Topic: Indian Economy and issues relating to planning, mobilization of resources
Q6. What are the limitations of inflation-adjusted poverty lines in India? Examine the price-basket based indexation method recently applied to update the Rangarajan poverty line. Assess its robustness as a framework for future poverty measurement in the country. (15 M)
Difficulty Level: Difficult
Reference: IE
Why the question
Poverty measurement debates in India have resurfaced after the RBI economists updated the Rangarajan poverty line, raising questions about the validity of inflation-adjusted methods and the future of poverty metrics.Key Demand of the question
The question requires analysing the shortcomings of using inflation-adjusted poverty lines, explaining the price-basket based indexation approach, and critically assessing whether it can serve as a robust framework for future poverty measurement.Structure of the Answer:
Introduction:
Briefly highlight why poverty measurement methodology matters for welfare targeting.
Body
- Limitations of inflation-adjusted poverty lines– issues of mismatch, outdated consumption patterns, and policy risks.
- Price-basket based indexation method – describe the approach, how it differs from CPI, and its benefits.
- Robustness as a framework – assess strengths, shortcomings, and need for multidimensional integration.
Conclusion:
Forward-looking, suggesting integration of basket-based indexation with multidimensional poverty metrics for holistic policymaking.
