The point in my news analysis of June 14, was to question the validity of the Finance Ministry's claim that poverty had declined by 4.2 percentage points in the period 2000 to 2004. The official claim was scrutinized at two levels: (i) I had questioned the lack of consistency between the government's figures on the composition of GDP growth (which suggested increasing poverty) on the one hand and the claim of sharp reduction in poverty on the other. (ii) I had also questioned the credibility of the claim in terms of a flawed estimation procedure for poverty reduction.
In his response (DT June 15) Dr. Ashfaque H. Khan, an official of the Finance Ministry failed to respond to (i) above, and pitched his defence in terms of (ii) only. In this rejoinder I shall propose that his claims of a credible estimate with respect to the comparability of the large sample of the year 2000 with the small sample of the year 2004, are incorrect. However, regardless of this debate on the veracity of numbers, an important proposition needs to be made with respect to the right of citizens to question the official truth on the basis of logic. Dr. Khan begins with an aggressive tone when he asserts in effect that no one has the right to question official fudging. I should like to remind him that the right of a citizen to question the official truth on the basis of reason, was not granted by the Ministry of Finance but is a fundamental right that was won by Socrates in the year 326 BC when he drank the portion of hemlock, rather than desist from questioning the official truth. I shall therefore persist in exercising this right as a citizen of Pakistan and the world, regardless of the threats and bluster of officialdom.
In the context of the government's poverty reduction estimate of 4.2 percentage points, the issue is really one of illegitimate approximation, with respect to the principles of economic science. It is clear that this figure emerges largely from the differences in sample design between the PIHS sample of 2000-01 and the much smaller sample of the year 2004. Consider. (1) It is incorrect to say as Dr. Khan claims, that the 19th April to 6th May data in the small sample survey of this period in 2004 is being compared to the same period for the year 2000. The reason is that the official poverty line of Rs.748.6 per adult equivalent per month (subsequently inflated to Rs.848.798) for the base year 2000-01 was estimated on the basis of annual data and therefore had averaged out the seasonality factor in the expenditures of the poor. The data for 2004 however is based on the harvesting period only when the poor can spend more from harvesting wage income. Consequently poverty levels in the year 2004 would be understated compared to those in the year 2000, thereby yielding poverty reduction over the period as a statistical bias rather than a description of reality. (2) It is also incorrect to say that the “methodology” with respect to provincial representation is the same in the large and small samples respectively. The reason is that in the case of the small sample survey, which Dr. Khan admits covers only 5046 households (one third of the large sample), the stratification at the provincial level would be so small as to have no statistical significance. By contrast the large sample survey would be meaningful in terms of provincial coverage. This is the point. The small sample survey is likely to leave out a much larger proportion of poor people than the large sample survey.
The problems of comparability between the large and small sample survey results therefore are inherent in the differing degrees to which the two samples are representative of the underlying population. Therefore a poverty reduction estimate (4.2 percentage points) based on such a flawed comparison is misleading. In the Oxford English Dictionary the meaning of the word fudge (as a verb) is as follows:
“To deal with something in an inadequate way, specially so as to conceal the truth, or mislead.” The New Oxford Dictionary of English, Oxford 1998, Page 740. What Dr. Khan has done in proffering the official truth on poverty reduction qualifies precisely for the word fudge (verb).
Regardless of the fact that Dr. Khan's claims on poverty reduction do not stand up to scrutiny, if he wishes his claims to transparency to be believed then he should do the following: (i) Let the Federal Bureau of Statistics place the raw data for both samples prior to its cleaning by another agency, on the FBS website. (ii) Specify the basket of goods on the basis of which the price index was used for the year 2000-01 and also the official estimation procedure for the inflation factor. (iii) Specify the official estimation procedure for the poverty line figure. (iv) Specify the number of households covered for each province in the 2004 sample, and the number of households covered in each province for the April-May period in the 2000-01 sample. If such information were made available on the website, independent economists and competent civil society institutions could do the estimations themselves and be able to judge whether the Finance Ministry's figures are right or wrong. In any case what is even more important for resolving this important policy question is for the PIHS to be allowed to conduct the July 2004 survey independently, with integrity and without fear or favour.