2004-05.
2  Alternative Deflators to
Calculate Real Expenditure
Since the consumer price indices have not
been capturing the actual change in the
cost of living, and deflating expenditure
series over a decade or more by these indi-
ces no longer gives a correct approxima-
tion to “real expenditure”, we need alter-
native deflators to convert nominal spend-
ing to real spending. The official poverty
lines (OPL) measure the cost of a fixed
base-year basket updated by consumer
price indices, so one set of implicit defla-
tors is given by the change in the OPLs at
successive points of time, representing the
change in the consumer price indices. An
alternative set of implicit deflators is
given by taking the nutrition-invariant or
direct poverty lines (DPLs) at successive
points of time at the norm and at lower
levels. “Real expenditure” is found to be
highly sensitive to the specific deflator
used, which not merely affects the values
but also alters the direction of change.
The interesting results of applying the
alternative deflators to average nominal
MPCE during 1983 to 2004-05, normalis-
ing for 1993-94, are shown in Table 1.
Applying the OPL implicit deflator gives a
rise in average “real expenditure” by 25%
in rural India from Rs 259 to Rs 323 and
by 40% in urban India from Rs 397 to
Rs 557. This is the same finding as Deaton
and Dreze (2009). But applying the
implicit deflator from the DPLs at norm
levels, alters the direction of change to
the opposite: rural real spending declines
by 25.5% from Rs 306 to Rs 228 and
Economic & Political Weekly  EPW   february 6, 2010  vol xlv no 6
discussion
declines by 5.6% in urban India from Rs 441 1,800 calories DPL deflator is not very
to Rs 416. large but it is enough to alter the rise in
Table 1: Nominal Average Monthly Per Capita rural real spending to a decline.
Expenditure Deflated Using Alternative Implicit
Deflators from Official and Direct Poverty Lines The performance using the DPL deflators,
Implicit Deflators 1983 1993-94 2004-05 is very different during the period 1983-
1 Rural 1993-94 compared to the subsequent eco-
a < 2,400DPL (norm) 36.8 100 245.4
nomic reforms decade. Urban real MPCE
b < 2,200 DPL 37.4 100 219.5
shows unambiguous rise in the pre-reform
c < 1,800 DPL 39.8 100 206.0
d OPL 43.4 100 172.8
decade for all nutrition level deflators. This
2 Urban improvement in real spending saw a small
a < 2,100 DPL (norm) 37.2 100 253.0 rise in average calorie intake. Rural real
b < 2,000 DPL 38.2 100 236.8 MPCE shows decline by 7.9% and 6.4% using
c < 1,800 DPL 40.7 100 215.4 the norm level and next lower deflators,
d OPL 41.3 100 189.0 while it remains virtually constant with
3 Nominal mean MPCE, Rs
the lowest level deflator. But over the sub-
Rural 112.5 281.4 558.8
Urban 164.0 458.3 1052.4
sequent economic reforms decade, which
4 Real mean MPCE, Rs (base 1993-94) saw income deflating macroeconomic
Rural policies, urban real spending declines by
a Applying < 2,400 DPL deflator 305.7 281.4 227.7 9.2% and 3% for the norm and next lower
b Applying <2,200 DPL deflator 300.8 281.4 254.6
level deflators while only the lowest level
c Applying<1,800 deflator 282.7 281.4 271.3
deflator gives a rise by 6.6%. Rural India
d Applying OPL deflator 259.2 281.4 323.4
shows much larger decline in real spend-
5 Urban
a Applying <2,100 DPL deflator 440.9 458.3 416.0 ing by 19.1% and 9.5% for the first two DPL
b Applying<2,000 DPL deflator 429.3 458.3 444.4 deflators while even the lowest level deflator
c Applying <1,800 DPL deflator 403.0 458.3 488.6 shows decline. All these results are very
d Applying OPL deflator 397.1 458.3 556.8 different from the OPL deflator showing
Source: Patnaik (2007) gives the official and the direct poverty lines at
both norm levels and at 1,800 calories level. Direct poverty lines for improvement in real expenditure over both
other nutritional levels are from author’s charts of the g relation. periods and in both rural and urban India.
Implicit deflators have been obtained What of the fractile specific behaviour
also for two additional, below norm nutri- of “real expenditure” over time? As Table 2
tional levels. Over the two decades from shows for urban India, the OPL deflator
1983 to 2004-05 there is a decline in rural gives rising real spending for all spending
real spending with implicit deflators for classes over 1993-94 to 2004-05 with the
every nutritional level. Urban India shows average rise at 21.5%. But with the DPL de-
spending decline with the norm level flator at norm level, the finding is the op-
deflator while the lower level deflators posite. There is a 9.2% average decline in
give rise in spending. Note that the differ- real spending, and 11 of the 12 spending
ence between the OPL deflator and the classes containing 95.1% of all persons
Table 2: 2004-05 Expenditure Deflated to 1993-94 Using Different Deflators by MPCE Classes (All-India Urban)
MPCE Persons 2004-05 1993-04 2004-05 2004-05 (Col 6- Col 5) Calorie Intake
Class 1993 2004 Current Current DPL OPL Change % Change
(%) (%) (Rs) (Rs) Index Index (Rs)
Deflated Deflated
1 2 3 4 5 6 7 8 9
1 5.0 5.0 279.7 132.8 110.6 148.0 22.2 3.7
2 5.0 5.1 368.1 175.5 145.5 194.8 -30.0 -0.5
3 9.4 9.8 410.3 210.8 162.2 217.1 -48.6 -2.4
4 9.0 10.3 533.2 247.5 210.8 282.1 -36.7 -2.7
5 10.9 9.7 625.8 286.8 247.4 331.1 -39.4 -4.2
6 10.0 9.9 730.2 331.6 288.6 386.3 -43 -4.2
7 10.3 10.3 858.0 380.7 339.1 454.0 -41.6 -5.2
8 10.6 9.7 1,014.3 447.6 400.9 536.7 -46.7 -5.0
9 10.0 10.2 1,226.4 543.5 484.7 648.9 -58.8 -5.0
10 10.2 9.9 1,594.1 698.3 630.2 843.4 -68.1 -8.2
11 4.7 5.1 2,157.2 923.4 852.7 1,141.3 -70.7 -8.4
12 4.9 4.9 4,235.6 1643.1 1,674.2 2,241.1 31.1 -7.5
All 100 100 1,052.4 458.3 416.0 556.8 -42.3 -4.9
For real spending col 6 uses 2,100 calories DPL Index = 253, and col 7 uses OPL Index =189 both with base 1993-94 = 100. The
last column gives the relative change in calorie intake in 2004-05 over 1993-94 for normalised calorie intake viz, deducting 1,000
calories from both sets.
75
discussion
show decline while only the top 4.9% of
persons show a rise. There is a clear asso-
ciation between the decline in real ex-
penditure and decline in calorie intake for
10 classes. The anomalies are the lowest
class which shows a small rise in calorie
intake despite fall in real expenditure1 and
the richest class which shows fall in calorie
intake albeit from very high levels, with a
rise in real spending. On average there is a
4.9% calorie intake decline with 9.2% real
spending decline.
Clearly, “real” per capita spending shows
rise without exception for every period in
the Deaton and Dreze (2009, Table 2) ex-
ercise, and in both rural and urban areas,
solely owing to the specific price indices
they use, which have been used always for
updating official poverty lines, and have
cumulatively underestimated the actual
rise in the cost of living. The “downward
drift” of calorie intake at a “given real ex-
penditure” is the result of using these spe-
cific indices to the exclusion of any other.
If the alternative deflators from the nutrition-
invariant poverty lines are used for com-
paring what Deaton and Dreze (2009)
have called the “calorie Engel curves”,2
the pattern would be very different from
the one in their Figure 1. The curves for
different years would not drift downwards
but would cluster closely together.
Thus, there is no puzzle of declining per
capita calorie intake with consistently ris-
ing per capita “real spending” since such
behaviour does not exist in reality: apply-
ing reasonable alternative deflators shows
decline in real spending, which turns out
to be particularly large in the economic
reforms decade. This is consistent with
macroeconomic policies over this decade
which were employment and income re-
ducing in the material productive sectors
while favouring tertiary sector growth.
Even applying the standard price index de-
flators, the consumption data show not
only falling real spending on food – as
Deaton and Dreze have correctly pointed
out – but also falling real spending on cloth.
The exception was urban India between
1983 and 1993-94 when per capita real ex-
penditure rose using the alternative defla-
tors, and average calorie intake far from
declining also registered a marginal rise.
Indian consumers are neither abnormal
nor irrational, and poor consumers who
76
are already undernourished and inade- Table 3: Percentages of the Population Living in
Households with Per Capita Calorie Consumption
quately clothed, do not further cut back on Below 2,100 Urban and 2,400 Rural
basic necessities like food and cloth unless (abstracted from Deaton and Dreze 2009 Table 5)
Year Round Rural Urban All-India
they are obliged to do so by falling pur-
1983 38 66.1 60.5 64.8
chasing power. The alleged puzzle in con- 1993-94 50 71.1 58.1 67.8
sumer behaviour arises from ignoring every 2004-05 61 79.8 63.9 75.8
bit of adverse evidence such as rising
unemployment rates, falling foodgrains (given in briefer form as Table 3 in this
availability per capita, stagnant mass in- article) only has a note saying “Authors’
comes in the material productive sectors calculations based on NSS data”. The ques-
especially the primary sector, loss of tion is precisely how the authors have cal-
owned land and livestock by the majority culated, which remains unstated, making
of peasants – all of which indicate falling their procedure non-transparent. We find
purchasing power. Relying exclusively on that most of their numbers for other years
increasingly faulty tools, the consumer are also off the mark to some degree but
price indices, for deflating
Table 4: Distribution of Persons, Average MPCE and Average Nutritional Intake
current spending values by MPCE Classes, All-India Rural, 61st Round 2004-05 (U-30) and Distribution of
to constant values pro- Persons and Average Expenditure by MPCE Classes 61st to 63rd Round 2006-07
(MRP)
duces misleading results. MPCE % of Cumulative % Average Average Cumulative % of Persons
My argument is not that Class Persons of Persons MPCE Rs Calorie Intake (Current Values)
URP URP URP URP MRP MRP MRP
these conventional tools 2004-05 2004-05 2004-05 2004-05 2004-05 2005-06 2006-07
should be rejected, but 1 2 3 4 5 6 7 8
0- 235 4.8 4.8 199.53 1,376 2.8 2.0 1.2
that they should be used
235-270 5.1 9.9 253.80 1,575 6.1 4.5 3.2
critically, never be treated
270-320 9.9 19.8 296.64 1,679 14.4 11.4 7.5
as cost of living indices,
320-365 10.5 30.3 342.40 1,800 23.9 18.7 12.7
applied only over short 365-410 10.2 40.5 387.72 1,885 33.9 27.9 20.8
periods of four years 410-455 9.4 49.9 432.06 1,962 43.6 36.5 29.1
at most between large 455-510 9.9 59.8 481.55 2,042 54.4 46.6 39.0
sample surveys, and sup- 510-580 10.2 70.0 543.25 2,158 65.3 58.9 50.3
plemented by alternative 580-690 10.4 80.4 630.40 2,290 77.5 72.3 64.9
deflators. However I have 690-890 9.8 90.2 775.00 2,380 88.8 86.1 80.3
no illusion that any 890-1155 4.9 95.1 999.94 2,568 94.7 93.2 90.6
established academic will 1155 ++ 4.9 100 1,956.57 3,018 100.0 100.0 100.0
ever think out of the All 100.0 558.78 2,047
Note that in Report 508 perhaps owing to rounding, the percentage of persons by MPCE
box, and economists in classes totals to 100.2. We have adjusted for this by assuming the last two classes to
contain 4.9% of persons each and not 5 as stated.
particular tend to be Source: NSS Report 508, Level and Pattern of Consumer Expenditure, 2004-05 Statement 2R
more deeply attached to on p 46, Appendix Tables 1R and 5R. Report 513, Nutritional Intake in India 2004-05,
Report No 527. Household Consumer Expenditure 2006-07, Table, p 1.
their standard concepts
and tools however faulty these have the largest divergence from the data is in
proved to be than they are to their spouses. their rural poverty estimate for 2004-05,
which is 79.8%, 7 percentage points lower
3  Problem of Deaton and than the correct 86.7%. So let us consider
Dreze Estimates this, reproducing the relevant information
Deaton and Dreze (2009, Table 5) have from NSS Reports for the reader’s ready
given estimates of the percentage of per- reference in Table 4.
sons below nutrition norms which do not It was earlier shown (Patnaik 2007) that
seem to square with the basic NSS data. direct head count rural poverty percentages
Their rural estimates for 1993-94 and changed little over the period 1973-74 to
2004-05 are 71.1% and 79.8% of the per- 1993-94. The variation is plus/minus 3%
sons falling below 2,400 calories and or so, around 72% below 2,400 calories in-
urban estimates are 58.1% and 63.9% of take. This relatively stable picture changed
persons below 2,100 calories. They have over 1993-94 to 2004-05 with the rural
not mentioned the poverty lines at which direct poverty line rising from Rs 326 to
they obtain these percentages, and neither Rs 800 and the percentage of persons below
the data for the ogives they use, nor for these lines rising by an unprecedented
the g relation are given. Their Table 5 12 points to reach an all-time high of 87%.
february 6, 2010  vol xlv no 6  EPW   Economic & Political Weekly
 discussion
Chart 1a: Ogive, All-IndiaChart
Rural,
1a 2004-05 (URP)
Ogive, All-India Rural 2004-5 URP
average plus half the dif- of the URP one. The mixed-recall period
100
100
ference of this with the (MRP) for the same year gives precisely
next class average of 2,380 such an ogive (col 6) since it records the
80 80

calories). Even without plot- same per head food expenditure but high-
ting the graphs it is crystal er per head non-food expenditure (on ac-
% of persons

60 60
Percent of Persons

clear that reaching 2,400 count of the 365 day recall period used
40 40
calories intake requires rather than the 30-day period, for infre-
spending at a level just quently purchased non-food items).
20 20 over half way between Let us do some detailed statistical de-
Rs 690 and Rs 890, and the tective work to trace the possible steps
0 0
200 400
poverty percentage has to
600 800 1000 1200
through which a lower than actual poverty
200 400 600 800 1000 1200
lie above 80.4 and include percentage can be claimed, referring to
MPCE. Rs.
MPCE, Rs
Source: Table 4 col 1 upper end values and col 3.
more than half of the 9.8% Table 4. Suppose the DPL of Rs 800 from
Chart 1b: Daily Per Capita Calorie Intake by MPCE, All-India Rural, 2004-05 URP
Chart 1b of persons falling in this
Daily per capita Calorie Intake by MPCE, All-India Rural 2004-5 URP
the g relation of Chart 1b is incorrectly
3500 3500
class. Even assuming the applied to the MRP ogive for the same year
ogive is linear at this (col 6) which lies to the right of the URP
3000
stretch which it is not. It ogive, we would get 84% of persons below
3000
Daily calorie intake

has to be over 80.4+4.9 = Rs 800. This while shaving off 3 percent-

2500 2500

85.3% and cannot possibly age points from the correct figure remains
Calorie Intake

2000 2000
be 79.8%. higher than the Deaton and Dreze estimate.
From Chart 1b, 2,400 Carrying the detective work a step further,
1500 1500 calories can be accessed at if we apply the same poverty line to the
Rs 800, so this is the direct MRP ogive for the next year 2005-06 which
1000
0 500
1000

1000 0
1500 500
2000
poverty line. From Chart 1a,
1000 1500 2000 lies even further to the right (col 7), we get
MPCE, Rs.
MPCE, Rs 86.7 or rounding to the a fraction over 80%, still a tiny bit “too
Source: Table 4 col 4 and col 5, URP distribution. This is the g relation referred to in
the text. nearest whole number, high” (see Chart 2, p 78). If the relevant
87% of persons in house- curved segment of the ogive is treated as
Given the data of Table 4 from the cited holds, failed to reach this level. Deaton linear however the percentage of persons
NSS Reports, used for the relations depicted and Dreze’s 79.8% of persons fall below drops a whisker below 80, the poverty es-
in Charts 1a and 1b, and applying the Rs 685 spending level which allows a timate claimed by Deaton and Dreze for
nutrition norm of 2,400 calories, there is a calorie intake of 2,325 only, not 2,400 2004-05. Chart 2 presents the 2005-06
unique value for the rural poverty line and calories. Plus ca change ……..again and MRP ogive with grid lines for greater ease
the associated poverty percentage. The em- again we find unstated and implicit low- of checking the argument.
pirical reading can vary at most by plus/ ering of the standard to arrive at under­ We are not in a position to assert posi-
minus Rs 5 for the poverty line and plus/ estimated poverty. Deaton and Dreze’s tively that Deaton and Dreze (2009) have
minus 0.5% for the associated poverty “below 2,400 calories” estimate is actually arrived at their figure of 79.8% by using
percentage when we read the graphs, but a “below 2,325 calories” estimate. One this particular procedure, since only they
it cannot possibly differ by as much as 7 wonders what the point of doing this know what they have done and they have
percentage points. That is why the Deaton might be, and what conceivable differ- not chosen to share their method with
and Dreze estimate of 79.8% below 2400 ence it would make to admit that the be- their readers. All we are saying is that
calories is so problematic. low 2,400 calories rural poverty is nearly following the incorrect procedure of tak-
Inspecting the first five columns of 87% and not just below 80%. ing the URP poverty line for 2004-05, and
Table 4 shows that the Deaton and Dreze How have Deaton and Dreze arrived at applying it to the 2005-06 MRP ogive
calculation of 79.8% under 2,400 calories, their very precise looking but incorrect while treating the relevant segment as
cannot be correct. 80.4% of all persons estimate of 79.8% of rural persons below linear, does give exactly their estimate.
spent below Rs 690 per month, with an 2,400 calories intake in 2004-05? Let us try The fact that the Planning Commission
average calorie intake of 2,290 calories to solve the puzzle. If the relation of calorie has been applying its URP price-updated
per day in the class Rs 580-Rs 690. Clearly intake to MPCE levels (which is available poverty line to the MRP distribution to
79.8% of persons would be spending a only for the URP distribution, and is shown give a second, lower poverty estimate
little below Rs 690. The average calorie in Chart 1b) is used to obtain the direct suggests that the incorrect method has
intake of even the next higher class Rs 690- poverty line, Rs 800 then the only way a wide acceptance at present among econo-
Rs 890 is marginally below 2,400 calories lower figure than the correct estimate can mists working in the area.
and 90.2% of all persons spent less than be obtained is to apply this poverty line to However widely it is being used, the
Rs 890. Deaton and Dreze’s 79.8% of per- an ogive which is not the appropriate URP fact remains that applying a URP poverty
sons could not possibly access anything ogive to which the calorie intake data per- line to the MRP distribution is incorrect
but a little below 2,335 calories (2,290 class tain, but a different ogive lying to the right procedure even if the distributions are for
Economic & Political Weekly  EPW   february 6, 2010  vol xlv no 6 77
 discussion
Ogive, MRP 2005-6 All-India Rural
Chart 2: Ogive, Mixed Recall Period 62nd Round 2005-06, All-India Rural (Table 5) and this extra classes will change for the MRP distribu-
100
100 spending is recorded on tion, by consulting the detailed Tables 6R
account of non-food items and 6U in NSS Report 508 which give the
80
80 under the 365-day recall cross-tabulation of households under
Percent of Persons

for infrequently purchased both MRP and URP using the same money
% of persons

60
60
goods. The average food class limits. The MPCE for the two distri-
spending and calorie in- butions are shown in our Table 5, ab-
40
40
take are exactly the same stracted from the detailed Table 6R of the
for both, since non-food cross-tabulation. Studying these data the
20
20
items cannot be used for reader can appreciate the point being made
obtaining calories; it is here, that the new g relation relevant for
00
00 200
200 400
400 600
600 800
800 1000
1000 1200
1200 only Charlie Chaplin who the MRP distribution will lie to the right of
MPCE, Rs
Source: Table 4, Col 7. MPCE, Rs. on celluloid could boil the URP g relation, just as the MRP ogive
shoes to make soup, but lies to the right of the URP one. The two
the same year. The average MPCE and in real life it does not happen. So it is a distributions will give exactly the same
calorie intake by classes will not remain matter of common sense that the URP basis direct poverty estimate.
the same for the MRP distribution as the expenditure level at which 2,400 calories Consider the poorest class spending
URP one when the same money class limits can be obtained, has to be suitably raised below Rs 235 containing 4.8% of persons.
are retained as is the case, and therefore by the amount of extra non-food spending, The MPCE is Rs 199.5 of which food spend-
the poverty line itself will be a different to give the MRP basis poverty line to pre- ing is 68.5%, and mean calorie intake is
and higher one than Rs 800. And it is serve access to the same level of nutrition. 1,376. With MRP basis spending, still tak-
doubly incorrect to take the MRP distri­ Differently put, a URP poverty line giving ing the same set of households (namely
bution for any later year and use the same the norm level of calorie intake, will nec- before “adjusting” them), the average
poverty line, because the price inflation essarily correspond to a lower than norm spending goes up to Rs 225.11, but food
factor will kick in additionally to make calorie intake and hence a lower than spending remains unchanged and is a
the given money poverty line inapplic­ norm level poverty ratio, when applied to lower share, 60.7% of this, hence average
able. At the very least the poverty line has the MRP curve of the same year. Since any calorie intake will be unchanged.
to be revised upwards for Inflation. The given calorie intake level will be accessi- However, the number of households
second point is obvious but the first point ble only at a higher MRP spending than will not actually remain unchanged in
needs more elaboration, which is relevant URP spending, the g curve pertaining to the given class with MRP spending since
also for our later critique of the Planning the MRP distribution for a given year will those mainly lying in the top half of the
Commission practice of giving two sepa- be a different one and it will always lie class will exceed the class limit of Rs 235.
rate poverty estimates using the same below and to the right of the g curve of Only 57% of households originally in this
poverty line. the URP distribution for the same year. class continue to remain in it (see Table 6R,
The MRP basis MPCE is on average only We can see precisely how the average Report 508) with adjustment, the remain-
Rs 20 higher than the URP basis spending expenditure and calorie intake by MPCE ing 43% move up while some households
move into this class from higher spending
Table 5: Per Capita Expenditure by MPCE Classes in MRP Distribution Compared to URP Distribution, Both Before
and After ‘Adjustment’ of Households, by Unchanged Money Class Limits (All-India Rural 2004-05) classes (see fn 5 for the reason). The aver-
MPCE Class Cumulative Before ‘Adjustment’ Cumulative After ‘Adjustment’ age MPCE declines to Rs 188.32 on URP
Rs % of Persons Average MPCE, Rs % of Persons Average MPCE, Rs
URP URP Basis MRP Basis MRP URP Basis MRP Basis
basis for the new group of 2.8% of per-
1 2 3 4 5 6 7 sons. This is lower than before by Rs 11.2
< 235 4.8 199.53 225.11 2.8 188.32 200.49 so the food spending falls, entailing at
235-270 9.9 253.80 284.36 6.1 236.87 253.40
least 30 to 35 calories decline in average
270-320 19.8 296.64 328.00 14.4 279.24 296.40
intake, given the slope of the g relation in
320-365 30.3 342.40 376.93 23.9 323.64 342.82
this segment.
365-410 40.5 387.72 425.24 33.9 368.65 387.18
410-455 49.9 432.06 469.66 43.6 411.90 432.51
Or, take the class of 9.8% of persons,
455-510 59.8 481.55 520.78 54.4 460.15 482.07 spending between Rs 690 and Rs 890,
510-580 70.0 543.25 585.92 65.3 517.75 543.70 which contains the Rs 800 direct poverty
580-690 80.4 630.39 672.44 77.5 606.62 630.02 line. Of Rs 775 average spending 53.9% is
690-890 90.2 775.00 814.44 88.8 753.12 774.90 on food, giving 2,380 calories. The same
890-1155 95.1 999.94 1,046.00 94.7 983.95 999.03 set of households spend on MRP basis al-
1155++ 100 1,956.57 1,651.65 100 1,735.96 1,754.90 most Rs 40 more, Rs 814.4. The unchanged
All 558.78 579.17 558.78 579.17 food spending declines to 51.3% of this
Source: NSS Report No 508, 2004-05 Table 6R for the four columns of average MPCE. The “before adjustment” refers to the average
taking the same numbers of households in each MPCE class even with MRP spending, while the “after adjustment” refers to the and calorie intake is unchanged. After
result of shifting out of households according to whether their MRP spending exceeds the class limit (or in a smaller number of
cases falls below the class limit). The MRP values of Col 7 are associated with a lower per capita food spending level and hence
households are “adjusted” depending on
lower calorie intake compared to the URP Col 3, values, for the reasons explained. whether their MRP basis spending keeps
78 february 6, 2010  vol xlv no 6  EPW   Economic & Political Weekly

them within the same class limits or moves
them up or down,3 60% remain, most
move up, some move down and many enter
it from lower classes. The URP basis
spending for the new group of 11.3% of
persons lying within the same class limits,
declines by Rs 22 to Rs 753.12 so food
spending and hence calorie intake will be
lower, by 18 to 20 calories given the slope
of the g relation over this segment.
To sum up, although overall average
calorie intake is the same for the URP and
the MRP basis data, in the latter the aver-
age calorie intake will be lower in each
MPCE class, and a higher value of MRP
spending than URP spending, will be re-
quired to reach any given nutrition level.
(These lower class-wise per capita calorie
intakes are getting weighted differently in
MRP, by a higher proportion of persons be-
ing in higher spending classes, with the
overall average calorie intake unchanged.)
Thus, for a given year the g relation for
MRP will always lie to the right of the g
relation for URP. Inspecting Table 5, we
see that the col 3 URP values and the col 7
adjusted MRP values are almost identical
for all classes but the top one, which is
bound to be the case since the money class
limits are fixed except for the open-ended
top class. But it is important to remember
that the MRP values of col 7 have lower per
capita food spending and hence lower cal-
orie intake compared to the URP col 3 val-
ues, for the reasons explained.
We cannot plot the g relation for MRP
2004-05 exactly yet since we have not been
given the new calorie intake values for the
adjusted classes of the MRP distribution by
NSSO. Nevertheless, since the observed
MRP spending is about Rs 40 higher than
URP spending in the relevant segment, we
can safely infer that the required MRP
poverty line for accessing 2,400 calories
will be about Rs 840 corresponding to
the URP poverty line of Rs 800. Applying
this Rs 840 to the MRP ogive for the same
year, shows nearly 87% of persons falling
below it. In short, no one can possibly
obtain a below 2,400 calories poverty
percentage which is a lower one simply by
using a MRP distribution – since this has
exactly the same per capita calorie intake
– unless the wrong procedure is followed
of applying the URP poverty line to it.
Those who do this are necessarily making
Economic & Political Weekly  EPW   february 6, 2010  vol xlv no 6
the absurd assumption that MRP gives a
higher calorie intake than URP. In short
people not only make soup out of shoes
like Charlie Chaplin, they also obtain
calorie intake from consuming the result.
Statistics do not lie, it is only mishandled
and abused statistics that are made to
lie, by applying the poverty line relevant
for one distribution incorrectly to a
different distribution.
The recent Tendulkar Committee Report
has fallen into the same error when it says
that its revised MRP poverty line of Rs 446.7
for rural India, 2004-05 gives 1,999 calories.
This stated calorie figure is not correct, it
is only consistent with applying this MRP
poverty line to the URP g relation of Chart 1b.
Unknowingly, the Committee too has as-
sumed that calorie intake is obtainable
from the excess recorded spending on
shoes, clothing and the like under MRP.
Correct computation requires getting the
URP value for the stated MRP line, before
applying it to the URP g relation. Alterna-
tively, the stated MRP poverty line should
only be applied to the new g relation of the
MRP distribution. From the ogives for
2004-05, we find that the stated MRP
poverty line of Rs 446.7 is lower at Rs 415
on URP basis and it gives 1,930 calories. In
Table 6 we have included the Tendulkar
Committee’s new poverty estimates using
MRP lines, and we have obtained the URP
poverty lines corresponding to these,
Table 6: Rural Poverty in India Including Revised Estimates
by Tendulkar Committee (All-India 1983 to 2004-05)
NSS Round 38th 50th 61st of rural persons in the base year which
1983 1993-94 2004-05
(1) Direct poverty line (DPL),Rs
<2,400 Kcal 120 326 800 j
(2) Direct poverty ratio (DPR), % 70 74.5 86.7
(3) a Official poverty line (OPL), Rs 89.5 206 356
b Revised OPL
Tendulkar Committee NA 237* 415*
(ROPL) NA NA 446.7
(MRP)
(4) a Official poverty ratio (OPR), % 45.6 37.2 28.3
b Revised official poverty ratio
(ROPR) NA 50.1 41.8
(5) a Calorie intake @ OPL 2,060 1,980 1,820
b Calorie intake at ROPL NA 2100 1930
(6) a Deficit of calorie intake at OPL - 340 - 420 - 580
b Deficit of calorie intake at ROPL NA 300 - 470
The URP basis poverty lines marked with asterisk are comparable
with other official poverty lines in the table. These PLs
correspond to the revised poverty percentages for 1993-94 and
2004-05 presented in the Tendulkar Report, and have been
obtained by this author from the ogives for the two years. The
Report gives new poverty ratios for both years and the MRP
poverty line of Rs 446.7 for 2004-05, but not the MRP poverty
line for 1993-94. This MRP line is likely to be about Rs 255. Prefix R
indicates revised values in Tendullkar Committee Report.
discussion
comparable to the earlier official ones, by
plotting the ogives.
The NSSO should calculate and give us
the exact average food expenditure and
the average calorie intakes corresponding
to the MRP distribution, in its reports on
nutrition. Such an explicit statement of
calorie intakes for the MRP distribution
would go a long way to introduce clarity
and would help to check the mishandling
and abuse of the data we see at present.
The mishandling of data had started
with the Planning Commission itself most
unfortunately using the MRP distribution
in an illegitimate fashion. It has been giv-
ing not only its regular poverty estimate
applying the official poverty line to the
URP distribution but has been applying the
very same poverty line to the MRP distri-
bution, without apparently realising that
the poverty line itself will necessarily
change. This is so even though the official
poverty line is an indirect one, since it still
retains an umbilical connection as it were,
however distant, with a nutrition norm.
Rural poverty is 28.3% at a poverty line of
Rs 356, which is the price-index updated
Rs 49 base year level, and rural poverty
is stated to be 21.8, nearly seven points
lower, by applying the same poverty line to
the MRP distribution. The latter procedure
is incorrect, and the figure of 21.8% is
meaningless. The fact has been conveniently
forgotten that the original Rs 49 poverty
line was derived by applying a nutrition
norm to calorie intakes for a distribution
was not a MRP distribution, so the price-
updated Rs 49 line cannot be validly ap-
plied now to a current MRP distribution to
obtain 21.8%, as is being done. The com-
mission has to obtain first the current MRP
spending which corresponds to its current
URP poverty line, and then this has to be
applied to the current MRP distribution.
This is readily done using the already
mentioned cross-tabulations in NSS Report
508 giving the relation between the two
distributions. From Table 5 interpolating
from the given series, about Rs 383 on the
MRP spending basis corresponds to Rs 356
official poverty line which applied to the
MRP ogive, gives 28.3% in poverty – both
distributions necessarily give the same re-
sult. The economists in the Planning Com-
mission do not seem to have applied their
79
discussion

minds seriously to the question of correct
computational procedure using their own
definitions. Had they done so they would
have realised that presenting two widely
different poverty estimates on the basis of
the same data set as regards food expendi-
ture is a contradiction in terms.
To conclude, research scholars are
strongly advised not to be tempted to take
short cuts in their dissertations and theses
by mechanically quoting the figures of
“poverty percentages” produced by any
individuals or institutions however well-
known, but to go always to the basic NSS
case, incorrect numbers – merely because
persons making them may be public figures
or have a respected position in society).
It is learnt that NSSO is proposing to dis-
pense altogether with the URP basis data
and present the MRP basis data alone –
which appears cosmetically “better” in
giving a lower percentage of persons below
every spending limit. Economists engaged
in poverty estimation, with their new-
found enthusiasm for the MRP distribution,
should remember, however, that abandon-
ing the URP basis data will not make an
iota of difference to obtaining the correct
1,800 calories deflator real spending falls little to
Rs 130 by 2004-05.
2 Incidentally, I consider it inappropriate to call the
g relation a “calorie Engel curve” because Ernst
Engel who studied a sample of 153 Belgian house-
holds in 1863 discussed the share of food expendi-
ture in the total and not calorie intake. Every vari-
able which depends on expenditure cannot be
called an Engel relation.
3 While the majority of households move up with
MRP classification, a minority also moves down
to lower spending classes. This could well be as
the Report 508, pp 12-13 mentions, because these
households happen to have made the infrequent
bulky purchase in the particular reference 30
days, and this same expenditure reported for 365
days in the case of Mixed Recall Period response,
being divided by12.17 gives a greatly lowered 30-
day average. Report 508, pp 12-13 points out that
“many more households move up than down as a
result of adjustment”.

data source and take the trouble to under-
stand the data. Published poverty esti-
mates – including this author’s, needless
to say – should be checked for definitional
clarity, methodological correctness and
internal consistency against the basic
data. Genuine mistakes can always occur
but they cannot be corrected unless esti-
mators clearly give their method of esti-
mation. Otherwise, we would simply have an
endless cycle of incorrect estimates being
quoted, particularly given the proneness
of our intellectuals to commit the fallacy
ad verecundiam which Aristotle warned
against (the “appeal to awe”, uncritically
accepting incorrect arguments – in this
direct poverty estimate, because the cor-
rect poverty line will necessarily be higher
for the MRP distribution and give exactly
the same result as the URP distribution.
Fortunately, the integrity of the Indian
data collection system itself remains un-
impaired so far and the NSSO makes its re-
ports available to all online, in the inter-
ests of transparency. No measure which
undermines the integrity of our data collec-
tion system built up by P C Mahalanobis
decades ago should ever be permitted.
Notes
1 The relevant deflator for the poorest class is not
the 2,100 calories implicit deflator; if we apply the
References
Deaton, A and J Dreze (2009): “Food and Nutrition in
India: Facts and Interpretations”, Economic & Po-
litical Weekly, Vol XLIV, No 7, 14 February.
Ministry of Finance, Government of India: Economic
Survey 2008-09.
National Sample Survey Organisation: Report No 402,
Level and Pattern of Consumer Expenditure 1993-94.
– Report No 405, Nutritional Intake in India 1993-94.
– Report No 508, Level and Pattern of Consumer
Expenditure 2004-05.
– Report No 513, Nutritional Intake in India 2004-05.
– Report No 527, Household Consumer Expenditure
2006-07.
Patnaik, U (2007): “Neo-liberalism and Rural Poverty
in India”, Economic & Political Weekly, Vol XL11,
No 30, 28 July-3 August.
Planning Commission, Government of India (2009):
Report of the Expert Group to Review the Methodol-
ogy for Estimation of Poverty.
Reserve Bank of India (2009): Handbook of Statistics
on Indian Economy.

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