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close this bookThe Basic Needs Concept and Its Implementation in Indian Development Planning (ILO, 1978, 106 p.)
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View the documentPreface
Open this folder and view contentsIntroduction
Open this folder and view contentsI. Formulation of approach
Open this folder and view contentsII. Implementation
Open this folder and view contentsIII. Lessons
View the documentAppendix
View the documentNotes to the Main Text
View the documentReferences
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Notes to the Main Text

Note 1:

Thus the Draft Fifth Five-Year Plan observes: “The problem cannot be overcome within the foreseeable future by efforts in one direction only. No rate of growth that can be realistically envisaged could make a major impact on the problem within the foreseeable future if inequality remains as acute as at present. Nor could any feasible egalitarian policies alter the position significantly in the absence of an accelerated rate of growth. Growth and reduction of inequality are both indispensable to a successful attack on mass poverty”.

Similarly, the Draft Fourth Five-Year Plan (1969-74) states: “In planning it is necessary to aim not only at an increase in total income and employment but also at an appropriate distribution of such increase. The distributive aim is particularly relevant to the goal of attaining a national minimum”.

Note 2:

Thus the Draft Fourth Five-Year Plan (1969-74) states: “It is laid down that planning should result in greater equality in income and wealth, that there should be progressive reduction of concentration of incomes, wealth and economic power and that benefits of development should accrue more and more to the relatively less privileged classes of society, and, in particular, the scheduled tribes whose economic and educational interests have to be promoted with special care”. Every Indian plan has had separate sections to deal with the problems of certain segments of the population called backward classes (which include tribal communities).

Note 3:

1. The consumer items were first of all divided into n groups. Of these, k were selected and for them normative targets of per capita consumption set. Let these normative quantities be h1, h2,..., hk per capita per year. Then the minimum expenditure per capita per year for these items alone would be . Let this be c1. From the NSS data it is possible to find out numerically a functional relation y = f(x) between per capita expenditure y on the items i = k+1,..., n and the per capita expenditure x on the items i = 1, 2,..., k. (This relation is found to be not very sensitive to price changes that occur between the items of the first group and those of the second group). Using this relation it can be said that, when the per capita expenditure is c1 on the items of the first group, that on the items of the second group would be c2 = f(c1), This leads to the estimate of c, per capita total private consumption expenditure of the target group, by the simple addition of c1 and c2:

c = c1 + c2

2. From c to the calculation of the aggregate consumption C the steps are as follows. It is assumed that the inequality of distribution of per capita consumption expenditure would be such in the target year (either the same as in the base year or different in some plausible way) that the average per capita consumption in the target year would be q times higher than the per capita expenditure of the target group. Then if the target group has to have the minimum target level of per capita consumption c, the average per capita consumption for the entire population has to be , and the aggregate consumption for the same population would have to be

C = Nqc

where N is the total population of consumers in the target year.

Note 4:

Let Di(x, pi) be a cross section demand function which gives the demand in quantity for commodity i, by a group of consumers with average per capita total consumption expenditure x, when the price of the commodity is pi. Let f(x) be the density function of the distribution of the population over per capita expenditure x. Then the aggregate demand Hi for commodity i would be given by

(for i = 1, 2,..., n)

It may be noted here that, if the target group be defined as the poorest a per cent of the population, then the following relation must also be satisfied (for i = 1, 2,...., k)

(for i = 1, 2,..., k)

where

It may be noted that as hi is normatively determined, and f(x) determined by (3), relation (1) above defines a set of equations for the prices pi. The solution values tell us what the prices of the k commodities (i = 1, 2,..., k) have to be if consumers with per capita total expenditure c would demand those commodities in the normative quantities h1, h2,..., hk.

Note 5:

It is usual in this kind of models to assume

aij(yj) = aijxj

where aij are constant coefficients, and this is what has been done in all Indian work. Gi, Ei were treated exogenously. Mi and Ki were treated partly endogenously and partly exogenously.

Note 6:

The plan documents as well as most research workers working with the concept of the Minimum Level of Living or that of the Poverty Line have satisfied themselves by accepting the figure of Rs. 20 uncritically, changing the figure somewhat roughly, or adopting some other figure more or less arbitrarily. Thus Pranab Bardhan {2} used the figure of Rs. 15 at 1960-61 prices for the rural population. Following him Indira Rajaraman {3} and Ahluwalia {4} adopted the same cut-off line. Dandekar and Rath {7} independently adopted this figure on the ground that it corresponded to the expenditure level at which the average food consumption by rural consumers reached the “normative” target of 2250 calories per day. Minhas {5} on his part stuck to the figure of Rs. 20 per capita per month at 1960-61 prices. Rudra {6} made some fresh calculations which showed that the minimum per capita consumption could have a range extending from Rs. 15.63 to Rs. 28.60, depending on what figures one used for representing the food consumption norms.

Note 7:

The only Information about the origin of the figure Rs. 20.00 as representing minimum consumption requirement per capita per month is the following occurring in a footnote in the paper {1}.

“A Working Group comprised of Prof. D.R. Gadgil, Dr. B.N. Ganguli, Dr. P.S. Lokanathan, Shri M.R. Masani, Shri Ashok Mehta, Shri Pitambar Pant, Dr. V.K.R.V. Rao, Shri Shriman Narayan, Shri Anna Saheb Sahasrabuddhe, set up by the Seminar on Some Aspects of Planning, after considerable discussion on minimum standard of living, recommended (July 1962) that

(i) The national minimum for each household of 5 persons (4 adult consumption units) should be not less than Rs. 100 per month in terms of 1960-61 prices or Rs. 20 per capita. For urban areas, this figure will have to be raised to Rs. 125 per month per household or Rs. 26 per capita to cover the higher prices of the physical volume of commodities on which the national minimum is calculated.

(ii) This national minimum excludes expenditure on health and education, both of which are expected to be provided by the State according to the Constitution and in the light of its other commitments.

(iii) An element of subsidy in urban housing will have to be included after taking Rs. 10 per month, or 10 per cent, as the rent element payable from the proposed national minimum of Rs. 100 per month.

(iv) As a first exercise, the target period within which the national minimum should be attained may be taken as fifteen years from 1960-61 or by 1975-76”.

Note 8:

All the work that has been done in India on normative consumption requirements has remained restricted to the food part of the consumption, even though the concept of minimum requirements is far from irrelevant with respect to such items as clothing and housing, education and health. The calculations that have been carried out are all of the nature of minimum cost normative dietary patterns. There are however great differences among the dietary patterns recommended by different authorities. The following table presents some of the alternative recommended patterns. It is the pattern ascribed to Patwardhan that has been the basis of the calculations made by Bardhan {2} to arrive at the low figure of Rs. 15.

Table 1: Normative Minimum Dietary Patterns

(quantities in kg. per days)


Sukhatme1/ (minimum target)

FAO1/

Patwardhan2/

Price multiplier per Kg.

cereals

0.403

0.395

0.425

0.400

pulses

0.1043/

0.075

0.1133/

0.600

starchy roots

0.046

0.160

-

0.375

sugar

0.050

0.035

0.043

0.600

milk

0.201

0.098

0.113

0.500

meat

0.007

0.036

-

2.130

fish and eggs

0.019

0.027

-

1.500

fruits and vegetables

0.137

0.225

0.170

0.500

oils and fats

0.018

0.016

0.035

2.250

value of diet at 1960-61 prices (in Rs.)

0.5238

0.6087

0.4838

-

1/ per person.
2/ per adult unit.
3/ inclusive of nuts.

Note 9:

The same approach was followed in the subsequent plans. Thus, the Draft Fourth Five-Year Plan, referring to the population in the lowest decile, noted:

“This segment of the population consists mostly of destitutes, disabled persons, pensioners and others who are not fully in the stream of economic activity. They constitute a special class whose income and living standards cannot be expected to rise with the growth of the economy in the absence of special assistance”.

Note 10:

It may be noted that the target group for the minimum level of living objective has not remained the same all through. The 1962 document treated as the target group the third decile from the bottom and leaves the bottom 20 per cent of the population to the mercy of vague unspecified welfare measures. The Fourth Plan document, as we have seen in Note 9, treated the second decile as the target group. The same is true of the Approach to the Fifth Plan, 1974-79, However, by the time the Draft Fifth Five-year Plan was written, the target group was 30 per cent of the population. One may naturally be curious to know why there have been so many changes in the target group; it is unlikely to be a matter of oversight. A cynical Interpretation might be that the broader the target group the easier it is to set targets for its average consumption and yet leave a great deal of poverty hidden behind the average.

Note 11:

Some idea of the variations in the consumption patterns in the different regions of the country may be obtained from the following two tables:

Table 2: Regional Variation in Consumption Patterns (Rural Areas)

(Quantity in 0.00 seers*)

States

Total Cereals

Milk

Meat

Fish

Egg (number)

Sugar

Andhra Pradesh

17.79

0.78

0.22

0.22

0.37

0.28

Assam

18.28

1.34

0.24

0.81

0.43

0.66

Bihar

19.38

1.22

0.11

0.14

0.07

0.35

Gujarat

16.88

4.10

0.05

0.03

0.19

1.66

Jammu and Kashmir

24.09

3.29

0.26

0.12

0.80

0.49

Kerala

10.63

0.68

0.15

1.17

0.56

0.40

Madhya Pradesh

22.40

1.38

0.07

0.06

0.09

0.39

Madras

16.84

0.76

0.24

0.30

0.34

0.49

Maharashtra

17.22

1.53

0.14

0.09

0.28

0.91

Mysore

21.21

1.98

0.14

0.08

0.53

1.08

Orissa

19.53

0.32

0.11

0.48

0.13

0.38

Punjab

19.61

7.43

0.10

0.03

0.33

3.43

Rajasthan

23.84

2.74

0.07

0.00

0.10

1.47

Uttar Pradesh

19.61

2.11

0.20

0.09

0.09

1.82

West Bengal

7.11

1.34

0.11

0.41

0.47

0.50

All India

18.81

1.75

0.15

0.22

0.25

0.85

* One seer is roughly equal to one kilogram.

Source: National Sample Survey Report, 17th Round (September 1961 - July 1962).

Table 3: Average Intake of Nutrients in Different States (1968-69)

(Per capita per day in grams)

States

Calories

Total protein

Animal protein

Fat

Andhra Pradesh

2,040

53

5

21

Bihar

1,865

56

3

13

Gujarat

1,612

54

2

13

Jammu and Kashmir

2,265

63

1

25

Kerala

1,842

47

11

25

Madhya Pradesh

2,779

98

7

45

Maharashtra

2,281

68

6

30

Mysore (Karnataka)

2,220

66

3

18

Punjab

2,832

84

16

52

Rajasthan

2,044

77

5

34

Tamil Nadu

1,498

36

4

12

Uttar Pradesh

2,307

66

5

32

West Bengal

1,927

48

7

24

All India

1,985

55

6

24

Source: Report of the National Commission on Agriculture, 1978, Part II, Policy and Strategy, p. 132.

Note 12:

According to Bardhan {2}, “..... the percentage of rural people below the minimum level of living has significantly gone up from 38 per cent in 1960-61 to 54 per cent in 1968-69. In absolute numbers this means a rise from about 135 million to about 230 million rural people below the minimum level between 1960-61 and 1968-69”.

Minhas {5} observes as follows: “If one regards the level of per capita annual consumption expenditure of Rs. 240 at 1960-61 prices as the bare minimum, then the number of people below this minimum level of living between 1956-57 and 1967-68 has not changed much...... However, there has been a steady decline in the proportion of people below the poverty line. In 1956-57, for instance, this proportion was. 65 per cent which fell to 50.6 per cent in 1967-68....... If, however, a level of Rs. 200 is taken as the minimum level of living, then the number of people below the poverty line works out to be considerably less. The proportion of people below the poverty line falls, more or less steadily, from 52.4 per cent in 1956-57 to 37.1 per cent in 1967-68. The corresponding number of people below the poverty line over the same period has varied from 173 million to 154 million, whereas on the alternative definition of minimum level of living we had around 210 million poor people in rural areas in the year 1967-68 and the corresponding numbers in the earlier years of this period were between 212 to 215. On each of these alternative definitions of a minimum level of living we are likely to have as many poor people in 1970 as there were in the year 1967-68”.

A somewhat different picture has been presented by Ahluwalia {4} whose principal conclusion is: “There is no evidence of a significant trend increase or decrease in the incidence of poverty in rural areas in India. What we observe is a pattern of fluctuation with the incidence of poverty rising in periods of poor agricultural performance and falling in periods of rising agricultural output per head”.

Note 13:

Thus Minhas {5} calculated with figures pertaining to the early 1960’s that, if all the land above a ceiling of 20 acres per holding were taken away and distributed among households operating land less than 5 acres, it should be possible to have a uniform distribution of holdings of size 0.54 acres per person among this population of households. Even for this, one would have to leave completely untouched the growing volume of the totally landless whose percentage was about 26 in the year 1969-70. In other words, even if the totally landless are not to be given any benefit at all, the land that could be obtained by imposing ceilings on the big-sized holdings is hardly adequate to convert the poorest landed peasants into cultivators of minimum-sized viable farms.

On the other hand, Dandekar and Rath {7} calculated that, if one were to try to benefit the landless labourers only (leaving out the cultivators of very small farms) by distributing among them land from above the ceilings, these latter would have to be extremely low, much lower than the existing ceilings (even which are not enforced anywhere).

The present author made a calculation with the help of the latest statistics publicised by the present Government of West Bengal. According to these statistics, there are in West Bengal 3.5 million agricultural labourer families (including landless ones). The estimated upper limit of land that could be obtained from the above ceilings is only about 1 million acres.

Note 14:

The allocations to agriculture and allied activities, inclusive of irrigation, in the different plans are presented in Table 5. Table 6 shows unmistakably how the terms of trade between agriculture and manufactures have moved in favour of agriculture.

Note 15:

Table 4 compares the incidence of direct tax on agricultural income with that of non-agricultural income.

In this connection, the following observations taken from the Report of the Committee on Taxation of Agricultural Wealth and Income {18} are worthy of being quoted: “There is no evidence either that States with relatively large holdings and higher per capita income from agriculture collect a larger proportion by way of land revenue and related cesses, rates, and surcharges than those with smaller holdings and lower per capita income. Though agricultural income per capita in the Punjab and Haryana is about twice as high as in the rest of India, the total yield from land revenue, surcharges and special charges, cesses on commercial crops, etc., amount now to less than 0.4 per cent of the net domestic product originating in agriculture in these States compared to nearly 1 per cent for the country as a whole”. Equally pertinent is the following statement taken from the same report: “It is generally recognised that the degree of progression in the incidence of all taxes taken together is less on agricultural than on non-agricultural incomes. The incidence on the lower income groups in the two sectors does not appear to be significantly different; if anything, it is somewhat higher in the rural sector. But, as between households placed in the higher income groups, the overall incidence of taxation is lower in agriculture, the disparities being particularly pronounced and increasing as one moves up the income-scale”.

Table 4: Tax Burden on the Agricultural and the Non-Agricultural Sector


Agricultural Sector

Non-Agricultural Sector

Year

National income (crores of rupees)*

Total taxes (crores of rupees)

(3) As percentage of (2)

Marginal tax rate

National income (crores of rupees)

Total taxes (crores of rupees)

(7) As percentage of (6)

Marginal tax rate

1951-52

5020

215.67

4.2

-

5080

430.88

8.4

-

1961-62

6960

439.82

6.3

11.5

7910

1046.77

13.2

21.7

1971-72 (Revised)

14197**

1461.89

10.2

14.1

18101*

3997.00

22.0

28.9

Source: P.K. Bhargava and G.S. Srivastava, “Tax Burden on Indian Agriculture”, Bulletin for International Fiscal Documentation, Vol. 28, No. 2-3/1974.

* One crore is equal to 10 million

** Figures relate to the year 1970-71 and are provisional.

Table 5: Percentage Outlay on Agriculture in the Five-Year Plans

Plans

Percentage

First Plan

31.4

Second Plan

20.0

Third Plan

22.9

Fourth Plan

20.7

Fifth Plan

20.1

Source: Different Plan Volumes.

Table 6: Terms of Trade of Agriculture

Base: 1961-62 = 100

Year

Index of Prices of Agricultural Commodities

Index of Prices of Agricultural Commodities

Terms of Trade*

1951-52

96.7

94.2

102.6

1952-53

81.4

78.9

103.1

1953-54

86.1

78.1

110.2

1954-55

76.8

79.4

96.7

1955-56

71.6

78.7

90.9

1956-57

85.1

83.9

101.4

1957-58

87.4

95.4

91.6

1958-59

92.8

85.6

108.4

1959-60

94.8

88.2

107.4

1960-61

100.8

97.8

103.2

1961-62

100.0

100.0

100.0

1962-63

102.3

102.6

99.7

1963-64

108.4

104.8

103.4

1964-65

130.9

109.0

120.0

1965-66

141.7

118.1

119.9

1966-67

166.6

127.5

130.6

1967-68

188.2

131.1

143.5

1968-69

179.4

132.7

135.1

1969-70

194.3

143.5

135.0

1970-71

201.3

154.9

129.9

Source: Index Numbers of Wholesale Prices in India (Forthnightly), Office or the Economic Advisor, Ministry of Industrial Development, Internal Trade and Company Affairs.

* (2) divided by (3)