India has seen a sharp reduction in poverty. An estimated 135 million people, that is close to 10 per cent of India’s population have escaped poverty between 2015 and March 2021 or that India is witness to a steep decline in poverty headcount ratio from 24.85 per cent in 2015-16 to 14.96 per cent in 2019-21. These and other numbers rich in good tidings about India’s progress on poverty reduction over the last five years emanate from a Niti Aayog Multidimensional poverty index 2023 report.
Since the report findings also include the debilitating period of the pandemic, the two obvious questions are: 1, Did India see a fall in poverty when COVID-19 was walloping India and 2, how was the data gathered during the pandemic? On this, the report makes an important disclosure: “It is important to note that the poverty estimates presented in this report may not fully assess the effects of the COVID-19 pandemic on poverty, since more than 70 per cent of the data (NFHS-5) was collected before the pandemic.” But then, it also adds: “At the same time, this report does not capture the economic and social progress the country has made in the last two years.”
Poverty in India has been a subject of rich debate especially among the devotees of the dismal science and much of the discussion has been around how it is defined and measured. The traditional approach has been to look at the consumption expenditure and the income criteria whereas the Niti Aayog report opts for the multidimensional data that instead looks at health, education and the standard of living.
The Niti Aayog report also refers to this and says: “historically, poverty estimation has predominantly relied on income as the sole indicator. However, the Global Multidimensional Poverty Index (MPI), based on the Alkire-Foster (AF) methodology, captures overlapping deprivations in health, education, and living standards. It complements income poverty measurements because it measures and compares deprivations directly.”
Giving a historical context to the findings, the Niti Aayog report also talks of poverty estimation and various efforts made in this direction right from the Working Group in 1962, Dandekar and Rath in 1971, and the Task Force on “Projections of Minimum Needs and Effective Consumption Demand” led by Dr. Y. K. Alagh in 1979. Subsequently, expert groups headed by Lakdawala (1993), Tendulkar (2009), and Rangarajan (2014). All of these continued estimating monetary poverty based on consumption and expenditure surveys. But then, the report argues that “over time, it has been recognized that poverty has additional dimensions that affect individuals’ experiences and quality of life.” This report therefore looks at multidimensional poverty and goes about giving equal weightage to health, education and standard of living. In this, health includes elements like nutrition, child and adolescent mortality and maternal health. In education, the aspects considered include: years of schooling and school attendance and finally, the standard of living encompasses the position with respect to cooking fuel, sanitation, drinking water, housing, electricity, assets and bank account.
In other words, the multidimensional index, an approach that many seem to be taking globally, takes into consideration elements ranging from sanitation, housing to education but not so much about consumption expenditure or the income criteria, which have been historically used.
Depending on which economist one is talking to, views differ from this being the best possible measure of poverty with some even saying India has no poverty to those who swear by the traditional approach of looking at consumption expenditure and the income criteria to assess poverty. The multidimensional approach, they argue, without wanting to be named, is at best one way of looking at poverty because the picture is not complete without taking into consideration income or consumption. But then, there are also those who also remind that the nutrition days after all also indirectly measure consumption deprivation. One could also argue that since the earlier reports on poverty were based purely on income and consumption, one may not be able to compare the findings of this report with the earlier reports. However, for the moment, those keen that the consumption expenditure data should be used to estimate poverty would have to wait since this survey has not yet been officially released.
The picture of poverty has therefore much to do with which report one is referring to and how one defines and measures it. Some see this more as a debate between absolute poverty versus relative poverty with the attempt to look at only consumption and income giving a picture of absolute poverty and multidimensional poverty a glimpse into relative poverty.
Measure of deprivation
The debate even had a veteran economist to call multidimensional poverty as a misnomer because what it measures is deprivation (assets included) whereas poverty has traditionally been seen as an ‘income concept’ the logic being that if someone says he or she is poor, they are understood as ones that do not have enough income. Deprivation takes into account historical factors and not something that is happening at the moment and is therefore a backward-looking measure as it looks at what the household has been through in the past. This is therefore totally different from the income and consumption measure, which is about the present and therefore this is the classic apples and oranges.