Reduction in Multidimensional poverty in India – Moving Faster than SDG Target!

Recently, the NITI Aayog has released a Discussion Paper on National Multidimensional Poverty Index based on National Family Health Surveys 4 (2015-16) and 5 (2019-21). MPI uses the internationally acclaimed Alkire Foster methodology with the difference that it is based on 12 indicators whereas global MPI covers 10 indicators. According to the report, Multidimensional poverty in India has declined from 29.17% in 2013-14 to 11.28% in 2022-23 with about 24.82 crore people escaping poverty during this period. Among the States, the highest decline in the number of people escaping poverty was recorded in Uttar Pradesh with 5.94 crore people escaping poverty followed by Bihar at 3.77 crore and Madhya Pradesh at 2.30 crore.

Monetary measures of poverty may not be adequate

Traditionally, poverty has been generally measured in terms of household income or consumption expenditure available for an individual or household. However, this approach of measuring poverty does not adequately capture the multiple deprivations which may be faced by individuals in their lives. Development, howsoever strong it may be, becomes meaningful when it becomes instrumental to not only achieve economic progress, but also to enhance people’s capabilities to convert resources into valuable outcomes.

The conventional measures of monetary poverty have their own limitations: ?

1. Increase in income may not be treated as an indicator of the overall well-being of individuals, as, income may as well be spent on items which do not involve improvement in the welfare of the household.
2. Even measurement of consumption expenditure may not accurately represent the household’s income, where part of it is financed through borrowed funds or saved for future requirements.
3. Household welfare depends not only on its own spending or earnings but also on welfare expenditures by state such as subsidized food grains, shelter, sanitation, free education and health, and nutritional support.

Multidimensional Poverty Index (MPI) is broader in its scope

Multidimensional Poverty Index (MPI), is a more direct and comprehensive measure of people’s deprivation and poverty as it captures the outcome of economic growth and development, income and its distribution and various development initiatives of the State. MPI, thus takes into account both the monetary measures and non-monetary measures to identify diverse dimensions of poverty.

The global Multidimensional Poverty Index (MPI) is based on the Alkire and Foster (AF) methodology that identifies people as poor or not poor based on a dual-cutoff counting method to assess acute poverty, providing a complementary perspective to conventional monetary-based measures of poverty assessment.

Global MPI uses ten indicators covering three areas as under:

?A)????? Health

-????????? Nutrition and Child

-????????? Adolescent Mortality

B)?????? Education

-????????? Years of Schooling and

-????????? School Attendance

C)?????? Standard of living.

-????????? Housing,

-????????? Household assets,

-????????? Type of Cooking Fuel,

-????????? Access to Sanitation,

-????????? Drinking water and

-????????? Electricity.

The MPI assesses poverty at the individual level. If a person is deprived in a third or more of ten (weighted) indicators, the global MPI identifies him as ‘MPI poor’. MPI includes both the share of people in multidimensional poverty and the extent to which they are deprived.

MPI = MPI = H x A where,

H = the percentage of people who are multidimensionally poor and

A= the percentage of weighted deprivations the average multidimensionally poor person suffers from.

The MPI value for a given population, thus, is the share of weighted deprivations faced by multidimensionally poor individuals divided by the total population. Hence the MPI is known as the adjusted headcount ratio. ?

India’s Multidimensional Poverty Index is even Broader

NITI Aayog has formulated an indigenized index for measuring multi-dimensional poverty as per the dual-cutoff approach of the AF methodology, which is consistent with the methodology used in the global MPI report. The national MPI not only retains all the ten indicators from the global MPI but has added two additional indicators, viz., Maternal Health and Bank Accounts, in line with India’s national priorities.

India is a vast country comprising 36 States & Union Territories, and more than 700 administrative districts. India’s MPI moves beyond the conventional monetary poverty assessments which are based on consumption surveys and measures deprivations up to the district level. Further, India is a diverse nation and its MPI is has been suitably designed in such a way that it facilitates targeted intervention to deal with acute poverty and upholds the principle of inclusivity to ensure that “no one is left behind.” It also offers a method for determining overlapping deprivations in health, education, and standard of living, directly influencing individuals’ quality of life and overall well-being.

Estimates of National Multidimensional Poverty

In the NITI discussion paper on the computation of Multidimensional poverty incidence for India, a comparative analysis has been made for the years 2005-06, 2015-16, and 2019-21, based on the data from the corresponding National Family Health Survey (NFHS) rounds (3 to 5) with due consideration to the harmonization of indicators across these survey rounds. (Refer Table 1 below).

Source: NITI Aayog Discussion Paper

The results are quite impressive. The Headcount ratio has drastically reduced from 55.34 percent in 2005-06 to 14.96 percent in the year 2019-21. Besides, the intensity (i.e., the percentage of weighted deprivations the average multidimensionally poor person suffers from) has also fallen from 54.96 per cent to 44.39 per cent. This implies that extent of deprivation among the deprived population is falling. As a result, MPI value, has improved from 0.304 to 0.117 in about 10 years after 2005-06 and further to 0.066 in about next 4.5 years in 2019-21. A pictorial presentation of the above results is given below:

The headcount poverty ratio, its severity and extent of multidimensional poverty (MPI) has decelerated over time.

India is ahead of SDG goal to reduce poverty to half by 2030

The progress in MPI demonstrates that India is ahead of the Sustainable Development Goal (Target 1.2) to reduce the proportion of men, women and children in all ages living in poverty in all its dimensions at least to half by 2030.

According to the NITI Aayog report 13.5 crore people have escaped poverty between 2015-16 and 2019-21. Poverty in rural India fell at a faster rate from 32.59% to 19.28% compared to the urban areas where it declined from 8.65% to 5.27%. The best part is that there is significant reductions (improvement) reported in the case of all 12 indicators between 2015-16 and 2019-21. For instance, deprivations in sanitation decreased by 21.8 percentage points and deprivations in cooking fuel decreased by 14.6 percentage points.

The fastest reduction in the proportion of multidimensional poor was observed in the States of Uttar Pradesh, Bihar, Madhya Pradesh, Odisha, and Rajasthan.

Computing MPI for 2013-14 and 2022-23

NITI Discussion Paper also compares the estimates of poverty and deprivation in year 2013-14 with year 2022-23 (over the last nine years) even though the actual estimates for 2015-16 and 2019- 21 clearly point to acceleration in rate of reduction in MPI, with the help of interpolation of estimates for the year 2013-14 and extrapolation for the year 2022-23. Thus, 2013-14 figure was computed from the 2005-06 estimate using annual compound rate of 7.69% reduction (Table 2).

Table - 2 Compounded annual rate of change (%) in Headcount Ratio, Intensity and MPI.

Similarly, 2022-23 estimate was projected by applying compound rate of reduction achieved during 2015-16 to 2019-21. It is estimated that more than 24.82 crore individuals have escaped multidimensional poverty during last 9 years.

However, the actual may as well be somewhat different, poverty levels may as well be affected by multiple variables and externalities such as Covid 19, severe drought or even a war. The method used for extrapolation, based on rate of decline rather than percentage point decline, takes care of this to some extent.

According to the World Bank, the international poverty line is defined as US $2.15 (in 2017 purchasing power parity [PPP] terms) a day to measure monetary poverty. The latest World Bank data indicates that the poverty headcount ratio at US $2.15 a day (2017 PPP) decreased from 18.73% in 2015 to 11.9% in 2021 in India (Poverty and Inequality Platform, World Bank). With the ongoing rate of decline in India’s Multidimensional Poverty, the country is expected to reach single digit level of poverty by the year 2024-25.

It seems that several policy-led initiatives of the Government of India have made significant strides in enhancing the quality of life for millions of individuals, with a focus on the SDG 1.2 target of halving poverty in all its dimensions. Some of them are reported as under:

1. Government of India’s food security programme, operated through targeted 5.4 lakh fair price shops (under PDS) is the largest in the world providing foodgrains to 81.35 crore beneficiaries. ?
2. Mission Poshan (Nutrition) 2.0 and Saksham Anganwadi have significantly contributed to facilitate easy and affordable access to fruits, vegetables, medicinal plants, and herbs. The programme is touching lives of nearly 10 crore beneficiaries at around 14 lakh Anganwadi centres,
3. Pradhan Mantri Poshan Shakti Nirman (PM POSHAN), is the largest School feeding Scheme in the world to address the twin problems of improving the nutritional status and school enrolment of children reaching out to children of pre-schools and 11.80 crore children of classes I to VIII studying in 11.20 lakh schools.
4. Pradhan Mantri Surakshit Matritva Abhiyan is offering assured, comprehensive, and quality antenatal care to all pregnant women universally on the 9th of each month.
5. The Ujjwala Yojana has provided clean cooking fuel to over 31 crore individuals, through 10 crore LPG connections. The smoke-free kitchens have protected numerous women from chronic respiratory disorders saving their time to participate actively in more productive activities.
6. ?Initiatives like Saubhagya have improved electricity coverage for almost 100% of the population benefiting an additional 2.86 crore households and rendering kerosene lamps obsolete, thus improving respiratory health and eyesight.
7. Transformative campaigns like Swachh Bharat Mission (SBM) and Jal Jeevan Mission (JJM) have led to a nationwide wave of improved sanitation facilities providing 14 crore tap water connections and construction of 11.33 crore IHHL in rural areas.
8. The Pradhan Mantri Jan Dhan Yojana (PMJDY) has been a driving force for change, opening of over 50 crore bank accounts in recent years which is helping a large population integrate into the formal financial system and getting direct access to government schemes, savings, and credit facilities.
9. The PM Aawas Yojana has facilitated the construction of over 4 crore homes for the underprivileged giving them access to safe, secure, and comfortable living spaces.

Over the last nearly two decades, there have been substantial improvements in quality of lives of people and the pace with which the poverty levels are declining, it is estimated that India is all set to reach single digit poverty levels during 2024. It simply implies that India is already moving ahead of the SDG target 1.2 and there seems to be no looking back in India's growth story as it is going the inclusive way!

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