Consumption-based poverty estimates have relevance (GS Paper 3, Economy)
Context:
- The article examine the issues, particularly on methodology relating to the multidimensional poverty index, and argue that consumption-based poverty estimates are still very relevant.
- Multidimensional poverty estimates are not substitutes for National Sample Survey (NSS) consumption-based poverty ratios.
Recent estimates:
- A recent report by NITI Aayog on multidimensional poverty shows that the percentage of the poor has gone down from 25% in 2015-16 to 15% in 2019-21 and around 135 million people were lifted out of poverty during this period.
- The Global Multidimensional Poverty Index report of 2023 of the United Nations Development Programme (UNDP) and the Oxford Poverty & Human Development Initiative (OPHI), which was released recently, also shows that the incidence of the multidimensional poverty index declined from 27.5% in 2015-16 to 16.2% in 2019-21.
Comparison of results:
- The report of the Global Multidimensional Poverty Index (MPI) 2018 says that the incidence of multidimensional poverty was almost halved between 2005/06 and 2015/16, climbing down to 27.5 per cent. Thus, within ten years, the number of poor people in India fell by more than 271 million.
Comparing Global MPI 2018 with the 2015-16 national estimates:
- The estimates of poverty based on consumer expenditure and using the Tendulkar committee methodology show (over a seven-year period between 2004-05 and 2011-12) that the number of poor came down by 137 million despite an increase in population.
- According to the Rangarajan Committee methodology, the decline between 2009-10 and 2011-12 is 92 million, which is 46 million per annum. For a decade, it will be larger than that of global MPI.
- However, in absolute terms, the poverty ratios based on the Tendulkar and Rangarajan Committee methodologies are lower than as estimated by global MPI.
Poverty based on income vs dimensions:
- The search for non-income dimensions of poverty possibly 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.
- Therefore, poverty based on income or consumption is different from deprivations based on education or health.
Challenges with Multidimensional Indicators:
- As pointed out by the Expert Group to Review the Methodology for Measuring Poverty (2014), there are reservations on using multiple indicators as these multidimensional indicators/measures raise several issues regarding their measurability, aggregation across indicators, and, crucially, of databases that provide the requisite information at reasonably short intervals.
- These need to be considered and evaluated carefully. For example, there is a problem with the child mortality indicator as it is for population groups and not for households.
Aggregation across indicators:
- Aggregation is another problem. In principle, they should be independent.
- Access to safe drinking water, for example, 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. More generally, this requirement poses several data constraints.
Non-income indicators:
- One can analyse the progress of non-income indicators such as education, health, sanitation, drinking water, and child mortality over time with income or consumption poverty. But, converting all of them into an index poses several problems.
- On multidimensional issues, Srinivasan (2007) says viewing public services as another dimension besides consumption in a multidimensional conceptualisation of poverty is more fruitful.
- The Human Development Index is an example of an arbitrarily weighted sum of non-commensurate indexes. It certainly is not a multidimensional conceptualisation in any meaningful sense but simply yet another arbitrary unidimensional index.
- The various non-income indicators of poverty are in fact 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.
What needs to be done?
Consistency:
- The consumption expenditure survey is being conducted in the current year. For purposes of comparison, there is need to follow one method.
Discrepancy:
- An important issue is the 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; India is no exception.
- The difference in India between the NSS and the NAS consumption is widening over time. From a difference of less than 10% in the late 1970s, it has come 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.
Impact of public expenditure:
- In addition, 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.
