Introduction
Poverty is a multidimensional phenomenon that goes beyond mere income deprivation to encompass lack of access to basic human needs such as education, health, nutrition, sanitation, and living standards. Accurately measuring poverty is critical for designing effective policies to alleviate deprivation and promote inclusive development. Traditional monetary measures based on income or consumption—such as the poverty line—have been the cornerstone of poverty measurement. However, recognizing the complex and multifaceted nature of poverty, newer frameworks like the Multidimensional Poverty Index (MPI) have emerged to capture a broader range of deprivation indicators. This dual approach provides policymakers and researchers with deeper insights into poverty’s nature, enabling targeted interventions.
Poverty Line: Concept and Measurement
The poverty line is a threshold that defines the minimum level of income or consumption required for an individual or household to meet basic needs. Individuals or households with income or consumption below this threshold are classified as poor.
1. Types of Poverty Lines
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Absolute Poverty Line: This line sets a fixed threshold of income or consumption based on the cost of a basket of essential goods and services—such as food, shelter, clothing, and fuel—needed for subsistence. It reflects the minimum resources required to avoid deprivation and is usually expressed in local currency adjusted for inflation.
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Relative Poverty Line: Unlike absolute poverty, this line is defined relative to the income or consumption distribution within a society. For example, individuals earning below 50% or 60% of the median income may be considered poor. This approach highlights inequality and social exclusion but is less common in developing countries.
2. Methods to Estimate the Poverty Line
In India, the poverty line has traditionally been calculated based on caloric intake norms, recommended by the Tendulkar Committee (2009) and earlier by the Planning Commission. The line was estimated by calculating the expenditure required to consume the minimum calories necessary for physical well-being—generally 2,100 kcal per day in rural areas and 1,900 kcal in urban areas. This consumption-based approach translates calorie requirements into monetary terms, factoring in the prices of food items.
Once the poverty line is established, surveys like the National Sample Survey (NSS) collect data on household consumption expenditure to identify the proportion of the population living below the poverty line, known as the headcount ratio.
3. Limitations of Poverty Line Measurement
While widely used, the poverty line approach has several limitations:
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It focuses primarily on income or consumption, ignoring other deprivation dimensions such as education, health, and living standards.
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Caloric norms may become outdated due to changes in lifestyle, health requirements, and economic structures.
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It does not account for inequality among the poor or depth of poverty (how far below the line the poor are).
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Regional price variations and cost-of-living differences make a single national poverty line less representative.
Multidimensional Poverty Index (MPI): A Holistic Approach
Recognizing the inadequacies of income-based measures, the Multidimensional Poverty Index (MPI) was developed by the Oxford Poverty and Human Development Initiative (OPHI) and adopted by the United Nations Development Programme (UNDP) as part of the Human Development Reports. The MPI assesses poverty by capturing multiple deprivations experienced simultaneously by individuals or households.
1. Components of MPI
The MPI comprises three key dimensions, each reflecting essential aspects of human development:
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Health: Indicators include nutrition and child mortality.
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Education: Indicators measure years of schooling and school attendance.
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Standard of Living: This includes indicators such as access to electricity, sanitation, safe drinking water, flooring, cooking fuel, and asset ownership.
Each dimension is given equal weight, and deprivation in specific indicators is identified through defined cut-offs. A household or individual is classified as multidimensionally poor if the weighted sum of deprivations exceeds a certain threshold (commonly one-third).
2. Advantages of MPI
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Comprehensive: Captures overlapping deprivations that affect quality of life beyond income.
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Policy-Relevant: Helps identify specific areas where interventions are needed, such as health infrastructure or sanitation.
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Disaggregated Analysis: Allows poverty assessment at household and individual levels, capturing intra-household disparities, including gender-based deprivation.
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Dynamic Tracking: Useful for monitoring progress in Sustainable Development Goals (SDGs) by integrating education, health, and living standards.
3. Application in India
India adopted the MPI framework to supplement traditional poverty measurements. The NITI Aayog released India’s MPI data based on the National Family Health Survey (NFHS-4), revealing that about 27.9% of the population was multidimensionally poor in 2015-16. The MPI highlighted the concentration of poverty in rural areas, with acute deprivation in sanitation and nutrition, guiding targeted government schemes such as Swachh Bharat Abhiyan and National Nutrition Mission.
Comparative Insights: Poverty Line vs MPI
While the poverty line remains a fundamental tool for assessing income poverty and determining eligibility for welfare schemes, the MPI provides a richer, multidimensional perspective necessary for comprehensive poverty alleviation. The poverty line identifies who is poor in monetary terms, whereas the MPI elucidates the specific facets of deprivation—informing holistic policy responses.
For example, a household might earn above the poverty line but lack access to clean water or education, issues the MPI captures but the poverty line misses. Conversely, some poor households identified by the poverty line may be better off in other dimensions, emphasizing the need for combined use of both measures.
Conclusion
Measuring poverty effectively is pivotal to designing inclusive development policies that address not just income deprivation but also the broader socio-economic realities faced by the poor. The poverty line, with its focus on income and consumption, offers a straightforward benchmark to identify monetary poverty and allocate resources. However, its limitations necessitate complementing it with multidimensional frameworks like the MPI, which capture the complex and interconnected deprivations in health, education, and living standards.
For IAS and MBA aspirants, understanding both methods is crucial for analyzing poverty trends, evaluating government welfare schemes, and contributing to policy formulation that strives toward holistic poverty eradication and sustainable human development. In an era where the Sustainable Development Goals emphasize “no one left behind,” adopting multidimensional perspectives on poverty measurement is indispensable for real progress.