Date : 17/08/2023

Relevance: GS Paper 3 - Poverty

Keywords: Consumption-based poverty estimates, Multidimensional Poverty Index (MPI), National Sample Survey (NSS), Poverty measurement methodologies, National Statistical Office (NSO), Poverty alleviation strategies, Indicator aggregation

Context-

The concept of poverty measurement has evolved over time, encompassing both income-based and multidimensional approaches. In recent years, multidimensional poverty estimates have gained attention, but their relevance in comparison to consumption-based poverty estimates is a subject of debate. This discussion delves into the intricacies of these methodologies and highlights the importance of consumption-based poverty estimates.

Consumption-Based Poverty Estimates

• Consumption-based poverty estimates, derived from surveys like the National Sample Survey (NSS), provide insights into the proportion of the population living below a defined poverty line based on their consumption patterns. These estimates are rooted in income and expenditure data and offer a comprehensive understanding of poverty dynamics.
• The NSS consumption-based poverty ratios reflect the changes in poverty over time, often correlated with economic growth. For instance, between 2004-05 and 2011-12, India witnessed a decline of 137 million in the number of poor individuals based on these estimates.

Multidimensional Poverty Index (MPI):

• Multidimensional poverty indices, exemplified by the Global Multidimensional Poverty Index (MPI), incorporate various non-income dimensions of deprivation such as education, health, sanitation, and more. While they highlight the multiple dimensions of poverty, these indices present challenges in terms of data aggregation, indicator selection, and timeliness of information.
• The MPI for India decreased from 27.5% in 2015-16 to 16.2% in 2019-21, signifying progress in reducing multidimensional poverty.

Comparison of Results:

• The MPI's assessment of poverty reduction is consistent with consumption-based estimates for specific time periods.
• The report of the Global Multidimensional Poverty Index (MPI) 2018 says: “India has made momentous progress in reducing multidimensional poverty. The incidence of multidimensional poverty was almost halved between 2005/06 and 2015/16, climbing down to 27.5 percent. Thus, within ten years, the number of poor people in India fell by more than 271 million — a truly massive gain”. This is high praise indeed.
• Is the conclusion of global MPI a new revelation? No, as far as the 2015-16 estimates are concerned. The estimates of poverty based on consumer expenditure and using the Tendulkar committee methodology show (over a seven-year period between 2004-05 and 2011-12) that the number of poor came down by 137 million despite an increase in population. According to the Rangarajan Committee methodology, the decline between 2009-10 and 2011-12 is 92 million, which is 46 million per annum. For a decade, it will be larger than that of global MPI. However, in absolute terms, the poverty ratios based on the Tendulkar and Rangarajan Committee methodologies are lower than as estimated by global MPI.
• The search for non-income dimensions of poverty possibly stems from a view that in terms of the capabilities approach to the concept and measurement of poverty, some of these ‘capabilities’ may not be tightly linked to the privately purchased consumption basket in terms of which the poverty lines are currently drawn. Therefore, poverty based on income or consumption is different from deprivation based on education or health.
• The decline in poverty based on methodologies like Tendulkar and Rangarajan Committees showcases substantial progress over the years. However, it's essential to note that while MPI captures non-income dimensions, consumption-based estimates remain valuable indicators of poverty.

Challenges of Multidimensional Poverty Measures

• The development of multidimensional indices involves challenges like measurability, indicator aggregation, and data availability.
• Aggregating indicators with varying characteristics can be complex.
• Additionally, issues arise when indicators pertain to different population units (e.g., child mortality at the population group level rather than households).
• Despite the value of non-income dimensions, converting them into a single index raises concerns.

Importance of Consumption Expenditure Surveys:

• Consumption expenditure surveys provide critical data for poverty estimation, aiding policy decisions.
• Yet, discrepancies between National Accounts Statistics (NAS) and NSS consumption estimates have emerged, with the divergence widening over time.
• A closer examination of this disparity is imperative, and the National Statistical Office must explore methods to enhance data collection through both routes.

Role of Public Expenditure:

• The impact of public expenditure on health and education needs consideration in poverty analysis. Assessing how different expenditure classes are affected by public spending can shed light on poverty dynamics and the effectiveness of government interventions.

Conclusion

While multidimensional poverty indices offer insights into various dimensions of deprivation, consumption-based poverty estimates remain relevant. These estimates provide a comprehensive view of poverty trends, often linked to economic growth and aid in informed policy formulation. As data continues to evolve, a balanced approach that considers both income-based and multidimensional measures is essential for a holistic understanding of poverty and effective poverty alleviation strategies.

Source- The Hindu