Poverty Estimates

Poverty is the inability to buy basic requirements of life such as food, clothing, housing, education and health. People who frequently move in and out of the poverty line are called transient poor. A poverty line helps to define a minimum level of income. The households that earn below this level fall in the poor category. Different countries adopt various methods to determine the poverty line. The government makes numerous policies to eradicate poverty. The poverty estimation is important to measure the success of policies.

How is the poverty line estimated in India?

In India, the consumption or income levels are used to estimate poverty. A household is considered below the poverty line if its income is below the minimum income level. The NITI Aayog’s task force does poverty estimation in India using the Ministry of Statistics and Programme Implementation’s (MOSPI) National Sample Survey Office (NSSO) data. Formerly, the Planning Commission used to calculate the poverty line in India, but later NITI Aayog replaced it.

The consumption level of people tends to be more stable than income. Self-employed people such as daily wage labourers have an extremely variable income. It is often seen that the daily wage earners have other sources of side incomes, and it is difficult to take such incomes into account. Households also take the help of credit facilities or their savings and try to smooth their consumption to some extent, and that’s why consumption expenditure could provide a better basis to determine a household’s actual living standard.

Regular surveys on household consumer expenditure are conducted by the NSSO, where the last 30 days’ consumption of a household is asked and is taken to represent the general consumption.

Methods of data collection

The methods of collecting data for poverty estimation in India are:

• Uniform Resource Period: Under this method, people were asked about their consumption expenditure through a 30-day recall period. The people would recall their previous 30-day consumption expenditure, and it would make the basis of information. This method was used until 1993-94.
• Mixed Reference Period: The NSSO moved to the mixed reference method in which the consumption of five items (clothing, footwear, durables, education and institutional health expenditure) is measured that are bought less frequently in the previous year and other items that are bought in the previous 30 days. This method has been in use since 1999-2000.

Measurement of the poverty line

Absolute measurement of poverty

The United Nations World Summit for Economic Development defines absolute poverty as a situation when a person cannot get even the basic necessities such as food, clean drinking water, health facilities, proper shelter, sanitation, and education. A monetary value is set on the collection of essential commodities that a household buys, and any household whose income is lower than this threshold would be considered poor.

The scope of absolute measurement of poverty method is limited as it depends upon a poverty line that does not change through geographies and time. This method does not consider the scarcity within countries and the higher cost of living in developed countries.

The relative measurement of poverty

The developed countries use this method of measurement. It exists if the household’s income is below the median income of the country. The household under this group is not deprived of all the essential needs. However, they may not have the same standard of living as most people. There is always a certain fraction of the population that falls below the poverty line.

Need for poverty estimation

• Estimation of poverty through poverty lines helps make plans to eradicate poverty.
• It is crucial to monitor the success of government policies to eliminate poverty. The Ministry of Rural Development conducts the below poverty line surveys to recognise poor households.
• Estimation of poverty allows the radiation of poverty which helps create an equitable society.

Conclusion

Poverty is described as a condition where a person is unable to buy basic human needs. The government takes various steps to identify poor households. For various reasons, consumption levels are used for poverty estimation in India. The NITI Aayog’s task force does poverty estimation in India. The estimation of poverty is necessary for a developing country like India. The government can take measures to eradicate poverty if it knows the condition of the people. Many methods are used for collecting data and poverty estimation in India.