How Accurately Do We Measure Poverty in India?

Has the ‘multidimensional’ index been able to capture the full picture? Unfortunately not.

A significant decline in poverty – this is what a recent NITI Aayog report announced.

The data published showed that over a span of five years, about 13.5 crore Indians came out of poverty. In fact, this measure was of multidimensional poverty, therefore it seemed that on the whole, crores of people enjoyed the fruits of holistic progress. They are no longer below the poverty line.

However, does the methodology and its results hold up to closer examination? Has the ‘multidimensional’ index been able to capture the full picture?

Perhaps not. To start with, the government of India has not been able to tell citizens the number and share of the population below the consumption poverty line, which has been the traditional method of estimating poverty globally for decades. India has used consumption poverty as the measure for over four decades.

The government had not released a consumption expenditure survey conducted by the National Survey Organisation (NSO) in 2017-18. The NSO has announced consumption expenditure surveys for 2022-23 and 2023-24. These might reveal to us what has happened to consumption (or money-metric) poverty in the last 10 years. Meanwhile, the NITI Aayog has just released the national multidimensional poverty index (MPI) for India, a few days after the global MPI estimates were released.

The 10 indicators of the global MPI are a mishmash of very different types of indicators. Some are indicators of inputs, others of process, yet others are output or outcome indicators. For instance, the education ones – having not completed 6 years of school and children up to Class 8 not attending school – are output and process indicators, respectively.

The health ones are both outcome indicators – adult body mass index and child nutrition. All six indicators of standard of living are input-based – electricity, drinking water, sanitation, cooking fuel, home floor and consumer assets. In statistics, it is theoretically flawed to lump together such different indicators to construct an index.

National and global

Despite this, the national MPI (NMPI) indicator framework has been modified vis-à-vis global MPI and interestingly, no reason has been provided in the report.

The NMPI framework has 12 instead of 10 globally considered indicators. The two new indicators are: Maternal health in the ‘health’ dimension and access to banking in the ‘standards of living’ dimension. This addition leads to change in the weights assigned to the two indicators, which were the two high-contributing factors to poverty.

The global MPI 2022 report, released a few weeks ago, had reported that India had reduced its incidence of multidimensional poverty from 54% in 2005-06 (National Family Health Survey 3) to 27.9% of the total population in 2015-16 (NFHS 4), halving the head count ratio.

Compared to that, the global MPI reported that the reduction in multidimensional poverty between 2015-16 was from 27.9% to 16% in 2019-21 (NFHS 5).

Also read: ‘Unhappy With Data Sets,’ Modi Govt Suspends Director of Institute Which Prepares NFHS

Excluding millions?

Moreover, the global nutrition indicator was modified in NMPI, leaving out children aged six to 14 years, consisting of more than 18% of India’s population. More than two-third of this population group suffers from anemia. NMPI thus leaves many poor and deprived out of the count on this account. More importantly, the NMPI uses undernourishment of under-fives (weight for age), while the global MPI uses a more robust indicator – stunting (height for age).

The latter is higher (35.5% in NFHS 5) in India than the underweight measure (31.1% in NFHS 5). Worse, India’s stunting rate is higher than that of Sub-saharan Africa (32%); just as India’s child wasting rate is 19.1% (NFHS 5), while Africa’s is 6% (UNICEF, 2023, State of World’s Children). Moreover, the recently released ‘The State of Food Security and Nutrition in the World 2023’ report by the UN highlighted that 104.3 crore (74.1%) Indians are unable to afford healthy food.

Secondly, selection of the new indicator on maternal health is faulty. It regards a pregnant woman to be deprived if her delivery is executed by an unskilled health personnel or if she has not availed the prescribed four antenatal care services. Most deliveries (more than 80%) are now happening in a health institution. As a result, there are very few deprived on this indicator. This will tend to significantly reduce the count of deprived pregnant women, reducing the overall number of persons falling under the category of multidimensionally poor.

Thirdly, take the issue of the addition of a new indicator – ‘No household member has a bank account or a post office account’ in the standard of living dimension. As per NFHS 4, nine out of 10 persons in the country (90.3%) had either a bank account and/or a post office account. While this is a major achievement for computation of deprivation and policy purposes, inclusion of this indicator significantly influences the overall number of deprived persons.

Differing data

Finally, and most worrying is the following: The MPI estimate for multidimensionally poor people in India in 2019-21 estimates reduction from the 2015-16 figure. The NITI Aayog’s report estimates the number of people rising out of poverty to be 135 million. However, there is a sleight of hand in the NITI Aayog estimate. I double checked the projected population used for 2015-16 and for 2019-21 as a denominator for determining the absolute number of MPI poor in each year.

Obviously, in the absence of exact population data between census years, we use population projections, as provided by the Ministry of Health and Family Welfare, based on Census 2011.

Naturally, India’s projected population in 2021 will be higher than that in 2015-16. To arrive at the number of MPI poor for 2021, that year’s population should be used; and to arrive at the number of MPI poor for 2015-16, again the latter year’s population should be used. If, on the one hand,  someone uses the same estimate of India’s total population for both years, the number of people pulled out of MPI poverty will be overstated. That is exactly what I found the NITI Aayog has done. The estimated population for both years was found to be the same. The result is that the NITI Aayog is claiming that India pulled 135 million out of MPI poverty, when in fact that number is really around 118 million (because the total population of India in 2015 was naturally lower than in 2021).

Also, even if one goes by the NMPI estimates for 2019-21 and projects it onto the 2021 estimated population, 410 million people are still deprived on the sanitation indicator of NMPI. Yet, the government has claimed that India has become open defecation free.

How unfortunate that government estimates fail to paint an accurate picture of the realities.

Santosh Mehrotra was the chief economist of the global Human Development Report (2002-04), UNDP New York, and the lead author of the second India Human Development Report (OUP, 2011) of the Planning Commission of India.

This article first appeared on Deccan Herald and has been republished with permission.