Poverty line estimation in India

India will be independent in the true sense only when the evil of poverty is eliminated from the country. This is what Mahatma Gandhi firmly believed concerning the necessity of adopting policy measures that would reduce poverty in India. In simple words, Poverty is the deficiency of adequate money to meet a bare minimum standard of living. The high poverty rates translate to poor quality of life, malnutrition, illiteracy, and instill frustration among people. 

To target poverty, it is of utmost importance to first estimate the number of poor people in the country. As per the latest estimates of UNDP’s Multidimensional Poverty Index(MDPI), nearly 415 million people in India were extracted from the web of poverty from 2005-06 to 2019-21. 

Several attempts have been made to estimate the number of poor in India. At first, it seems pertinent to know the basic overview of poverty line estimation. To start with, the policymakers require the distribution of household expenditure I.e. the spending pattern of houses on several activities. After that, the need is to calculate the nutritional needs of each person which is further translated to the monetary value needed to fulfill the same requirements. This helps in knowing the number of people that fall below the poverty line and hence, the policymakers arrive at the number of poor. The number of poor can be accessed either via the poverty ratio or the headcount ratio. In 2011-12, the Planning Commission noted Poverty levels to be at 21.92%. It was based on the criteria of the Tendulkar Committee report. 

The chronological sequence of all the efforts to estimate poverty is as follows

1. Pre-independence era-

  • Dada Bhai Naroji carried out poverty line estimation and concluded Rs. 16- Rs. 35 per capita per year using the prices of the period 1867-68. 
  • The National Planning Committee established under Shri Jawaharlal Nehru in 1938 measured the poverty line to be Rs. 15 to Rs. 20 per month. 
  • The Bombay Plan of 1944 by leading industrialists came up with Rs. 75 per capita/- year as the poverty line. 

2. The working group was established in 1962 – The poverty line was set as Rs. 100 for Rural areas and Rs. 125 for Urban areas. It was for a month per family. It did not consider expenditure on health and education.

3. In the year 1979, a task force headed by YK Alagh came up with its interpretation of the poverty line. It became the first report on whose premises poverty line estimation began officially in India. It linked the poverty line to calorie requirements as 2400 kcal for Rural people and 2100 kcal for urban people. 

4. Lakdawala Task Force – The need to have state-specific poverty lines for better targeting of policies was felt. It was against this backdrop the Lakdawala expert group was established by the Planning Commission in 1993. The task force recommended continuing with YK Alagh task force’s assigned poverty line and rather introduced a poverty line specific to states. This helped in taking Price differences in States into account. However, the price method didn’t prove much effective and, again health and education expenditure wasn’t taken into account.

5. Suresh Tendulkar Committee- This expert group was set up in 2005 and presented the report in 2009. It transitioned from the calorie-based approach of measuring poverty to nutritional targets. It also incorporated the expenditure on health and education in the calculation of the poverty line. It finally reached the poverty line of Rs. 816 per individual per month for rural areas and Rs. 1000 per individual per month for urban areas. 

6. The Rangarajan Committee was appointed in 2012 to put the controversy set in by the Tendulkar Committee to rest. It moved back to the idea of having distinct poverty line baskets for rural and urban areas. It had both food and non-food components in the basket. It raised the poverty lines to Rs. 972 per capita per month in rural areas and Rs. 1407 per capita per month in urban areas. However, the suggestions were not accepted by the government. 

Later on, the Monthly Per Capita Expenditure Survey (MPCE) is also carried out and further, utilized by the NITI Aayog to record the percentage of people BPL. It was conducted in 2017-18 but no official record is there to access it. 

Problems associated with poverty line estimation 

  1. Experts believe the poverty line is too less and doesn’t confirm reality. 2. The multi-dimensional aspect of poverty is not considered in its entirety. Needs such as housing, sanitation, etc. are not given enough importance. 
  2. The assumption is unsatisfactory that meeting the food requirements would also translate to meeting non-food needs. 
  3. It needs regular updates as to the new goods and services that are finding a place in the consumer’s basket. 
  4. Specifying the ingredients of a basket of goods is not an easy task and needs a host of empirical evidence and studies. 
  5. The poverty line estimation exercise is marred with inclusion and exclusion errors. 

The government on the contrary believes that the percentage of poor people in India I.e close to 22% is in line with the World Bank’s estimate of 21.2%. Further, the government uses various other methods such as Socio-Economic Caste Census (SECC) 2011 to recognize beneficiaries of various welfare schemes. It also states that regular updating of the methods makes it challenging to access the progress made so far. 

A trend has been figured out that percent of Below Poverty Line(BPL), people has consistently decreased since the 1990s in India. Moreover, the decline in urban poverty rates is much faster than that of rural poverty rates.

The way forward for the government is to incorporate more transparency and ground-level analysis for poverty estimation. It is applaudable that innovative methods such as Bare Necessity Index are also being assimilated to better target poverty in India.

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