Declining poverty ratio: a continuing trend

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

Trends in poverty, inequality

• The estimated poverty ratios declined
  • from 29.5% in 2011-12 to 10% in 2022-23 (1.77% points per year) based on the Rangarajan Committee’s poverty lines
  • from 21.9% in 2011-12 to 3% in 2022-23 (1.72% points per year) based on the Tendulkar Committee’s poverty lines.
• According to the estimates on inequality, between 2011-12 and 2022-23,
  • the Gini coefficient declined from 0.278 to 0.269 for rural areas
  • from 0.358 to 0.318 for urban areas
• 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.
• The NSSO has changed the reference or recall period of data collection over time to improve the reporting of consumption.
• Three estimates of consumption are available depending upon the recall period of different types of expenditure:
  • uniform reference period (URP);
  • mixed reference period (MRP); and
  • modified mixed reference period (MMRP).
• The Tendulkar Committee estimates poverty ratios on the basis of MRP for 1993-94 and 2004-05.
• The Planning Commission used the same methodology and MRP to estimate poverty ratios for 2009-10 and 2011-12.
• However, the Rangarajan Committee used MMRP for estimating poverty ratios for 2009-10 and 2011-12.

Measurement issues

• The Tendulkar Committee was clear that a calorie norm-based poverty line is no longer appropriate.
  • It converted the urban poverty line of 2004-05 from URP-consumption based, into MRP-consumption.
  • The urban poverty line used by the Lakdawala Committee had calorie norms and so, the Tendulkar Committee also indirectly used these norms.
• In defining the consumption basket separating the poor from the rest, the Rangarajan Committee said
• that it should contain a food component and some consumption expenditure for essential non-food item groups.
• Therefore the HCES 2022-23 tried to get imputed values for some items of public expenditure.
  • The value figures for items received free entirely or at low prices by the households have been imputed using an appropriate method.
• Thus, there has been a decline in poverty. The inequality in consumption expenditure has come down a bit.
  • Usually, income inequality is higher than inequality in consumption expenditure.
  • There is no unique way of measuring poverty.
  • The higher the poverty cut off, the more will be the number of poor.