Poverty and Inequality in India: a Reexamination - Princeton University

must have improved in the nineties. Asdiscussed in Section III, however, this isnot the case: indeed economic inequalityhas increased rather than decreased in thenineties. The correct answer relates to the‘density effect’ mentioned earlier (seeSection I.2): when many poor householdsare close to the poverty line, modest increasesin APCE can produce substantialdeclines in standard poverty indexes. Onereason for drawing attention to this is thatthe official poverty estimates have sometimesbeen used to claim that the ninetieshave been a period of spectacular achievementsin poverty reduction. In fact, whenthe relevant adjustments are made, andthe poverty indexes are read together withthe information on APCE growth, povertyreduction in the nineties appears to bemore or less in line with previous rates ofprogress.IIFurther EvidenceII.1 National Accounts StatisticsThere has been much discussion of theconsistency between National SampleSurvey data and the ‘national accounts’published by the Central StatisticalOrganisation (CSO). 22 The latter includeestimates of ‘private final consumer expenditure’,which is frequently comparedwith NSS estimates of ‘household(Rural)consumption expenditure’. Over time, theCSO estimates have tended to grow fasterthan the NSS estimates, leading some commentatorsto question the reliability ofNational Sample Survey data.It is important to note that these twonotions of ‘consumer expenditure’ are notTable 3: Growth Rates of APCE and Per Capita SDP, 1993-94 to 1999-2000Six-Year Growth of APCE (‘Adjusted’), 1993-94 to 1999-2000 Annual Growth Rate ofRural Urban Combined Per Capita SDP,1993-94 to 1999-2000Assam 0.9 8.8 1.7 0.58Orissa 1.4 –0.0 3.3 2.34West Bengal 2.1 11.5 3.3 5.48Jammu and Kashmir 5.4 8.0 5.3 2.49Bihar 6.9 4.8 7.1 2.10Madhya Pradesh 6.6 14.1 7.8 2.78Andhra Pradesh 2.8 18.5 8.3 3.57Rajasthan 7.0 15.4 8.6 4.60Uttar Pradesh 8.3 10.1 9.0 2.99India 8.7 16.6 10.9 4.36Karnataka 9.5 26.5 14.0 5.82Maharashtra 14.1 16.7 15.9 3.53Gujarat 15.1 20.9 16.8 4.88Himachal Pradesh 16.2 28.5 17.6 5.06Tamil Nadu 15.7 25.1 18.9 5.39Kerala 19.6 18.2 19.6 4.01Punjab 20.2 17.9 19.9 2.74Haryana 31.0 23.0 29.2 3.05Delhi – 30.7 30.7 5.69Note: The states are arranged in ascending order of the growth rate of APCE for rural and urban areacombined.Sources: For APCE: Authors’ calculations from unit record data for the 50th and 55th Rounds of the NationalSample Survey. For SDP: Authors’ calculations based on unpublished data kindly supplied by thePlanning Commission. The figures in the last column should be taken as indicative, given thesignificant margin of error involved in SDP estimates.Proportionate decline in rural headcount ratio706050403020100–10Figure 3: HCR Declines and APCE Growth, 1993-94 to 1999-2000ASWBORAP0 5 10 15 20 25 30Source: Tables 2a and 3.JKRA UPINDIABI KAMPGUMAHPTNSix-year growth of rural APCEKEPUHAexactly the same, and also that there aremajor methodological differences betweenthe two sources. The NSS figures are directestimates of household consumption expenditure.The CSO figures include severalitems of expenditure that are notcollected in the NSS surveys; examples areexpenditures by non-profit entreprises, aswell as imputed rent by owner occupiersand ‘financial intermediation servicesindirectly measured’ (the last item is essentiallythe net interest earned by financialintermediaries, which is counted asexpenditures on intermediation servicesby households). According to Sundaramand Tendulkar (2002), who quote a recentcross-validation study by the NationalAccounts Department, the last two itemsaccount for 22 per cent of the differencein levels between CSO and NSS estimatesof consumer expenditure. Further, the CSOestimates are ‘residual’ figures, obtainedafter subtracting other items from thenational product. Leaving aside thesecomparability issues, there is indeed a gapbetween the CSO-based and NSS-basedgrowth rates of consumer expenditure.According to CSO data, per-capita consumerexpenditure has grown at muchthe same rate as per capita GDP between1993-94 and 1999-2000 – about 3.5 percent per year in real terms. 23 The correspondingNSS-based estimate associated3736Economic and Political Weekly September 7, 2002