New Prespective in Poverty Analysis

Recent reports indicate that over a quarter of India’s rural population lives below the poverty line. Specifically, 25.7% of the rural population falls into this category, while in urban areas, the situation is somewhat improved, with 13.7% of the population living below the poverty line.
In this background , a new method of poverty analysis has been proposed by amartya sen.

According to the World Bank, Poverty is pronounced deprivation in well-being and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity.

Poverty Estimation

A common method to estimate poverty in India is based on income or consumption levels. If a household’s income or consumption falls below a specified minimum level, it is classified as Below the Poverty Line (BPL).

Poverty Line Calculation: Currently, poverty estimation in India is carried out by NITI Aayog’s task force. The poverty line is determined based on data collected by the National Sample Survey Office (NSSO) under the Ministry of Statistics and Programme Implementation (MOSPI). NITI Aayog, now serving as the government’s policy think tank, has replaced the Planning Commission, which was previously responsible for poverty line calculations.

Consumption vs. Income Levels: Poverty estimation in India is based on consumption expenditure rather than income levels for several reasons:

Income Variability: The income of self-employed individuals, daily wage laborers, etc., can vary significantly both across time and locations, while consumption patterns are generally more stable.

Additional Income: In cases of regular wage earners, additional side incomes are difficult to account for.

Data Collection: For consumption-based poverty estimation, sample surveys typically ask households about their consumption over a specific reference period (e.g., 30 days), which serves as a representative measure of general consumption.

Reference Period: This refers to the time frame during which the NSSO conducts its survey, asking households specific questions to capture their consumption behavior during that period.

Need for Poverty Estimation

Evaluating the Impact of Welfare Schemes: Poverty estimates are not only of academic interest but also play a crucial role in assessing the effectiveness of government policies, particularly social welfare programs aimed at reducing poverty.

BPL Census: The Ministry of Rural Development, in collaboration with state governments, conducts the Below Poverty Line (BPL) Census to identify poor households.

Formulating Poverty Elimination Plans: Poverty estimates, represented by the poverty line, are essential for designing and implementing poverty-focused elimination strategies.

Constitutional Mandate: Estimating poverty is a step towards its eradication, which ultimately lays the foundation for a just and equitable society, as envisioned by the Constitution.

A new approach in poverty analysis: Amartya sen

Poverty is often viewed in terms of low income and has traditionally been measured by counting the number of individuals whose income falls below the poverty line—this is known as the head-count measure. However, this approach raises two important questions. First, is poverty adequately defined solely by low income? Second, even if poverty is considered in terms of income, is the overall poverty of a society best represented by the head-count index alone?

While low income is undoubtedly significant, especially in a market economy where it limits an individual’s opportunities, it is not the sole determinant of a person’s ability to lead a minimally acceptable life. Various factors influence how income translates into real-life capabilities.

These include:

1. personal differences, such as susceptibility to illness,
2. Environmental challenges, like living in disaster-prone areas,
3. Social conditions, such as high crime rates or disease outbreaks, and
4. The impact of relative deprivation due to societal norms and consumption patterns. Therefore, it is important to consider factors beyond income when assessing poverty.

There is, thus, an important need to go beyond income information in poverty analysis, in particular to see poverty as capability deprivation.

For instance, famines are often best understood as a sharp drop in the real incomes of specific groups, leading to widespread starvation and death. Investigating the dynamics of income generation and purchasing power is crucial in famine analysis. Shifting the focus from merely examining food supply to looking at entitlements (which include both income and supply, and the resulting relative prices) provides new insights. Famines can occur even if food production or supply remains steady. For example, if the incomes of rural wage laborers, service providers, or craftsmen drastically fall due to unemployment, declining real wages, or reduced demand for their services, these groups may face starvation even with ample food supply in the economy.

The nature of this issue highlights the need to focus on specific “spaces” in the analysis. Additionally, understanding famine patterns can be deepened by supplementing income-based analysis with data on how income converts into nourishment, which varies due to factors like metabolic rates, susceptibility to illness, and body size.

Traditional poverty measures have focused on counting the number of people below the poverty line. However, it is also important to consider how far below the line individuals are, and how deprivation is distributed among the poor. Aggregating social data on individual deprivations is essential for creating informative and actionable measures of overall poverty in society.

Tackling poverty is the biggest issue which is need to be tackled with the urgency,therefore different method of analysis should be considered.

The End of the Blog: New Prespective in Poverty Analysis