MULTIDIMENSIONAL POVERTY INDEX AS INDEX FOR POVERTY

A Project Submitted to

ARMY INSTITUTE OF LAW

In partial fulfilment of the requirements for the award of

Degree BA.LLB.

SUBMITTED TO: SUBMITTED BY:

Dr. Ekjyot Kaur Kashish Kochar

(Economics -2) (2101)

PUNJABI UNIVERSITY PATIALA (PUNJAB)

2022-23
 DECLARATION

I hereby declare that all the work embodied in this project entitled “Multidimensional
Poverty Index as Index for Poverty” is the fruitful result of my own research from various
sources. All the material referred to has been gathered from secondary sources such as books
and websites. They have been duly acknowledged.

Date: 10 February 2023 Name: Kashish Kochar

Place: Army Institute of Law, Mohali Roll No. : 2101

 ACKNOWLEDGEMENT

I am overwhelmed in all humbleness and gratefulness to acknowledge my depth to all those

who have helped me to put all these ideas, well above the level of simplicity and into
something concrete. I would like to express my special thanks of gratitude to my teacher Dr.
Ekjyot Kaur, who gave me this golden opportunity to execute this project. Their approachable
nature has made learning more effective and effortless. Without their expertise and
extraordinary method of instruction, the project would lack in quality.

I would like to convey my heartfelt thanks to my parents for their constant guidance and
support. Best wishes are in order to all my batch mates who have been cooperative, patient
and have stood by me as pillars of strength at all times. Special mention to my seniors for
being my guiding light at all times and for being very proactive whenever I’ve approached
them for assistance.

My deepest gratitude would also go out to my Principal, Dr. Tejinder Kaur and Army
Institute of Law, Mohali, for giving me the privileged to being a part of the esteemed AIL
family and for all the learning opportunities in the years to come.
 INDEX

1. What is Poverty?......................................................................................................1
2. What is Multidimensional Poverty Index ?..........................................................1-2
3. Historical Background..........................................................................................2-3
4. What is the Alkire and Foster Counting Method?................................................3-4
5. Dimensions and Indicators of MPI........................................................................4-6
6. Advantages of Multidimensional Poverty Index..................................................6-7
7. Limitations of Multidimensional Poverty Index......................................................7
8. Comparison between HDI and MPI........................................................................7
9. Key Statistics revealed by Global Multidimensional Poverty Index Report
2022..........................................................................................................................8

10. National Multidimensional Poverty Index 2021..................................................8-10

11. Conclusion...............................................................................................................10
12. Bibliography.............................................................................................................11
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I. WHAT IS POVERTY?

Poverty is defined as, “A term used to denote a condition in which people are unable to meet
their basic necessities, due to lack of money or skill. There are two primary terms used to
denote poverty; absolute and relative. Absolute poverty is when the people of a country are
unable to provide for their basic needs, while relative poverty is when people find it difficult
to live according to the standards set by the government.”

II. WHAT IS MULTIDIMENSIONAL POVERTY INDEX?

1. Multidimensional Poverty Index (MPI) is an international measure of acute

multidimensional poverty covering over 100 developing countries.\
2. This figure considers both the proportion of the population that is deemed poor, and the
'breadth' of poverty experienced by these ‘poor’ households, following the Alkire &
Foster ‘counting method’.
3. Multidimensional Poverty Index (MPI) is an index designed to measure acute
poverty, understood as a person’s inability to meet minimum internationally agreed
standards.
4. MPI complements traditional monetary poverty measures by capturing the acute
deprivations in health, education, and living standards that a person faces
simultaneously.
5. Multidimensional Poverty Index looks into more than just income or consumption, the
traditional measures of poverty.
6. In other words, MPI measure those experiencing multiple deprivations. For example,
people who are undernourished, and do not have access to electricity or cooking fuel.
7. Fundamentally, MPI reflects deprivations in very basic services and core human
functioning for people across 104 countries.
8. Multidimensional Poverty Index provides an alternative lens through which poverty
may be viewed and understood through dimensions, indicators, and deprivation
criteria.
9. MPI is composed of 3 dimensions made up of 10 indicators.
10. Among the 10 indicators, two are for health, two are for education and six indicators
are for living standards.
11. The indicators of MPI are closely linked to the Sustainable Development Goals
(SDGs).
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12. The method was developed following increased criticism of monetary and
consumption based poverty measures, seeking to capture the deprivations in non-
monetary factors that contribute towards well-being.

13. While there is a standard set of indicators, dimensions, cut-offs and thresholds used for
a 'Global MPI', the method is flexible and there are many examples of poverty studies
that modify it to best suit their environment.

14. The methodology has been mainly, but not exclusively, applied to developing
countries.
III. HISTORICAL BACKGROUND OF MPI

1. The human development approach has long argued that although income is important,
it has limitations that call for more direct measures.
2. The 1997 United Nations Development Programme’s flagship Human Development
Report (UNDP HDR) introduced the Human Poverty Index (HPI), which measured
multiple deprivations in key aspects of human development.
3. UNDP researchers concluded that the HPI had limited utility because it aggregated
average deprivation levels for each dimension and thus could not be linked to any
specific group of people.
4. In its 20th anniversary year (2010), the UNDP Human Development Report (UNDP
HDR) decided to introduce a new international measure of poverty – the
Multidimensional Poverty Index or MPI – which directly measures the combination
of deprivations that each household experiences. The MPI uses microeconomic data
to reflect the percentage of households that experience overlapping deprivations in
three dimensions—education, health and living conditions.
5. The new MPI was developed and applied by OPHI with UNDP support and supplants
the HPI. Sabina Alkire and Maria Emma Santos designed the MPI using a technique
for multidimensional measurement.
6. In 2010, OPHI analysed poverty across 78% of the world’s people in 104 developing
countries using the MPI and released the results in advance of the 2010 HDR. Forty-
six researchers in 13 countries in both the developed and developing world worked on
the project. The 2011 MPI took this total to 109 countries.
7. From their inception, the UNDP HDRs have pioneered new ways to analyse human
development and poverty, intended to have a direct impact on development strategy
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and methodology. By featuring this independently conceived new approach to poverty

measurement in the 20th anniversary report, UNDP HDR hopes to encourage its use
in the field by governments, development agencies, and other institutions dedicated to
the eradication of poverty.
IV. WHAT IS THE ALKIRE AND FOSTER COUNTING METHOD?

The Alkire-Foster (AF) method, developed by Sabina Alkire and James Foster at OPHI, is a
flexible technique for measuring poverty or wellbeing. It can incorporate different
dimensions and indicators to create measures adapted to specific contexts. This means the AF
method can be used in several different ways such as-

1. Poverty and wellbeing measures- The AF method can be used to create national,
regional, or international measures of poverty or wellbeing by incorporating
dimensions and indicators that are tailored to the particular context. For example, the
AF method is used to construct the global Multidimensional Poverty Index that is
featured in the United Nations Development Programme’s flagship Human
Development Reports.
2. Monitoring and evaluation- The AF method can be used to monitor the
effectiveness of programmes over time. For example, the AF method underpins
the Women’s Empowerment in Agriculture Index (WEAI), which measures the
empowerment and inclusion of women in the agriculture sector. The WEAI is used to
help evaluate performance of United States agricultural aid programs.
3. Targeting poor people as beneficiaries of services or conditional cash transfers -
The AF method can also be used to target individuals for public service programmes
or conditional cash transfers (CCTs) against set criteria.
4. Effective allocation of resources- With the AF method, policymakers can identify
the poorest people and the indicators in which they are most deprived. This
information is vital to investing resources where they are likely to be most useful in
reducing poverty.
5. Policy design- Policymakers can identify which deprivations constitute poverty and
which are most common among and within poor groups, so that policies can be
designed to address particular needs and more effectively reduce poverty.
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6. Identifying interconnections among deprivations- The AF method integrates many

different aspects of poverty into a single measure, reflecting interconnections among
deprivations and helping to identify poverty traps.
7. Showing impacts over time- The AF method can more quickly reflect the effects of
changes in policies than income alone. For example, if a new social programme aimed
at improving education is introduced to an area, it will be a long time before any
benefits from education are reflected in an income measure. In contrast, a
multidimensional poverty measure that includes child school attendance and
achievement in education could reveal the results of policies geared towards
improving education and measure education’s contribution to overall
multidimensional poverty.
8. Flexibility- Different dimensions, indicators, and cut-offs can be used to create
measures tailored to specific uses, situations, and contexts. These can be chosen
through participatory processes, such as in El Salvador. The method can be used to
create poverty measures, to target poor people as beneficiaries of Conditional Cash
Transfers (CCTs) or services, and for the monitoring and evaluation of programmes.
9. Complementing other metrics- Multidimensional measures can complement other
measures of poverty, such as income. This allows a better understanding of what
poverty is in a country and a more in-depth analysis of the situation of individuals and
households living in poverty.
V. DIMENSIONS AND INDICATORS OF MULTIDIMENSIONAL POVERTY
INDEX
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Source: Alkire, S., Kanagaratnam, U. and Suppa, N. (2020). ‘The global Multidimensional Poverty Index (MPI):

2020 revision’, OPHI MPI Methodological Note 49, Oxford Poverty and Human Development Initiative,

University of Oxford.

MPI is the product of Incidence (H) and Intensity (A).

MPI= Incidence of poverty (H) * Intensity (A) of poverty

1. Incidence of poverty (H): is proportion of people identified as poor on the basis of the
multiple deprivations they experience. ‘H’ denotes headcount ratio.
2. Intensity of poverty (A): is how poor people are i.e., average proportion of (weighted)
deprivations poor people experience. A denotes average deprivation share.
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Example to Understand the ‘Incidence (H)’ and ‘Intensity (A)’ of Poverty:

1. Imagine two countries: in both, 60% of people are poor. This 60% is the incidence of
poverty in both the countries. Based on this incidence, the two countries are equally
poor.
2. Now, imagine that in one of the two countries, poor people are deprived – on average
– in one-third of the dimensions, whereas in the other country, the poor are deprived –
on average – in two-thirds of the dimensions.
3. By combining the two pieces of information (i.e., the intensity of deprivations and the
proportion of poor people), we can see that these two countries are not equally poor.
4. Moreover, the second country is poorer than the first because the intensity of poverty
is higher among the poor.

VI. ADVANTAGES OF MUTIDIMENSIONAL POVERTY INDEX

1. Helps to create comprehensive picture: MPI depicts who is poor and how they are
poor. So, it can be used to create a holistic picture of people living in poverty.
2. Highly comparative and replicable: MPI allows for comparison between countries or
regions. It also allows within country comparison among different groups, urban and
rural areas etc.
3. Flexibility, Choice and Identifications : MPI can be adapted to different context with
different unit of analysis whether developed or undeveloped countries. Transparency is
maintained which helps in the clear identification of who is poor and communications
is easy. As increase in the number of dimensions, measurement will be able to focus
more acutely on poorest of poor.
4. Effectiveness: The indicators used here have immediate practical applications and can
be used to target poorest of poor more effectively.
5. Prioritizing: MPI prioritizes work at both system level and the level of
individuals/families.
6. Working Levels: MPI makes it possible to work on three levels; individual, agency
and community. It also ensures implementation of policies through engagement of
partners at various levels.
7. Comparison: MPI provides basis to compare each individual’s achievement against
the respective dimensions specific cut offs.
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8. Calculation: Well- being of different groups in the population can be calculated from
it. For example; people from certain ethnic groups, regions, gender.
9. Simplification: The measurements can be broken down into dimensions to reveal what
dimensions contribute to the most dimensional poverty.

VII. LIMITATIONS OF MULTIDIMENSIONAL POVERTY INDEX

1. Poverty is a complex issue and depends on lot of factors; it is difficult or impossible
to address all elements.
2. Gathering of data for multidimensional indicators can be challenging.

3. Due to large numbers of indicators, it can become overwhelming to deal and to make
proper assessment leading to ineffective implementation.
4. Intra-household inequality and inequality amongst the poor is not captured.
5. Which and how many dimensions are relevant and should be considered or privileged
are difficult to quote.

VIII. COMPARISION BETWEEN HDI AND MPI

HDI MPI
It uses four indicators to measure its three MPI shares with the HDI in terms of
dimensions; income, education, and dimensions but goes further by
health. incorporating 10 indicators.

The calculation of the HDI relies on the The MPI is calculated using a threshold
geometric mean, which shows effect of a count approach where, an individual is
change in one dimension to be the same considered poor if the number of her
for a proportionate change in any of the deprivations total to at least a third of the
other dimensions. measured items.
It shows how close a country is in It shows how far a country is from
achieving human development. achieving human development.
HDI reports values that range between 0 MPI also ranges values between 0 and 1,
and 1. The closer a country is to 1, the but it is about the level of deprivation. In
higher is the level of human development. this case, the closer a country is to 1, the
higher is the lack of human development.
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IX. KEY STATISTICS REVEALED BY GLOBAL MULTIDIMENSIONAL

POVERTY INDEX REPORT 2022
Global Multidimensional Poverty Index (MPI) 2022 was released by the United
Nations Development Programme (UNDP) and the Oxford Poverty and Human
Development Initiative (OPHI).

What are the Key Highlights of the Index

1. 1.2 billion People are multidimensional poor.

2. Nearly half of them live in severe poverty.
3. Half of poor people (593 million) are children under age 18.
4. The number of poor people is highest in Sub Saharan Africa (579 million),
followed by South Asia (385 million). The two regions together are home to
83% of poor people.
5. While the data does not reflect post-pandemic changes, according to the report
the Covid-19 pandemic could set back the progress made in poverty
reduction globally by 3-10 years.
6. The most recent data on food security from the World Food Programme suggest
that the number of people living in food crises has increased to 193 million in
2021.

X. NATIONAL MULTIDIMENSIONAL POVERTY INDEX

Introduction:
NITI Aayog has released the state-wise National Multidimensional Poverty Index or MPI in
line with the global index released by the United Nations each year.
The National MPI Project is the first attempt in years to define poverty measures and is aimed
at deconstructing the Global MPI and creating a globally aligned and yet customised India
MPI. The MPI is based on three dimensions — health, education, and standard of living —
with each having a weighting of one-third in the index. The household micro data collected at
the unit-level for the NFHS serves as the basis of the computation of National MPI.
This unit level micro data collected in 2015-16 was used in the current MPI report to derive
an idea of baseline multidimensional poverty. The MPI identifies 25.01 per cent of
the population as multidimensional poor. The progress of the country with respect to this
baseline was measured using the NFHS-5 data collected in 2019-20.
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Key highlights of the index-

1. It was developed by the NITI Aayog in consultation with 12 ministries and in
partnership with state governments and the index publishing agencies , namely,
Oxford University’s Oxford Poverty and Human Development Initiative
(OPHI) and United Nations Development Programme (UNDP).
2. The National MPI Project is aimed at deconstructing the Global MPI and
creating a globally aligned and yet customised India MPI for drawing up
comprehensive Reform Action Plans with the larger goal of improving India’s
position in the Global MPI rankings.
3. It was calculated using the household micro-data collected at the unit-level for
the NFHS-4 (which was conducted between 2015 and 2016) that was used to
derive the baseline multidimensional poverty.
4. NFHS (National Family Health Survey) is conducted by the International
Institute for Population Sciences (IIPS) under the Ministry of Health and
Family Welfare.
5. The Index is calculated using 12 indicators – nutrition, child and adolescent
mortality, antenatal care, years of schooling, school attendance, cooking fuel,
sanitation, drinking water, electricity, housing, assets and bank account that
have been grouped under three dimensions namely, health, education and
standard of living.
6. According to Global MPI 2021, India’s rank is 66 out of 109 countries.
7. The NMPI enables estimation of poverty not only at the level of the states but
also for all the 700-plus districts across the 12 indicators, capturing
simultaneous deprivations and indicator-wise contribution to poverty.
8. As per NMPI (National MPI), Bihar has the highest number of malnourished
people followed by Jharkhand, Madhya Pradesh, Uttar Pradesh, and
Chhattisgarh.
9. Kerala, Goa, and Sikkim have the lowest percentage of population being
multidimensional poor at 0.71 per cent, 3.76 per cent and 3.82 per cent,
respectively.
10. Among the Union Territories (UTs), Dadra and Nagar Haveli (27.36 per cent),
Jammu & Kashmir, and Ladakh (12.58), Daman & Diu (6.82 per cent) and
Chandigarh (5.97 per cent), have emerged as the poorest UTs in India.
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11. The proportion of poor in Puducherry at 1.72 per cent is the lowest among the
Union Territories, followed by Lakshadweep at 1.82 per cent, Andaman &
Nicobar Islands at 4.30 per cent and Delhi at 4.79 per cent.
Why are these poverty numbers important?

1. Poverty numbers matter because central schemes like Antyodaya Anna Yojana
(which provides subsidised food grains to households living below the poverty
line) and Rashtriya Swasthya Bima Yojana (health insurance for BPL
households) use the definition of poverty given by the NITI Aayog or the
erstwhile Planning Commission.
2. The Centre allocates funds for these schemes to states based on the numbers of
their poor. Errors of exclusion can deprive eligible households of benefits.

XI. CONCLUSION:

Poverty can effectively be eradicated only when the poor start contributing to growth
by their active involvement in the growth process. This is possible through a process
of social mobilization, encouraging poor people to participate and get them
empowered. This will also help create employment opportunities which may lead to
increase in levels of income, skill development, health and literacy. Moreover, it is
necessary to identify poverty stricken areas and provide infrastructure such as schools,
roads, power, telecom, IT services, training institutions etc.

XII. BIBLIOGRAPHY
1. https://ophi.org.uk/background-to-the-mpi/
2. https://thelawdictionary.org/poverty/
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3. https://ophi.org.uk/policy/alkire-foster-methodology/#:~:text=The%20Alkire
%2DFoster%20 (AF),used%20in%20several%20different%20ways.
4. https://www.publichealthnotes.com/what-is-multidimensional-poverty-index-mpi/
#:~:text=Helps%20to%20create%20comprehensive%20picture,comparison
%20between%20countries%20or%20regions
5. https://www.drishtiias.com/daily-updates/daily-news-analysis/global-
multidimensional-poverty-index-mpi-2022
6. https://www.insightsonindia.com/2022/01/11/sansad-tv-perspective-
multidimensional-poverty/
7. https://ophi.org.uk/multidimensional-poverty-index/