For India to measure poverty and achieve development goals, it needs a multipronged approach

In India, poverty assessments date back to the pre-independence period and have undergone methodological revisions over the decades. The assessment frameworks have evolved from unidimensional approaches based on the calorific requirement, consumption expenditure and income-based measures to the recent recognition of measuring poverty from multiple dimensions.

The earlier unidimensional approach was based on the calorific availability of food. It was then translated into a food basket and income was arrived at based on the wholesale prices of these food commodities. The national recommendation was 2,400 kilocalories for rural and 2,100 kilocalories to determine the poverty line.

The income computation was carried out by different committees the latest being the Rangarajan committee 2014, which suggested Rs 972 per month in rural areas and Rs 1,407 per month in urban areas based on 2011-’12 prices. This method had numerous flaws. First, the calorific method of energy consumption ignores the nutrient requirements for individuals. This has led to the undermining of the malnutrition problem that India is railing through. In addition, the poverty line drawn based on such a unidimensional method had kept the minimum wages at a low level for a long period of time. Therefore, this new multi-dimensional poverty index is a welcome change and departure from the past.

Multidimensional index

The National Multidimensional Poverty Index was released by the NITI Aayog in November 2021. The index is a comprehensive measure of non-income poverty and is hailed as a public policy tool to monitor poverty in its multiple dimensions. Adoption of the National Multidimensional Poverty Index as a monitoring tool is part of the central government’s larger mandate of leveraging the global indices, to drive reforms and growth to enhance ease of living and thereby improve the country’s position in the global ranking on these indices.

The idea of multi-dimensional poverty and its implementation is not new to India. The multidimensional aspects of poverty and the importance of multiple-deprivation methods in identifying the poor were first articulated in the 11th Five Year Plan of India. Poverty assessments also double up as analytical tools that help understand the linkage between the policy environment and the intended development outcomes.

This exercise provides insights on and roadmaps for welfare policy design and implementation. Identification of below poverty line households through this method had also the objectives to effectively target services, government programs and subsidies to the poor households.

The National Multidimensional Poverty Index provides evidence-based policy directions at both the national and sub-national levels. The index can be potentially used to foster competitive federalism, by comparing progress on development outcomes at the subnational level.

The National Multidimensional Poverty Index is expected to provide inputs for development policy design, budgeting and target allocation at the national and sub-national levels. At the district level, the index is expected to provide guidance on prioritising the execution and delivery of development interventions.

In a way, the National Multidimensional Poverty Index is a monitoring tool towards achieving Sustainable Development Goals by the end of this decade. We critically look at the intents, deliverables and actions that lie in the heart of the National Multidimensional Poverty Index constructs and scores.

Capturing deprivation

The National Multidimensional Poverty Index is based on the Alkire-Foster methodology developed by the Oxford Poverty and Human Development Initiative and United Nations Development Programme. It captures multiple and simultaneous deprivations by households using a dual cut off method.

It estimates the “headcount ratio” ie how many people are poor and measures the intensity of poverty ie how poor are the poor. The National Multidimensional Poverty Index score is the product of headcount ratio and intensity.

The first order cut off estimates the individual deprivation scores and the second-order cut off identifies households that are multidimensionally poor. Households showing deprivation on about one-third of the indicators are classified as multidimensionally poor.

Compared to the Global Multidimensional Poverty Index, the national index has two additional indicators – maternal health and bank accounts. Thus, India’s National Multidimensional Poverty Index has twelve indicators classified across three equally weighted dimensions of deprivations viz health, education and standard of living.

The contribution of each indicator is a weighted censored headcount ratio as shown in the table. The nutrition indicator at 28.14% has the highest contribution to National Multidimensional Poverty Index. The second and third highest contributors to National Multidimensional Poverty Index are the “years of schooling” and “maternal health”. This is followed by the other indicators related to the “standard of living” dimension which has seven components with all indicators in this sub-group being assigned equal weightage but different contributions.

For example, cooking fuel (9.34%), sanitation (8.61%) and housing (8.31%) top in terms of contribution to the National Multidimensional Poverty Index in that order. The National Multidimensional Poverty Index is based on the National Family Health Survey-4 data pertaining to the year 2015-’16 and is referred to as the baseline report. The National Multidimensional Poverty Index has computed disaggregated indices at the state and the district level.

The choice of the indicators in the National Multidimensional Poverty Index, especially those in the “standard of living” dimension, shows that our development narrative is still stuck at the basic availability approach and not really the quality of utilization. The indicators on cooking energy, electricity and bank account are clear indicators towards this.

Gauging policy impact

Post 2015, the central government has introduced several flagship programmes like Pradhan Mantri Ujjwala Yojana, Saubhagya scheme, Pradhan Mantri Jan Dhan Yojana, Jal Jeevan Mission and Pradhan Mantri Awas Yojana, aimed at improving access to clean energy and facilitating financial inclusion. These programs were initiated around and after the National Family Health Survey-4, which is used as the baseline for the National Multidimensional Poverty Index. Therefore, the current status of the National Multidimensional Poverty Index would also be a reflection of the success of these programs.

A critical look at the nature and quality of indicators included in the standard of living dimension reveals that the index restricts itself to capturing access, without saying anything on the deeper aspects of the quality or developmental impact of these services. Nor does it capture the social and structural constraints for accessing these services by poor households. The use of LPG for cooking is lowest among the Scheduled Tribe population, followed by the Scheduled Caste population. Women headed households also report very poor access to LPG.

The National Multidimensional Poverty Index while relying on resource-based approaches, ignores interpersonal, inter-community or groups differences in capabilities. Thus, the scope of the index as a policy monitoring tool delves at the provisioning parameters, which are by nature, the low hanging fruits in policy evaluations.

The impact of policies on development is better measured at the outcome level. This requires parameters of the utilisation of these services in a meaningful way. The transformative changes in households’ capabilities and opportunities that access to LPG, electricity, or bank account results in, would make for a more meaningful narrative of a country’s development trajectory.

As per the National Multidimensional Poverty Index baseline report 2021, shown in the table below, the states of Bihar and Uttar Pradesh are the two states that perform worse on several of the deprivation indicators. Kerala, Sikkim, Goa, Tamil Nadu perform well on most of the indicators.

Methodological improvements

Any tool for capturing deprivation and progress of reforms should focus on the most vulnerable social groups and communities. While the global Global Multidimensional Poverty Index covers disparities by ethnicity, caste and gender, for India the indices do not provide disaggregated measures of deprivation across gender and social groups.

The global Global Multidimensional Poverty Index reports that in India, five out of six multidimensionally poor people belong to the scheduled tribes or castes. The Scheduled Tribes in India are the poorest with more than 50% of their population reporting multidimensional poverty. The National Family Health Survey, which is used as the baseline, provides data disaggregated by sex, residence, age, religion and social group on several indicators. The current methodology needs to be complemented with efforts at collecting disaggregated levels to appropriately map the incidents of poverty.

Multidimensional poverty requires multidimensional indications and approaches. Therefore, only an administrative boundary-based approach ignoring the social group (ie tribe, caste, gender and religion), natural resource dependency groups (fishers, forest dwellers and pastoralists) would be partial and ineffective in the last miles of target.

Multidimensional poverty is not just aggregation across the various dimensions of deprivation. Interaction between the dimensions is also an important aspect of consideration in judging the severity of the deprivation. The dual cut off criterion (headcount and multidimensional poverty) indicates that the National Multidimensional Poverty Index results are sensitive to the number of dimensions in which deprivation is measured.

For example, if a household reports deprivation in less than one-third criteria and if the cut-off is at one-third level, such households would not be reported as multidimensionally poor. The National Multidimensional Poverty Index like its global counterpart suffer from these shortcomings. The headcount ratio is discretionary at the poverty line and hence any slight change in the inclusion/exclusion criteria would result in unrealistic estimates of poverty, leading to the formulation of flawed policies.

Finally, the National Multidimensional Poverty Index does not account for inter-state differences in initial threshold and progress on the various deprivation dimensions, with them being attributed equal weights across states. The relevance of the National Multidimensional Poverty Index as a monitoring tool for deprivation.

Reform progress at the subnational level would depend on how reflective the index is of the economic, social, political and institutional contexts of the states. If this aspect is not considered seriously, states may use it as a report card where winner and loser almost self-select. The indicators, therefore, need to be reflective of the degree of change and improvement to appreciate the efforts of the changes brought in through the interventions.

The National Multidimensional Poverty Index is certainly a way forward from the calorific headcount poverty measurement. However, it is high time to see the quality of utilisation beyond the magnitude and numbers. Development is not just about having a bank account, but its utilisation for transactions, it is not just about having LPG but its regular refilling, it is not just about having a toilet at home but its regular usage as a toilet.

These qualitative aspects require data beyond what is being collected. It requires state and civil society organisations to engage beyond provisioning to bring in characteristic changes. Such changes are slow and gradual, require stability in income and livelihood, require dignity and harmony. We hope, there would sooner be such reflective indicators that would truly represent the Sustainable Development Goals and multipronged data and methods would show the changes in a positive direction.

Manjula M and Amalendu Jyotishi are faculty at the School of Development at Azim Premji University. Their email addresses are manjula.m@apu.edu.in and amalendu.jyotishi@apu.edu.in.