Sambhav-2024

• Start the answer by introducing the methodology used for estimating the poverty line.
• Discuss the necessity of recalibrating poverty lines in light of the evolving socio-economic landscape in the country.
• Conclude as per the requirement of keywords.

Introduction

The poverty line in India is estimated using the methodology recommended by the Rangarajan Committee in 2014, which updated the methodology followed by the Tendulkar Committee in 2009. The Rangarajan Committee suggested using a uniform methodology for both rural and urban areas, taking into account the multidimensional nature of poverty.

Body

Estimation Methodology of the Poverty Line in India:

• Consumption-Expenditure Based Methodology:
  • The poverty line is primarily based on consumption expenditure data collected by the National Sample Survey Office (NSSO).
  • The Tendulkar Committee initially used the calorie intake method to estimate poverty but later shifted to a consumption expenditure-based approach, which is more comprehensive.
    • The government uses the Tendulkar poverty line for the calculation of poverty.
    • It recommended a new poverty line based on a basket of essential goods and services required for a minimum level of living.
    • The Tendulkar Committee poverty line was set at:
      • Rs. 33 per capita per day in urban areas
      • Rs. 27 per capita per day in rural areas
    • These poverty lines were based on the calorie requirement of 2400 kcal per capita per day in rural areas and 2100 kcal per capita per day in urban areas.
  • The Rangarajan Committee continued with the consumption expenditure approach but updated the consumption basket to reflect changing consumption patterns.
    • However, the government did not directly adopt the Rangarajan Committee's specific poverty line, citing concerns about its potential fiscal implications.
• Adjustment for Inflation and Price Variations:
  • Poverty lines are adjusted for inflation using the Consumer Price Index for Industrial Workers (CPI-IW) for urban areas and the Consumer Price Index for Agricultural Labourers (CPI-AL) for rural areas.
  • Price variations across states and regions are also considered while estimating poverty lines.
• Multidimensional Poverty Index (MPI):
  • In addition to the income-based poverty line, India also uses the MPI to measure poverty, which considers factors such as education, health, and standard of living.
  • The MPI provides a more holistic view of poverty and helps target interventions more effectively.

Necessity of Recalibrating Poverty Lines:

• Changing Socio-Economic Landscape:
  • The socio-economic landscape of India is constantly evolving, with changes in income levels, consumption patterns, and living standards.
  • Critics argue that the current official poverty measures, based on the Tendulkar poverty line of ₹27.2 per day in rural areas and ₹33.3 per day in urban areas, are too low.
• Impact of Policy Interventions:
  • Policy interventions such as the implementation of welfare schemes and economic reforms can have a significant impact on poverty levels.
  • Recalibrating poverty lines helps in evaluating the effectiveness of interventions such as MGNREGA, PMAY, etc, and making necessary adjustments.
• Regional Disparities:
  • India has significant regional disparities in income levels and living standards.
  • Recalibrating poverty lines allows for the customization of poverty estimates to account for these regional variations through Special Category Status etc.
• Global Comparisons:
  • Recalibrating poverty lines is essential for comparing poverty levels with other countries and meeting international standards.
  • It helps in assessing India's progress towards achieving global development goals such as the Sustainable Development Goals (SDGs) 1, 2, and 3.
• Data Accuracy and Reliability:
  • Regular recalibration of poverty lines ensures that they are based on the latest and most reliable data as per the United Nations System of National Accounts.
  • It helps in maintaining the credibility of poverty estimates and avoids discrepancies due to outdated data.

Conclusion

The methodology used for estimating the poverty line in India is comprehensive, taking into account various factors such as consumption patterns, inflation, and regional variations. Recalibrating poverty lines is necessary to ensure that they reflect the evolving socio-economic landscape and remain relevant for policy formulation and evaluation.