Poverty level will increase if health expenditure included

Planning Commission factors in less than one rupee a day as health expenditure in its affidavit to the apex court

By Richard Mahapatra
Published: Monday 26 September 2011

India's poverty level will go up by 3.6 per cent in rural areas and 2.9 per cent in urban areas if people's expenditure on health is factored in while measuring poverty.

A study by the Institute of Economic Growth in Delhi redrew the poverty estimates of 2007 (the Planning Commission has not released new estimates since then) by including health expenditure incurred by people. The study shows how much impact health expenditure can have on poverty estimates. Given that hardly 10 percent of the population has some kind of health cover, health expenditures cut into the normal expenditure of households. This impacts the level of poverty. The study was a part of the Planning Commission's expert group on poverty set up in 2009.   

This questions the Planning Commission's affidavit to the Supreme Court on the proposed poverty line. It said that the poverty line of Rs. 25/person/day is 'adequate' for meeting food, health and education expenditure. As it is based on the poverty line suggested by the Tendulkar Committee, it includes a median health expenditure of less than one rupee a day.  The study found people spending much more than one rupee a day on health. “Roughly speaking, one rupee per day is the 'median expenditure' on health, that is, the level of expenditure such that half of the population spends less than that on health. How this benchmark can be interpreted as 'adequacy' is not explained,” says Jean Dreze, a noted economist and proponent of the Right to Food Bill.

“The results (of the study) indicate that out-of-pocket spending is more poverty-inducing in the rural areas than the urban areas, and its impact on poverty has increased over the years,” says the study. Going by the study, the rural poverty ratio will go up from 28.3 per cent in 2007 to 31.9 percent if health expenditure is factored in. Rural poverty will increase more than urban poverty if the health expenditures are included in poverty measurement.

At the state level, the result is more revealing. Traditionally poor states will have more poor if the parameter is applied. For example, Chattisgarh's rural poverty will increase by 5.6 percent.  “Overall, 4.7 percent household expenditure is spent on out-of-pocket health spending. However, there is wide variation across states, with the poorer states showing much higher health spending than the other states,” it finds.

The affidavit missed this point.  Though it clarified that the poverty line at June 2011 price-level is based on consumption expenditure, it devilishly recommended it as 'adequate' to cover expenditure on health and education as well.

Subscribe to Daily Newsletter :

Comments are moderated and will be published only after the site moderator’s approval. Please use a genuine email ID and provide your name. Selected comments may also be used in the ‘Letters’ section of the Down To Earth print edition.