8 March 2025 : Daily Answer Writing

Q1) Given India’s strides in reducing extreme poverty, should the country consider redefining its poverty line to better reflect the current socio-economic realities? Discuss the potential benefits and challenges associated with redefinition of the poverty line. (15 marks, 250 words)

ANSWER

According to the Household Consumption Expenditure Survey (HCES), India’s rural poverty level had declined to 7.2% in 2022-23 from 25.7% in 2011-12, while urban poverty slipped to 4.6% from 13.7% over the same period. The survey suggests that less than 5% of the total population in India now lives below the poverty line. This progress, driven by robust economic growth and significant reductions in inequality, marks a pivotal moment for the country.

POVERTY LINE ESTIMATION IN INDIA

1. Tendulkar committee (2009): Poverty line in the Suresh Tendulkar methodology was expenditure of ₹33 a day in urban areas and ₹27 a day in rural areas. Thus, India’s poor percentage of total population in 2011-12 as per the Tendulkar committee was 21.9.
2. Rangarajan committee(2014): In the Rangarajan methodology, it was ₹47 a day in urban areas and ₹30 a day in rural areas. Thus, India’s poor population as percentage of Indian population in 2011-12 was 29.5, as per Rangarajan committee.
3. Current poverty line calculation by NITI Aayog: A new approach has evolved by the NITI Aayog to incorporate multiple dimensions and non income factors in the form of Multidimensional Poverty Index, based on National Family Health Surveys(NFHS) results. At the core of the MPI is the Alkire-Foster (AF) methodology, a globally accepted general framework for measuring multidimensional poverty, which captures overlapping deprivations in health, education, and living standards.
4. International Poverty Line: The World Bank defines a person as extremely poor if she is living on less than $1.90 per day, which is adjusted for inflation as well as price differences between countries.

CASE FOR REDEFINING POVERTY LINE: 

1. Debates on Definition and Measurement: Different poverty lines (income levels considered poor) and data sources lead to varying estimates, creating a confusion on implementation of universal welfare schemes.
2. The World Bank, using the $2.15 per day benchmark (PPP – Purchasing Power Parity), estimates an 11.9% poverty rate for India.
3. Government Data: The Indian government uses its own poverty indicators, which tends to show lower poverty rates compared to international benchmarks.
4. Uneven Progress: Poverty reduction has been faster in rural areas compared to urban areas.

POTENTIAL BENEFITS OF REDEFINING THE POVERTY LINE

1. More Accurate Measurement: Adopting the PPP of 3.2 $ poverty line (median national poverty line of lower-middle-income countries) will provide a more accurate reflection of the current socio-economic realities, capturing a broader section of the population still vulnerable to poverty.
2. Enhanced Social Protection: A higher poverty line would enable better targeting of social protection programs, ensuring that resources reach those genuinely in need, thus improving the overall effectiveness of poverty alleviation strategies.
3. Inclusive Growth: Redefining the poverty line would highlight the need for inclusive growth policies that address the needs of the lower-middle-income population, fostering more balanced economic development.
4. Global Standards Alignment: Aligning India’s poverty line with international standards will facilitate better comparison and benchmarking with other countries, enhancing the credibility of India’s poverty reduction efforts.
5. Policy Innovation: The transition could drive policy innovation, encouraging

the development of new and more effective programs to address the multidimensional aspects of poverty.

6. Reducing Inequality: With urban and rural Gini indices showing significant declines (from 36.7 to 31.9 and 28.7 to 27.0 respectively), a higher poverty line would further support policies aimed at equitable growth.
7. Sustainable Development: Broadening the definition of poverty aligns with sustainable development goals, fostering a more resilient and inclusive economy.
8. Improved Resource Allocation: A higher threshold would help in channeling resources towards those who may not be classified as extremely poor but still require significant assistance to achieve a decent standard of living.

CHALLENGES OF REDEFINING THE POVERTY LINE

1. Fiscal Pressure: Expanding the poverty line to include more people would require substantial financial resources. This could strain the government’s budget, especially if current fiscal policies are not adjusted accordingly.
2. Inflation Adjustments: Ensuring that the new poverty line reflects real purchasing power requires regular adjustments for inflation, which can be administratively challenging.
3. Data Collection: Accurate and timely data collection is crucial. Transitioning to the Modified Mixed Recall Period (MMRP) method has improved data accuracy, but consistent and comprehensive implementation remains essential.
4. Administrative Capacity: Enhancing the administrative capacity to identify beneficiaries accurately and deliver targeted services effectively is necessary for the success of any revised poverty measure.
5. Policy Continuity: Sustained political commitment is essential to drive the transition and ensure policy continuity across different government tenures.
6. Public Acceptance: Raising the poverty line might face resistance from various stakeholders who may perceive it as an admission of ongoing economic challenges despite reported progress.
7. Economic Shocks: The economy’s vulnerability to external shocks, such as pandemics or global economic downturns, could complicate the implementation of policies aligned with the higher poverty line.

WAY FORWARD

1. Adopt a Higher Poverty Line: Transition to the PPP$ 3.2 poverty line, aligning with the World Bank’s recommendation for lower-middle income countries. This will enable a more accurate identification of those in need, ensuring that social protection programs are more inclusive and comprehensive.
2. Strengthen Data Collection and Monitoring: Ensure consistent and comprehensive implementation of the Modified Mixed Recall Period (MMRP)

method. This will improve the accuracy of consumption expenditure data and enable more precise targeting of social protection programs.

3. Enhance Fiscal Policies and Resource Allocation: Reallocate fiscal resources to support the expanded social protection framework. This includes increasing budgetary allocations for health, education, and housing, thereby addressing multiple dimensions of poverty beyond mere subsistence.
4. Build Administrative Capacity: Invest in strengthening administrative capacities at both national and local levels to ensure effective identification of beneficiaries and efficient delivery of services. Training programs and technological upgrades can play a crucial role in this process.
5. Sustain Political Commitment and Public Awareness: Foster sustained political will across different government tenures to ensure policy continuity. Additionally, raise public awareness about the benefits of redefining the poverty line, addressing misconceptions and building broad-based support for the initiative.

India’s remarkable progress in reducing extreme poverty provides a strong foundation for redefining its poverty line. Redefining India’s poverty line is a crucial step towards reflecting current socio-economic realities and enhancing the effectiveness of social protection programs. This transition, while challenging, offers substantial benefits in accurately targeting the needs of its population and fostering sustainable development. However, the success of this transition  will hinge on robust data collection, careful policy planning, and a steadfast commitment to addressing the multifaceted nature of poverty.

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