Missed call, Planning Commission?

To those unfamiliar with the concept of missed calls in India, it’s a fundamental form of communication. It involves calling someone on his/her mobile phone from your mobile phone and hanging up after a couple of rings before the other person picks up. It is like a facebook poke. It isn’t very descriptive, yet can mean a lot. “Call me back”, or, “Your letter has arrived”, or, “Your package is ready to be picked” etc. Why is it done? Because it is free – well almost, if you have lifetime validity on your sim card.

Non food expense in INR. Total Rs. 8

Why is this relevant? While accounting for all our non-food expenses for the day, we made a key observation. Of course, we are constrained by our upper limit of Rs. 25 for our daily budget. This means, after Rs. 17 for food, we have 8 rupees for everything else. (Why Rs. 25 instead of Rs. 32? because we cannot expense for education, healthcare, clothing, durables, rent, etc, which make up the difference between 25 and 32. You can find more details here). Most of our expenses seemed to be in line – cooking on a combo of firewood and gas and using cheap toiletries (no shampoo or deodorant – lifebuoy all the way!) – with what the Planning Commission has allocated for non-food expenses. But communications stood out at a hefty Rs. 2; and this too when we made no outbound calls and put in the minimum for incoming and SMS plans! In reality, of course, people make outbound calls as well – you can’t survive only on missed calls forever. Are we missing something? So we turned to our Tendulkar report expense pie chart to verify and were shocked to see that the Planning Commission doesn’t account for communications.

How is this possible? After all, with 900 million mobile subscribers, it means that multiple individuals in most, if not all, families have a mobile phone today. Is the Planning Commission missing an obvious expense in its analysis? Not wanting to blame the Commission irrationally, we decided to drill down and this is what we found: The planning commission didn’t arbitrarily decide on the Rs. 32 figure. It relies on the comprehensive Tendulkar report that further relies on 2004/2005 NSS survey data to determine what the expenditure buckets were for various income classes before statistically deriving the poverty line at Rs. 19.29/day, given the existing national and state price levels for those very buckets (all 23 of them!). It finally applies overall inflation on it from 2005 to 2011 and arrives at Rs. 32.17

Sounds very comprehensive indeed and reliant on empirical data – not just randomly chosen points. In fact, more sophisticated than previous calculations done over the years to arrive at the poverty level. So why is it that some of the expenses seem out of wack? Well,one of the reasons could be that the buckets itself have shifted from 2005 to 2011- some expanded, others contracted – while yet others have completely diminished or emerged from scratch. Mobile is one such good example. Take a look at the growth of mobile subscribers in the last 10 years below (Thanks Kunal Bajaj for the data!). Mobile penetration has gone up more than 10 times! Back in 2005, when the base survey was conducted, mobile was not a reality beyond the 50-75 million elites in India. Today its a nationwide phenomenon and an essential aspect of lifestyle and sustenance. And therefore, as basic a need as clothing, education, and health. Moreover, given how much it strengthens democracy and transparency at the grassroots level, it is arguably a fundamental right in the Indian context. If the survey was to be conducted today, a new expenditure bucket would likely emerge on communications, pushing the Rs. 32 upwards, and not a mere reallocation of expenditure.

Wireless Subscriber Base & Teledensity in India (Dec 2004 to Aug 2011). Source TRAI. Credits: Analysys Mason

The same reasoning applies to education. Household expenditure on education has gone up from 2.5% of overall outlays to 7.5% in 2 years alone from 2008 – 2010 (Click here to know more). What does this mean? Rise in educational expenditure is certainly much higher than rise in overall inflation. People are paying – more and more – for private education. The educational expenditure bucket itself has expanded much more than inflation can account for. Therefore, this change too could push the poverty line upwards.

Our point is that, perhaps, the revised poverty line needs to be established using the latest NSS data (66th round), not merely updating the one based on a 6-year old survey for inflation, accounting for new budget allocations of the poor. Given our poor connectivity, we are having a tough time analyzing the new NSS data, but would be grateful if any of the readers can shed light on this!

This could perhaps be one explanation for why Planning Commission has missed a call on the poverty line number. Or perhaps the commission is assuming that everyone in India simply gives “missed calls” 🙂

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2 Comments to “Missed call, Planning Commission?”

  1. Back in the fifties and sixties, within the US long distance was “expensive”, When we were teens and would leave my grandmother’s (about 30 miles away), she would tell us to place a person-to-person call to Mary Ellen Boyle (Fictitious)–when she heard that she knew we had arrived home and would refuse the call for Mary Ellen Boyle and therefore not pay for it. Some things never change.

  2. oh! That is the story of the missed call… and don’t miss why they chose Rs.32 to define poverty and it can be read at : http://chapter18.wordpress.com/2011/09/30/the-power-of-32/

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