Consumption-Based Poverty Estimates Have Relevance

Why in News?

• 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. 
• In this context, it is important to examine methodology relating to the multidimensional poverty index, and assess whether consumption-based poverty estimates are still relevant or not.

 

Multidimensional Poverty

• Poverty is often defined by one-dimensional measures – usually based on income.
• Multidimensional poverty encompasses the various deprivations experienced by poor people in their daily lives.
• The deprivations include poor health, lack of education, inadequate living standards, disempowerment, poor quality of work, the threat of violence, and living in areas that are environmentally hazardous, etc.

 

Recent Reports on Multidimensional Poverty in India

• A total of 415 million people moved out of poverty in India within just 15 years from 2005/2006 to 2019/2021, highlighting the remarkable achievement by the world's most populous nation.
• This is according to the latest global Multidimensional Poverty Index (MPI) released by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) at the University of Oxford.
• The global MPI is a poverty measure that reflects the multiple deprivations that poor people face in the areas of education, health, and living standards.
• In 2005/2006, about 645 million people were in multidimensional poverty in India, with this number declining to about 370 million in 2015/2016 and 230 million in 2019/2021.

 

Consumption Based vs Multidimensional Poverty Indices (MPI)

• Consumption level-based poverty measures do not directly measure other dimensions of deprivation.
• The global MPI reflects both the incidence of multidimensional poverty (the proportion of people in a population who are multidimensionally poor) and its intensity (the average number of deprivations that each poor person experiences).
• However, Multidimensional poverty estimates are not substitutes for National Sample Survey (NSS) consumption-based poverty ratios.

 

Issues with Multidimensional Poverty Index

• The Conclusion of Global MPI is not a New Breakthrough
  • The estimates of poverty based on consumer expenditure and using the Tendulkar committee methodology show that the number of poor came down by 137 million (between 2004-05 and 2011-12) 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.
• Large Number of Indicators
  • Due to the large number of dimensions and indicators, it becomes necessary to perform good asset mapping in order to find your most appropriate niche.
  • However, due to the large number of indicators within the multi-dimensions, proper assessment and thus implementation of policies may not be effective.
• Aggregation Across Indicators
  • This is another problem. In principle, they should be independent.
  • For example, access to safe drinking water cannot be aggregated with indicators such as child mortality.

 

Concerns About Consumption Expenditure Surveys

• Official data on consumer expenditure after 2011-12 to make a comparison with trends in the multidimensional poverty index is not available.
• 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 Centre for Monitoring Indian Economy (CMIE) and Periodic Labour Force Survey (PLFS) data sources — and they have come up with differing conclusions.

 

Ways to Address Issues With MPI

• Analysing MPI Along with Consumption Based Poverty Estimates
  • The progress of non-income indicators such as education, health, sanitation, drinking water, and child mortality over time can be analysed with income or consumption poverty.
  • But, converting all of them into an index poses several problems.
• Consider Public Services as Another Dimension: On multidimensional issues, viewing public services as another dimension besides consumption is more fruitful.

 

Need for Changes in Consumption Expenditure Surveys

• Improve the collection of data
  • 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.
  • What is perplexing is that 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. The difference is too big to be ignored.
  • The National Statistical Office must study the problem and come out with possible suggestions to improve the collection of data through both routes.
• 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.

 

Conclusion

• Most people relate having a high or low income with being rich or impoverished. Inadequate income is reflected in the many non-income indices of poverty.
• It seems most suitable to define poverty in terms of income, or in the absence of such data, in terms of expenditure, and this approach is used in the majority of nations.

 

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Q1) What are the findings of Niti Aayog on multi-dimensional poverty in India?

All 12 indicators saw improvement. India’s national MPI value has nearly halved from 0.117 to 0.066.The proportion of population in multidimensional poverty reduced from 24.85 per cent to 14.96 per cent between 2015-16 and 2019-21. This reduction of 9.89 percentage points indicates that, at the level of projected population in 2021, about 135.5 million (13.5 crore) people have been pulled out of poverty during this five-year period. The Intensity of Poverty, which measures the average deprivation among the people living in multidimensional poverty, also reduced from 47.14 per cent to 44.39 per cent.

 

Q2) What led to the reduction in MDP in India?

The Niti Aayog report credits the government's targeted policies, schemes and development programmes. The Government’s focus on investments in critical areas of education, nutrition, water, sanitation, cooking fuel, electricity, and housing has played a pivotal role in driving these positive outcomes. Key Government schemes such as Swachh Bharat Mission (SBM), Jal Jeevan Mission (JJM), Poshan Abhiyan, Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya), Pradhan Mantri Ujjwala Yojana (PMUY), Pradhan Mantri Jan Dhan Yojana (PMJDY) among others have contributed significantly in driving the tremendous progress.

 

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Source: The Hindu