Consumption-based poverty Estimation is still relevant

Why in the news?

A recent report by NITI Aayog on multidimensional poverty and the Global Multi-dimensional Poverty Index Report, 2023 have shown a declining trend of Poverty in India.

• The NITI Aayog report on multidimensional poverty
  • Decline of percentage of poor from 25% in 2015-16 to 15% in 2019-21.
  • 135 million people were lifted out of poverty during this period.
• The Global Multi-Dimensional Poverty Index Report, 2023
  • Released by United Nations Development Programme (UNDP) and the Oxford Poverty & Human Development Initiative (OPHI).

The incidence of the multidimensional poverty index declined from 27.5% in 2015-16 to 16.2% in 2019-21.

Poverty-Estimation Committees set up in India:

Tendulkar Committee (2009):

1. The estimates revealed that over a 7-year period between 2004-05 and 2011-12, the number of poor-population decreased by 137 million despite an increase in population.

 Rangarajan Committee methodology:

1. Decline between 2009-10 and 2011-12 is 92 million, which is 46 million per annum.

In absolute terms, the poverty ratios based on the Tendulkar and Rangarajan Committee methodologies are lower than estimated by global MPI.

Issues with the use multi-dimensional indicators in the measurement of poverty:

Issues highlighted by the Expert Group to Review the Methodology for Measuring Poverty (2014):

1. Measurability

There is a problem with the child mortality indicator as it is for population groups and not for households.

2. Aggregation across indicators is an issue as the indicators should be independent.

For instance, access to safe drinking water cannot be aggregated with indicators such as child mortality.

3. Databases that provide the requisite information at reasonably short intervals is a constraint.
4. The arbitrariness in devolving weighted sum of non-commensurate indexes.
   • For instance, in Human Development Index (HDI), an equal weight of 1/3 is given to three variables- life expectancy, literacy rate and GNI per capita. This lacks some value judgement and seems to be quite arbitrary.

Need for changes in Surveys:

1. Consumption expenditure is a multidimensional conceptualisation of poverty
2. Following one method for poverty estimation is required for purposes of comparison.
3. There is a need to supplement the results of consumption surveys with a study of the impact of public expenditure on health and education of different expenditure classes.