The release of the 2022-23 Household Consumption Expenditure Survey (HCES) sparked renewed debates about poverty in India. In February of last year, B.V.R. Subrahmanyam, CEO of NITI Aayog, claimed that poverty in India had dropped significantly, with the poverty headcount ratio standing at just 5%. This assertion was based on adjusting the 2011-12 poverty line (set by the Tendulkar Committee) for inflation using the Consumer Price Index and applying it to the new HCES data.
The government’s narrative attributed this sharp decline in poverty to the success of major welfare schemes and rapid economic growth. However, an alternative analysis by C. A. Sethu, L. T. Abhinav Surya, and C. A. Ruthu, using the Rangarajan Method on the same 2022-23 HCES data, revealed a startling contradiction. Their findings show that a significant 26.4% of the Indian population is living below the poverty line, a gap of over 21 percentage points from the government’s claims.
Rural and Urban Poverty Rates
According to the Rangarajan method, 27.4% of people in rural areas are below the poverty line, where the threshold is set at Rs 2,515 per capita per month. In urban areas, 23.7% of the population falls below the poverty line, with a higher threshold of Rs 3,639 per capita per month. These numbers stand in stark contrast to the government’s claim of near-eradication of poverty, raising serious questions about the accuracy and intent of the official statistics.
Why the Discrepancy?
The discrepancy between the government’s claims and the Rangarajan analysis stems from differences in methodology. The government’s approach, which adjusts the older poverty line for inflation, fails to account for the rising costs of essential non-food items like healthcare, education, and housing. On the other hand, the Rangarajan method uses updated nutritional standards and a more comprehensive consumption basket, including non-food essentials, offering a more accurate reflection of current living conditions.
The Rangarajan Committee’s Approach
The Rangarajan Committee, formally known as the ‘Expert Group to Review the Methodology for the Measurement of Poverty,’ was set up in 2012 to revisit the poverty estimation methods after criticisms of the Tendulkar Committee’s approach. The Tendulkar Committee, which proposed a poverty line based primarily on nutritional requirements, was criticized for using poverty thresholds that were too low, potentially underestimating the true levels of poverty.
The Rangarajan Committee, in its 2014 report, proposed a broader methodology for measuring poverty, incorporating a wider range of consumption expenditures. This included not just food but also essential non-food items such as clothing, shelter, and education, calculated based on median consumption levels. Their estimates showed a higher poverty line than the Tendulkar method, revising the poverty headcount ratio for 2011-12 from 21.9% to 29.5%.
Despite this more comprehensive approach, the Union government has not officially adopted the Rangarajan Committee’s recommendations. Consequently, poverty estimates have been contested, especially due to the absence of consistent, updated survey data.
Challenges in Poverty Estimation
The gap in poverty estimates is also compounded by the decade-long gap between the last Consumer Expenditure Survey (2011-12) and the 2022-23 HCES. During this period, estimates of poverty were largely speculative. The government’s claim of a dramatic reduction in poverty to 5% is based on outdated consumption patterns and an inflation-adjusted poverty line, which fails to reflect the reality of rising costs for the poor, particularly in areas like healthcare and education.
Research has shown that the poor often face disproportionately higher costs for essential goods and services, leading to gross inaccuracies in poverty estimates. Moreover, the official narrative of a “poverty-free” India overlooks the increasing inequality in access to basic needs like healthcare, education, and sanitation.
The Impact of Welfare Programs
While welfare programs like the Public Distribution System (PDS) have been crucial in providing food security, they focus narrowly on food, rather than nutrition security. They also fail to address other aspects of poverty, such as rising costs in education and healthcare. The privatization of these sectors has made them increasingly unaffordable for the poor, and the exclusion of health-related expenses from poverty calculations further underestimates the extent of deprivation.
Wages and Living Standards in Rural India
Wages in rural India have largely stagnated, and the informal sector, which employs the majority of the population, has faced declining incomes and business closures. Between 2011-12 and 2022-23, per capita energy consumption for the poorest quartile in rural India dropped by 2.6%, signaling that rising nominal incomes have not translated into better nutrition or living standards.
This decline in basic living conditions directly contradicts claims of significant poverty reduction, as improved nutrition is a critical indicator of poverty alleviation.
A Call for More Accurate Poverty Measurement
The gap between government claims and the Rangarajan method’s findings highlights the need for a more honest and accurate appraisal of India’s poverty situation. While official reports celebrate economic progress, the reality for millions of Indians suggests otherwise.
India needs to adopt dynamic methodologies, like the Rangarajan method, that account for changing consumption patterns, updated nutritional norms, and the rising costs of essential services. A shift toward multidimensional poverty indices, which consider factors such as health, education, and living standards, would provide a clearer picture of deprivation and enable more effective policy responses.
As India works toward addressing poverty, it is essential to translate this understanding into policies that prioritize the needs of the country’s most vulnerable populations.
