Economy
Why India needs a new method to count its poor
Summary
- Poverty is measured by first arriving at a poverty line, the minimum level of income required to buy bare minimum necessities and then identifying those who fall below it by looking at household consumption surveys.
While India may be lifting a lot of people out of poverty, the way it goes about counting those living below the poverty line is imprecise. After calls for an overhaul last week, Mint looks at issues surrounding poverty measurement and the need for having a more modern model.
How is poverty measured?
Poverty is measured by first arriving at a poverty line, the minimum level of income required to buy bare minimum necessities and then identifying those who fall below it by looking at household consumption surveys. The poverty threshold varies from country to country according to people’s social and economic conditions. However, the World Bank has an international benchmark—anyone living below $2.15 per day is considered to be in extreme poverty. Multidimensional poverty looks at health, education and standard of living across 12 indicators. It is more survey-based and not on actual consumption.
Read more: Debroy’s right, we need a revised poverty line
Where does India stand?
According to a recent study by State Bank of India (SBI), the country’s headline poverty rate (the share of people who fall below the poverty line) in 2022-23 stood at 4.5% to 5%. The rural poverty rate was 7.2% (it was 25.7% in 2011-12) and the urban poverty rate was 4.6% (it was 18.7% in 2022-23). The SBI study arrived at these figures by taking the Tendulkar Committee’s poverty line of 2011-12 and imputing inflation over the past decade to it. The new poverty line was ₹1,622 per month for rural areas and ₹1,929 for urban. It then applied the latest Household Consumption Expenditure Survey (HCES) 2022-23 to it.
What are the trends of multidimensional poverty?
A Niti Aayog study has revealed that 248 million people have escaped multidimensional poverty in the past nine years. It also said that the poverty headcount ratio declined from 29.17% in 2013 to 11.28% in 2022-23. Uttar Pradesh showed the biggest decline followed by Bihar, MP and Rajasthan. India may halve multidimensional poverty by 2030.
Read more: The quiet influencers: How the poor have shaped India
What do economists say about the figures?
Experts questioned the logic behind SBI’s move to take Tendulkar Committe’s poverty line of 2011-12 and impute inflation for over a decade. The Manmohan Singh government had appointed another committee under C. Rangarajan after it felt the Tendulkar committee poverty line was too low. Some questioned the sampling of HCES 2022-23 on the grounds that it gave a skewed representation to affluent sections of society. A few others said the reduction in multidimensional poverty is out of tune with reality.
What is the way forward?
Experts are calling for an all-new estimate to measure poverty. Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council spoke about it last week at a conference. T.C.A. Anant, former chief statistician of India, says the poverty norms not only need updating but the concept of poverty itself needs to be re-visited. Rangarajan agrees. He says there is a need to completely reassess what poverty is. A reasonably accurate estimation of poverty is critical for to come up with the right policies.
