Poverty Being Underestimated in India

Context:

The recently released 2023-24 Household Consumer Expenditure Survey (HCES) suggests a significant decline in poverty levels in India. However, experts have raised concerns about the credibility of these estimates, citing issues related to data collection, outdated poverty measurement methodologies, and inconsistencies in defining the poverty threshold. This has reignited debates on whether India’s poverty is being underestimated and whether existing frameworks truly capture the on-ground economic realities of millions of Indians.

The United Nations Development Programme (UNDP) had estimated India’s poverty at 12.9% in 2019, much higher than some domestic estimates. Meanwhile, global poverty indices such as the World Bank's and the Multidimensional Poverty Index (MPI) present contrasting figures, questioning the reliability of national poverty assessments.

Understanding poverty trends in India requires an examination of historical methodologies, contemporary measurement challenges, government policies, and potential solutions for more accurate assessments.

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Introduction
Historical Context of Poverty Estimation in India
Current Poverty Estimation Methods & Discrepancies
Challenges in Measuring Poverty Accurately
Government Initiatives for Poverty Alleviation
Case Studies and Comparative Analysis
Solutions & Way Forward
Conclusion

1. Introduction

India has made significant strides in economic development over the past few decades. However, poverty remains a persistent challenge, affecting millions of people across urban and rural landscapes. Official poverty estimates have often been met with skepticism due to inconsistencies in methodology, outdated criteria, and disparities between government and international assessments.

While government reports suggest a consistent decline in poverty, independent studies and international organizations like UNDP and the World Bank present higher estimates. This raises an essential question—Is India underestimating its poverty levels? If so, what are the implications for social policy and economic planning?

This blog explores historical and current poverty estimation methods, the challenges in accurately assessing poverty, and the policy measures needed to ensure a comprehensive and transparent approach to measuring and reducing poverty.

2. Historical Context of Poverty Estimation in India

Evolution of Poverty Measurement (1970s-2005)

From the 1970s to 2005, India followed a calorie-based approach to define the poverty line, focusing on minimum expenditure required to meet essential calorie intake. However, this approach did not account for essential non-food expenditures such as housing, healthcare, and education.

Tendulkar Committee Report (2011-12) Findings

The Tendulkar Committee revised the poverty estimation criteria to include broader consumption patterns, reporting 22% of Indians below the poverty line in 2011-12.
The new method faced criticism for setting the poverty threshold too low, leading to underestimation of real poverty levels.

Comparison with Global Poverty Estimates

The World Bank’s $1.90/day (PPP) international poverty line suggests a higher percentage of Indians living in poverty than domestic estimates.
The UNDP’s Multidimensional Poverty Index (MPI) includes non-monetary aspects such as health, education, and living standards, painting a more nuanced picture of poverty.

3. Current Poverty Estimation Methods & Discrepancies

HCES 2023-24 and Its Limitations

The HCES data suggests a substantial poverty decline, but concerns over sample representation, outdated survey techniques, and reliance on household recall periods remain.
Experts argue that ground realities such as rural distress, informal sector employment, and rising inflation are not adequately captured.

Differences in UNDP, World Bank, and Indian Estimates

UNDP (2019) estimated 12.9% poverty in India, significantly higher than some national reports.
Disparities arise from different calculation models, leading to inconsistencies in official vs. independent estimates.

Rural vs. Urban Poverty Trends

Rural areas show improvement due to expanded welfare schemes, but income disparities persist.
Urban poverty, particularly among informal workers, remains underreported due to gaps in survey methodologies.a

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4. Challenges in Measuring Poverty Accurately

Outdated Data Collection Techniques – The reliance on long recall periods results in underreporting of real consumption and expenditure.
Changing Consumption Patterns – Traditional models do not account for rising education, healthcare, and digital economy costs.
Regional Disparities – States like Bihar and Uttar Pradesh report higher poverty rates compared to southern and western states.
Need for a Multidimensional Approach – A framework that includes income, access to health, and educational attainment is required.

5. Government Initiatives for Poverty Alleviation

Direct Benefit Transfers (DBT): Welfare programs like PM Kisan and Ujjwala Yojana improve financial security.
MGNREGA: Provides employment and income support to rural households.
National Food Security Act (NFSA): Ensures subsidized food grains for nearly two-thirds of the population.

6. Solutions & Way Forward

Update Poverty Line Definitions to reflect modern economic realities.
Improve Data Collection with shorter recall periods and technology-driven real-time tracking.
Enhance Social Security Programs and their implementation.
Localized Assessments to create targeted policy interventions.
Use of AI & Big Data for monitoring economic vulnerabilities.

Conclusion

While official reports suggest a decline in poverty, the accuracy of these estimates remains contested. India must adopt modern, multidimensional, and globally aligned methodologies to measure poverty comprehensively. Ensuring transparent data collection, strengthening welfare delivery, and leveraging technology for better tracking are essential steps toward achieving a realistic and effective poverty alleviation strategy.