Poverty Estimate

Poverty Estimate

Subject: Economy

Section: National Income

Context:

Extreme poverty in India has declined by over 12 percentage points during 2011-2019, a World Bank working paper has said.

Details:

• Extreme poverty was as low as 0.8 per cent in the pre-pandemic year of 2019, and food transfers were instrumental in ensuring that it remained at that level in the pandemic year 2020.
• Extreme poverty is measured as the number of people living on less than $1.90 per day (Rs 144.40 at Rs 76 a dollar).
• The poverty head-count rate was 10.2 percent in 2019, down from 22.5 percent in 2011
• Poverty reduction was higher in rural areas (down from 26.3 to 11.6 per cent between 2011 and 2019) than in urban areas (from 14.2 to 6.3 percent).
• Consumption inequality in India has moderated after 2011, with almost no change between 2015 and 2019 as farmers with small landholding sizes have experienced higher income growth.
• Urban poverty rose by 2 percentage points in 2016 (coinciding with demonetisation) and rural poverty rose by 10 basis points in 2019 (coinciding with a slowdown in the economy).

Poverty Estimation:

A common method used to estimate poverty in India is based on the income or consumption levels and if the income or consumption falls below a given minimum level, then the household is said to be Below the Poverty Line (BPL).

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 National Sample Survey Office under the Ministry of Statistics and Programme Implementation (MOSPI).

Data Collection Methods:

• Uniform Resource Period (URP): Up until 1993-94, the poverty line was based on URP data, which involved asking people about their consumption expenditure across a 30-day recall period, that is the information was based on the recall of consumption expenditure in the previous 30 days.
• Mixed Reference Period (MRP): From 1999-2000 onwards, the NSSO switched to an MRP method which measures consumption of five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) over the previous year, and all other items over the previous 30 days. That is to say, for the five items, survey respondents are asked about consumption in the previous one year. For the remaining items, they are asked about consumption in the previous 30 days.

Various Committees: 

• VM Dandekar and N Rath (1971), made the first systematic assessment of poverty in India, based on National Sample Survey (NSS) data.
• Alagh Committee (1979): Task force constituted by the Planning Commission under the chairmanship of YK Alagh, constructed a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure.
• Lakdawala Committee (1993): Task Force chaired by DT Lakdawala, based on the assumption that the basket of goods and services used to calculate Consumer Price Index-Industrial Workers (CPI-IW) and Consumer Price Index- Agricultural Labourers (CPI-AL) reflect the consumption patterns of the poor.
• Tendulkar Committee –Expert group constituted by the Planning Commission and, chaired by Suresh Tendulkar, was constituted to review methodology for poverty estimation.
• Rangarajan Committee –The committee was set up in the backdrop of national outrage over the Planning Commission’s suggested poverty line of ₹22 a day for rural areas.