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APRIL 23, 2006
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Insurance: The Challenge
India is poised to experience major changes in its insurance markets as insurers operate in an increasingly liberalised environment. It means new products, better packaging and improved customer service. Also, public sector companies are expected to maintain their dominant positions in the foreseeable future. A look at the changing scenario.


Trading With
Uncle Sam

The United States is India's largest trading partner. India accounts for just one per cent of us trade. It is believed that India and the United States will double bilateral trade in three years by reducing trade and investment barriers and expand cooperation in agriculture. An analysis of the trading pattern and what lies ahead.
More Net Specials
Business Today,  April 9, 2006
 
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Redefining Poverty
The new definition is more representative, but makes calculations that are much more difficult.

How many poor people are there in India? That should be a fairly simple question to answer. Only, it isn't. In fact, there is no unanimity among planners, economists and the authorities even on the raw data that should be used. Should it be data provided by the National Sample Survey Organisation (NSSO)? Should it be the figures supplied by the National Accounts Statistics? Or should we use the formula used by the World Bank-which defines the poor as those living on less than $1 (Rs 45) a day? Interestingly, there is a broad agreement on one point-that the government's existing definition of poverty is woefully inadequate and unsatisfactory. Hence, the need for a new, more representative, definition.

The Centre has recently notified 13 new parameters for defining the poverty line. They include landholding, type of dwelling, clothing, food security, hygiene, capacity for buying commodities, literacy, minimum wages earned by households, means of livelihood, education of children, debt, migration and priority for assistance. These are all issues that crop up regularly in any discussion on poverty, so the government is obviously trying to cover all its bases.

The earlier categorisation-households that could afford 2,100 calories per day in urban areas and 2,400 calories in rural areas were deemed to be above the poverty line-ignored all these other issues that, too, are central to a person's life. Thus, as in December 2005, rural households that spent more than Rs 368 per month and urban households more than Rs 559 per month were considered to be above the poverty line.

According to this definition, which is used by the Planning Commission, 26 per cent of Indians were below the poverty line (BPL) in 1999-2000. Interestingly, the World Bank estimates that nearly 36 per cent earns less than $1 a day and are, therefore, BPL. But independent expert and Managing Director of Oxus Research & Investments Surjeet Bhalla maintains that only 15 per cent of the population are BPL households, according to data from the National Accounts Statistics.

So, will the new definition change the face of Indian poverty? Not really. Why? Experts point to the fact that some of the new criteria have already been factored into the consumption expenditure referred to above. For instance, the new consumption basket (used to calculate consumption expenditure) includes both food-foodgrains, milk and milk products oils, meat and fish-and non-food-clothing and footwear, rent, commercial and non-commercial fuel, medical care and health services, transport and communications, recreation and education-items.

But the new parameters, though more representative, come with their own problems. "How do you, for instance, put a figure on issues like priority for assistance and hygiene?" asks Bhalla, adding that the new definition will make comparisons with earlier years virtually impossible. So, how will the government now figure out how many people have actually come out of the poverty hell hole over the last few years? The government is still working that out.

 

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