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Measuring poverty and inequality in India

Table of Contents

Introduction #

Poverty and inequality are critical issues that impact social and economic development. Accurately measuring these phenomena is essential for designing effective policies and interventions. In India, various metrics and methodologies are used to assess the extent of poverty and inequality. This section explores the key indicators, methodologies, and current trends in measuring poverty and inequality in India.

Measuring Poverty in India #

Poverty Indicators #

  1. Poverty Line

    • Definition: The poverty line is an income level below which individuals are considered to be living in poverty.
    • Determination: The poverty line is determined based on the minimum income required to meet basic needs such as food, clothing, and shelter.

  2. Headcount Ratio (HCR)

    • Definition: The percentage of the population living below the poverty line.
    • Significance: Provides a measure of the prevalence of poverty within a population.

  3. Multidimensional Poverty Index (MPI)

    • Definition: Measures poverty across multiple dimensions, including education, health, and living standards.
    • Significance: Offers a more comprehensive view of poverty beyond income-based measures.

Methodologies for Measuring Poverty #

  1. Consumption Expenditure Surveys

    • Process: Conducted by the National Sample Survey Office (NSSO) to collect data on household consumption and expenditure.
    • Application: Used to estimate the poverty line and calculate poverty ratios.

  2. Socio-Economic and Caste Census (SECC)

    • Process: A comprehensive survey collecting data on socio-economic status, including income, assets, and access to basic services.
    • Application: Used to identify and target beneficiaries for social welfare programs.

  3. Tendulkar Committee Methodology

    • Overview: Introduced a revised methodology for estimating poverty in 2009, accounting for changes in consumption patterns and cost of living.
    • Application: Set new poverty lines based on updated consumption expenditure data.

  4. Rangarajan Committee Methodology

    • Overview: Proposed further revisions in 2014, with higher poverty lines to reflect better living standards.
    • Application: Provided alternative poverty estimates using updated consumption baskets and prices.

Current Trends and Data #

  1. Poverty Rates

    • Tendulkar Committee Estimates: According to the 2011-12 estimates, about 21.9% of India’s population lived below the poverty line.
    • Rangarajan Committee Estimates: Revised estimates for 2011-12 indicated a higher poverty rate of around 29.5%.

  2. Multidimensional Poverty

    • Global MPI: As per the 2020 Global Multidimensional Poverty Index, India saw a significant reduction in multidimensional poverty, with improvements in health, education, and living standards.

Measuring Inequality in India #

Inequality Indicators #

  1. Gini Coefficient

    • Definition: A measure of income inequality ranging from 0 (perfect equality) to 1 (perfect inequality).
    • Application: Widely used to assess the extent of income inequality within a population.

  2. Lorenz Curve

    • Definition: A graphical representation of the distribution of income or wealth within a population.
    • Application: Used to visualize inequality and calculate the Gini coefficient.

  3. Palma Ratio

    • Definition: The ratio of the income share of the top 10% to the bottom 40% of the population.
    • Application: Highlights disparities between the richest and poorest segments of society.

  4. Theil Index

    • Definition: A measure of economic inequality that considers the distribution of income or wealth.
    • Application: Used to assess both income inequality and wealth inequality.

Methodologies for Measuring Inequality #

  1. Household Income and Expenditure Surveys

    • Process: Surveys conducted by NSSO and other agencies to collect data on household income and expenditure.
    • Application: Used to analyze income distribution and calculate inequality indices.

  2. Tax Records and Administrative Data

    • Process: Analysis of tax records and administrative data to assess income and wealth distribution.
    • Application: Provides insights into the distribution of wealth and high-income groups.

  3. Wealth Surveys

    • Process: Surveys collecting data on assets, liabilities, and wealth distribution among households.
    • Application: Used to measure wealth inequality and understand the concentration of wealth.

Current Trends and Data #

  1. Income Inequality

    • Gini Coefficient: India’s Gini coefficient has shown an increasing trend, indicating rising income inequality. Estimates suggest a Gini coefficient of around 0.35 to 0.40.
    • Income Disparities: Significant income disparities exist between urban and rural areas, and among different states and social groups.

  2. Wealth Inequality

    • Wealth Distribution: A substantial concentration of wealth among the top 10% of the population, with stark disparities in asset ownership.
    • Wealth Inequality Trends: Reports indicate growing wealth inequality, with the top 1% owning a significant share of total wealth.

Government Initiatives to Address Poverty and Inequality #

  1. Direct Benefit Transfer (DBT)

    • Objective: Ensure efficient and transparent transfer of subsidies and benefits directly to beneficiaries’ bank accounts.
    • Impact: Reduced leakages and improved targeting of social welfare schemes.

  2. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

    • Objective: Provide guaranteed wage employment to rural households and enhance rural livelihoods.
    • Impact: Increased rural income, reduction in poverty, and development of rural infrastructure.

  3. Pradhan Mantri Jan Dhan Yojana (PMJDY)

    • Objective: Promote financial inclusion by ensuring access to financial services, including bank accounts, credit, insurance, and pensions.
    • Impact: Enhanced financial literacy, increased savings, and improved access to financial services.

  4. National Social Assistance Program (NSAP)

    • Objective: Provide financial assistance to the elderly, widows, and persons with disabilities.
    • Impact: Improved social security and support for vulnerable populations, reduction in poverty among targeted groups.

  5. Pradhan Mantri Awas Yojana (PMAY)

    • Objective: Provide affordable housing for all by 2022, with a focus on urban and rural areas.
    • Impact: Construction of millions of affordable homes, improved living conditions for low-income families, and promotion of housing finance.

Conclusion #

Measuring poverty and inequality is crucial for understanding the socio-economic challenges facing India and designing effective policies to address them. While significant progress has been made in reducing poverty and improving living standards, income and wealth inequality remain significant concerns. Continued efforts to enhance data collection, improve targeting of social welfare programs, and promote inclusive growth are essential for addressing these challenges and achieving sustainable development.

References #

Indian Economy
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