Poverty and inequality

Poverty and inequality

As per the Report of the Expert Group to Review the Methodology for Measurement of Poverty (also called the Rangarajan Committee Report on Measurement of Poverty 2014), which was submitted to the Government of India in June 2014 (Please click here to download):

•    Based on the analysis presented in the Report by Rangarajan Committee, monthly per capita consumption expenditure of Rs. 972 in rural areas and Rs. 1407 in urban areas is treated as the poverty lines at the all India level. This implies a monthly consumption expenditure of Rs. 4860 in rural areas or Rs. 7035 in urban areas for a family of five at 2011-12 prices.

•    Based on the methodology outlined in the Report, the poverty ratio at all India level for 2011-12 comes to 29.5%. Working backwards this methodology gives the estimate for 2009-2010 at 38.2%. This is in contrast to 21.9% as estimated by Tendulkar methodology for 2011-12 and 29.8% for 2009-10.

•    Compared to the poverty lines based on the methodology of the Expert Group (Tendulkar), the poverty lines estimated by the Expert Group (Rangarajan) are 19% and 41% higher in rural and urban areas, respectively.

•    The Expert Group (Rangarajan) uses the Modified Mixed Recall Period consumption expenditure data of the NSSO as these are considered to be more precise compared to the MRP, which was used by the Expert Group (Tendulkar) and the URP, which was used by earlier estimations. 67% of the increase in the rural poverty line and 28% of the increase in the urban poverty line is because of the shift from MRP to MMRP*.

•    The Expert Group (Rangarajan) estimates that the 30.9% of the rural population and 26.4% of the urban population was below the poverty line in 2011-12. The all-India ratio was 29.5%. In rural India, 260.5 million individuals were below poverty and in urban India 102.5 million were under poverty. Totally, 363 million were below poverty in 2011-12.

•    The poverty ratio has declined from 39.6% in 2009-10 to 30.9% in 2011-12 in rural India and from 35.1% to 26.4% in urban India. The decline was thus a uniform 8.7 percentage points over the two years. The all-India poverty ratio fell from 38.2% to 29.5%. Totally, 91.6 million individuals were lifted out of poverty during this period.

•    The Expert Group (Tendulkar) had used the all-India urban poverty line basket as the reference to derive state-level rural and urban poverty. This was a departure from the earlier practice of using two separate poverty line baskets for rural and urban areas. The Expert Group (under C Rangarajan) reverts to the practice of having separate all-India rural and urban poverty basket lines and deriving state-level rural and urban estimates from these.

•    The Expert Group (Tendulkar) had decided not to anchor the poverty line to the then available official calorie norms used in all poverty estimations since 1979 as it found a poor correlation between food consumed and nutrition outcomes. However , on a review of subsequent research, the Expert Group (Rangarajan) took a considered view that deriving the food component of the Poverty Line Basket by reference to the simultaneous satisfaction of all three nutrient -norms would be appropriate when seen in conjunction with the emphasis on a full range of policies and programmes for child-nutrition support and on public provisioning of a range of public goods and services aimed at the amelioration of the disease-environment facing the population.

•    The Expert Group (Rangarajan) prefers NSSO’s estimates and decides not to use the National Accounts Statistics (NAS) estimates. This is in line with the approach taken by Expert Group (Lakdawala) and Expert Group (Tendulkar).

•    Public expenditure on social services has increased substantially in recent years. These expenses are not captured, by design, in the NSSO’s Consumer Expenditure Surveys and the poverty line derived from these is thus lower than the services actually consumed.
•    Percentage of population living below the poverty line is found to be highest in Chhattisgarh (47.9%) and lowest in A&N Islands (6.0%) (see the table below)
Poverty in states
* Note: The three MPCE measures may be defined as follows.

-Uniform Reference Period MPCE (or MPCEURP): This is the measure of MPCE obtained by the NSS consumer expenditure survey (CES) when household consumer expenditure on each item is recorded for a reference period of “last 30 days” (preceding the date of survey).

-Mixed Reference Period MPCE (or MPCEMRP): This is the measure of MPCE obtained by the CES when household consumer expenditure on items of clothing and bedding, footwear, education, institutional medical care, and durable goods is recorded for a reference period of “last 365 days”, and expenditure on all other items is recorded with a reference period of “last 30 days”.

-Modified Mixed Reference Period MPCE (or MPCEMMRP): This is the measure of MPCE obtained by the CES when household consumer expenditure on edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants is recorded for a reference period of “last 7 days”, and for all other items, the reference periods used are the same as in case of Mixed Reference Period MPCE (MPCEMRP).

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