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News Excerpt: 

Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM) advocated to adopt a new methodology to measure poverty.

More detail about news:

• According to the chairman of EAC-PM, India might require updated methods to measure poverty, surpassing the decade-old findings of the Tendulkar Committee.
• The Chairman mentioned that the Rangarajan Committee report was never officially adopted, and the Multidimensional Poverty Index (MPI) does not precisely define a poverty line.
• He suggested establishing a new poverty line to apply data from the Household Consumption Expenditure Survey (HCES). These data not only measure inequality and poverty but also reflect various other factors.

Tendulkar Committee:

• The Tendulkar Committee, led by former National Statistical Commission chief Suresh Tendulkar, was created in 2005 by the Planning Commission to reassess poverty estimation methods.
• Its report, submitted in December 2009, indicated that the rural poverty headcount ratio for 2004-05 was 41.8%, urban poverty was 25.7%, and the overall poverty rate in India was 37.2%.

Rangarajan Committee:

• In 2012, another expert group, chaired by former Reserve Bank of India governor C. Rangarajan, was established to review the poverty measurement methodology.
• The Rangarajan Committee's report, submitted in June 2014, defined poverty as living on less than ₹47 per day in cities and ₹32 per day in villages, estimating that poverty levels were 19% higher in rural areas and 41% higher in urban areas compared to the Tendulkar Committee's estimates.

Measurement of inequality:

• The Chairman suggested examining state-wise Gini coefficients to assess inequality, as national estimates might not provide a complete picture.
• He questioned the assumption that a declining Gini coefficient is always beneficial, noting that inequality tends to increase as economies grow.
• He emphasized that current discussions are about a Gini coefficient around 0.32 to 0.34, not the extreme levels of 0.6.
• The Gini coefficient measures income, wealth, or consumption inequality within a population.

Gini coefficient for consumption expenditure:

• According to the Household Consumption Expenditure Survey (HCES) report released by the National Statistical Office (NSO) in early June, the Gini coefficient for consumption expenditure decreased from 0.283 in 2011-12 to 0.266 for rural areas, and from 0.363 to 0.314 for urban areas in 2022-23.

Poverty in India:

• Niti Ayog's chief executive, stated that less than 5% of Indians were expected to be below the poverty line, based on the HCES findings for FY23.
• Additionally, the Niti Ayog's MPI report indicated that approximately 248 million Indians escaped multidimensional poverty between 2013-14 and 2022-23.