August 6, 2012 12:53:28 am
The provisional data on household consumption expenditure from the 68th Round of the National Sample Survey (NSS),has generated a lot of debate on whether incomes have grown in the country. The Indian Express brings you views of leading economists on whether rural and urban incomes have risen and poverty levels have fallen,and why it is essential to wait for the final figures that will be released in 2013 before jumping to any conclusions:
The confusion created could have been avoided
The recent release of the data on household consumption expenditure by the NSSO from its 68th round has created avoidable confusion among concerned citizens,researchers and policy makers. The problem with such a quick release,without explanatory notes,appropriate clarifications and temporal comparisons,is that it often results in erroneous interpretation in the media and by common people.
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It is important to point out that the released information is based on preliminary tabulation of the data collected through the central sample of NSSO. It is not possible to calculate poverty estimates from the data released so far for the 68th Round.
The striking result from the data,which has been much publicised is that the growth in consumption expenditure during 2009-10 and 2011-12 is very high both in rural and urban areas. It is much higher than that recorded during the period between the two preceding employment-unemployment surveys (large sample-based) conducted in 2004-05 and 2009-10. A part of the increase during 2010-12 can indeed be attributed to government interventions through NREGA and other programmes. Much of the explanation,however,lies in the fact that the base year of 2009-10 was a bad year as there was a crop failure.
As a result,the per capita rural consumption expenditure grew by less than 2 per cent per annum in real terms during 200405 and 2009-10. In contrast,during 2010-12,it has grown by 9 per cent. Correspondingly,the growth rate in urban areas has risen from 3 per cent per year during 2005-10 to 6 per cent during 2010-12. The numbers indeed point towards an improvement in economic situation.
The worrying fact,however,is the growing rural-urban inequality which has not received due attention of the policy makers over the years.
In 2004-05,the per capita urban expenditure was 88 per cent higher than that in rural areas. In the latest round of NSS survey,this is more than 92 per cent.
The assessment which should send alarm bells among policy makers is that the modest economic growth in recent years has been characterised by significant rise in consumption inequality. The growth in consumption expenditure for the bottom deciles (data sorted into ten equal parts,so that each part represents one-tenth of the sample size) is reported to be much less than the growth in the higher expenditure groups,both in rural and urban areas. The implications are that inequality has gone up which would have serious implications for poverty. But do the data really confirm such assertions?
The reported rise in inequality is due to an elementary error of computing the growth rate by using mixed (modified) reference period in 2009-10 and uniform reference period in 2011-12.
The confusion could have been avoided if the press release by NSSO had given the growth figures by deciles for expenditures using uniform reference period,that work out to be almost uniform across deciles.
The figure for the top decile is higher than the average by a small margin that too in case of only rural households.
The rate of poverty is likely to be less than what was registered in 2009-10,the poorest 10 per cent in rural areas still spend about Rs 16 per capita per day. In urban areas,the bottom 10 per cent spend about Rs 23. It is a tragedy that the country still has about 25 per cent people below the Tendulkars poverty line. It makes no sense to fault the Planning Commission for placing the poverty line around Rs 30 for rural and urban areas.
The author is professor at JNU,and formerly a member of National Statistical Commission
Efforts to boost agri,rural activities have not lifted consumption
Two facts stand out from the NSS 68th Round on Household Consumption Expenditure Survey. The first is that rural households continue to be worse off than their urban counterparts in terms of monthly per capita expenditure (MPCE) and the second is that the richest in rural areas fare relatively unfavourably compared with those in urban areas.
This suggests that the rural population remains disadvantaged vis-à-vis the urban folk in terms of employment,income and consumption.
It is also a reflection of the limited attention that has been paid to the development of our rural economy which has made migration to the urban areas more attractive.
It is significant that over the last 7-8 years,rural population consumption standard is still marginally lower than the urban population in the period June 2004-June 2005 in real terms while there is an almost status quo situation at current prices.
Clearly the efforts that have been put in to boost agriculture and other rural activity in the small scale and services sectors have not been able to uplift the consumption levels here.
The picture is even starker when one looks at the inequality levels across different levels of income.
The poorest 10 per cent of the rural population consume around 72 per cent of that in urban areas. The poor are better off hence in the urban surrounding.
Within the richer sections,i.e. top 10 per cent,the rewards are relatively lower as their consumption is just 45 per cent of that in the urban areas.
Therefore,looked at from both ends,there are disadvantages in living in the rural areas as consumption levels are better across the borders.
There are three implications here. The first is that the government has to focus on uplifting rural economic activity to ensure sustainability of Indian agriculture in particular,as farming has already become a less attractive proposition given the vagaries of nature.
The second is that in a positive sense,industry could seek to make further inroads into the rural territory for selling their products as the richer groups which have spending power could be provided access to them.
Lastly,the fact that the status quo has not really changed puts the debate of NREGA in a different light. Critics have argued that this programme has led to increase in spending that has impacted the demand-supply matrix.
Quite clearly,notwithstanding such expenditure,rural consumption has not really increased relatively,and therefore,we must stop blaming this programme for our inept handling of our agriculture.
The author is chief economist at Care Research
Urban-rural inequality has dropped over the last two years
The NSS provisional results of household consumer expenditure survey for 2011-12,68th Round,on the MPCE (Mean Per Capita Expenditure) of the Indian consumer is given in the table below. According to this:
* The growth rate in consumption (constant prices) over the last two years,2009-10 to 2011-12,has been 9.1 per cent in rural areas and 8.3 per cent in urban areas,much higher than in the period 2004-05 to 2009-10,when it was 1.4 per cent and 2.7 per cent in rural and urban areas respectively.
This is also the perhaps the first time in recent years that the NSS consumption growth has been more than the growth in private final consumption expenditure (constant 2004-05 prices) in the National Accounts,which grew at 6.8 per cent over 2009-10 (Rs. 2,841,675 crore) to 2011-12 (Rs. 3,241,479 crore).
* The inflation rate over the last two years,2009-10 to 2011-12,has been lower than in the period 2004-05 to 2009-10.
* Urban-rural inequality has dropped in the last two years. The urban:rural consumption ratio,which was 1.88 (current price terms) in 2004-05,rose to 1.92 in 2009-10 but has fallen back to 1.87 in 2011-12.
So,we have lower inflation,higher growth and reducing rural urban inequality. Whats to complain about (that is,if you trust the numbers)?
The author is senior fellow,Centre for Policy Research,New Delhi
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