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    Poverty Essay

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    The document summarizes the history of poverty estimation methodologies in India from 1950-2000. It discusses key committees that defined poverty lines over this period including the Tendulkar Committee (2009) and the Rangarajan Expert Group (2012). The Rangarajan methodology built upon past approaches by using household expenditure data, separate rural and urban poverty line baskets, a family of five as the estimation unit, and modified mixed recall period consumption data from NSSO surveys. While continuing some aspects of past methodologies like the use of NSSO data and state-wise disaggregation, the Rangarajan approach updated certain parameters like energy requirements and introduced new concepts like the inability to save as the

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    Poverty Essay

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    40 views4 pages
    The document summarizes the history of poverty estimation methodologies in India from 1950-2000. It discusses key committees that defined poverty lines over this period including the Tendulkar Committee (2009) and the Rangarajan Expert Group (2012). The Rangarajan methodology built upon past approaches by using household expenditure data, separate rural and urban poverty line baskets, a family of five as the estimation unit, and modified mixed recall period consumption data from NSSO surveys. While continuing some aspects of past methodologies like the use of NSSO data and state-wise disaggregation, the Rangarajan approach updated certain parameters like energy requirements and introduced new concepts like the inability to save as the

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    indian economy sem 5 university of delhi

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    The document summarizes the history of poverty estimation methodologies in India from 1950-2000. It discusses key committees that defined poverty lines over this period including the Tendulkar Committee (2009) and the Rangarajan Expert Group (2012). The Rangarajan methodology built upon past approaches by using household expenditure data, separate rural and urban poverty line baskets, a family of five as the estimation unit, and modified mixed recall period consumption data from NSSO surveys. While continuing some aspects of past methodologies like the use of NSSO data and state-wise disaggregation, the Rangarajan approach updated certain parameters like energy requirements and introduced new concepts like the inability to save as the

    Copyright:

    © All Rights Reserved
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    40 views4 pages

    Poverty Essay

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    The document summarizes the history of poverty estimation methodologies in India from 1950-2000. It discusses key committees that defined poverty lines over this period including the Tendulkar Committee (2009) and the Rangarajan Expert Group (2012). The Rangarajan methodology built upon past approaches by using household expenditure data, separate rural and urban poverty line baskets, a family of five as the estimation unit, and modified mixed recall period consumption data from NSSO surveys. While continuing some aspects of past methodologies like the use of NSSO data and state-wise disaggregation, the Rangarajan approach updated certain parameters like energy requirements and introduced new concepts like the inability to save as the

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    lOMoARcPSD|9652449

    Poverty essay

    Indian Economics (University of Delhi)

    StuDocu is not sponsored or endorsed by any college or university


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    lOMoARcPSD|9652449

    Home Assignment II

    Poorvi Gupta

    November, 2020

    Introduction

    Poverty can be defined as a condition in which an individual lacks the financial resources to afford a
    minimum standard of living. Economists estimate poverty as the shortfall in consumption expenditure
    from a threshold called the “Poverty Line”. The official Poverty Line is the expenditure incurred to obtain
    the goods in a “Poverty Line Basket” (PLB). Poverty Rate is then measured in terms of the proportion of
    people living below this line.

    Poverty estimates are crucial for tracking the impact and success of various government policies. Thus
    when the Suresh Tendulkar Committee Report (2009) pegged the poverty line as Rs 27 in rural areas and
    Rs 33 in urban areas per capita per day, it faced sharp criticism and sparked a nationwide outrage. In the
    face of this civil dissatisfaction, the government appointed the Rangarajan Expert Group (2012) to
    identify the poor by revisiting the previous methodologies.

    A Brief History of Poverty Estimation in India (1950-2000)

    The first poverty estimation was done by a Working Group (1962) which formulated separate national
    poverty lines for rural and urban areas - ₹20 and ₹25 per capita per month respectively. It excluded
    consumption expense on health and education. Till 1979, the approach to estimate poverty was traditional
    i.e. lack of income. This was changed by the Alagh Taskforce (1979) which measured poverty as
    starvation i.e. in terms of what people eat. Alagh constructed a poverty line separately for rural and urban
    areas on the basis of nutritional requirements.

    The main point of criticism for the Alagh Poverty Line was the application of the same poverty line in all
    the states, which implied the absence of price differentials. It assumed a fixed uniform consumption

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    lOMoARcPSD|9652449

    basket over time. It was based on the pro- rata adjustment of NSS consumption expenditure to NAS data.
    Over years, this adjustment factor grew larger which led to under estimations.

    Hence, the Lakdawala Committee (1993) was appointed to revisit the methodology. It made two changes.
    Firstly, the method used state-specific poverty lines as against national poverty line. Secondly, it used the
    consumption distributions of NSS without any adjustments.

    Finally, the Tendulkar Committee (2009) did away with the above calorie-based criteria and included
    consumption on other basic requirements like housing, clothing, education, and health, to make
    estimation more realistic. Unlike Alagh, it introduced a uniform PLB for both urban and rural areas. It
    also recommended using Mixed Recall Period (MRP) estimates as opposed to the Uniform Recall Period
    (URP).

    A break from the past: Rangarajan Committee

    We see that the improvements over time have led to a firmer reliance on the NSSO’s surveys, a much
    better method to adjust for inter-state and inter-region differences in price changes over time, and the use
    of the better recall period introduced in the NSSO’s surveys. Rangarajan committee further builds on this
    to make the poverty estimates more robust.

    Methodology:

    Rangarajan’s estimates were based on an independent large survey of households by CMIE wherein a
    household is considered poor if it is unable to save. The poverty line in this methodology is therefore
    derived entirely from the observed data of household income and expenses. It is not dependent upon any
    assumptions or norms regarding a minimum standard of living.

    Poverty Line Basket:

    Tendulkar committee shifted to a uniform PLB for both urban and rural areas. Rangarajan however
    reverts to the old practice of using separate all India urban and rural baskets. The basket contains three
    items: (i) Food Items, (ii) Essential Non-Food Items and (iii) Behaviorally Determined Non-Food Items.
    This differs from old poverty lines which were based on calorie intake only and not the normative
    expenditures like rent and transport.

    Unit of Estimation:

    Rangarajan Committee calculates the poverty line on family basis with average 5 members since the non-
    food items are shared amongst the family members. While all previous poverty lines laid emphasis on
    per-capita calculations, Rangarajan focuses on a family unit of five.

    Nutrition:

    The Tendulkar formula correlates calorie with nutrition level, though nutrition level is influenced by
    many other factors. To remove this, Rangarajan formula included protein and fat levels too. This helped
    achieve better correlation between poverty line and nutrition level.

    Energy Requirement:

    The energy requirement as calculated by Rangarajan Committee is 2,155 kcal per person per day in rural
    areas and 2,090 kcal per person per day in urban areas. This is significantly lower than the 2,400 kcal in

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    lOMoARcPSD|9652449

    rural areas and 2,100 kcal in urban areas used by the Lakdawala panel. Since more work is done using
    machines now, the energy requirements have also decreased.

    Recall Period:

    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 Tendulkar and the URP,
    which was used by earlier estimations.

    Some Continuations: Rangarajan Committee

    Data:

    Estimates of consumption expenditure seen in the National Accounts Statistics (NAS) and as inferred
    from the sample surveys of the National Sample Survey Organization (NSS) show a large and growing
    variance. From being less than 10% in 1970, it has widened to 68% in 2017-18. Rangarajan prefers
    NSSO’s estimates and decides not to use the NAS estimates. This is line with previous trends.

    Estimation of Prices:

    Rangarajan agrees with the methodology adopted by Tendulkar in this regard. To overcome the
    limitations of using fixed base-year weights, they use a combination of unit values derived from
    successive NSSO’s Surveys and price-relatives derived from the Consumer Price Indices.

    Disaggregation:

    In line with previous estimations, under Rangarajan too, national poverty lines are disaggregated into state
    specific poverty lines using the Fisher Index.

    Concluding Remarks:

    With the recent dissolution of the Planning Commission, there is no formal organization tasked with the
    work of measuring poverty in India. There is a need to formalize the process and make it more continuous
    over years. This shall help in formulating better policies for uplifting the poor, and tracking their efficacy
    over time and space.

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