Context:
In recent, President Donald Trump praised India for having lifted “over 270 million people out of poverty” in “a single decade”.
It also been highlighted that “12 Indian citizens are lifted out of extreme poverty every single minute of every single day”.
What is poverty, and how is it measured?
Poverty can be defined as a condition in which an individual or household lacks the financial resources to afford a basic minimum standard of living.
Economists and policymakers estimate “absolute” poverty as the shortfall in consumption expenditure from a threshold called the “poverty line”.
The official poverty line is the expenditure incurred to obtain the goods in a “poverty line basket” (PLB).
Poverty can be measured in terms of the number of people living below this line (with the incidence of poverty expressed as the head count ratio). The “depth” of poverty indicates how far the poor are below the poverty line.
Post-independence poverty estimates:
- In 1962, the Planning Commission constituted a working group to estimate poverty nationally, and it formulated separate poverty lines for rural and urban areas – of Rs 20 and Rs 25 per capita per year respectively.
- VM Dandekar and N Rath made the first systematic assessment of poverty in India in 1971, based on National Sample Survey (NSS) data from 1960-61.
- They argued that the poverty line must be derived from the expenditure that was adequate to provide 2250 calories per day in both rural and urban areas.
- This generated debate on minimum calorie consumption norms while estimating poverty and variations in these norms based on age and sex.
- Alagh Committee (1979): In 1979, a task force constituted by the Planning Commission for the purpose of poverty estimation, chaired by YK Alagh, constructed a poverty line for rural and urban areas on the basis of nutritional requirements.
- Poverty estimates for subsequent years were to be calculated by adjusting the price level for inflation.
- Tendulkar Committee (2009):
- Expert group constituted by the Planning Commission and, chaired by Suresh Tendulkar, was constituted to review methodology for poverty estimation and to address the following shortcomings of the previous methods:
- Consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates.
- There were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time).
- Earlier poverty lines assumed that health and education would be provided by the state and formulated poverty lines accordingly.
What does the basket of goods include?
The “poverty line basket” (PLB) comprises goods and services considered essential to a basic minimum standard of living — food, clothing, rent, conveyance, and entertainment. The price of the food component can be estimated using calorie norms or nutrition targets. Until the 1990s, the calorie norms method was used — it was based on the minimum number of calories recommended by the Indian Council of Medical Research (ICMR) for a household of five members. However, this method does not consider the different food groups that are essential for health — this is why the Tendulkar Committee targeted nutritional outcomes. The Lakdawala Committee assumed that health and education is provided by the state — therefore, expenditure on these items was excluded from the consumption basket it proposed. Since expenditure on health and education rose significantly in the 1990s, the Tendulkar Committee included them in the basket. As a result of revisions to the basket and other changes in the method of estimation, the percentage of people living below the poverty line in 1993-94 rose from 35.97% to 45.3%.
Multidimensional Poverty Index by United Nations:
- India lifted 271 million people out of poverty between 2006 and 2016, recording the fastest reductions in the multidimensional poverty index values during the period with strong improvements in areas such as “assets, cooking fuel, sanitation and nutrition.
- The 2019 global Multidimensional Poverty Index (MPI) from the UN Development Programme (UNDP), the Oxford Poverty and Human Development Initiative (OPHI).
- Multidimensional poverty index (MPI) to capture poverty using 10 indicators: nutrition, child mortality, years of schooling, school attendance, ownership of assets, and access to proper house, electricity, drinking water, sanitation, and clean cooking fuel.
- Poverty is measured in terms of deprivation in at least a third of these indicators. In 2015-16, 369.546 million (nearly 37 crore) Indians were estimated to meet the deprivation cut-off for three or more of the 10 indicators.
- The report said that in the 101 countries studied — 31 low income, 68 middle income and 2 high income – 1.3 billion people are “multidimensionally poor”, which means that poverty is defined not simply by income, but by a number of indicators, including poor health, poor quality of work and the threat of violence.
- The report underscored that the traditional concept of poverty is outdated, demonstrating more clearly than ever that labelling countries – or even households – as rich and poor is an oversimplification.
- To fight poverty, one needs to know where poor people live. They are not evenly spread across a country, not even within a household.
- The report also highlighted a positive trend that those furthest behind are moving up the fastest.
- While the overall headcount multidimensional poverty ratio in 2015-16 was 27.9%, the number was 36.8% for rural and 9.2% for urban India.
- There were wide variations across states — poverty was the highest for Bihar (52.5%), followed by Jharkhand (46.5%), Madhya Pradesh (41.1%), and Uttar Pradesh (40.8%). It was the lowest for Kerala (1.1%), Delhi (4.2%), Punjab (6.1%), Tamil Nadu (7.3%) and Himachal Pradesh (8.1%).
What is the current “level” of poverty in India?
The National Statistical Office (NSO) Report on Household Consumer Expenditure for 2017-18 was junked in 2019 — so there are no data to update India’s poverty figures. Social scientist S Subramanian used data from a leaked version of the consumer expenditure data to conclude that the incidence of poverty in India increased from 31.15% to 35.1% between 2011-12 and 2017-18. The absolute number of poor people also increased from 270 million to 322.22 million over the same period, which translates to 52 million more poor people in six years.
Why are poverty numbers important?
- The PLB has been the subject of much debate. The 1962 group did not consider age and gender-specific calorie requirements.
- Expenditure on health and education were not considered until the Tendulkar Committee — which was criticized for setting the poverty line at just Rs 32 per capita per day in urban India (and at Rs 27 in rural India).
- And the Rangarajan Commission was criticized for selecting the food component arbitrarily — the emphasis on food as a source of nutrition overlooks the contribution of sanitation, healthcare, access to clean water, and prevalence of pollutants.
- Poverty numbers matter because central schemes like Antyodaya Anna Yojana (which provides subsidided foodgrains to households living below the poverty line) and Rashtriya Swasthya Bima Yojana (health insurance for BPL households) use the definition of poverty given by the NITI Aayog or the erstwhile Planning Commission.
- The Centre allocates funds for these schemes to states based on the numbers of their poor. Errors of exclusion can deprive eligible households of benefits.
Conclusion:
The MPI is a more comprehensive measure of poverty because it includes components that capture the standard of living more effectively. However, uses “outcomes” rather than expenditure, the presence of an undernourished person in the household will result in it being classified as “poor”, regardless of the expenditure on nutritious food.
