Why in the News?
The National Sample Survey Organization’s and Household Consumption Expenditure Survey (2022-23) prompted researchers to estimate Poverty and Inequality trends, highlighting data comparability and measurement issues.
Present trends of Poverty and Inequality in Indian Society:
1. Poverty Declined:
- Poverty ratios declined from 29.5% in 2011-12 to 10% in 2022-23 (1.77% points per year) based on the Rangarajan Committee’s poverty lines.
- Poverty ratios declined from 21.9% in 2011-12 to 3% in 2022-23 (1.72% points per year) based on the Tendulkar Committee’s poverty lines. Earlier period estimates showed a decline from 37.2% in 2004-05 to 21.9% in 2011-12 (2.18 percentage points per year).
2. Inequality Declined :
- Subramanian’s estimates indicate the Gini coefficient declined from 0.278 to 0.269 for rural areas and from 0.358 to 0.318 for urban areas between 2011-12 and 2022-23.
- The Gini coefficient measures the inequality among the values of a frequency distribution, such as levels of income.
- Bansal et al show similar trends: Gini coefficient for rural areas declined from 0.284 to 0.266, and for urban areas from 0.363 to 0.315 over the same period. (significant decline in urban inequality compared to rural areas between 2011-12 and 2022-23)
Back2Basics:
Lakdawala Committee (1993):
- It disaggregated poverty lines into state-specific poverty lines.
- Poverty lines: same as Alagh’s committee of 1979. (2400 kcal per capita per day for rural areas and 2100 kcal per capita per day in urban areas.)
- Poverty lines were updated using the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas and the Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas rather than using National Accounts Statistics.
- Estimates of poverty: 54.9% (All India)
Tendulkar Committee (2009):
- Constituted: In 2005
- Submitted report: 2009.
- Recommendations:
- Firstly, the incorporation of private expenditure on health and education while estimating poverty.
- Secondly, to shift away from two separate poverty line baskets (PLBs) (for rural and Urban) towards a uniform all-India PLB.
- Thirdly, to shift away from Uniform Reference Period (URP) based estimates towards Mixed Reference Period (MRP) based estimates.
- Fourthly, A change in the price adjustment procedure to correct spatial (across regions) and temporal (across time) issues with price adjustment.
- It concluded that India’s poverty line was Rs. 446.68 per capita per month in rural areas and Rs. 578.80 per capita per month in urban areas in 2004-05.
- Estimates of poverty: 37.2 % (All India)
C. Rangarajan Committee (2014):
- Constituted: 2012
- Submitted report: 2014.
- Used a method of calculating urban and rural poverty separately (similar to the Lakdawala committee).
- Took into account both food and non-food items of expenditure.
- Used the MMRP method instead of MRP.
- Poverty was estimated on monthly expenditure of a family of five (and not individual as in case of the Tendulkar committee). All three, i.e., Calorie + protein + Fat intake values were taken into account to estimate poverty.
- Estimates of poverty: 29.5%
- Poverty lines: Rural- Rs. 32; Urban- Rs.47
Methods to Estimate Absolute Poverty by NSSO:
Poverty estimation in India is now carried out by NITI Aayog’s task force through the calculation of poverty line based on the data captured by the NSSO under the Ministry of Statistics and Programme Implementation (MOSPI). It uses the following 3 methods:
- Uniform Recall (reference) Period (URP): Under URP, consumption data for all items are collected for a 30-day recall period. When URP is applied, the households are surveyed about their consumption in the last 30 days preceding the date of the survey.
- Until 1993-94, the poverty line estimated by NSSO was based on URP.
- Mixed Recall (reference) Period (MRP): MRP takes into account consumption expenditure for five non-food items (clothing, footwear, durable goods, education, and institutional medical expenses) for a 365-day recall period, and consumption data for the remaining items are collected for a 30-day recall period.
- Modified mixed reference period (MMRP): The Rangarajan Committee in its 2014 report recommended MMRP as a more suitable method to measure poverty as compared to URP and MRP methods. The World Bank in 2015 also supported the idea of shifting from MRP to MMRP. Under MMRP there are 3 reference periods as follows:
- The 365-day recall period is used for clothing, footwear, education, institutional medical care, and durable goods.
- The 7-day recall period for edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, paan, tobacco and intoxicants and
- The 30-day recall period for the remaining food items, fuel, and light, miscellaneous
good and services including non-institutional medical, rents, and taxes.
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Measurement issues regarding Poverty Lines and Consumption Expenditure:
- Shift Away from Calorie Norm-based Poverty Line: The Tendulkar Committee recognized the inadequacy of a calorie norm-based poverty line. Instead, the Tendulkar Committee indirectly utilized calorie norms by adopting the urban poverty line based on the Lakdawala Committee’s methodology, which included calorie norms.
- Need for new Consumption Basket: The Rangarajan Group emphasized the need for a new consumption basket that addresses both adequate nourishment and essential non-food items, alongside behaviorally determined non-food expenditure.
- Estimating this new poverty basket required a fresh approach rather than simply updating an old basket with new prices.
- Incomplete Capture of Public Expenditure: Despite efforts to impute values for public expenditure items, the imputation process captured only a fraction of the total public expenditure on subsidized or free items.
- Complexity in Poverty Measurement: There is no universally agreed-upon method for measuring poverty, leading to variability in estimates.
Constitutional provisions related to eliminating inequalities:
i. [Article 38 (2) ]: Obligation of the State ‘to endeavour to eliminate inequalities in status, facilities and opportunities’ amongst individuals and groups of people residing in different areas or engaged in different vocations.
ii. [Article 46]: Obligation of State ‘to promote with special care’ the educational and economic interests of ‘the weaker sections of the people’ (besides Scheduled Castes and Scheduled Tribes).
Conclusion: Given the inadequacy of calorie norm-based poverty lines, as recognized by the Tendulkar Committee, there is a need to adopt more effective and real-time approaches that will consider evolving consumption patterns.
Mains PYQ:
Q “The incidence and intensity of poverty are more important in determining poverty based on income alone”. In this context analyse the latest United Nations Multidimensional Poverty Index Report.(UPSC IAS/2020)
