Poverty Measurement in India – Revisiting the Rangarajan Line and the Shift to Multidimensional Poverty

Poverty Measurement in India Latest News

• Fifteen years after the C. Rangarajan Committee redefined India’s poverty line, a recent study by economists from the RBI’s Department of Economic and Policy Research (DEPR) has updated the poverty estimates for 20 major states.
• Done using the 2022–23 Household Consumption Expenditure Survey (HCES), the findings reveal substantial inter-state variation and highlight the transformation in India’s poverty landscape.

Background – Revisiting the Rangarajan Committee’s Methodology

• The Rangarajan Committee (2014) was set up by the erstwhile Planning Commission to review poverty measurement.
• It estimated the national poverty line at ₹972/month for rural areas (approx. ₹32/day), and ₹1,407/month for urban areas (~₹47/day).
• This placed 29.5% of India’s population below the poverty line in 2011–12. Since then, no government-endorsed poverty line has been established.

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Key Findings – RBI Economists Update (2022-23)

• Major State-level trends: Odisha and Bihar emerged as big movers, showing the largest poverty reduction.
• Odisha: Rural poverty (2011–12) – 47.8%; rural poverty (2022–23) – 8.6%
• Bihar: Urban poverty (2011–12) – 50.8%; urban poverty (2022–23) – 9.1%
• Kerala: Rural poverty (2011–12) – 7.3%; rural poverty (2022–23) – 1.4%
• Himachal Pradesh: Urban poverty (2011–12) – 8.8%; urban poverty (2022–23) – 2.0%
• Lowest rural poverty (2022–23): Himachal Pradesh (0.4%)
• Lowest urban poverty (2022–23): Tamil Nadu (1.9%)
• Highest rural and urban poverty (2022–23): Chhattisgarh (25.1% & 13.3%)

Methodological Approach

• The study did not use consumer price index (CPI) inflation to adjust the 2011–12 lines, as the consumption baskets differ – 
  • Food weight: 57% in rural PLB vs. 54% in rural CPI
  • Food weight: 47% in urban PLB vs. 36% in urban CPI
• Instead, a new price index was constructed matching the Rangarajan Poverty Line Basket (PLB) weights to better reflect price changes.
• This updated index was applied to derive state-specific poverty lines for 2022–23.

The Broader Debate – Measuring Poverty in India

• Divergent estimates:
  • SBI research (using 2023–24 HCES data): Rural poverty – 4.86%; urban poverty – 4.09%
  • World Bank (2022): Poverty in India stood at 10.2% (2019).
  • IMF (2022): Asserted that the poverty rate in India was a much lower 0.8% in 2019, aided by the government’s food transfers.
  • These variations highlight the sensitivity of poverty estimates to methodology, data source, and welfare accounting.
• The shift to multidimensional poverty:
  • Based on the global Multidimensional Poverty Index (MPI), the Indian MPI looks at poverty through three lenses—health, education, and standard of living.
  • These are represented by 12 indicators including nutrition, mortality, schooling, sanitation, electricity, assets, and bank accounts.
  • This shows that poverty lines are seemingly a thing of the past, and poverty estimations now goes beyond just money and consumption. 
  • NITI Aayog (2024) estimates: 24.82 crore people exited multidimensional poverty between 2013–14 and 2022–23, and MPI reduced from 29.17% to 11.28%.
  • World Bank (2022) estimates: India’s poverty headcount ratio at 23.9% (using the $4.2/day line for lower-middle-income countries).
• Analysis – Changing dynamics of poverty measurement:
  • The Rangarajan line provided a monetary lens, focused on minimum consumption expenditure.
  • The current MPI approach integrates human development factors, aligning with the SDGs (Goal 1: No Poverty).
  • The RBI study underscores that poverty reduction is not uniform across states, reflecting disparities in growth, welfare delivery, and employment generation.
  • Methodological issues—such as updating PLBs, data gaps, and regional cost differentials—remain central to India’s poverty discourse.

Way Forward

• Periodic revision of poverty lines: Update the poverty line basket (PLB) to reflect changing consumption patterns and price structures.
• Integration of monetary and multidimensional measures: Combine income or consumption metrics with MPI indicators for a holistic poverty assessment.
• Data transparency and timely surveys: Ensure regular HCES releases to enable evidence-based policymaking.
• Targeted State-level interventions: Focused policies for lagging states like Chhattisgarh, Jharkhand, and Uttar Pradesh.
• Leverage digital welfare platforms: Use Aadhaar-linked DBTs and social registry databases for efficient delivery of benefits.

Conclusion

• The RBI’s updated poverty estimates mark an important revival of the monetary poverty debate in India. 
• While the Rangarajan line remains a statistical benchmark, the policy focus has decisively shifted toward multidimensional poverty—capturing human capabilities and access to basic services. 
• The remarkable decline in poverty, especially in states like Odisha and Bihar, highlights the impact of growth and welfare synergy. 
• But persistent disparities call for region-specific and evidence-based policy frameworks to ensure inclusive and sustainable development.

Source: IE