A sharp reduction in India’s poverty and inequality

Context

According to a study by economists Surjit S Bhalla and Karan Bhasin, India has witnessed a sharp decline in poverty and inequality during the last decade.

Key Highlights

• The study is based on government household expenditure data from 2022-23 and 2023-24.
• Poverty Reduction: India’s poverty price on the $3.65 PPP line dropped from 52% in 2011-12 to 15.1% in 2023-24. Extreme poverty on the $1.90 PPP line is now under 1%.
• Consumption Growth: Largest improvements in consumption seen in the backside 3 deciles of the population, showing record increases.
• Declining Inequality: Consumption inequality has decreased, with the Gini coefficient losing from 37.5 in 2011-12 to 29.1 in 2023-24.
• Global Context: India’s reduction in inequality is exceptional for a huge, fast-developing economy, with only Bhutan and the Dominican Republic having better records (with smaller populations).
• New Poverty Line Needed: Current poverty traces are previous, suggesting a new benchmark based on the lowest 33rd percentile or relative poverty measures like Europe’s.
  • NITI Aayog has yet to revise reputable poverty estimates, last set by the Tendulkar and Rangarajan committees.

Poverty Line Estimation in India

• Tendulkar committee (2009): Poverty line in the Suresh Tendulkar method was expenditure of ₹33 a day in urban areas and ₹27 a day in rural regions.
  • The country wide poverty line for 2011-12 was envisioned at Rs. 816 per capita per month for rural regions and Rs. 1,000 per capita per month for urban regions.
• Rangarajan committee(2014): In the Rangarajan methodology, it was ₹47 a day in urban areas and ₹30 a day in rural regions.
  • The authorities did not take a call on the report of the Rangarajan Committee,  consequently, poverty is measured using the Tendulkar poverty line.
• International Poverty Line: The World Bank defines someone as extraordinarily bad if someone is living on much less than $2.15 per day, which is adjusted for inflation as well as rate differences between nations.

Concerns with India’s Calculation of Poverty Line

• Inadequate Thresholds: The updated poverty line of Rs 965 (urban) and Rs 781 (rural) per month is seen as too low to reflect simple living standards, leading to complaints for not accurately capturing poverty.
• Outdated Methodology: It specializes in calorie consumption and fails to reflect current consumption patterns and desires.
• Limited Consideration of Non-Food Needs: The poverty line doesn’t completely account for growing personal costs in health, education, and other important offerings.
• State-Level Variations: The same poverty line is carried out uniformly across states despite vast regional price-of-living differences, which distorts the accuracy of poverty assessments.
• Lack of Regular Updates: The official poverty line hasn’t been updated in alignment with newer financial realities, such as inflation or changes in consumption patterns, making it much less applicable.

Way Ahead

• Periodically revise the poverty line to reflect current financial conditions, inflation, and converting consumption patterns.
• Broaden Criteria: Incorporate non-food factors like fitness, education, and housing into the poverty line calculation to higher reflect the real cost of living.
• Regional Adjustments: Implement location-particular poverty lines to account for variations in fee of residing throughout states and regions.
• Adopt Modern Methodologies: Move far from outdated calorie-based measures and adopt more holistic signs, which include nutritional needs and usual well-being.

Source: The PIB

UPSC Mains Practice Question

Q. COVID-19 pandemic accelerated class inequalities and poverty in India. Comment. (2020)

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