[Answered] Explain the differences between consumption-based poverty estimates and multidimensional poverty estimates. Suggest possible improvements in the collection of data and the need to supplement consumption surveys.

Introduction: Define Poverty and methods to estimate poverty.

Body: Explain the differences between consumption-based poverty estimates and multidimensional poverty estimates

Conclusion: Way Forward.

Poverty can be defined as a condition in which an individual or household lacks the financial resources to afford a basic minimum standard of living. A common method used to estimate poverty in India is based on the income or consumption levels and if the income or consumption falls below a given minimum level, then the household is said to be Below the Poverty Line (BPL). Multidimensional poverty index (MPI) on the other hand captures poverty using 10 indicators: nutrition, child mortality, years of schooling, school attendance, ownership of assets, and access to proper house, electricity, drinking water, sanitation, and clean cooking fuel. The MPI is a more comprehensive measure of poverty because it includes components that capture the standard of living more effectively.

Difference between both methods:

  • Factors and dimensions: Consumption-based estimates are based primarily on the economic aspects showcasing the household consumption or income pattern to meet their basic needs of food, clothing, and shelter. MPI on the other hand broadens the definition by including various dimensions like health & education giving a more comprehensive view.
  • Measurability: Consumption-based estimates are relatively easy to measure as they are based on expenditure or income of the household which can be derived from the consumption pattern or economic figures while MPI indicators need to be evaluated carefully. MPI indicators generally give a comprehensive view of the entire population rather than the household.
  • Policymaking: Consumption-based estimates are useful for understanding the basic economic well-being of individuals and households & framing policies related to income redistribution, social safety nets, and poverty alleviation programs. MPI on the other hand considers non-monetary aspects of deprivation helping policymakers to design programs for the complete well-being & human development of all.

What are the ways to improve the collection of data?

  • Frequent surveys: Poverty estimates should be done frequently to capture the changes in poverty and well-being more accurately.
  • Supplement with other surveys: Poverty estimates in India should consider data from surveys like the Centre for Monitoring Indian Economy (CMIE) and Periodic Labour Force Survey (PLFS) to overcome any shortcomings in data estimates.
  • Minimizing the gap between different surveys: NSO should study the widening gap between the data of National Accounts Statistics (NAS) and National Sample Survey data & make efforts to improve the collection of data through both routes.

Conclusion:

Recent reports of NITI Aayog and UNDP on multidimensional poverty highlight that India has made momentous progress in reducing multidimensional poverty. These statistics should be supported by the consumption-based estimates which are due to be released later this year.

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