This is significant because it is known that the NSS tends to underestimate overall consumption in the country, resulting in a substantial divergence between the estimates of total and per capita consumption as yielded by the NSS surveys and in the NAS. If income inequality has not worsened during the 1990s and if the divergence between the consumption estimates provided by the NSS and NAS has increased, then the poverty figures themselves would be suspect.
 
Till recently, it was the practice in the Planning Commission to calculate poverty figures after blowing up the NSS consumption estimates to deal with such underestimation. A return to such a procedure would not only reduce measured poverty significantly, it could also negate the observed stagnation or rise in the incidence of poverty during the 1990s. The lack of correspondence between growth and poverty trends could then be seen as a result of statistical inadequacies rather than a reflection of real trends.
 
However, most academic research, as indeed the work at the World Bank, has not in the past favoured blowing up the NSS consumption estimates since there is evidence that most of the underestimation that occurs is in the consumption of the rich, so that the unadjusted NSS figures would still be measuring poverty correctly. Indeed, this was the view of the Expert Group in 1993 as a result of whose recommendation the old Planning Commission method was discontinued.
 
An implication of this, which is still not adequately appreciated, is that inequality measures obtained from the NSS underestimate the true inequality which is likely to be higher the greater the discrepancy between the NSS and NAS mean consumption estimates. If increasing discrepancy between the two data sets occurs in such a way that NAS shows growth in mean consumption but the NSS shows higher poverty without increased inequality, then either one must reject the Expert Group recommendations outright or conclude that true inequality has risen by so much as to wipe out the possible benefits of growth. Such a situation would, however, be an impasse since in the absence of a measure of "true" inequality, commentators could continue to debate the relative virtues of the erstwhile Planning Commission method versus that of the Expert Group without necessarily reaching consensus.

Chart 3 >> Click to Enlarge

Luckily, however, the evidence, does permit stronger conclusions. First, as Chart 3 shows, the Gini coefficients, or the indices of inequality in the distribution of NSS consumption expenditure, as calculated at the World Bank display interesting trends. Rural inequality fell steadily between 1972-73 and 1990-91, but has since then fluctuated wildly around a rising trend. That is, there is no contradiction between the direction of movements in inequality and that in poverty as far as NSS data for rural India is concerned. In urban India, on the other hand, the 1990s seem to be associated with falling poverty even as inequality increased, presumably because income growth was sufficiently high.
 
Second, and more importantly, a comparison of the absolute per capita consumption figures at current prices obtained directly from the NSS and from the NAS by interpolating from financial years to NSS rounds (Table 1), shows no strong evidence of a widening gap between the two during the 1990s. The ratio of NSS consumption expenditure figures and NAS consumption expenditure figures as yielded by the series with 1980-81 as base, did fall from 0.79 to 0.69 between 1972-83 and 1990-91, but has remained at that level subsequently (Chart 4).

Table 1 >> Click to Enlarge

Chart 4 >> Click to Enlarge

It is true that the same ratio calculated with NAS consumption expenditure figures from the new series with 1993-94 as base does show a decline from 0.60 in 1993-94 to 0.57 in 1997-98, but this is too small to explain the poverty puzzle. Per capita consumption in nominal terms increased by 98 per cent between 1990-91 and 1997 according to the NSS. The corresponding growth in NAS is 99 per cent when the old 1980-81 series is extended from 1996-97 to 1997-98 using the new 1993-94 series and 111 per cent when the new series is carried back to 1990-91 using the old one. The NAS consumption growth would be 140 per cent if the 1997 figure from the series with 1993-94 as base is compared to the 1990-91 figure from the series with 1980-81 as base, but this is surely invalid !
 
The poverty puzzle is, therefore, not mainly in differences between the NSS and NAS regarding nominal consumption trends but in the trend in real consumption. As Chart 5 shows, the indices of real per capita mean consumption obtained directly from the two national accounts series have increased much more sharply than the index obtained by appropriately averaging the urban and rural real per capita mean consumption figures computed by the World Bank researchers from the NSS figures. The latter shows a growth of only 4 per cent between 1990-91 and 1997 against growth of 20 and 23 per cent according to the old and new NAS series, appropriately spliced forwards and backwards.

Chart 5 >> Click to Enlarge