Estimation Method In India

The poverty line is an extremely important tool for policy makers and researchers around the world. The development of a country can be tracked by observing how different policies have improved the lives of the poor people in a country. India has adopted various poverty estimation methods since the 1970s. Numerous committees were appointed by the Indian government to decide upon an appropriate method in deciding the poverty line. This report will broadly talk about the efforts made by committees like Dandekar and Rath, Alagh, Ladkawala, Tendulkar and Rangarajan and try to critically evaluate methodologies followed by these expert groups for poverty line estimation in India.

Dandekar and Rath Committee

Dandekar and Rath Committee were the first

The committee recommended the usage of the minimum calorie requirement method and the commodity basket was not very different from the one used in the Alagh Committee. The new contribution of the committee came into the picture through the usage of Consumer Price Index of Industrial Workers (CPI-IW) and the Consumer Price Index of Agricultural Labour (CPI-AL) in order to estimate the poverty line in urban and rural areas respectively. Even though, the basket of goods considered by the committee was the same, a state specific poverty line was derived in urban and rural areas. Some of the methods used by the Lakdawala Committee was criticised by the scholars around the world. The 1973-74 consumption data were used by the committee to estimate the poverty line in India during 1993-94. Usage of the two-decade old data was heavily criticised as scholars felt that the poverty estimation failed to truly recognise the structural changes that took place in the country during that time. This was mainly because of the difference of consumption patterns in the 1970s and 1990s. Also, researchers have opined that the change in price with respect to inflation will not give a true picture for poverty estimation in

The committee decided to make use of the Mixed Reference Period (MRP) based estimates rather than the Uniform Reference Period estimates that has been used by previous committees. It also included the cost involved in accessing education and health facilities in the poverty line estimation procedure. Rural and urban India was assigned different poverty lines by calculating the value of the quantity consumed by the poor in the country. The poverty lines are different for rural and urban as prices vary in these two regions. The consumption basket data of 2004-05 was used by the committee to finalise the poverty line. Even though this approach was considered to be better than the previous ones, many argue that it could not completely capture different consumption patterns in a culturally and socially diverse country such as India. Another criticism that was discussed was the omission of nutritional or calorie requirements in this approach. Most countries around the world have estimated poverty lines based on the guidelines laid out by the Food and Agricultural Organisation (FAO). Hence, comparison of poverty figures with the rest of the world will be a challenge as the parameters used for estimation is