Measuring Poverty . Ghost of deprivation continues to stalk India

To address the inadequacy of the standard indicators like the per capita GDP to measure the well being of the people in an economy, the United Nations Development Program (UNDP) introduced the notion of the Human Development Index (HDI) in 1990.

The HDI considers three dimensions of well being — income, health, and education. If the obverse of well being is poverty or deprivation, then head-count poverty ratio (i.e., percentage of the population with income level lower than a constructed poverty line necessary for subsistence living) is often taken as a standard measure of poverty. The head-count ratio too suffers from various limitations, the principal among which is its inability to capture inequality and social deprivation.

In this context, the UNDP has made a contribution of measuring a “Multidimensional Poverty Index” (MPI) that “identifies multiple deprivations at the household and individual level in health, education and standard of living”. The MPI uses the same three dimensions as the HDI but augments the standard of living indicator by incorporating data on cooking fuel, sanitation, drinking water, electricity, housing and various assets.

Using micro data from household surveys, each person in a given household is classified as, “multidimensionally poor or non-poor depending on the weighted number of deprivations his or her household”. These data are further aggregated into the country-specific measures of poverty.

The stark reality

The 2021 MPI report (released on October 7, 2021) reveals some stark numbers. It presented estimates for 109 developing countries with a combined population of 5.9 billion (77 per cent of the world total). The report shows that worldwide, about 1.3 billion people are multidimensionally poor, out of which nearly 85 per cent live in Sub-Saharan Africa (556 million) or South Asia (532 million).

The distribution of the poor shows that half (644 million) of global multidimensionally poor people are children (below 18 years), and 481 million live with an out-of-school child and 678 million lack electricity. These numbers indicate that a sizeable population will start their lives from a severely disadvantaged position.

As the 2021 MPI report is based mostly on pre-Covid data, the extent of deprivation in health and education is likely to worsen due to the pandemic. As education and health are crucial for breaking the intergenerational cycle of poverty, it will be a major challenge for policymakers to address these vulnerabilities.

Where does India stand in this regard? It should be mentioned here that cross-country comparisons using the 2021 MPI report are tricky because the survey years are different for different countries, and not all indicators are available for all the countries.

But still, based on the collated data, the table below reports derived ranks of select countries among 109 countries, as per the MPI value of 2021. In this list, Serbia and Niger happen to be the least and the most multidimensionally poor, respectively. India emerges with a rank of 66, which is lower than many of our peers — China (32), Brazil (33), or South Africa (42), or Mexico (43).

The performance of many of the smaller (relatively speaking) Asian economies like Sri Lanka, Indonesia, Vietnam, the Philippines, or Nepal is also quite impressive. Among the 43 countries which are below India in the MPI table, 35 of them are categorised as Least Developed Countries (LDCs) according to the United Nations.

The MPI 2021 report uses survey data of 2015-16 for India. It shows that using the conventional monetary poverty line of $1.90 (2011 Purchasing Power Parity adjusted)/per day, 22.5 per cent of India’s population are poor. But using multidimensional poverty estimates, 27.9 per cent of India’s population is below the poverty line, with another 19.3 per cent of the population close to the multidimensional poverty line and hence vulnerable to any shocks.

The report also highlights that multidimensional poverty is high among the lower castes in India and shows that more than 83 per cent of the multidimensionally poor people in India are from the lower castes and tribes.

While overall, the report paints a sombre picture for India, moving forward the scenario could be mixed. On the positive side, during the last few years, the government has focussed on improved provisioning of LPG, sanitation facilities, provision of drinking water, electricity and housing to the general population and the next round of survey may show improvement in these aspects and hence improve India’s multidimensional poverty numbers. But on the other hand, the incidence of the pandemic might have taken a toll on all the three dimensions of the MPI. It will be interesting to see how in MPI, India fares compared to others and, more importantly, compared to it's past.

Pal is Professor of Economics of Indian Institute of Management Calcutta, Kolkata, and Ray is Director of National Institute of Bank Management, Pune. Views expressed are personal

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