India’s poverty debate needs to move on: Let’s adopt new norms

In either case, these estimates suggest that there has been a sharp reduction in poverty since 2011-12. Partly in response to these articles, other commentators have suggested revisiting the poverty line. They argue that changes in survey methodology in the recent HCES renders the application of earlier methodologies to HCES data inappropriate. These types of arguments were comprehensively rebutted by Surjit S. Bhalla in a column in this paper on 27 March 2024.

None of these discussions, however, examined the appropriateness of the existing methodologies for tracking poverty using consumption data.

Consumption-based poverty measurement in India traces its roots to a Working Group constituted by the Planning Commission in 1962, which was subsequently re-visited and revised by a task force in 1979. This task force provided a careful description of the reasoning it employed to arrive at a poverty line for India. 

In brief, it defined the poverty line as a per-capita consumption expenditure level which could meet an average per capita daily calorie requirement of 2,400 Kcal in rural areas and 2,100 Kcal in urban areas, along with the associated quantum of expenditure on non-food items. This average calorie norm was based on an analysis of the demographic and activity-based composition of the population at that time.

The monetary value of this norm formed the basis of poverty lines in all subsequent revisions. However, the basic approach underlying this calculation was never seriously revisited until the Tendulkar and Rangarajan committees. Both of them noted that changes in the demographic and activity composition since the task force required changes in the calorie norm and expenditure level. 

However, while they revisited the expenditure and nutritional dimensions of a poverty norm, they did not adequately address its non-food components. The essence of their argument was to assert that if spending in an expenditure class is adequate to meet nutritional norms, it will also be normatively adequate to meet the associated non-food components.

The problem with this assumption is that India has changed significantly since the task force on poverty was set up in the 1970s. Life expectancy at birth, which was 49.7 years in 1970 has risen to 69.4 in 2018. The population above 60 has risen from 6.1% to above 10.1% (as of 2021). India’s gross enrolment ratio (GER) at the primary level has risen from about 62% in 1971 to universal enrolment today. In higher education, our GER has risen from below 6% then to around 28% today.

These changes have implications for out-of-pocket expenditures on education and health. NSS surveys reveal this fact by showing the significant rise in expenditure on these accounts over the years. The reduction in mortality rates and rise in life expectancy have increased age heterogeneity in our population, with a rising share of the elderly. Changes in household composition (with the rise of unitary families) have also increased the proportion of the elderly who are living on their own. It is well documented that the medical requirements of the elderly are different from those of the young. 

The implications of this changing age profile on the normative health expenditure requirements of this emerging group have thus far not been carefully addressed. Given that the proportion of the elderly is projected to rise even more sharply in the coming years, the adequacy of norms derived for a much younger population will become even more questionable.

The inclusion of a poll promise to extend the coverage of Ayushman Bharat to the elderly in the Bharatiya Janata Party manifesto is an indicator that the political class has understood this problem better than the academic community that specializes in studying poverty.

The success of policies that have resulted in a rise in enrolment ratios both at primary and higher education levels has meant that competition for aspirational jobs has become stiffer. This increased competition has led to increased out-of-pocket expenditure on supplementary tuition classes, as indicated by the mushrooming of coaching institutions across the country. 

The burden of expenditure on private coaching is a major factor in creating what we may call ‘education poverty’ among families with young children. Addressing this problem is not merely about making financial resources available, but about changing the approach to education, as has at least been signalled in the National Education Policy, 2020.

The deeper problem is as follows. Consumption- based poverty measures are essentially capturing the average attributes of the population. While an average is a reasonable way to compare population attributes over time when the underlying population structure is stable, increased heterogeneity in the population makes the use of an average to describe attributes such as poverty seriously problematic.

For example, an elderly household may have enough income to meet the expenditure requirements of a nutrition norm, but not its healthcare requirements. Similarly, we could have a household with young children that can meet its food needs but not its aspirational requirements of private tuition. 

Such examples reveal that households may exceed the thresholds of extreme poverty, but yet continue to lack resources for a ‘decent standard of living.’ In order to meet the Sustainable Development Goal of ending poverty in all its forms, we should acknowledge India’s success in relieving poverty by norms framed in the 1970s and move on, so that we can define fresh norms appropriate for Amrit Kaal.