SBI’s Report on Poverty

The release of the 2023-24 Household Consumer Expenditure Survey (HCES) fact sheet has reignited the poverty debate in India. While recent estimates suggest a sharp decline in poverty levels, the methodological challenges and historical context continue to complicate the discourse.

Key Developments in the Poverty Estimates

• 2023-24 Poverty Estimates:
  • Rural Poverty: Declined from 7.2% (2022-23) to 4.9%.
  • Urban Poverty: Declined from 4.6% (2022-23) to 4.1%.
  • National-level poverty dropped significantly from 21.5% in 2011-12 to below 5% in 2023-24 (SBI report).
• Historical Trends:
  • The poverty line traditionally reflected the minimum expenditure required to meet basic calorie needs.
  • Evolving methodologies (Tendulkar and Rangarajan Committees) and shifts in survey techniques have introduced inconsistencies over time.

Evolution of Poverty Measurement in India

Early Methodology

• Anchored to a calorie-based poverty line proposed by Dandekar and Rath (1960s).
• Adopted by the Planning Commission with periodic revisions using price inflators.

Shift from Calorie Norms (Tendulkar Committee)

• Recommended moving away from calorie-based thresholds to a broader consumption basket.
• Used urban poverty benchmarks for rural areas and introduced the Mixed Reference Period (MRP).

Rangarajan Committee's Redefined Basket

• Defined the poverty line with specific calorie, fat, and protein requirements.
• Added normative expenses for non-food essentials (clothing, housing, mobility, and education).
• The report was not officially adopted but highlighted higher poverty estimates compared to Tendulkar’s method.

Recent Methodological Innovations

• Modified Mixed Reference Period (MMRP):
  • Records consumption across three timeframes: weekly (food), monthly (regular goods), and yearly (large expenditures).
• Inclusion of Imputed Values:
  • Expenditures now account for free provisions like laptops, bicycles, school uniforms, and food.
• Improved Data Collection:
  • Adoption of three-monthly household visits for better accuracy.

Challenges in Comparing Poverty Estimates

• Data Inconsistencies:
  • New methodologies (2022-23 and 2023-24 surveys) are not strictly comparable with the 2011-12 data, leading to underestimated poverty figures.
• Urban-Rural Gap:
  • Decline in rural-urban poverty disparity attributed to unchanged urban boundaries since 2011. Inclusion of potential “census towns” could increase rural poverty estimates.
• Impact of Methodological Changes:
  • Enhanced expenditure recording through imputed values and multiple visits inflates consumption figures, complicating longitudinal comparisons.

Human Development Report(HDR) 2023-24