Why is it in the News?

It is important to recognize India’s progress in alleviating poverty based on norms established in the 1970s. However, there is a need to update the poverty threshold to reflect contemporary notions of a ‘decent standard of living’.

Context:

• The recent release of the Household Consumer Expenditure Survey (HCES) data by the National Sample Survey Office (NSSO) has sparked renewed debates on poverty estimation in India.
• According to estimates derived from the methodologies proposed by the Tendulkar and Rangarajan Committees, poverty levels have reportedly decreased significantly since 2011-12, with figures standing at approximately 6.3% and 10% respectively for the year 2022-23.

Evolution of Consumption-Based Poverty Measurement in India:

• India's consumption-based poverty measurement has evolved since its inception in the 1960s.
• The approach was first introduced by the 1962 Working Group and further refined by the 1979 Task Force.

The 1979 Task Force:

• The task force defined the poverty line as the per-capita consumption expenditure level that could satisfy the average daily calorie requirement of 2,400 kcal in rural areas and 2,100 kcal in urban areas.
  • This included associated non-food expenditures, and the monetary value of this norm became the foundation for subsequent poverty line revisions.

Tendulkar and Rangarajan Committees:

• These committees revisited the calorie norms and expenditure levels established by the 1979 Task Force.
  • However, they did not adequately address non-food components.
  • The committees argued that if expenditures on specific necessities meet nutritional requirements, they should also cover other essential non-food needs.

Implications of the estimates:

• The estimates indicate a notable decrease in poverty since 2011-12.
• However, some commentators advocate for a reassessment of the poverty line in light of changes in survey methodology.
• They contend that recent alterations in survey methodology in the Household Consumer Expenditure Survey (HCES) make previous methodologies unsuitable for analyzing HCES data.
• Surjit S. Bhalla, an economist and former member of the Economic Advisory Council, has provided comprehensive counterarguments to such assertions.
• Nevertheless, none of these discussions have addressed the suitability of current methodologies for monitoring poverty using consumption data.

Historical Background of Poverty Measurement:

• Early approaches: Consumption-based poverty measurement was initiated with a Working Group established by the Planning Commission in 1962 and further refined by a task force in 1979.
  • This task force meticulously outlined its rationale for establishing a poverty line specific to India.
• Definition of poverty line: It was delineated as the per-capita consumption expenditure required to fulfil average daily calorie needs (2,400 Kcal in rural areas, 2,100 Kcal in urban areas) along with associated non-food expenses.
  • This average calorie standard was derived from an analysis of the demographic and activity-based composition of the population during that period.
• The monetary value assigned to this standard became the foundation for subsequent revisions of poverty lines.
  • However, the fundamental methodology underpinning this calculation was not critically reassessed.

Reevaluating Poverty Measurement Norms in India:

• The Tendulkar and Rangarajan Committees acknowledged the evolving demographic and activity composition in India, leading them to propose adjustments to calorie norms and expenditure levels for poverty measurement.
  • However, these committees did not adequately reconsider the non-food components of the poverty line.
• At the core of their argument was the assertion that if spending within an expenditure class is sufficient to meet nutritional requirements, it should also be adequate to cover associated non-food needs.
  • This assumption is questionable in the context of modern India, as the country has undergone significant changes since the 1970s when the Task Force on Poverty was established.

Demographic and Educational Indicators in India Since the 1970s:

Several significant demographic and educational shifts have taken place in India since the 1970s:

• Life Expectancy: Life expectancy at birth has improved from 49.7 years in 1970 to 69.4 years in 2018, reflecting advancements in healthcare and overall quality of life.
• Ageing Population: The proportion of individuals aged 60 and above has grown from 6.1% in the 1970s to 10.1% by 2021.
  • This shift highlights the need for policies and programs that address the unique needs of an ageing population.
• Primary Education: The Gross Enrolment Ratio (GER) in primary education has experienced substantial growth, increasing from 62% in 1971 to universal enrolment today.
  • This progress demonstrates a stronger emphasis on ensuring access to basic education for all children.
• Higher Education: The Gross Enrolment Ratio for higher education has also seen significant growth, rising from below 6% in the 1970s to approximately 28% in recent years.
  • This development signals a greater focus on providing opportunities for advanced education and skill development.

Implications of Demographic and Educational Changes in India:

• The demographic and educational shifts observed in India since the 1970s have significant implications for out-of-pocket expenditures on health and education, as revealed by National Sample Survey (NSS) data. Key implications include:

Education Expenditures:

• The increase in primary and higher education enrolment has led to stiffer competition for aspirational jobs.
• This competition has driven higher spending on private tuition, leading to 'education poverty' among families with young children.
• Addressing this issue requires a change in the approach to education, as outlined in the National Education Policy (2020).

Health Expenditures:

• The rise in life expectancy and an ageing population have led to increased health expenditure needs, especially among the elderly.
• Changes in household composition and a growing elderly population living independently have further highlighted the need for better healthcare provisions.
• Political parties, like the ruling party with its Ayushman Bharat promise, recognize the importance of addressing these healthcare needs, indicating a potential shift in policy focus.

Elderly Population and Household Composition:

• The increase in life expectancy and decline in mortality rates have created a more age-diverse population with a larger elderly population.
• This ageing population necessitates greater attention to healthcare and financial support for the elderly, an issue that may not be adequately captured by current poverty measurement norms.

Redefining Poverty Norms for a Changing India:

• Current consumption-based poverty measures capture average population attributes but face limitations when accounting for increased population heterogeneity.
• As the population structure evolves, using averages to describe poverty becomes problematic.
  • For example: Elderly households may meet nutrition expenditure requirements but struggle with healthcare costs.
• Households with young children might cover food needs yet face challenges in meeting aspirational education expenses, like private tuition.
• These examples highlight how households could surpass extreme poverty thresholds yet lack resources for a decent living standard.
  • Consequently, updating poverty norms is essential to accurately capture the realities of diverse household needs.
• To achieve the Sustainable Development Goal of eradicating poverty in all forms, India must redefine its poverty norms, moving away from outdated standards based on 1970s data.
• By establishing fresh norms for the Amrit Kaal, India can better address the unique challenges faced by its population and make significant strides towards alleviating poverty.

Conclusion

India has made remarkable progress in alleviating poverty based on existing norms. However, to ensure a decent living standard for all citizens, it is crucial to update poverty measures to reflect current demographic and economic changes. By acknowledging the evolving needs of its population, India can continue making significant strides in poverty reduction and work towards a more inclusive and prosperous future.