MACROECONOMICS CA

ARTICLE- Poverty of Thought VS Richness of Imagination by P C Mohanan and Amitabh

Kundu

Bhavya Yadav 2315150

The debate on poverty in India has been ongoing since the late 1990s, marked by extensive
empirical research and national and international participation. However, despite these
efforts, the discussion has remained inconclusive, largely due to methodological challenges
in data collection, defining the poverty line, adjusting for regional variations, and reconciling
discrepancies between different data sources.

One significant setback occurred when the National Sample Survey Office (NSSO), the
primary survey agency, faced delays in providing consumption expenditure data. This
culminated in the government discarding the 2017–18 survey report due to undisclosed
quality issues. In the absence of official surveys, researchers turned to alternative data
sources such as the Consumer Pyramids Household Survey and India Human Development
Survey. Some resorted to extrapolating consumption expenditures based on income growth
in different states.

The historical context of poverty estimation in India dates back to the 1960s when poverty
lines were initially established based on minimum expenditure linked to calorie requirements.
These lines were periodically adjusted for price changes but faced criticism for outdated
consumption patterns and not accounting for government subsidies or changes in essential
service provision.

The Tendulkar Committee, formed in 2006, recommended moving away from calorie-based
poverty lines, acknowledging the lack of evidence linking calorie intake to health outcomes.
Instead, they proposed poverty lines based on expenditure patterns, validated against
nutritional norms. Subsequent committees, including the Rangarajan Committee in 2012,
suggested alternative methodologies for poverty estimation, leading to variations in poverty
line definitions and estimates.

Methodological improvements, such as adjusting reference periods and incorporating a mix

of recall periods in consumption surveys, have been proposed to enhance data accuracy.
However, these changes have implications for temporal comparability and require careful
consideration in poverty estimation.

Recent developments, including the release of the Household Consumption Expenditure

Survey (HCES) 2022–23 factsheet, have reignited the poverty debate. However,
discrepancies in poverty estimates based on different methodologies and data sources
persist, leading to conflicting conclusions.

The government's claim of significant poverty reduction based on the latest data has been
met with skepticism from researchers, highlighting the need for transparency and rigorous
analysis in poverty estimation. Efforts to update poverty lines and methodologies based on
current consumption patterns and data collection practices are essential to ensure accurate
and meaningful poverty assessment in India.
In conclusion, the debate on poverty in India remains complex and multifaceted, influenced
by methodological challenges, data limitations, and differing perspectives. While efforts to
improve data collection and estimation methodologies are underway, achieving consensus
on poverty measurement remains elusive. Moving forward, collaborative efforts between
policymakers, researchers, and statisticians are crucial to address the challenges and
advance our understanding of poverty in India.

The comparison of poverty levels between the 2022–23 Household Consumption

Expenditure Survey (HCES) factsheet and the 2011–12 survey brings to light overlooked
aspects of data collection methodologies. Rangarajan and Dev (2024) aptly point out that the
reliance on multiple visits to collect expenditure data compromises the robustness of
comparability between the two surveys. This procedural change reflects an acknowledgment
of field problems in gathering comprehensive consumption data in a single sitting.

The shift towards multiple visits raises concerns about the quality of responses. When all
survey schedules are administered in one sitting, respondents may experience fatigue,
leading to underreporting of non-food items, typically covered in the latter part of the
questionnaire. This underreporting is particularly evident in social consumption surveys by
the NSSO, which report significantly higher expenditures on health and education compared
to those captured in the consumption survey, indicating the need for fragmented schedules
and more time-intensive interviews.

Despite the loss of comparability with earlier surveys, the efforts of the NSSO in
implementing reforms in data collection for consumption surveys are commendable. The
repeat survey planned for 2023–24 offers an opportunity to evaluate the appropriateness of
the current methodology and address any shortcomings. Additionally, achieving consensus
among economists on establishing a fresh poverty line using Modified Mixed Recall Period
(MMRP) data and implementing a method for updating it over time could lead to a less
contentious poverty debate.

In essence, while the adoption of multiple visits for data collection introduces challenges, it
reflects a commitment to improving the accuracy and reliability of poverty measurement. By
addressing these challenges and fostering collaboration among stakeholders, India can
enhance the integrity of its poverty estimation efforts and facilitate more informed
policymaking in poverty alleviation.

Furthermore, the Tendulkar Committee's recommendation stemmed from the absence of

definitive evidence linking calorie input to health outcomes. By validating the rural poverty
line through private expenditure near the poverty line for essentials like food, education, and
health, the committee aimed to ensure adequate calorie intake. This validation process
utilized a new reference basket and price indices derived from the same dataset. The
committee cautioned against comparing its poverty estimates with earlier ones, particularly
when transitioning to MMRP.

However, the adoption of MMRP for data collection presented challenges in estimating
poverty consistently over time. While MMRP improved consumption reporting, its
implementation required a new poverty line derivation, as specified by the Tendulkar
Committee. Despite recommendations from subsequent committees, like the Rangarajan
panel, for higher poverty lines based on different expenditure data, no official poverty
estimation adopted MMRP until the release of the 2022–23 Household Consumption
Expenditure Survey (HCES) factsheet.

The release of the 2022–23 HCES factsheet stirred debate as it indicated significant poverty
reduction, leading the government and researchers to claim sharp declines in poverty rates.
However, concerns arose regarding the methodology used, particularly in updating the
poverty line based on MRP and applying it to data collected using MMRP. Statisticians
criticized this approach, highlighting issues with data comparability and updating poverty
lines, labeling it as "poverty of thought."

In response, economists proposed updating poverty lines based on MRP using available
consumer price index inflation, overlooking recommendations from the Tendulkar
Committee. The proliferation of poverty lines, consumption data with multiple reference
periods, and the use of different price indices further complicated the debate on poverty
estimation.

To address challenges in data collection, the NSSO introduced reforms, including multiple
visits to households and fragmenting the survey schedule to improve the quality of
responses, particularly for non-food items. These reforms aimed to enhance the robustness
and comparability of consumption data despite compromising some aspects of data
consistency with earlier surveys.

Looking ahead, a repeat survey for 2023–24 may validate the present methodology, while
economists' consensus on deriving a fresh poverty line using MMRP data could alleviate
acrimony in the poverty debate. Despite these efforts, challenges persist in achieving
consistent and accurate poverty estimates, necessitating ongoing methodological refinement
and data collection reforms.