Poverty Estimation Methods – UPSC GS2

What are the different methods used for Poverty estimation?
  • Consumption method: 
    • Any household failing to meet the minimum level of consumption expenditure or poverty line can be treated as a poor household.
    • This minimum level of consumption expenditure can be derived from minimum expenditure on food and non-food items.
    • Various committees have recommended different consumption level for Urban and Rural areas like Tendulkar Committee, Lakdawala Committee etc.
  • The Multidimensional Poverty Index (MPI):
    • It was developed in 2010 by the Oxford Poverty & Human Development Initiative (OPHI).
    • It is based on 10 indicators related to health, education, and standard of living.
    • A person is MPI poor if they are deprived of at least one-third of the weighted MPI indicators.
    • NITI Aayog, using the same methodology, released the report ‘India: National Multidimensional Poverty Index, Baseline Report’.
  • The Human Development Index (HDI):
    • It is a summary measure of achievements in three key dimensions of human development (a long and healthy life, access to knowledge, and a decent standard of living).
  • Global Hunger Index (GHI):
    • It is based on four indicators (undernourishment, child stunting, child wasting, and child mortality).
    • The scores are aggregated to calculate the GHI score for each country.
    • Countries are ranked based on the GHI score.
Why Consumption method is best?
  • The Multi-Dimensional Poverty Index arbitrarily sets a cut-off of one-third of weighted indicators.
  • The same criticism applies to NITI Aayog’s MPI for India.
  • HDI only shows country rankings.
  • GHI is a partial index, not related to entire household poverty.
  • Whereas, the Consumption method can determine the poverty line and poverty ratio as well.
What are the trends in poverty-estimation methods?
  • Estimates of poverty based on consumer expenditure, using the Tendulkar Committee methodology, show the poverty ratio came down from 37. 2% to 21. 9% and the number of poor came down by 137 million (between 2004-05 and 2011-12). (#Diagram #Chart)
  • MPI was almost halved between 2005/6 and 2015/16.
  • HDI values for India increased significantly from 0. 536 in 2005 to 0. 624 in 2015 and to 0. 645 in 2019.
What are the issues in consumption-based estimates?
  • Presently, there are no officially released estimates after 2011-12.
  • There is an alarming difference between aggregate private consumption expenditure in the National Sample Survey and the figure provided by the National Accounts Statistics. From a difference of less than 10% in the late1970s, it has widened to 53. 1% in 2011-12.
What is the way forward?
  • The NSSO Advisory Group or the National Statistical Commission must study the problem and come out with possible suggestions for improving the collection of data through both routes and narrowing their differences.
  • The National Statistical Office can collect the consumer expenditure data for a normal year after analyzing the reasons for the difference between NSS and NAS estimates.

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