appropriate price indices derived from the price information within the sample surveys themselves. This methodology fully aligned all poverty lines.

# **5. Controversies Regarding Poverty Lines**<sup>**4**</sup>

We address here the two rounds of controversies over the poverty line that broke out in the media in September 2011 and March 2012. The first round of controversy began with the Planning Commission filing an affidavit with the Supreme Court stating that the poverty line at the time was on average 32 and 26 rupees per person per day in urban and rural India, respectively. Being based on the Tendulkar methodology, these lines were actually higher than the Lakdawala lines on which the official poverty estimates had been based until 2004-05. However, the media and civil society groups pounced on the Planning Commission for diluting the poverty lines so as to inflate poverty reduction numbers and to deprive many potential beneficiaries of entitlements. For its part, the Planning Commission did a poor job of explaining to the public precisely what it had done and why.

The controversy resurfaced in March 2012 when the Planning Commission released the poverty estimates based on the 2009-10 expenditure survey. The Planning Commission reported that these estimates were based on average poverty lines of 28.26 and 22.2 rupees per person per day in urban and rural areas, respectively. Comparing these lines to those previously reported to the Supreme Court, the media once again accused the Planning Commission of lowering the poverty lines.<sup>5</sup> The truth of the matter was that whereas the poverty lines reported to the Supreme Court were meant to reflect the price level prevailing in mid-2011, those underlying poverty estimates for 2009-10 were based on the mid-point of 2009-10. The latter poverty lines were lower because the price level at the mid-point of 2009-10 was lower than that in mid-2011. In real terms, the two sets of poverty lines were identical.

While there was no basis to the accusations that the Planning Commission had lowered the poverty lines, the issue of whether the poverty lines remain excessively low despite having been raised does require further examination. In addressing this issue, it is important to be clear about the objectives behind the poverty line.

Potentially, there are two main objectives behind poverty lines: to track the progress made in combating poverty and to identify the poor towards whom redistribution programs can be directed. The level of the poverty line must be evaluated separately against each objective. In principle, we may want separate poverty lines for the two objectives.

With regard to the first objective, the poverty line should be set at a level that allows us to track the progress made in helping the truly destitute or those living in abject poverty, often referred to as extreme poverty. Much of the media debate during the two episodes focused on what could or could not be bought with the poverty-line

> 4 This section is partially based on Panagariya (2011).

> 5 See, for example, the report by the NDTV entitled “Planning Commission further lowers poverty line to Rs. 28 per day” at <u>http://www.ndtv.com/article/india/planning-commission-further-lowers-poverty-line-tors-28-per-day-187729</u> (accessed December 29, 2012).

7