Declining poverty ratio

Source-This post on Declining poverty ratio has been created based on the article “Declining poverty ratio: a continuing trend” published in “The Hindu’’ on 13 May 2024.

UPSC Syllabus-GS Paper-2- Issues relating to Poverty & GS Paper-1- Poverty and Developmental issues.

Context– The Household Consumption Expenditure Survey for 2022-23 (HCES) by the National Sample Survey Office (NSSO) led to estimations of poverty and inequality trends by researchers.

 What are the trends in poverty and inequality according to some studies?

1) Based on the Rangarajan Committee’s poverty lines, the estimated poverty ratio declined from 29.5% in 2011-12 to 10% in 2022-23 (1.77% points per year).

2) Based on the Tendulkar Committee’s poverty lines, the poverty ratio declined from 21.9% in 2011-12 to 3% in 2022-23 (1.72% points per year).

3) Between 2011-12 and 2022-23, the Gini coefficient declined from 0.278 to 0.269 for rural areas and from 0.358 to 0.318 for urban areas, indicating a decrease in inequality.

4) This means poverty declined significantly between 2011-12 and 2022-23, though the rate of decline was lower compared to the 2004-05 to 2011-12 period. Inequality declined between 2011-12 and 2022-23 particularly in urban areas. It is to be noted that all these estimates depend on where the poverty line is drawn.

Read more- All India Household Consumption Expenditure Survey 2022-23

What changes have been made regarding the data collection methodology?

1) The NSSO has changed the reference or recall period of data collection over time, leading to three estimates of consumption: Uniform Reference Period (URP), Mixed Reference Period (MRP), and Modified Mixed Reference Period (MMRP).

2) The Tendulkar Committee used MRP for 1993-94 and 2004-05, while the Rangarajan Committee used MMRP for 2009-10 and 2011-12, making the 2022-23 estimates (based on MMRP) not strictly comparable with earlier years.

3) Changes in methodology, such as coverage of more items and multiple visits, may provide better estimates but raise comparability issues.

What are the issues regarding the data collection methodology?

The NSSO altered the reference or recall period of data collection over time to enhance the accuracy of consumption reporting. Changes in methodology, such as coverage of more items and multiple visits, may provide better estimates but raise comparability issues.

What are the measurement issues discussed regarding poverty lines?

There has been a discussion on the appropriateness of calorie norm-based poverty lines.

The Tendulkar Committee adopted the official urban poverty line of 2004-05 based on the Lakdawala methodology, which indirectly used calorie norms.

The Rangarajan Committee estimated a new poverty basket, including a food component for adequate nourishment, essential non-food items, and behaviorally determined non-food expenditure.

How does public expenditure affect poverty measurements?

The poverty line is based on private consumption expenditure, but public expenditure also impacts household well-being. The Household Consumption Expenditure Survey 2022-23 tried to estimate the value of some things the government provides for free or at low prices. However, this survey didn’t fully account for the government’s help. Thus, there is a need to capture these values better as public expenditure on these items is substantial.

Conclusion– Overall, there has been a decline in poverty and a slight reduction in consumption expenditure inequality. However, it’s noted that there isn’t a single method for measuring poverty, and the number of poor varies depending on the poverty cut-off used.

Question for practice

Highlight the emerging trends in poverty and inequality according to some studies? What changes have been made regarding the data collection methodology?