Declining poverty ratio: a continuing trend
Context:
The release of the Household Consumption Expenditure Survey for 2022-23 by the National Sample Survey Office (NSSO) has sparked discussions among researchers about poverty and inequality trends in India. This article delves into the significance of these trends, the challenges in measurement, and suggested measures to address them.
Relevance:
GS-03 (Economy)
Dimensions of the Article:
- Household Consumption Expenditure Survey 2022-23
- Understanding Poverty and Inequality Trends
- Challenges in Measurement
- Suggested Measures
Household Consumption Expenditure Survey 2022-23
• Average Monthly Per Capita Consumption Expenditure (MPCE):
- The latest survey reveals that the average MPCE in urban households increased by 33.5% since 2011-12 to ₹3,510, while rural India saw a 40.42% rise to ₹2,008. Notably, these figures exclude the imputed values of free items obtained through welfare programs like PM Garib Kalyan Ann Yojana (PMGKAY) but include select non-food items like computers, mobile phones, bicycles, and clothing.
- When including the imputed cost of free items, the average monthly consumption expenditure stood at Rs 3,860 in rural areas and Rs 6,521 in urban areas.
• Difference in Average MPCE between Rural and Urban Households:
- The gap in average MPCE between rural and urban households narrowed to 71.2% in 2022-23 from 83.9% in 2011-12, indicating a relatively higher increase in rural consumption spending over the 11-year period.
• Average MPCE of the Bottom 5% of Rural and Urban Populations:
- The bottom 5% of the rural population has an average MPCE of Rs 1,373, while it is Rs 2,001 for the bottom 5% of the urban population.
- Conversely, the top 5% of both rural and urban populations have significantly higher average MPCE of Rs 10,501 and Rs 20,824, respectively.
• Share of Expenditure on Food:
- In 2022-23, the share of expenditure on food was 46% (Rs 1,750) in rural India and 39% (Rs 2,530) in urban India, indicating a decrease from 2011-12 levels.
- This shift has implications for consumer price index-based inflation.
• Consumption Expenditure on Non-food Items:
- The rise in the share of spending on conveyance, consumer services, and durable goods drove the consumption expenditure on non-food items in both rural (54%) and urban (61%) India in 2022-23. Conversely, the share of expenditure on cereals, pulses, and vegetables decreased during this period.
• Comparison Among States:
- Sikkim has the highest MPCE among states, with ₹7,731 for rural areas and ₹12,105 for urban areas.
- In contrast, Chhattisgarh has the lowest MPCE, with ₹2,466 for rural households and ₹4,483 for urban households.
Understanding Poverty and Inequality Trends:
- While some argue that the estimates based on the survey’s fact sheet are provisional, they still provide valuable data for analysis. Trends reveal a significant decline in poverty ratios between 2011-12 and 2022-23, albeit at a slower rate compared to the previous period.
- Inequality, measured by the Gini coefficient, has also decreased, particularly in urban areas.
Challenges in Measurement:
- The NSSO has adopted varying reference periods for data collection over time to improve consumption reporting. However, this has led to challenges in comparing estimates across different periods.
- Methodological changes, such as coverage of more items and multiple visits, have improved estimation accuracy but have also raised comparability issues. Furthermore, there is ongoing debate regarding the appropriate poverty line definition, with some advocating for a shift away from calorie-based norms.
Suggested Measures:
- To address these challenges and ensure accurate measurement of poverty and inequality, several measures can be taken.
- Firstly, efforts should be made to standardize data collection methods and reference periods to enhance comparability across different surveys.
- Secondly, there is a need to reevaluate the poverty line definition to reflect changing consumption patterns and socioeconomic dynamics.
- Additionally, capturing the value of public expenditure on subsidized items more effectively can provide a more comprehensive picture of household well-being.
