Estimating Poverty Including Social Expenditure: Adequacy and Implications of New Official Methods in the Context of Urban India

Abstract

This article examines the adequacy of private expenditure on education and health in the All India urban Poverty Line Basket (PLB) proposed by the Tendulkar Committee. Estimating the normative expenditures for education and health care and comparing them with the level of expenditure at poverty lines suggested by the Tendulkar Committee, the article observes that the revised PLB does not satisfy the normative level of expenditure required at the poverty line class. Adjusting the starting point of index multiplication upward by adding the normative cost of education and health care to the existing PLB, it attempts to answer the question whether households can afford adequate expenditure on education and medical care if they are simply provided with the value required. The results show that the normative expenditure is unmet even after an upward revision and that the poverty line monthly expenditure level, where households actually spend the normative amount of social expenditure, is far above the PLB. The other implication is that targeting based on a poverty line that does not satisfy social expenditure will leave out impoverished households. The article concludes that households at the poverty line class cannot take the social expenditure burden, nor can a transfer of adequate value make them capable of spending it. Rather, the social services should be provided by the government to all households so that they do not have to bear the expenses and that targeting is not required.