Abstract
Eradication of poverty is an important objective of economic policy. Therefore, measurement of poverty has to be sound as it has significant policy implications. This paper presents the methodology followed by the Expert Group (Rangarajan) and explains some of the issues that were raised after the publication of the Report. Apart from the methodology, some of the issues discussed in the paper are: use of calories, multidimensional poverty, urban poverty, NAS (National Accounts Statistics)-NSS (National Sample Survey) consumption differences, poverty measures in other countries, public expenditure and poverty, NSS and SECC (Socio-Economic Caste Census), headcount and depth of poverty, inequality and poverty and criteria for eligibility under programmes. The methodology adopted by the new group on poverty is based on sound principles. However, as the group has clearly indicated, this measure is not considered as an appropriate basis for determining entitlements under various programmes. But to obtain a general picture of the progress of the country, a suitable measure on poverty is useful. It represents absolute minimum. Obviously, policy should work towards not only to reduce the number of people below that line but also to ensure that people in general enjoy a much higher standard of living. Policy-makers must continue to follow the twofold strategy of letting the economy grow fast and attacking poverty directly through poverty alleviation programmes.
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Notes
- 1.
- 2.
URP-consumption = consumption data are collected from the households using 30 day recall period for all the items. MRP-consumption = consumption data for five non-food items, viz. clothing, footwear, durable goods, education and institutional medical expenses are collected using 365-day recall period and 30-day recall period for the remaining items.
- 3.
This national level urban poverty line is disaggregated into state-specific poverty lines using “urban state-relative-to-all-India” price differentials. The prices differentials are constructed from a variety of price data most of which are implicit. For 15 commodity groups namely, cereals, pulses, milk, oil, egg-fish-meat, vegetables, fresh fruit, dry-fruit, sugar, salt-spices, other-food, intoxicants, fuel-light, clothing and bedding and footwear, the Fisher indices are computed using implicit prices obtained from the NSS consumer expenditure data of 61st Round (2004–05); for five item groups namely entertainment, personal care items, miscellaneous goods, miscellaneous services and durables, Labour Bureau price data underlying CPIAL and CPIIW is used. The pricing of educational services are constructed from the employment- unemployment survey of the NSS 61st Round (2004–05) and of health services are constructed from the health and morbidity survey of NSS 60th Round (January-June 2004).
- 4.
The state-specific rural poverty lines (of 2004–05) are worked out by adjusting the state- specific urban poverty lines (of 2004–05) with the “within-state-rural-relative-to-urban” price differentials computed from the similar price statistics as in the case of disaggregating the national poverty line into state-specific poverty lines in urban areas.
- 5.
The Expert Group (Rangarajan) has the following terms of reference:
(a) “To comprehensively review the existing methodology of estimation of poverty and examine whether the poverty line should be fixed solely in terms of a consumption basket or whether other criteria are also relevant, and if so, whether the two can be effectively combined to evolve a basis for estimation of poverty in rural and urban areas.
(b) “To examine the issue of divergence between consumption estimates based on the NSSO methodology and those emerging from the National Accounts aggregates; and to suggest a methodology for updating consumption poverty lines using the new consumer price indices launched by the CSO for rural and urban areas state-wise.
(c) “To review alternative methods of estimation of poverty which may be in use in other countries, including their procedural aspects; and indicate whether on this basis, a particular method can be evolved for empirical estimation of poverty in India, including procedures for updating it over time and across states”.
(d) “To recommend how the estimates of poverty, as evolved above, should be linked to eligibility and entitlements for schemes and programmes under the Government of India”.
- 6.
In the MMRP, the consumer expenditure data is gathered from the households using the recall period of: (a) 365-days for clothing, footwear, education, institutional medical care, and durable goods, (b) 7-days for edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants, and (c) 30-days for the remaining food items, fuel and light, miscellaneous goods and services including non- institutional medical, rents and taxes.
- 7.
- 8.
PPD refers to Perspective Planning Division of the Planning Commission.
- 9.
India has made tax data public recently by releasing it for the year 2011–12 (assessment year 2012–13). But, it is very small sample to look at overall income inequalities.
- 10.
For example, see Radhakrishna (2015).
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Acknowledgements
The Expert Group Report (Rangarajan) is based on contributions of all the members of the group. Besides the authors, the group included Dr. K. Sundaram, Mr. Mahesh Vyas and Mr. K. L. Datta. We thank all of them as well as Dr. Savita Sharma and her colleagues in Planning Commission. Usual disclaimers apply.
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Rangarajan, C., Mahendra Dev, S. (2022). Poverty in India: Measurement, Trends and Other Issues. In: Hashim, S.R., Mukherji, R., Mishra, B. (eds) Perspectives on Inclusive Policies for Development in India. India Studies in Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-19-0185-0_13
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