The traditional measurement of poverty has largely focused on income-based assessments, which provide an incomplete picture of people’s well-being. A paradigm shift is underway with the introduction of consumption-based poverty estimates. This approach takes into account not only income but also the actual goods and services individuals and families consume. It offers a more holistic perspective on poverty, as it considers access to essential needs, such as food, shelter, and healthcare, which is often missed by income-based metrics. By adopting this new method, policymakers can gain deeper insights into the challenges faced by the most vulnerable in society and develop more targeted and effective strategies for poverty reduction. This shift signals a crucial step toward a more accurate and comprehensive understanding of well-being, highlighting the need for a reevaluation of poverty alleviation efforts to ensure no one is left behind.
Tag: GS Paper-3: Poverty
Exam view:
Status of poverty in India; The estimates of poverty based on multidimensional indicators; The estimates of poverty based on consumer expenditure.
Context:
A recent report by NITI Aayog on multidimensional poverty shows that the percentage of the poor has gone down but these estimates are not substitutes for National Sample Survey consumption-based poverty ratios.
Decoding the editorial: Status of poverty in India
- The Global Multidimensional Poverty Index (MPI) report of 2018 by UNDP and OPHI
- The incidence of multidimensional poverty was almost halved between 2005/06 and 2015/16, climbing down to 27.5 percent.
- Thus, within ten years, the number of poor people in India fell by more than 271 million.
- The Global Multidimensional Poverty Index report of 2023
- The incidence of the multidimensional poverty index declined from 27.5% in 2015-16 to 16.2% in 2019-21.
The estimates of poverty based on multidimensional indicators
- The search for non-income dimensions of poverty stems from a view that in terms of the capabilities approach to the concept and measurement of poverty, some of these ‘capabilities’ may not be tightly linked to the privately purchased consumption basket in terms of which the poverty lines are currently drawn.
- As per the Expert Group to Review the Methodology for Measuring Poverty (2014), these measures raise several issues regarding their
- measurability,
- aggregation across indicators, and
- databases that provide the requisite information at reasonably short intervals.
- Aggregation
- In principle, indicators should be independent.
- For example: Access to safe drinking water, cannot be aggregated with indicators such as child mortality.
- Even in respect of independent indicators, analytically appropriate rules of aggregation require that all of them relate to the same household. This requirement poses data constraints.
- For example, there is a problem with the child mortality indicator as it is for population groups and not for households.
- Converting all of them into an index poses several problems.
- The Human Development Index pioneered by the United Nations Development Programme is an example of an arbitrarily weighted sum of non-commensurate indexes.
- The non-income indicators of poverty are reflections of inadequate income.
- Defining poverty in terms of income or in the absence of such data in terms of expenditure seems most appropriate, and it is this method which is followed in most countries.
The estimates of poverty based on consumer expenditure
- The Tendulkar committee methodology: The number of poor came down by 137 million over a seven-year period between 2004-05 and 2011-12, despite an increase in population.
- The Rangarajan Committee methodology: The 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 as estimated by global MPI.
- Issues:
- There is no official data on consumer expenditure after 2011-12 to make a comparison with trends in the multidimensional poverty index.
- The survey data on consumption expenditures done in 2017-18 have not been released officially.
- In the absence of such data, there have been several studies on poverty using indirect methods and using the Centre for Monitoring Indian Economy (CMIE) and Periodic Labour Force Survey (PLFS) data sources, and they have come up with differing conclusions.
- The widening differences in aggregate consumption estimates between National Accounts Statistics (NAS) and NSS data.
- These two estimates of consumption (NSS and NAS) do not match in any country.
- However, the difference in India between the NSS and the NAS consumption has widened from less than 10% in the late 1970s, to 53.1% in 2011-12, i.e., the Survey Estimate is only 46.9% of NAS estimates.
- The National Statistical Office must study the problem and come out with possible suggestions to improve the collection of data through both routes.
- 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.
Source: The Hindu
Frequently Asked Questions (FAQs)
Q: What are Consumption-Based Poverty Estimates?
A: Consumption-Based Poverty Estimates are an alternative approach to measuring poverty that takes into account the goods and services individuals or households consume rather than focusing solely on their income. It assesses whether people have access to essential needs like food, shelter, and healthcare, providing a more comprehensive view of their well-being.
Q: How do Consumption-Based Poverty Estimates differ from Income-Based Estimates?
A: While income-based estimates focus on the money people earn, consumption-based estimates consider the actual goods and services they consume. This means it includes both purchased and non-purchased items, providing a more accurate picture of a person’s standard of living.
Q: Why is it important to use Consumption-Based Poverty Estimates?
A: Consumption-based estimates offer a more holistic view of poverty, as they capture aspects of well-being often missed by income-based measures. They help policymakers better understand the living conditions of the poor and can lead to more effective poverty reduction strategies.
Q: What are some challenges in implementing Consumption-Based Poverty Estimates?
A: Gathering data on consumption can be challenging, as it requires detailed information on what people are consuming, which may be more difficult to obtain than income data. Additionally, the methodology for calculating consumption-based estimates can vary, making comparisons between regions or countries complex.
Q: Can Consumption-Based Poverty Estimates be used to assess well-being in both developed and developing countries?
A: Yes, consumption-based estimates are applicable in both developed and developing countries. They provide valuable insights into the living conditions of individuals or households in any context and can be adapted to different economic and social conditions. This makes them a versatile tool for assessing well-being worldwide.
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