Special articles

Rural-Urban Disparities
Income Distribution, Expenditure Pattern
and Social Sector
This paper is based on the most recent primary household level data obtained from a survey
on income, expenditure, poverty measures for 1994-95 and human development indicators for
1996 in rural and urban India as a part of the project Micro Impact of Macro and Adjustment
Policies (MIMAP). Empirical results show wide disparities in levels of living in terms of economic
and social indicators in rural and urban India. The comparison of the distribution with a similar
survey conducted in 1975-76 shows the changes in the pattern of income distribution and the
gap between the shares of income in rural and urban areas during the last two decades.
BASANTA K PRADHAN, P K ROY, M R SALUJA, SHANTA VENKATRAM

T
he need to know the differential
impact of macro adjustment poli-
cies across different groups of
population at the micro level is increas-
ingly being realised by planners and policy-
makers. The adverse effect of such poli-
cies, if any, on the vulnerable groups
could then be corrected by designing
proper compensatory programmes. To
ensure this, it is necessary not only to
identify the likely effects on these groups
based on theoretical models but also to
monitor the welfare indicators in terms of
availability of choices to people for basic
health, education and other essential ser-
vices apart from income. The non-avail-
ability of current data pertaining to pat-
terns of income and expenditure distribu-
tion by socio-economic groups at the micro
level do not permit a clear understanding
of the effect of these policies. It is often
said that the rich are getting richer and the
poor becoming poorer in the country but
the lack of such data over time prevents
researchers from either refuting or accept-
ing such comments. No estimates of in-
come distribution are available even at all
India level, leave alone by occupational
groups except for a few all India household
surveys conducted by National Council of
Applied Economic Research (NCAER),
New Delhi.
In India, eradication of poverty and
reduction of income inequality have al-
ways been one of the most important
objectives of the five-year plans. As is
known, economic growth would not re-
duce poverty substantially unless the spread
of additional income goes more in favour
of the depressed classes along with
improvements in social indicators. It may,
therefore, be desirable to enquire about the
distribution of generated income at the
micro level. The impact of adjustment and
stabilisation policies may get reflected in
a number of indicators like consumption
of goods, levels of health, morbidity, school
enrolment and dropouts, etc. Therefore, a
study of the impact of policy reforms on
income distribution and poverty is of special
importance as these factors are crucial for
public policy.
The household survey, conducted as a
part of the MIMAP-India project spon-
sored by International Development Re-
search Centre (IDRC), is a step forward
to help monitor the welfare indicators and
act as inputs to the MIMAP-models which,
in turn, attempt to understand the process
of transmission mechanism of such poli-
cies. It would, perhaps, not be out of place
to mention the importance of having such
data over time which will be of immense
value for the monitoring of adjustment
policies. The study is expected to answer
some of the important questions.
(a) Is there any disparity in income and
consumption level between rural and
urban areas?
If so, to what extent?
(b) What are the basic sources of income
and distribution of income?
(c) Have inequalities in income distribu-
tion decreased in rural and urban India?
(d) What is the magnitude of poverty by
occupational groups? Is it increasing
or decreasing?
(e) What is the pattern of consumption
expenditure?
(f) What are the social indicators of poor
compared to non-poor ?
Under this survey, a highly desegregated
micro level data base has been created to
observe the status of different population
groups by income, occupation, and social
characteristics in terms of human develop-
ment indicators. In the process, detailed
information has been collected on income,
employment, expenditure, savings and
investment which is not available from any
other recent source. The analysis of the
MIMAP survey broadly contains the fol-
lowing exercises.
(i) An analysis of income distribution and
expenditure patterns by occupational
categories in rural and urban areas.
(ii) Measurement of different inequalities
in the per capita income distribution,
viz, Gini coefficient of inequality, Gini
coefficient of inequality in income
among poor, and FGT index of pov-
erty, etc.
(iii) Estimation of absolute poverty with
reference to poverty line using the ex-
penditure as well as income distribu-
tion.
(iv) Analysis of education, health and other
social sector indicators by different
population categories especially for the
poor and non-poor groups.
Section I describes the methodology and

Economic and Political Weekly July 8-15, 2000 2527

sample design of the study. Empirical
results on the distribution of income,
expenditure and poverty measures are
presented in Section II, while the social
sector indicators are presented in
Section III. Possible areas for further re-
search and future plan is discussed in
Section IV. The Appendix describes the
concepts and definitions used.
I would, however, be on the basis of the
Sample Design and
Methodology
NCAER had earlier conducted an all
India rural household survey on Human
Development Indicators (HDI) in 1993-94
with the main emphasis on social indica-
tors. This survey covered 195 districts,
35,000 households in 1,703 villages spread
over all the major states in India. The need
for monitoring the changes in the indica-
tors was felt and the MIMAP survey was
conducted accordingly to provide some
information on key social indicators on
education, health, basic amenities, social
securities, etc, by taking a sub-sample of
HDI survey of rural households. Also, to
study the disparity in rural and urban areas,
the MIMAP survey included the urban
areas by taking a sub-sample from another
study conducted by NCAER in 1993, viz,
Market Information Survey of Households
(MISH).
NCAER has conducted, over the years,
a number of household surveys to estimate
household income, savings and consump-
tion both in rural and urban parts of the
country through a three-stage stratified
design with districts, villages and house-
holds as first, second and final stage units
in rural areas and towns, blocks and house-
holds as respective units in urban areas.
On the basis of the earlier studies and the
cost factor, it was decided to select a sample
of around 5,000 households for the MIMAP
survey, which would be adequate to yield
an estimate of average household income
with a reasonable margin of error. These
studies suggested that the major compo-
nent of sample error was contributed by
variations between the first stage units of
selection of districts in rural areas and
towns in urban areas. The contribution due
to variations between households within
a village or a block was quite small, sug-
gesting the possibility of a significant
improvement in precision through an in-
crease in the number of first and second
stage units of selection without increasing
the overall sample size. Keeping this in
2528
view, it was decided to select larger num-
ber of first and second stage units for the
MIMAP survey relative to the earlier
surveys.
According to the 1991 census, 25.7 per
cent of the population live in urban areas
in India. A proportional allocation on this
basis would suggest a sample size of 1,285
urban households and 3,725 rural house-
holds. A more efficient way of allocation
relative variance of income in two regions
rather than only on the basis of propor-
tions. Taking cue from the earlier study,
the optimal allocation of the sample for
rural and urban areas was worked out as
3,400 and 1,600 respectively.
In any large-scale survey, where the data
are to be collected from a number of
households, a few non-responses are in-
evitable due either to absence, non-coop-
eration or unwillingness of respondents to
give information. There are two possible
ways of tackling non-responses:
– by substituting original households with
similar households in the sample;
– by increasing the initial sample size to
provide for possible non-responses so
that the effective sample size would be
around the required level.
The latter approach is adopted in this study.
Based on the experience of earlier surveys
where the non-responses ranged between
8 to 10 per cent, a sample of 3,666 house-
holds in rural and 1,757 households from
urban were selected for the study to cover
an effective sample of 5,000 households.
The sample represents more than 98 per
cent of the total population. The study
excluded Jammu and Kashmir, Mizoram,
Andaman and Nicobar Islands, Laccadives,
Minicoy and Dadra and Nagar Haveli.
In the rural areas, a three-stage sample
design was adopted to select the house-
holds, with the first and second stage units
as districts and villages respectively. In
each state, 50 per cent of the districts
covered by the HDI survey, 1993-94, were
selected for this study by adopting a sys-
tematic random sampling technique. For
each selected district, a random sample of
four villages was selected from among the
villages selected for the HDI survey. From
each selected village, roughly 50 per cent
of the households of the HDI survey were
selected from each category (as defined by
HDI survey) of households, with the
condition that at least one household of
each existing category is selected. A total
of 392 villages from 98 districts were
selected for this study.
Economic and Political Weekly
For urban areas, 53 towns were selected
for this survey. These towns formed a sub-
sample of the towns selected for the MISH
1993 study. The towns were selected in
such a manner that, as far as feasible, in
each state one town is selected from each
town size category. All the four metropoli-
tan cities were selected for the survey. The
total number of blocks were allocated to
towns by giving higher sample for towns
in higher size category. Blocks from each
town were selected randomly from the
MISH blocks. For each selected block the
list of households was available in the
listing for the MISH study according to
income classes. Households were selected
from each income category in such a way
as to give a higher relative sampling frac-
tion to higher income households (because
of larger variation in higher income house-
holds). Nine households were selected from
each block to achieve the required sample.
The effective number of households
selected for the analysis were 3,364 in
rural and 1,492 in urban areas, the non-
response was found to be 8.2 per cent in
the rural and 15.1 per cent in urban areas.
The rate of non-response in an earlier (1976)
survey of income and its disposition in
rural was 6.6 per cent and in urban was
11.1 per cent. The margin of error for the
estimate of per household and per capita
income were worked out both for rural and
urban areas. The margin of error per house-
hold and per capita income worked out from
the MIMAP survey in rural households
was 3.2 per cent and 3.1 per cent respec-
tively, while for urban households it was
5.8 per cent and 6.2 per cent respectively.
It is well known that in any income-
expenditure survey, there is an inherent
under-reporting of income. People tend to
suppress their income particularly when
questions relating to its disposition are not
asked. For this purpose a cash flow state-
ment at the household level in MIMAP
survey is prepared to check whether cash
inflows during the year checks with cash
outflows. Similarly, details of all sources
of funds and all uses of funds were pre-
pared at the household level to check
inconsistencies in the data in the field
itself. It was decided to allow ± 5 per cent
differences in sources and uses of funds
to accommodate memory lapses of the
respondent. The questionnaire was re-
canvassed wherever the difference ex-
ceeded the limit. However, in spite of
repeated visits and canvassing, some of the
respondents were unable to express the
details of matching sources of funds with
July 8-15, 2000
the uses of funds especially where the Islands, Lakshadeep, Minicoy Islands and hold income as obtained from MIMAP
respondents were illiterate and also at the Dadra and Nagar Haveli. Besides, the gross survey was 32.4 per cent and the share
highest level of income for various rea- income as estimated from the MIMAP of net value added comprising of farm-
sons. Such questionnaires were not ac- survey is found to be around 74 per cent ing and agricultural wages to total net
cepted for analysis. Thus the survey differs of the personal income as provided by the value added from National Accounts
from others as it tried to cross-check the National Accounts Statistics (NAS). The Statistics (NAS) for 1994-95 was 31.8
gap between sources and uses of funds at differences between these two estimates per cent. The NAS does not provide
the household level. A similar study was may possibly be attributed to the following the rural urban break-up. However
conducted by NCAER in the ‘Survey of factors. according to the survey, in rural areas,
Household Income and Its Distribution’ in (i) Certain population groups (belonging the share of farm and agriculture wage
1975-76. However, this survey did not to the non-household category and the income to total household income was
include social indicators. A comparison of inaccessible regions) are not covered 55.7 per cent and in urban areas 2.5
the distribution of income from these two in the survey. per cent.
surveys reveals the changes in the pattern (ii) The income based on household sur-
of the distribution in rural and urban areas veys generally tends to be under-re- II
during the past two decades. ported. This is a general experience Empirical Results
The household questionnaires of across countries, both developed and
MIMAP survey were divided into two parts. developing. An attempt has been made to address
Part I collected information from indi- (iii) The survey estimates of income do not some of the key issues relating to the
vidual members of the household regard- cover accrued but unrealised income distribution of income, expenditure and
ing their age, sex, education status and from interest, reimbursements for poverty measures from the MIMAP survey,
occupation. Detailed information on edu- medical, travel, etc. There are prac- and the findings are given below.
cation is obtained on: tical difficulties in getting informa- Is there any disparity in income and
– dropouts and never enrolled in the age tion on the contribution towards provi- consumption level in rural and urban India?
group of 6-14 years; dent fund, etc. If so, to what extent? Of the total estimated
– currently studying; (iv) Central Statistical Organisation (CSO) gross income generated in the household
– expenditure on education. estimates of domestic product and sector, the share of rural income accounted
Information on health indicators is col- hence personal income are themselves for 55.6 per cent with 74.6 per cent of
lected on: not based on firm data especially in country’s population, which was 66.8 per
– reproductive history of ever-married the unorganised sectors of the cent in 1975-76 with 79.1 per cent of
woman aged 15-45 years on pregnancy, economy. This fact is admitted by the population. The rural share of income seems
live birth, etc; CSO itself (NAS 1989). The estimated to have gone down during the last two
– immunisation of children less than two consumption expenditure according decades, resulting in wider disparities in
years of age; to our survey is 80.4 per cent of the income distributions between rural and
– prevalence of illness, pattern of corresponding estimate of the NAS. urban India (Table 1). On an average, one
utilisation of health care, factors influ- The survey estimates, however, were in every 25 households in rural areas had
encing the choice of treatment, level of found to be more than the projected an income of more than Rs 72,000 while
satisfaction, etc; NSS survey estimate of 1994-95. every fourth household in urban areas
– birth and death during the last one year; The estimated share of farm and agri- reported a similar income. With the rise
– maternal care, both ante and post natal. cultural wage income to total house- in income the proportion of households
This part of the questionnaire also col- Table 1: Percentage Distribution of
living in urban India rose and in the highest
lected information on the beneficiaries of Households, Population and Income income brackets more than two-thirds of
basic amenities with respect to access to the households reside in cities and towns
Households Population Income
potable water, electricity and other welfare (Table 2).
programmes. Rural 72.6 74.6 55.6 The survey revealed wide disparities in
Urban 27.4 25.4 44.4 the average per household and per capita
In Part II, data at the household level All-India 100.0 100.0 100.0
were collected on: income in favour of urban households in
– household income from different sources; Table 2: Percentage Distribution of Households and Their Share in
– consumption expenditure by major Income by Income Groups
items of expenditure;
Annual Income Rural Urban All India Per Cent of
– sources and uses of funds; Group (Rs) Hhds Share in Hhds Share in Hhds Share in Urban Hhds
– pattern of savings and investment, both Income Income Income to All Hhds
physical and financial; Up to 12,000 16.21 5.28 2.33 0.37 12.41 3.11 5.15
– labour of employment in productive 12,001-18,000 25.71 14.20 7.74 2.12 20.80 8.85 10.19
activities. 18,001-24,000 17.92 13.67 9.61 3.50 15.62 9.17 16.66
It may be useful to record the limitations 24,001-48,000 29.91 36.47 35.83 22.20 31.52 30.16 31.10
48,001-72,000 5.86 12.58 19.80 20.07 9.68 15.90 56.01
of the present study. The study covered 72,001-96,000 2.10 6.33 11.32 16.30 4.62 10.74 67.07
more than 98 per cent of the total popu- Above 96,000 2.29 11.47 13.47 35.43 5.35 22.06 68.88
lation of India, excluding some of the Total 100.00 100.00 100.00 100.00 100.00 100.00 27.37
Avg income per
states and union territories like Jammu and
household (Rs) 27411 57675 35694
Kashmir, Mizoram, Andaman and Nicobar

Economic and Political Weekly July 8-15, 2000 2529

2530 Economic and Political Weekly July 8-15, 2000
all the occupational categories. The house-
holds were classified into six categories
by their major source of income, viz, self-
employed (farming), self-employed (non-
farming), salary, wages (agriculture), wages
(non-agriculture) and others (income from
rent, interest, dividend, pension, etc)
(Table 3).
of income from farm activities to non-farm statistical agencies and the World Bank.
activities is more prominent. Collection of income distribution data is
Have inequalities in income distribution not systematically organised and the data
decreased in rural and urban India? The
lack of data on income distribution over Table 6:Composition of Household
Income
time prevents researchers studying the (Per Cent)
changes in inequalities. World Develop-
ment Report (1996) provides the data on Source of Income Rural Urban All India

The urban households according to the income or consumption distribution ac- Self-emp farm 35.37 1.72 20.49
Self-emp non-farm 11.16 20.74 15.39
1975-76 survey, earned an income, on an cording to percentile groups of households Salary 17.42 54.07 33.63
average, 1.82 times the rural households ranked by household income/per capita Agricultural wages 20.29 0.74 11.65
while the MIMAP survey indicated that income or expenditure for a number of coun- Non-agricultural wages 7.56 4.94 6.40
Others 8.20 17.79 12.44
the multiple is now 2.1. The consumption tries. Income distribution data for low and All sources 100.00 100.00 100.00
expenditure per household in urban areas middle-income countries have been com- Estimated income
(Rs crore) 321488 254864 576312
from the MIMAP survey, however, was piled from two main sources: government,
found to be higher by 1.97 times the rural Table 3: Average Annual Per Household and Per Capita Income
households. by Occupation Groups
What are the basic sources of income? Average Income Per Capita Income
Is there any change in the pattern of sources Occupation category Rural Urban All India Rural Urban All India
of income? The majority of households Self-emp farm 32357 56773 32719 5324 8076 5372
had reported more than one source of Self-emp non-farm 39405 60779 49897 7104 11090 9049
income, the major share of around 70 to Salary 38579 64805 54375 6581 12814 10112
Agricultural wage 18026 20616 18091 3349 3446 3352
80 per cent always coming from the ac- Non-agricultural wage 17998 26578 20459 3392 5074 3870
tivity pursued as defined by their oc- Others 26639 53819 38506 5848 14946 9305
cupational categories. The second major All categories 27411 57675 35964 4864 11306 6502
source of income in urban areas was ‘other
Table 4: Source of Income by Occupation Groups
sources’ which includes incomes from (Per cent)
house property, interest, dividend, pen-
Source of Income
sion, etc, while that in rural areas was Occupation Group Farming Non-Farming Salary Agr Wage Non-Agr Others All Sources
‘farming’ (Table 4). Wage
Nearly 38 per cent of household sector
Rural
income in the country originated in self- Self-emp farming 81.76 2.05 3.60 5.36 1.96 5.28 100.00
employed households with 37 per cent of Self-emp non-farming 11.08 78.75 2.98 1.76 0.35 5.05 100.00
population. Another 38 per cent of total Salary 8.08 1.88 79.79 2.55 0.99 6.71 100.00
Agr wage 8.57 0.87 0.20 79.95 4.67 5.74 100.00
income originated by households engaged Non-agr wage 6.71 0.30 0.22 3.61 80.42 8.74 100.00
mainly in salaried work at the country level Others 16.45 2.32 5.81 6.05 0.96 68.41 100.00
All groups 35.37 11.16 17.42 20.29 7.56 8.20 100.00
having 25 per cent of total population Urban
(Table 5). On the other hand 34 per cent Self-emp farming 74.01 1.43 4.63 2.28 2.65 14.50 100.00
of the population consisting of wage earn- Self-emp non-farming 0.85 82.81 2.54 0.10 0.57 13.14 100.00
Salary 0.85 1.57 84.04 0.06 0.40 13.09 100.00
ers got only 18 per cent of the income. Agr wage – – – 72.80 19.25 7.95 100.00
The self-employed sector generated 35.8 Non-agr wage 0.81 1.12 3.52 1.38 81.66 11.51 100.00
per cent of total income at the country Others 0.88 5.95 12.51 0.15 1.87 78.64 100.00
All groups 1.72 20.74 54.07 0.74 4.94 17.78 100.00
level. About one-third of the total income All India
was generated through salaries. A com- Self-emp farming 81.56 2.04 3.62 5.28 1.98 5.51 100.00
parison of the MIMAP survey results with Self-emp non-farming 4.96 81.18 2.72 0.78 0.48 9.88 100.00
Salary 2.89 1.66 82.84 0.76 0.56 11.29 100.00
the similar survey conducted by NCAER Agr wage 8.32 0.85 0.20 79.75 5.09 5.80 100.00
in 1975-76 revealed a significant decrease Non-agr wage 4.51 0.61 1.45 2.78 80.88 9.77 100.00
in the share of income from farming from Others 6.95 4.54 9.90 2.45 1.52 74.66 100.00
All groups 20.49 15.40 33.63 11.65 6.40 12.44 100.00
37.8 per cent to 20.5 per cent, an increase
in share of income from salaries from 22.7 Table 5: Distribution of Households, Population and Share in Income
per cent to 33.6 per cent and other incomes by Occupation Groups
from 7.2 per cent to 12.4 per cent during (Per Cent)
the last two decades, i e, from 1975-76 to Category Rural Urban All India
1994-95 (Table 6). Hhds Pop Income Hhds Pop Income Hhds Pop Income
This is because the growth in industry Share Share Share

and services sector is much higher com- Self-emp farm 30.59 32.98 36.11 1.22 1.68 1.20 22.55 25.02 20.67
pared to agricultural growth during this Self-emp non-farm 8.62 8.49 12.40 22.06 23.70 23.25 12.30 12.36 17.19
Salary 13.79 14.34 19.40 55.41 54.93 62.26 25.18 24.66 38.36
period. The index of production of all Agr wages 32.64 31.18 21.47 2.21 2.59 0.79 24.31 23.91 12.32
crops over these years has gone up by 1.7 Non-agr wages 10.55 9.94 6.93 11.27 11.57 5.19 10.75 10.35 6.16
times while index of industrial production Others 3.81 3.08 3.70 7.83 5.53 7.30 4.91 3.70 5.29
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
by 3.2 times. The relative shift from share

Economic and Political Weekly July 8-15, 2000 2531

are derived from surveys designed for other holds according to the 1975-76 survey Although, a household has been taken
purposes, most often consumer expendi- earned an income, on an average, 1.82 times as an indivisible entity for this survey,
ture surveys, which also collect some infor- the rural households, while the MIMAP poverty has a welfare connotation which
mation on income. These surveys use a survey indicated the gap has been widened ultimately relates to an individual and not
variety of income concepts and different and has risen to 2.1 times.1 Thus the all to a household. It is often assumed, in a
sample designs, and in many cases their geo- India distribution of income inequality has culture where work and income are shared
graphical coverage is too limited to provide marginally increased when the rural and
reliable nationwide estimates of income urban households are combined. Table 10: Measures of Concentration of
Per Capita Income
distribution. Therefore, while the esti- The concentration of income within
mates are considered the best available, agricultural wage earning households was Measures of Rural Urban All India
Concentration
they do not avoid all these problems and found to be least and self-employed non-
should be interpreted with extreme caution. farm households had the most inequitable Lorenz ratio 0.366 0.402 0.433
Coefficient of variation
There are very few studies relating to distribution of household income, because (per cent) 88 98 112
income distribution in India. Only NCAER the group includes artisans, petty shop- Share of first quintile 7.13 3.72 5.67
has conducted a few surveys from which keepers to large businessmen (Table 8). Share of last quintile 45.00 46.91 50.88
the distribution of income can be esti-
mated. In addition a number of researchers Table 7: Income Distribution by Decile Groups: Per Cent Share in Income
have estimated the distribution of income, Decile Group 1975-76* 1994-95
combining information from different Rural Urban All-India Rural Urban All-India
sources and by making brave assumptions, Bottom 10 2.50 2.26 2.27 2.76 2.39 2.33
during sixties and early seventies. Studies 11-20 3.81 3.56 3.52 4.26 3.65 3.60
21-30 4.81 4.47 4.45 5.19 4.66 4.45
by Iyenger and Mukherjee (1961), Ojha 31-40 5.82 5.36 5.47 5.95 5.93 5.25
and Bhatt (1961), Ranadive and Ahmad 41-50 6.90 6.43 6.49 6.95 7.07 6.31
and Bhattacharya (1972) need special 51-60 8.11 7.57 7.71 8.14 8.40 7.61
61-70 9.62 9.37 9.28 9.67 10.08 9.34
mention. All these studies have superim- 71-80 11.78 11.53 11.49 11.80 12.35 11.94
posed assumed pattern of savings on the 81-90 15.12 15.85 15.44 15.31 16.11 16.31
distribution of consumption expenditure 91-100 31.53 33.60 33.88 29.97 29.37 32.87
Total 100.00 100.00 100.00 100.00 100.00 100.00
obtained from the National Sample Survey Lorenz ratio 0.388 0.416 0.416 0.376 0.390 0.425
Organisation (NSSO). Saving estimates
Note: *‘Household Income and Its Disposition’, NCAER, 1980.
were obtained from the CSO and Reserve
Bank of India (RBI). Income tax data have Table 8: Concentration of Household Income by Occupation Groups
also been used by some authors. However, Measure of Concentration Self Self Salary Agriculture Non- Others All
because of these limitations, a comparison Employed Employed Wages Agriculture India
of income distribution over time was Farm Non-farm Wages
difficult as the definitions, sources and, All India
more importantly reliability varied. Lorenz ratio 0.400 0.451 0.338 0.251 0.287 0.440 0.425
Coefficient of variation 96 120 70 49 57 109 103
To study the movement of inequalities, Share of first quintile 6.32 5.57 7.42 9.73 8.63 4.88 5.93
a comparison of percentile distribution of Share of last quintile 47.16 52.40 42.13 35.33 38.16 49.86 49.18
household income in MIMAP (1994-95) Rural
Lorenz ratio 0.396 0.431 0.275 0.249 0.275 0.369 0.376
with the similar study of ‘Household In- Coefficient of variation 91 97 53 48 53 74 87
come and Its Disposition’ in 1975-76 con- Share of first quintile 6.31 6.11 8.63 9.64 9.13 5.50 7.02
ducted by NCAER was made (Table 7). Share of last quintile 47.22 42.32 36.62 35.27 36.41 41.61 45.27
Urban
The Gini coefficients of these two distri- Lorenz ratio * 0.441 0.329 * 0.259 0.434 0.390
butions were worked out which is the most Coefficient of variation * 123 66 * 52 104 92
popular measure of inequality. It is a Share of first quintile * 5.54 7.39 * 9.86 5.02 6.04
Share of last quintile * 50.58 40.84 * 38.54 50.66 45.48
summary measure of the extent to which
the actual distribution of income or con- Note: * Not estimated as the number of observations was small.
sumption differs from a hypothetical Table 9: Percentage Distribution of Households and Population
uniform distribution in which each person by Monthly Per Capita Income Groups
or household receives an identical share. Per Capita/Monthly Rural Urban All India
The result indicated that although the Income Groups (Rs) House- Popu- Income House- Popu- Income House- Popu- Income
incomes are relatively more evenly distrib- holds lation holds lation holds lation
uted in 1994-95 compared to 1975-76 in Up to 150 6.88 8.90 2.59 1.40 1.74 0.24 5.38 7.08 1.55
rural and more so in urban areas, the all- 151-200 11.17 13.09 5.68 1.67 2.54 0.48 8.57 10.41 3.38
201-250 11.97 12.88 7.18 2.06 2.66 0.64 9.25 10.28 4.29
India inequality has shown a marginal 251-300 11.08 11.73 7.89 6.97 7.77 2.35 9.96 10.72 5.44
increase. The share of rural income in 301-400 20.41 20.01 17.10 6.40 7.70 2.89 16.58 16.88 10.81
1975-76 was 66.8 per cent of total income 401-600 20.40 18.61 22.45 16.24 17.33 9.20 19.27 18.28 16.59
601-800 8.46 6.89 11.76 15.58 15.83 11.72 10.41 9.17 11.76
which has come down to 55.6 per cent 801-1200 5.82 5.09 12.05 21.12 20.30 20.85 10.01 8.96 15.94
according to MIMAP, resulting in a wider 1,201-1,800 2.21 1.63 5.80 15.81 14.22 21.93 5.93 4.83 12.92
disparity between average income of rural 1,801 and above 1.60 1.18 7.46 12.74 9.89 29.70 4.64 3.40 17.30
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
and urban households. The urban house-

2532 Economic and Political Weekly July 8-15, 2000

among household members, that welfare pied houses as an item of expenditure on The pattern of consumption varied widely
is equally distributed amongst them. This consumption. However, in the earlier between rural and urban households and
is not necessarily a true representation of sample surveys of income and expenditure also between income groups. The share of
facts, and, in any case, one cannot easily undertaken by the NCAER, the imputed food items was higher in rural (56.2 per
compare the welfare of one individual with value of rent was included under expen- cent) as compared to urban (39.9 per cent)
another on any known quantitative basis. diture as well as income. In this study for areas. The share of cereals and pulses
Therefore, there is little option but to ignore the sake of comparability with both the among food items was nearly twice (26 per
interpersonal differences in welfare within sources, household consumption expendi- cent) in rural as compared to urban (14 per
a household and, on the assumption that ture including the rental value of owner cent) areas in CE I. The rental value of the
income is equitably distributed within it, occupied houses as well as excluding it has owner occupied houses constituted a major
also assume that welfare is similarly dis- been analysed. The distribution of Con- share in urban (16 per cent) as compared
tributed. To give the conventional indi- sumption Expenditure I (CE I), in this to rural (7 per cent) in CE I (Table 13).
vidual basis to poverty, per capita per month study, refers to consumption expenditure If we exclude this component of imputed
income is derived by distributing house- including the imputed rental value of owner rental value of houses, the share of each
hold income equally among the members occupied houses while the distribution of Table 14: Per Capita Annual Expenditure
of the household irrespective of age and CE II is derived by excluding the same. by Items of Expenditure
sex. It was observed that the average As expected the inequality in per capita (in Rs)
household income increased with the consumption expenditure distribution Items of Consumption Rural Urban Ratio of
household size but the rise in household (0.35) is much less compared to the per Expenditure Urban to
income did not keep pace with the increase capita income distribution (0.433). All the Rural
in household size. The distribution of inequality measures in CE II are found to Cereals 844 929 1.10
households by per capita income classes be less than the CE I. This is due to the Pulses 206 268 1.30
Other food items 1175 2246 1.91
showed that the proportion of population fact that at the higher level of consump- Clothing 414 851 2.10
was higher than the proportion of house- tion, the imputed value of owner occupied Fuel 148 540 3.60
holds in lower income brackets and vice houses would be much higher in CE I Ceremonies 166 382 2.30
Health 103 211 2.00
versa for those in higher income groups compared to that at the lower level. The Education 101 455 4.50
(Table 9). This could happen only when different measures of inequality in the Other non-food items 521 1374 2.60
the household size decreased with an distribution of per capita CE I and CE II Imputed rental value 282 1381 4.90
Total 3959 8637 2.20
increase in per capita income. are presented in Table 12.
It is observed that only 3.8 per cent of Table 11: Distribution of Population by Fractile Group on Household Income and
the households in rural areas with 2.8 per Per Capita Income
cent of population reported an income of (Per cent)
more than Rs 1,200 per capita per month Fractile Group on Fractile Groups on Per Capita Income
while 28.5 per cent of households with 24 Household Income 0-20 21-40 41-60 61-80 81-90 91-100 Total
per cent population in urban areas reported 0-20 75.36 17.20 5.28 1.92 0.21 – 100.00
a similar income. The per capita distribu- 21-40 41.39 40.29 14.69 3.32 0.22 0.08 100.00
tion of income indicated a slight decline 41-60 17.90 29.62 39.18 11.98 1.25 0.05 100.00
61-80 1.01 17.92 25.21 44.22 9.56 2.07 100.00
in the concentration of income compared 81-90 – 7.45 16.93 34.69 29.97 10.95 100.00
to per household income in rural and a 91-100 – 1.41 2.70 15.89 27.45 52.50 100.00
corresponding increase in urban (Table 10).
The measurement of inequality does not Table 12: Concentration of Per Capita Consumption Expenditure
change much between the per household Measure of Inequality Rural Urban All India
income and per capita income. Generally, CE I CE II CE I CE II CE I CE II
the fractile position was maintained by a Lorenz ratio 0.295 0.289 0.356 0.338 0.372 0.350
major group of the population whether Coefficient of variation of CE (per cent) 61 60 85 84 92 86
viewed on household or per capita income Share of first quintile 8.68 8.87 6.57 7.09 7.07 7.52
Share of last quintile 38.63 38.23 42.67 41.11 45.78 43.85
while movements in both directions were
found for the rest (Table 11). Table 13: Percentage Distribution of Consumption Expenditure
Is there any difference between the levels by Items of Expenditure
and pattern of consumption expenditure Items of Expenditure Per Cent Share in CE I Per Cent Share in CE II
between rural and urban households by Rural Urban All Rural Urban All
occupational groups? The expenditure on Cereals 21.32 10.75 16.81 22.95 12.80 18.87
consumption covered in this study relates Pulses 5.20 3.11 4.31 5.60 3.70 4.84
to expenditure on cereals, pulses, other Other food items 29.67 26.01 28.11 31.95 30.96 31.55
Clothing 10.45 9.85 10.19 11.25 11.72 11.44
food items, clothing, fuel, ceremonies, Fuel 3.73 6.26 4.81 4.02 7.45 5.40
health, education, other non-food items Ceremonies 4.20 4.42 4.29 4.52 5.26 4.82
including imputed rental value of owner Health 2.59 2.45 2.53 2.79 2.91 2.84
Education 2.55 5.26 3.71 2.75 6.26 4.16
occupied houses. Other non-food items 13.17 15.91 14.34 14.18 18.95 16.09
The NSSO in its surveys on consump- Imputed rental value 7.12 15.99 10.90 – – –
tion expenditure has not included the Total 100.00 100.00 100.00 100.00 100.00 100.00
Average consumption expenditure (Rs) 22327 44048 28272 20738 37005 25190
imputed rental value of the owner occu-

Economic and Political Weekly July 8-15, 2000 2533

item of CE II, for urban households was tion group reported a per capita expendi- Table 17: Percentage Distribution of
Population below Poverty Line: Per
found to be higher than that for rural except ture of 11.7 times that of agricultural wage Capita CE II Distribution
for food items. earning households (Table 16).
The per capita expenditure on education What is the magnitude of poverty in rural Occupational Groups Rural Urban All-India
of urban households on an average was and urban India? Is it similar for different Self-employed farming 24.7 0.8 25.5
4.5 times the corresponding expenditure occupational groups? Normally, poverty is Self-employed
non-farming 2.7 6.3 9.0
of rural households, and on health twice measured in terms of the proportion of a Salary 5.3 5.4 10.7
that of rural. The per capita rental value population living below the poverty line. Agricultural wage 35.0 1.5 36.5
of owner occupied houses in urban was A poverty line dividing the poor from non- Non-agricultural wage 10.8 4.9 15.7
Others 1.8 0.8 2.6
found to be five times more than that of poor is used by putting a price on the All groups 80.3 19.7 100.0
rural (Table 14). minimum required consumption levels of
The share of food consumption in total
CE I by agricultural wage earning house- Tablle 16: Per Capita CE I by Occupation Groups (in Rs) All India
holds was highest (61 per cent) followed Items of CE-I Self- Self- Salary Agricultural Non- Others All
by self-employed farm and non-agricul- Employed Employed Wage Agricultural
tural wage earning households (55 per Farm Non-Farm Wage
cent). However, when the imputed rental Cereals 851 937 960 778 729 1014 866
value of owner occupied households is (1.09) (1.20) (1.23) (1.00) (0.94) (1.30) (–)
excluded, the share of food increases to Pulses 231 232 260 186 166 255 222
(1.24) (1.25) (1.40) (1.00) (0.89) (1.37) (–)
64.4 per cent in agricultural wage earning
Other food items 1228 1795 2100 935 1036 1831 1448
households and 61.5 per cent in non-agri- (1.31) (1.92) (2.25) (1.00) (1.11) (1.96) (–)
cultural wage earning households. The Clothing 455 639 805 310 358 590 525
share of education expenditure was lowest (1.47) (2.06) (2.60) (1.00) (1.16) (1.90) (–)
Fuel 142 337 453 114 171 363 248
in agricultural wage earners and highest (1.25) (2.96) (3.97) (1.00) (1.5) (3.18) (–)
in salaried households (Table 15). In terms Ceremonies 193 367 325 120 99 220 221
of absolute total expenditure per capita, (1.61) (3.06) (2.71) (1.00) (0.83) (1.83) (–)
the salaried households spend 2.4 times Health 122 156 154 79 83 398 130
(1.54) (1.98) (1.95) (1.00) (1.05) (5.04) (–)
more than an agricultural wage earning Education 126 286 369 59 87 308 191
household and 100 per cent more on health (2.14) (4.85) (6.25) (1.00) (1.48) (5.22) (–)
at all India level. The other occupational Other non-food items 567 1071 1221 368 413 857 738
category of households deriving their (1.54) (2.91) (3.32) (1.00) (1.12) (2.33) (–)
Rental value 274 785 953 182 366 2120 561
income from house properties and transfer (1.51) (4.31) (5.24) (1.00) (2.01) (11.65) (–)
incomes spend five times more on health All 4188 6592 7600 3130 3506 7955 5150
than an agricultural wage earning house- (1.34) (2.11) (2.43) (1.00) (1.12) (2.54) (–)
hold at all India level. As expected, on the Note: Figures in bracket relate to ratio of per capita expenditure in the concerned occupational group to the
imputed rental value the ‘others’ occupa- per capita expenditure in the agriculture wage earning occupational group.

Table 15: Per Cent Share in CE II of Items of Expenditure and Occupation Groups
Items of Consumption Expenditure*
Occupational category 01 02 03 04 05 06 07 08 09 10 11

Rural
Self-employed (F) 21.85 5.91 31.32 11.64 3.61 4.97 3.08 3.13 14.48 100.00 23675
Self-employed ( NF) 21.95 4.73 32.79 10.61 3.84 4.22 2.60 2.84 16.40 100.00 25197
Salary 20.05 4.65 32.40 12.15 4.96 5.62 2.55 3.19 14.42 100.00 27299
Agricultural wage 26.42 6.31 31.73 10.47 3.79 4.13 2.66 1.96 12.52 100.00 15841
Non-agricultural wage 25.46 5.54 33.09 11.28 4.30 2.29 2.31 1.97 13.77 100.00 15338
Others 21.70 5.17 32.26 10.18 4.63 2.94 3.64 3.73 15.74 100.00 20239
All 22.95 5.60 31.95 11.25 4.02 4.52 2.79 2.75 14.18 100.00 20738
Urban
Self-employed (F) 16.88 4.96 34.20 10.51 4.60 2.91 5.19 6.92 13.83 100.00 34261
Self-employed ( NF) 12.22 3.51 29.64 11.26 7.11 7.73 2.75 6.01 19.80 100.00 39054
Salary 11.99 3.58 31.25 12.10 7.63 4.56 2.22 6.58 20.09 100.00 41344
Agricultural wage 25.33 6.56 30.63 11.69 6.21 2.22 3.29 3.09 10.99 100.00 19014
Non-agricultural wage 19.12 4.83 32.78 11.63 7.50 4.71 3.21 4.18 12.03 100.00 20887
Others 13.52 3.65 30.58 10.05 7.65 4.50 9.67 6.64 13.73 100.00 29214
All 12.80 3.70 30.96 11.72 7.45 5.26 2.91 6.26 18.95 100.00 37005
All-India
Self-employed (F) 21.74 5.89 31.38 11.62 3.64 4.93 3.12 3.21 14.48 100.00 23823
Self-employed (NF) 16.12 4.00 30.90 11.00 5.80 6.32 2.69 4.74 15.44 100.00 31999
Salary 14.44 3.90 31.61 12.12 6.82 4.89 2.32 5.55 18.37 100.00 35759
Agricultural wage 26.39 6.31 31.70 10.51 3.86 4.08 2.68 1.99 12.48 100.00 15919
Non-agricultural wage 23.22 5.29 32.98 11.41 5.43 3.15 2.63 2.75 13.15 100.00 16930
Others 17.38 4.37 31.37 10.11 6.23 3.76 6.83 5.27 14.67 100.00 24158
All 18.87 4.84 31.55 11.44 5.40 4.82 2.84 4.16 16.09 100.00 25190

Note : * Codes of items of consumption expenditure: 01 – Cereals; 02 – Pulses; 03 – Other food; 04 – Clothing; 05 – Fuel; 06 – Ceremonies; 07 – Health;
08 – Education; 09 – Other Non-food items; 10 – Total; 11 – Average household expenditure (Rs).

2534 Economic and Political Weekly July 8-15, 2000

food, clothing, shelter, fuel and health until recently, making uniform adjustment using statewise weighted consumer price
care, etc. In the Indian context, the defi- in the NSS data on consumption expen- index numbers for agricultural labourers
nition of poverty line was for the first time diture of households by a factor equal to for rural areas and a simple average of
attempted in 1962 by a working group of the ratio of the total private consumption weighted consumer price index numbers
eminent economists. They considered the expenditure obtained from the NAS to that for industrial workers and for non-manual
recommendations of the nutrition advisory obtained from the NSS. The number of employees for urban areas. All India
committee of the Indian Council of Medi- poor was, then, estimated by applying the estimates of people below the poverty line
cal Research (ICMR 1958) on minimum updated poverty line to the corresponding will be equal to the total of such people
requirement to sustain oneself. adjusted NSS distribution of households for different states. The planning commis-
The task force (1979) defined the pov- by levels of consumption expenditure. For sion has accepted these recommendations
erty line as the per capita expenditure level estimating incidence of poverty at the state with one modification. For updating the
at which the average per capita per day level, all India poverty line and the adjust- poverty line for urban areas, only con-
calorie intake was 2,435 calories for rural ment factors were used on the state specific sumer price index numbers for industrial
areas and 2,095 for the urban areas. These NSS distribution of households by level workers will be used.
calorie estimates were worked out by using of consumption expenditure, uniformly In this paper, the updated poverty lines
the age-sex-activity specific calorie allow- across the states. used for 1994-95 are Rs 228 and Rs 305 per
ances recommended by the nutrition expert An expert group on estimation of pro- capita per month consumption expendi-
group (1968) and the age-sex-occupational portion and number of poor was appointed ture in rural and urban areas respectively.
structure of the respective populations. by the planning commission in 1989. The These are obtained by making use of respec-
These calorie estimates were rounded off to report was submitted in July 1993. The group tive price index numbers for rural and
2,400 for rural and 2,100 for urban areas. made the following recommendations. urban areas on the base year poverty lines.
Monetary equivalence of these calorie (1) Giving up the adjustment of NSS data The most commonly used poverty mea-
estimates, i e, or poverty lines in monetary on the basis of the estimates of private sure is the poverty incidence ratio com-
terms were worked out by using the 28th consumption expenditure given in the NAS. monly known as head count ratio. It
round (1973-74) NSSO data on household (2) Having separate state specific poverty measures the proportion of people below
consumption (both in quantity and in value lines for the base year (1973-74) corre- the poverty line and is used as an index of
terms). Using conversion factor, the calo- sponding to a fixed basket of goods and poverty. The ratio is defined as: Hp =n/N,
rie contents of consumption baskets cor- services as used for all-India. For other where n is the number of people below the
responding to different per capita expen- years the poverty lines to be updated by poverty line and N is the total population.
diture classes were worked out. Inverse
linear interpolation method was used to get Table 18: Different Measures of Poverty on Per Capita CE II Distribution by
Occupation Groups
the data on average per capita monthly
expenditure and the associated calorie Poverty Measures Self- Self- Salary Wages (Non- Wages Others All
Farm Non-Farm (Agricultural) Agricultural)
content of food items in different expen-
diture classes separately for rural and urban Rural
Hp .3679 .1511 .1847 .5497 .5358 .2945 .3943
areas. Corresponding to an average daily Ip .2684 .1694 .1511 .2446 .3119 .2262 .2518
intake of 2,400 calories for rural and 2,100 I2 .0391 .0083 .0067 .0493 .0703 .0244 .0377
Total 218.0 56.1 94.8 206.0 65.7 20.3 660.9
calories for urban areas, the average Urban
monthly per capita expenditures worked Hp .6475* .3860 .1424 .8000* .6103 .2135 .2837
Ip .3347* .1737 .1566 .2384 .2366 .1785 .1959
out to Rs 49.09 and Rs 56.64 for rural and I2 .0964* .0227 .0077 .0753* .0570 .0123 .0205
urban respectively. These were taken as Total 3.8 53.4 123.8 5.8 26.1 12.5 225.4
All India
poverty lines for the rural and urban areas Hp .3726 .2657 .1607 .5566 .5570 .2637 .3662
for 1973-74 and have been used by the
planning commission for estimating the Table 19: Comparison of Different Estimates of Poverty
number of poor for rural and urban areas. Tendulkar Pl Com Ravallion and MIMAP
These estimated poverty lines need 1993-94 1993-94 Datt 1993-94 1994-95
updating over time to take into account the Gini HP FGT Gini HP HP Gini HP FGT
changes in the price level. Initially the whole- Rural .285 39.65 .0314 .282 37.27 38.73 .289 39.43 .0377
sale price index was used by the planning Urban .345 30.94 .0264 .339 32.36 30.03 .338 28.37 .0205
commission to reflect the price changes.
A study group on the concept and estimation Table 20: Percentage Distribution of Households, Population and Income by
of poverty line (perspective planning divi- Education of Head
sion, planning commission, November Head’s Education Rural Urban All-India
1984) recommended the use of the implicit Level Hhds Pop Income Hhds Pop Income Hhds Pop Income
private consumption expenditure deflator No formal education 50.81 50.06 42.34 15.69 17.06 9.72 41.20 41.61 27.91
obtained from the NAS for rural as well Below primary 11.41 11.50 11.08 4.93 5.48 4.45 9.63 9.97 8.15
as urban areas (same deflator). These Below middle 14.39 14.81 15.64 12.15 12.28 8.34 13.77 14.17 12.42
Below secondary 8.50 8.74 9.99 10.40 10.74 7.53 9.02 9.25 8.90
deflators were used to update the poverty Below higher secondary 10.14 10.08 13.41 21.88 21.46 22.31 13.35 12.97 17.34
lines for 1977-78, 1983-84 and 1987-88. Undergraduate 2.43 2.44 3.61 9.22 8.84 9.13 4.28 4.06 6.05
In order to arrive at the estimates of the Graduate and above 2.33 2.37 3.93 25.74 24.15 38.52 8.73 7.91 19.23
All levels 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
number of poor, planning commission was

Economic and Political Weekly July 8-15, 2000 2535

However, this measure does not take into The different measures of poverty on the 41 per cent. The share of income of these
account the intensity of deprivation of the basis of per capita CE II distribution by 41 per cent of households was only 27.9
poor. Besides incidence, which is one of occupational categories in rural and urban per cent. The difference in the share of
the most important dimension of poverty, areas are given in Table 18. income as compared to the share of popu-
another dimension is the intensity. One of The proportion of people below the lation was much sharper in urban house-
the measures is the poverty intensity ratio, poverty line, i e, incidence of poverty, in holds with no formal education of the head
1993-94 as estimated by the planning than rural. It also revealed that the level
Ip = 1 – (yp/y*), yi < y*
commission at all India level was 35.97 of education at which the share of income
where yp is the average income/consump- per cent as against the MIMAP survey of as compared to population share increases
tion of the poor and y* is the poverty line. 36.62 per cent in 1994-95. The survey is the primary level in rural areas and
This is actually per person per cent gap. estimate is found to be higher at 39.43 per secondary level in urban areas. This can
One of the major defects in this ratio is cent in 1994-95 corresponding to planning be explained by the fact that more than 55
its insensitivity to incidence altogether. commission estimate of 37.27 per cent in per cent of heads of household reported
The index developed by Watts (1968) 1993-94 in rural while in urban it is found attaining at least secondary level in urban
is defined as Iw = HpIp. It takes into account to be lower at 28.37 per cent in 1994-95 areas as compared to 15 per cent in rural.
both poverty incidence ratio and poverty corresponding to the planning commission Thus the households with lower than
intensity ratio. However, the index was estimate of 32.36 per cent in 1993-94. average level of education find difficult to
found to be weak due to its sensitivity to Tendulkar (1998) estimated the Gini co- compete. About 26 per cent households
transfers among the poor. efficient, incidence of poverty and FGT with the head a graduate or technical degree/
The FGT index developed by Foster, measures for rural and urban areas for diploma holder in urban area have 38.5 per
Greer and Thorbecke (1984) is defined as 1993-94. A comparison of these estimates cent of income, while 2.3 per cent such
along with Planning Commission 1993-94, rural households have 4 per cent of income
Iλ = 1/N ΣnI=1 [(y*–yi)/y*]λ, yi < y*, λ ≥ 0
Ravallion and Datt (1993-94) and for (Table 20).
which is equivalent to Hp when λ=0 and MIMAP survey is presented in Table 19. An attempt is made to find out whether
to Iw when λ=1. The index is sensitive to The estimates of MIMAP survey are found income increases with age and levels of
change in income when λ >0 and to trans- to be closer to the estimates of Tendulkar. education of the household. It should be
fer of income when λ >1. The index with However, these estimates are not strictly pointed out that this analysis is usually
λ=2 is found to be similar to Sen’s index comparable as they relate to different years, done by observing the same household
as it considers incidence, intensity and different data sets and different concepts. over different periods of time. However,
inequality dimensions of poverty. Does income increase with the level of
education of the head of the household in Table 22: Per Capita Public Expenditure
I2 = Hp [I2p +(1 – Ip)2 C2p] on Health and Education and Its Share in
rural and urban areas? In Indian society, GDP (1991-92 Prices)
where C2p is the coefficient of variation the views of the head of the household
Per Capita Public Public Expenditure
of the income among the poor. prevail to a large extent and in a majority Expenditure as Per Cent of
The NSS data on which empirical stud- of instances the chief earner and the head (Rs) GDP
ies are carried out for estimating the extent of the household are the same person. The Year Health* Education** Health Education
of poverty does not include the imputed education level of the head of the house- 1990-91 89 207 1.38 3.22
rental value of owner occupied house- hold is thus considered to be an important 1991-92 100 229 1.55 2.54
holds. For the sake of comparability, CE II social variable as it would influence his 1992-93 96 231 1.44 3.47
is worked out in this study which excludes ability of making right decisions. 1993-94 100 225 1.51 3.38
1994-95 105 238 1.49 3.37
the imputed rental value. The present study The head of the household reported no
revealed that an estimated population of formal education in 51 per cent of the Notes: * includes public health, water, sanitation
and family welfare.
around 325 million persons lived below households in rural and 16 per cent of ** includes education, art and culture.
poverty line in India, which is 36.4 per cent households in urban areas of the country, Sources:(i) CMIE: Social Sectors, February 1996.
of the total population. The incidence of while at all-India level it was found to be (ii) CMIE: Public Finance, January 1996.
poverty is found to be much greater in rural
(39.4 per cent) than urban (28.4 per cent) Table 21: Per Household and Per Capita Income by Head’s Education and Age Group
(in Rs), All-India
areas. About 80 per cent of total poor lived
in rural areas. The distribution of the total Education Level of Head
Age Group in Years lliterate Below Secondary Above Secondary All
poor by occupational groups in rural and
urban areas is presented in Table 17. Below 30 20134 28422 32871 26276
About 52 per cent of the total poor belong (4395) (5251) (7444) (5459)
30-39 18323 23755 46729 28785
to the occupational category of wage (3601) (4431) (9061) (5531)
earners and another 25 per cent to self- 40-49 21749 29898 54065 34999
employed households engaged in farming. (3876) (5403) (10383) (6418)
In urban areas the incidence of poverty is 50-59 26710 37972 76085 41807
(4847) (6758) (13921) (7547)
found to be 61 per cent in households 60 and above 29950 42202 80974 41658
engaged in non-agricultural wage followed (4887) (6652) (15255) (6871)
by self-employed (non-farm) 38.6 per cent. All 24184 32434 57685 35694
(4356) (5739) (11109) (6502)
Hence, the incidence of poverty is much
more severe in wage earning households. Note: Figures in brackets are per capital income.

2536 Economic and Political Weekly July 8-15, 2000

by analysing age cohort and education of On the other side, Uttar Pradesh has the tor is that it would capture the cultural
head of the household, usually the prin- lowest GDI (0.310) matching the tail end differences with focus on (a) gender and
cipal earner and the decision-maker, one countries. Similarly, there are glaring (b) state level differences in public facili-
can find the changing pattern of returns variations in HDI status among different ties. This is important in the Indian context
to education. An age cohort comprises a states. Again, Kerala has the highest HDI, because, here, education is a state subject
group of people born roughly at the same which is 80 per cent higher than the na- and health is a concurrent subject. Any
time and as a consequence, they experi- tional average but its per capita GDP is kind of policy decisions and reallocation
ence the same major social, economic and not commensurate with this. Punjab has of resources are state-specific.
political events at about the same age. the highest GDP per capita among states An analysis of the per capita public
The analysis revealed that the returns to but with a lower HDI. Some other states spending on health and education (expen-
education of the head are significantly like Bihar, Rajasthan, Orissa, Madhya diture both by centre and the states) reveals
higher in each age cohort especially at the Pradesh and Uttar Pradesh are not only that in the first year (1991-92) when the
highest level of education (Table 21). A impoverished but also have a low HDI economic reforms were initiated, the per
similar trend was observed both in rural compared to most of the major states as capita public expenditure increased by over
and urban areas and even in different well as the national average. Thus, eco- 10 per cent in health as well as in education.
occupational categories. nomic measures along with non-economic Thereafter, the increase is only marginal,
measures, which include political as well 3 to 4 per cent. However, this level of per
III as social indicators, seemed to provide a capita public expenditure may not suffice
Social Sector Indicators holistic approach to measuring human if the country wants to achieve the goals
poverty. Therefore, to be able to capture of health for all and universal literacy.
India, which is one of the largest devel- the level of household living in a more Compared to other developing countries
oping countries in the world, ranks 138th comprehensive way, both income distribu- like Maldives, Namibia, Philippines, Zam-
as per the HDR 1997. Though it has been tion and poverty statistics need to be bia, etc, the resource allocation in social
successful in bringing down the poverty supplemented by statistics on social indi- sector in India was much lower (Table 22).
level from 55 per cent in 1973-74 to 36 cators. The major strength of studying the A comparison of the key social indica-
per cent in 1993-94 (Economic Survey public expenditure and private (personal/ tors estimated from the MIMAP survey
1997-98), in absolute numbers, the people household) expenditure on the social sec- 1996 and the survey of ‘Human Develop-
below the poverty line remain more or less
Table 23: Key Social Indicators for India
the same. India’s infant mortality rate of
75 per thousand live births (IMR) is still Social Indicators Rural Urban All-India
MIMAP HDI SEC MIMAP SEC MIMAP SEC
one of the highest in the world. As per 1991 1994-95** 1993-94 Source 1994-95 Source 1994-95 Source
Census, nearly 48 per cent of population
continues to be illiterate and about two- Education
Literacy rates (7+) (per cent) 51.7 53.5 44.71 83.2 73.11 59.8 52.21
thirds of females are not literate; access Enrolment rate (per cent) 73.2 71.4 – 86.7 – 76.2 –
to health care, availability of potable water, Avg years of schooling of
sanitation, shelter are a far cry, particularly primary drop-outs 1.42 – – 0.40 – 1.30 2.22
Health
in the rural sector, where, over three-fourths IMR (per ‘000 LB) 79.0 84 944 75 594 78 794
of the population reside. Immunisation of children
(less than 24 mths) (per cent) 65.9 48.5* – 80.8 – 69.5 –
The HDR clearly defines the need for Ante-natal care (per cent) 46.6 46.6 – 74.5 – 5.3. 62.24
enlarging dimensions of poverty from a Prevalence of illness episodes
mere per capita income/expenditure indi- (per 000 pop) 119 168 1073 – 103 115 –
Basic amenities
cator to social indicators to arrive at a Households without proper
comprehensive index of poverty. The HDR shelter (per cent) 53.2 55.4 – 12.8 – 42.2 –
1993 added a new dimension of global Access to potable water
(per cent of pop) 70.4 72.0 82.85 86.2 84.95 74.8 83.0
gender disparity index (GDI), which re- Households electrified (per cent) 46.6 45.9 – 92.0 – 59.0 –
veals that the GDI values are lower than
Notes: * For 12-23 months. ** Data on health and education pertains to January 1996.
HDI values, confirming that in every
Secondary Sources :
country, there are gender inequalities in (1) Census of India, 1991.
capabilities. The Report concludes: “No (2) UNDP (1991): Human Development Report, Data refers to 1980 for 25+.
country treats its women as well as it treats (3) NCAER (1995): Household Survey of Medical Care, Data refers to 1993.
(4) IIPS (1995): NFHS-India, Data refers to 1992-93.
its men”. Regions within India also re- (5) Government of India (1995-96): Economic Survey, Data refers to 1995.
vealed the same trend; the interstate dis-
parities in terms of both HDI and GDI were Table 24: Literacy, Enrolment, Dropout and Immunisation Rates in BPL and APL Categories
quite high. Some evidence of this follows. (Per cent)
The nation is placed at 103rd rank among Literacy Rates Enrolment Rates Dropout Rates Immunisation Rates
123 countries with a GDI value of 0.41. (Age 7+) (6-14 Age Group) (6-14 Age Group) (up to 2 Years)
Nevertheless, the interstate variations are Male Female Male Female Male Female Male Female
as high as 90 per cent in India. For ex- Rural BPL 53.8 29.4 70.3 56.8 6.5 8.6 65.4 63.7
ample, the state of Kerala has the highest APL 69.3 44.5 83.6 78.1 3.8 6.7 59.8 77.1
Urban BPL 77.2 56.1 77.2 66.5 3.9 4.9 75.4 65.8
GDI of 0.597, which puts at par with APL 95.0 81.4 96.7 95.6 – 1.8 82.3 94.6
Mauritius, which is ranked 80th (globally).

Economic and Political Weekly July 8-15, 2000 2537

ment Indicators’ 1994 in rural areas re-
vealed a marginal improvement in some
of the social indicators during 1994-96,
e g, in enrolment rates (6-14 years of age),
immunisation of children (less than 24
months), infant mortality rates per thou-
sand live births, prevalence of illness per
thousand population and access to elec-
tricity (Table 23). All the social indicators
are more favourable in urban areas than
in rural areas. This is because the health
services, educational and infrastructural
facilities are concentrated in urban areas.
The literacy rates, enrolment rates are
much higher in the categories of people
in the above poverty line (APL) than the
below poverty line (BPL) group. Similarly
the dropout rates are lower in non-poor
(APL) compared to poor (BPL) category
of people both in rural and urban areas.
This trend is true when male and female
are separately considered in BPL and APL
categories. Except for the percentage of
immunisation of boys (up to 2 years) in
the BPL category which is higher than the
APL in rural areas, all indicators of
immunisation of girls in rural and both
boys and girls in urban are lower in BPL
than APL category. This could be because
of the attitude of the poor people in rural
areas, a majority of whom are illiterate,
preferring boys to girls. Table 24 provides
some of the social indicators by sex in BPL
and APL categories of people in rural and
urban India. It is also observed that the
gender disparity is more pronounced in
BPL than APL category.
IV
Future Agenda
It is well known that much data at the
household level does not exist which is
required for drawing valid conclusions
concerning the changes in income distri-
bution which have taken place over planned
periods because of change in policies. Some
of the impacts may be felt at the micro level
very quickly but many others, particularly
those related to structural change may take
longer to be felt. In fact, it is much more
desirable that monitoring changes in the
welfare indicators should cover a longer
term of horizon, so that both short and
long-term effects could be known. So far
the intra-household distribution of welfare
has not been given any weightage in policy
design. The socially less aggressive mem-
bers of the household, viz, women, the
aged, children, particularly girl children,
in the Indian society get less than their
2538
proportionate share of household welfare.
A repeat survey of the same panel of
households covered in MIMAP 1996 after
a gap of five to six years could immensely
help to identify how and to what extent
policy reforms affect intra-household dis-
tribution of welfare. Apart from monitor-
ing the social indicators of the sub-sec-
tions of the population, the repeat survey
could answer some of the very important
questions about the magnitude of change
in pattern of income, consumption, sav-
ings and social indicators and the factors
responsible for the changes. It would thus
be desirable to have a repeat survey of
households for 2000-01.
Appendix: Concepts and
Definitions
(A) Economic Sector
Sampling unit : The household unit of the
study is defined as a composition of per-
sons living in the same dwelling unit,
sharing food from a common kitchen. The
number of members in the household thus
defined above constituted the household
size.
Head of the household : The person, male
or female, who takes all major decisions
related to the household activities is
recognised as the head of the household.
Reference period : In view of the predomi-
nance of rural households in the country,
and agriculture being the dominant activ-
ity, agriculture year, July 1994 to June
1995, is adopted as the accounting period
for the study.
Household income : Household income is
defined as the sum of earnings of all
members of the household, from all sources
of income during the reference period.The
various sources of income of the house-
hold are categorised as self-employment
in darming, self-employment in non-farm-
ing, salary, agriculture wages, non-agri-
culture wages, and others.
Farming activity for the study covered
cultivation, plantations, and other allied
agricultural activities, such as orchards,
sericulture, forestry, bee-keeping, fishery,
piggery, poultry and livestock.
Income from self-employment in farming,
i e, agriculture and allied pursuits, is
obtained by deducting from the total
gross receipts or value of output (includ-
ing by-products) from agriculture, animal
husbandry, poultry, bee-keeping, etc, all
the paid out operating expenses incurred
by the household to obtain the gross re-
ceipts during the reference period. The
Economic and Political Weekly
value of the output from a crop is derived
as follows:
If a farmer has not sold any part of his
output, the entire output is valued at the
farm harvest prices. If a farmer has sold
a part of his output and retained the other,
then the actual value of the part sold plus
the value of the output retained by him at
farm harvest prices is taken as the total
value of his agricultural produce. In the
case of by-products, their value, as indi-
cated by the farmer, has been adopted.
From the gross receipts from agriculture,
thus obtained, operating expenses for the
production of crops (e g, cost of seeds,
fertiliser, manure, hired labour, irrigation
charges, marketing charges, land revenue,
etc) have been deducted. It may be relevant
to note that imputed value of family labour
employed in the production of crops is
neither treated as imputed income nor as
part of the current operating expenses
incurred by the farmer. Gross income from
self-employment in farming is derived by
adding the income from crops and other
agricultural activities.
Non-farm activity comprised business\
trade, crafts like blacksmithy, goldsmithy,
weaving and professions such as doctors,
lawyers, etc. Gross income under this
category is accounted for separately for the
purpose of analysis, by deducting from the
gross receipts any operating expenses
incurred by them during the reference year.
Income from salaries received by the
members of a household is shown sepa-
rately for analysis if they are employed on
a regular salary payment basis during the
reference period. It may be noted that the
salary income includes the basic pay plus
allowances, bonus, commission, other
receipts and also employer’s contribution
to the provident fund, if any.
Income from wages earned by members
of a household working as agricultural and
non-agricultural labourers include both the
cash receipts as well as the imputed value
of the payments in kind (such as meal, crop
produce, etc) received during the period
they worked as labourers.
All other sources of income like house
property, current transfers, etc, are put
under ‘others’ category. Gross income from
house property is derived by deducting the
current expenses incurred for maintenance
of the residential building including house
tax paid, if any, during the reference period
from the income from the house property
which includes actual rent received by the
household, if any, as well as the imputed
value of the rental income of the house
July 8-15, 2000
property owned and occupied by the
household. Income received by the mem-
bers of the household from other sources
such as interest, dividends, pensions and
regular receipts is also included.
The algebraic sum of income from self-
employment in farming, self-employment
in non-farming, salaries, agricultural wages,
non-agricultural wages and other sources
received by all the members in a household
is defined as the gross income of the
household during the reference year.
Consumption: Expenditure on consump-
tion is an essential part of the household.
Items of consumption covered for the study
were cereals, pulses, other food items,
clothing and footwear, fuel and light,
ceremonies, health, education, other non-
food items, and imputed rental value of
owner occupied houses.
Consumption of food items comprises
cereals, pulses and other food items. Apart
from regular items of cereals and pulses,
‘other food items’ category include such
items as edible oils, vegetables, meat
products, milk and milk products, sugar,
confectionery, beverages, etc.
Clothing consists of cloth for garments,
readymade garments, hosiery items, tailor-
ing charges, bedding, footwear and others.
Consumption of fuel includes both com-
mercial fuels like kerosene, soft-coke,
charcoal, gas, electricity and non-commer-
cial fuels like firewood, twigs, crop waste,
etc. Non-commercial fuels are purchased
as well as collected by a household. Where
a household reported collection of such
fuels, the imputed value of the quantity
collected was considered.
Ceremonies are a regular and irregular
item of expenditure in nature. However,
every household spends some part of its
income on ceremonies like marriage, fes-
tivals and other celebrations. Occasional
gifts given by the household in the form
of cash, gold, consumer durable, etc, are
also covered under expenditure on cer-
emonies for this study.
Expenditure on health covers the amount
spent on doctor’s fees, purchase of medicines,
hospital/nursing home charges, transport
expenses for visiting hospital/doctor, etc.
Education expenditure on the children
incurred by the household includes school/
college fees, books and stationery, uni-
form, hostel and mess charges, transport
expenses, etc.
Apart from the above items of consump-
tion expenditure, a household spends some
proportion of its income regularly on other
non-food items like toiletry/cosmetics,
Economic and Political Weekly July 8-15, 2000
furnishings, intoxicants, entertainment,
hotels/restaurants, house rent, payment to
domestic servants, barber, dhobi, travel
expense, etc.
(B) Social Sector
Literacy: Literacy rates have been defined
for all persons aged 7 years and above. Any
person who can read as well as write with
comprehension irrespective of their enrol-
ment status is literate.
Ever enrolment: Enrolment status has been
defined for children of 6-14 years of age.
A child who had enrolled in a formal
school at any point of time is defined as
enrolled, although the person may not be
currently enrolled.
Dropout/discontinuation: Any child who
is between 6-14 of age and was enrolled
at any point of time but has discontinued
studies/schooling before completing pri-
mary education (standard V) is defined as
dropout.
Average years of schooling: This has been
estimated for dropout children in 6-14 age
group on the basis of highest grade com-
pleted. The highest grade completed is
taken to indicate the average years of
schooling. Since no formal examination/
tests are conducted up to grade IV, pro-
motions to next higher grade is automatic
when the academic year starts. However
no adjustments have been made for such
children who have discontinued schooling
after having enrolled in an academic year
and may have re-enrolled in the next
academic year in the same grade. To this
extent the mean year of schooling may be
an underestimate.
Students: Any person up to 34 years of age and
currently studying are considered students.
But the expenditure on education which is
recorded for the last academic year complet-
ed is taken only if the person was a student
during that academic year even though the
person may be currently studying.
Infant mortality rates: The IMR is calcu-
lated for the population by taking the num-
ber of children dying before completing
age one during the year 1995 divided by
the total live births during the same period.
Children ever born: The total number of
children born to an ever married woman
during her reproductive span (15-49 years)
is defined as CEB.
Ante natal care: ANC is defined as the num-
ber of women in the reproductive age (15-49)
who were pregnant any time during the two
years preceding the survey for 1994 and
1995 and had taken iron tablets and ‘teta-
nus toxoid’ injections during their pregnancy.
Natal care: Deliveries during last two years
preceding the survey for 1994 and 1995
that had been attended by trained health
personnel whether in medical institution
or at home is defined as deliveries attended
by health personnel.
Post natal care: Any medical check-up
related to child birth within six weeks after
the delivery is included.
Prevalence of illness: Any person who has
suffered any ill health during the 30 days
(RP) preceding the survey is defined as ill.
It includes illness prevailed/prevailing
during this time irrespective of when it started.
Shelter: Kuchha house is defined as im-
proper shelter.
Potable water: Houses that have access to
protected well water/handpump/piped
water is uniformly defined as safe drinking
water. However, in urban areas, water sup-
plies through mobile tanks is also included
in this category.
Electrification: A household which
has an electricity connection is treated
as electrified. EPW
Note
[This paper forms a part of the MIMAP-India
Project sponsored by the International Develop-
ment Research Centre, Ottawa. Earlier versions
of the paper were presented at the 3rd Annual
MIMAP meeting held on November 2-6, 1998,
Kathmandu, Nepal, and MIMAP-India workshop
held on November 12-13, 1998, New Delhi. We
would like to express our thanks to A R Lokrey
and B S Danu for able research assistance and
K N Kool and Geeta Bhowmik for programming
support.]
1 If we take the difference in the increase of
respective consumer price indices into account,
then the per household income in urban
areas remains more or less the same multiple
in 1994-95 as in 1975-76.
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Centre for Monitoring Indian Economy (1996):
‘India’s Social Sector, Economic Intelligence
Service, India’, February; ‘Public Finance in
India, Economic Intelligence Service’, January,
India.
National Council of Applied Economic Research,
(1980): Household Income and Its Disposition,
New Delhi.
National Council of Applied Economic Research,
(1996): Human Development Profile or India,
New Delhi.
Planning Commission (1993): Report of the Expert
Group on Estimation of Proportion and
Number of Poor, Perspective Planning
Division, New Delhi, July.
Tendulkar, S D (1998): ‘Indian Economic Policy
Reforms and Poverty, An Assessment’ in I J
Ahluwalia and I M D Little (eds), Indian
Economic Reforms and Developments: Essays
for Manmohan Singh, Oxford University Press.
UNDP (1991, 1993 and 1997): Human Develop-
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World Bank (1990, 1997): World Development
Report.
2539