Friday, October 21, 2011

Latest poverty stats: Poverty declined to 25.16 percent in 2010-11 in Nepal

The preliminary report of the NLSS (2010-2011) made public by the Central Bureau of Statistics (CBS) states that 25.16 percent of Nepalese population is below the poverty line fixed at 2,200 calorie consumption per day per person and access to essential non-food items.

Based on current market prices, a person needs to earn at least Rs 19,261 (Rs 11,929 for food items and Rs 7,332 for non-food items) every year to buy basic food calories. In 2003-2004 (NLSS II), a person would need 2144 basic food calories. In 1995-1996 (NLSS I), a person would require just 2124 basic food calories to escape the poverty line. Again, the consumption basket is changed in NLSS III. So, even for the same calorie intake people would be spending at varying rate, most likely they would be spending way more, which also means that poverty rate would not decline as fast as they should. Since the consumption basket in NLSS III was changed, the poverty figures cannot be compared with that of NLSS I and NSLL II. More on this in a minute. First, the main highlights of the report:

Overall poverty

  • Overall, 25.16 percent of Nepalese are below the poverty line. In rural areas, 27.43 percent people are below the poverty line. In urban areas, 15.46 percent of people are below the poverty line.
  • The poverty line for Nepal, in average 2010-11 prices, has been estimated at Rs. 19,261; the food poverty line is Rs. 11,929 and the non food poverty line Rs. 7,332.
  • Poverty gap is 5.43 percent and poverty gap squared is 1.81 percent respectively.
  • In Kathmandu, a person needs to earn Rs 40,933 per year for buying basic food calories and essential non-food items. And, a person spends Rs 26,323 for non-food items as against Rs 15,610 for basic food calories in Kathmandu.

Regional poverty

  • There is high variation in poverty rates amongst the 12 analytical domains. urban Hill is the least poor region with a poverty incidence of 9 percent.
  • Within urban areas, poverty ranges from 9 percent in urban Hills to 22 percent in urban Terai. Within rural hills, poverty ranges from 16 percent in Eastern region to 37 percent in Mid and Far Western region.
  • Within rural Terai, poverty ranges from 21 percent in Eastern region to 31 percent in Mid and Far Western region. Within each of the development region except the Eastern, hills have higher poverty rates than Terai.

Seasonal poverty

  • The poverty rates are highest in April-May coinciding with the food scarce months. Poverty declines gradually till July and again spikes in September. Poverty falls sharply between September and November. Poverty is lowest around November 1 and the timing coincides with the festivals of Dashain and Tihar.

Poverty and household size

  • Poverty incidence increases monotonically with household size. The poverty rate is the lowest for one-person households (3 percent), increases drastically to 7 percent for two-person households and reaches the maximum (38 percent) for households having 7 or more members. The depth and severity of the poverty also increase with household size, reaching up to 9 percent and 3 percent respectively for the households that have 7 or more members.
  • Poverty increases with number of kids that are under 7. Female headed households have slightly lower poverty rates. Poverty rate is lowest at 12 percent for household with no child under 7, but increases to 47 percent for households with 3 or more children under 7.

Poverty, women and Dalits

  • Poverty rates are slightly higher for households headed by males between 26 and 45 years of age and slightly lower of households headed by female.
  • The percentage of poor among Dalitsis 42 percent compared to 23 percent for the Non-Dalits.

Poverty and education

  • Poverty is substantially lower for higher levels of head’s education. Households with an illiterate head are more than 4.5 times more likely to be poor than households with a head that has completed 11 or higher. Similarly households that have at least a women who completed primary education are much less likely to be poor than households in which the most educated female has lower than primary education.
  • Households headed by agricultural wage workers are poorest while those headed by professional wage-workers are the least poor.

Poverty, landholding, and access to services

  • Poverty rate falls, both in rural and urban areas, with increase in the size of arable land. In rural areas, households with more than 1 hectare of agricultural land have lower than average poverty rates. In urban areas, reduction in poverty appears even with smaller landholdings.
  • Households that are closer to facilities are less likely to be poor than the national average. Having good access to higher secondary school, public hospital, paved roads, market centers, agricultural center, cooperative and banks have large effects on poverty.


  • The Gini-coefficient declined to 0.3294 from 0.414 in NLSS II.
  • Inequality in rural and urban areas is 0.31 and 0.3529 respectively. The corresponding figures in NLSS II were 0.349 and 0.436.

I wonder why they did not have both rural and urban figures for the analytical domains. For instance, if you have figures for Urban-Hill, then it would be better to have figure for Rural-Hill as well. It makes comparison easier. The report has figures for 12 analytical domains.

Earlier, it was reported that poverty declined to 13 percent. This caused quite a stir, with analysts questioning the role of government and donors in helping to reduce poverty (as much of it was attributed to remittances). Specifically, the question was: What did the government and donors do to help reduce poverty if all the astounding gains are due to remittances? They were in the defensive and were struggling to find an explanation (remittances mostly but also due to access to roads, education and health services, they finally said). With NLSS III, they have arrived at 25.16 percent figure by changing the consumption basket (eating more items like fruits, meat, fish, egg and rice). It also means that the figures from NLSS II are not wholly comparable with that of the NLSS III. You can play with statistics and provide multiple deductions from the same data! With the new figure arrived by changing consumption basket (or like they say consumption aggregates), the poverty rate is still high, which means people will be questioning less about the role of government and donor funded poverty-related initiatives (and also the role of remittances). The narrative could be that poverty headcount ratio drastically declined since 1995-96 (to the tune of about 30 percentage point), but it is still high and rigid. [Specifically, about consumption stuff, NLSS III adds one component that asks households their consumption in “last 7 days” (along with consumption during the “typical month” for each of the 72 food items as in previous surveys)].

If you want to make a valid comparison of poverty over time then you need comparable consumption aggregates (similarly constructed and that they are converted to constant prices using price deflator relevant to the poor).  So, the earlier media story by Prem Khanal that poverty declined by 13 percent still holds true. In the figure below, the red line reflects change in poverty over time using the 1995-96 poverty line whereas the blue line reflects change based no the “new” poverty line.The dotted lines in the figure below represent the alternative estimate based on such valid comparisons.