Significant drop in poverty as per National Multidimensional Poverty Index report 

  • August 17, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Significant drop in poverty as per National Multidimensional Poverty Index report 

Subject: Economy

Section: Indices and Reports

In News: 13.5-crore people came out of poverty from 2015- 2019 as per the second National Multidimensional Poverty Index report.

Key Points:

  • The 2nd National Multidimensional Poverty Index report, published by Niti Aayog notes significant drop in poverty. The first such report was published in 2021.
  • The 2023 edition of the index uses data from the latest round of the National Family Health Survey (2019-21), and captures changes in multidimensional poverty between the survey periods of NFHS-4 (2015-16) and NFHS-5 (2019-21).
  • The poverty headcount ratio, that is, the proportion of multi-dimensionally poor in the country, fell from around 25% to just under 15% between the two rounds of NFHS. In absolute terms, this implies that 135 million (or 13.5 crore) Indians escaped multidimensional poverty in this period.
  • It must be noted that this is a multidimensional poverty index and, as such, is not comparable to India’s traditional and official way of estimating poverty.
  • Poverty has traditionally been estimated using a monetary measure. The idea has been to arrive at an amount of money that is considered necessary to either eat a subsistence diet or to achieve a minimum standard of living.
  • Since data on income was difficult to collect, India used regular (five-yearly) consumption expenditure surveys (which showed how much people were spending on consumption).
  • Based on this data, several expert committees — led by D T Lakdawala (1993), Suresh Tendulkar (2009), and C Rangarajan (2014) — drew a “poverty line”. The line is the level of consumption expenditure (stated in rupees) that divides those who are poor from those who are not.
  • India’s last official poverty statistics are from 2011. The data have not been updated because the government junked the consumption expenditure survey of 2017-18. That survey showed a decline in rural consumption and, as such, pointed to an increase in abject poverty.
  • Several economists have tried to work around the absence of consumption data — by using NFHS data or data from the think tank Centre for Monitoring Indian Economy (CMIE) and provided estimates of poverty.
Multidimensional Poverty Index (MPI)

  • The national MPI measures deprivations across the three dimensions of health and nutrition, education, and standard of living.
  • Health
    • Tracks three variables: nutrition, child and adolescent mortality, and maternal health.
  • Education
    • Tracks two variables: years of schooling, and school attendance.
  • Standard of living
    • Tracks seven variables such as sanitation, drinking water, electricity, cooking fuel, housing, assets and bank account.,
  •    The index is based on the methodology used by the Oxford Poverty and Human Development Initiative (OPHI) and United Nations Development Programme (UNDP) to construct the Global MPI. OPHI and UNDP are technical partners in the formulation of the national index.
  •     But India’s MPI is not exactly the same as the Global MPI. For instance, India’s MPI has 12 variables, while the Global MPI has 10. The two additional variables in India’s MPI are maternal health and bank account.
The rise of India’s middle class

  • The report by the title “The rise of India’s middle class” has been recently published by the People Research on India’s Consumer Economy (PRICE) a Mumbai based Think Tank, on the basis of a survey.
  • The report is based on analysis of primary data collected by PRICE through its ICE 360° pan-India survey. The latest survey is based on 40,000 households from 25 Indian states.
  • Although there is no official definition of Middle class in India, PRICE in their report have divided all households into four categories: Destitutes, Aspirers, Middle Class and Rich.
  • Households which are classified as Middle Class have an annual income in the range of Rs 5 lakh to Rs 30 lakh (at 2020-21 prices).
  • Destitute households were those with an annual income less than Rs 1.25 lakh.
  • According to PRICE’s survey, as of 2021, out of a population of 1,416 million, 196 million Indians were categorised as ‘Destitutes’, 432 million were the ‘Middle Class’, and 732 million were ‘Aspirers’.
economy Significant drop in poverty as per National Multidimensional Poverty Index report