Poverty in India : Data for 2020-21 shows a Decline Over the Decade : Daily Current Affairs

Relevance: GS-2: Issues relating to Poverty and Hunger.

Key phrases: Poverty, headcount ratios, Consumer Price Index (CPI), BIMARU, Suresh Tendulkar committee, Periodic Labour Force Survey (PLFS), Household Consumption Expenditure survey.

Context:

Poverty has been an issue in general. It has also received additional attention because of the exogenous shock of the pandemic.
As is known growth leads to a reduction in poverty, but here the composition of growth is also important.

How poverty is measured?

Poverty is usually measured through headcount ratios, the percentage of the population below a determined poverty line.
That poverty line is typically defined as a minimum basket of goods and services required for subsistence, converted into a nominal consumption expenditure figure, using appropriate prices.
That has been the approach in India since poverty began to be measured in the 1950s and was further refined in the 1970s.
In other words, one uses monthly per capita consumption expenditure to define the poverty line.
The official poverty line is still the Tendulkar poverty line, available for 2011-12, state-wise, and separately for rural and urban areas.
We have used the Consumer Price Index (CPI) for price changes since 2011-12, to arrive at corresponding poverty lines for 2020-21.
After that, using PLFS 2020-21 household monthly consumption data, the percentage of the population living below that poverty line has been estimated.

Do you know?

The all-India poverty ratio is 2020-21 is 17.9%, compared to 21.9% in 2011-12, with lower poverty in urban India compared to rural India.

What State-level figures show:

Poverty ratios have declined over this period, though not as much as they might have.
The quantum was limited by the pandemic. This, however, has implications for sustainable development goals.
Of particular concern is the deterioration in Himachal Pradesh, Jammu and Kashmir, Karnataka, Maharashtra, Rajasthan, Sikkim, and Uttarakhand.
In contrast, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh, and West Bengal are remarkable successes. These red areas, with an obvious difference between the base (the absolute) and the increment, are no longer classic ‘BIMARU’.

Do you know?

Six official committees have so far estimated the number of people living in poverty in India — the working group of 1962; V N Dandekar and N Rath in 1971; Y K Alagh in 1979; D T Lakdawala in 1993; Suresh Tendulkar in 2009; and C Rangarajan in 2014.
The government did not take a call on the report of the Rangarajan Committee; therefore, poverty is measured using the Tendulkar poverty line.

Impacts of recent shocks:

India’s growth may have slowed, but before the covid shock, did not turn negative. So, there must have been declines in poverty, perhaps at slower rates.
It is possible that the temporary shock of covid temporarily reversed the trend.
In addition to the health and employment shock, there was an increase in medical costs.
Wild figures have floated around, suggesting millions of Indians dropped below the poverty line because of the pandemic.
If growth enabled those just below the poverty line to move above, it is plausible that a temporary exogenous shock would move them below the line, temporarily. That is, once growth recovers, the negative trend will reverse itself.

Need for alternative data source:

To measure poverty, one needs:
1. a poverty line; and
2. accurate data.
The Household Consumption Expenditure survey has been the basis of the estimation of poverty in the country.
It is a detailed survey seeking information on expenditure by households of around 350 items of food, clothing, durable goods, education, health, transport, fuel, rent, etc.
The last such survey for which results are available in 2011-12. Hence, in a sense, the official poverty ratios still date to 2011-12.
Using various assumptions, people have tried to extrapolate the 2011-12 survey.
The National Sample Survey Office (NSSO) is going to start the next NSS survey in July 2022 for the period 2022-23, the final results of which may be available by end of 2023.
This means we should explore alternative data sources that are reliable enough to provide comprehensive coverage.

Changed methodology for data collection in PLFS survey:

The Periodic Labour Force Survey (PLFS) by the NSSO also collects information about usual household consumption expenditure.
Till 2019-20, the PLFS used to collect the monthly consumption expenditure of households through a single question.
However, in the PLFS conducted during 2020-21, the information on household expenditure was collected through five questions relating to:
1. goods and services;
2. homegrown produce;
3. the imputed value of in-kind transfers and gifts;
4. expenditure on clothing, footwear, etc; and
5. expenditure on durable goods.
In other words, the PLFS now approximates an NSS household consumption expenditure survey rather well.

What is The Multidimensional Poverty Index (MPI) ?

The global Multidimensional Poverty Index (global MPI) is a poverty measure that reflects the multiple deprivations that poor people face in the areas of education, health, and living standards.
It reflects both the incidence of multidimensional poverty (the proportion of people in a population who are multidimensionally poor) and its intensity (the average number of deprivations that each poor person experiences). It can be used to create a comprehensive picture of people living in poverty and allows for comparisons between countries, regions and the world, as well as within countries by ethnic group, urban/rural location, and other characteristics of households and communities.

[Oxford Poverty and Human Development Initiative (OPHI)]

In India - Multidimensional Poverty Index:

The history of poverty estimation in India dates back to as early as 1901 when Dadabhai Naoroji estimated poverty in the country based on the cost of a subsistence diet.
In 1938, the National Planning Committee suggested a poverty line estimation based on living standards followed by the authors of the Bombay Plan in 1944
Various committees, working groups and scholars including the working group of 1962, Dandekar and Rath in 1971 and the Y.K. Alagh taskforce in 1979 were engaged in the estimating the headline statistic of poverty to inform public policy. Similarly, the Expert Groups under Lakdawala (1993) and Tendulkar (2009) and the Rangarajan Committee (2014) undertook the exercise of estimating monetary poverty.
Globally, the focus on reducing monetary poverty was mirrored in the Millennium Development Goals target of halving the proportion of people living on less than $ 1.25 a day between 1990 and 2015.
The adoption of Transforming our world: the 2030 Agenda for Sustainable Development by 193 countries of the United National General Assembly, including India, brought institutionalised focus in measuring, and addressing poverty in “all its forms” enshrined in its preamble and explicated under Goal 1.

Source: NITI Aayog

Conclusion:

Poverty estimates continue to remain relevant as inputs for decisions on the distribution of resources across states and for various development programs.
Such an exercise begs an urgency on the part of the government. But poverty estimates are also important for a meaningful analysis of what happened to income distribution, poverty, and vulnerability after 2011-12, a period of an economic slowdown and policy shocks in the Indian economy.
Despite the availability of alternative data sources, estimates of poverty require a credible database and poverty lines that are defined by taking into account the contemporary reality.

Source: Live-Mint

Mains Question:

Q. Data deficiency and excessive subjectivity have been problems to measure poverty necessitating the development of other methods. Analyse.