Poverty Measurement

Recently, in the latest release of UNDP reports on HDR, the indicators to find the extent of poverty for different countries was based on a new method. This is improved from the earlier version as it encompasses other socio economic impact in the indices.

Multidimensional Poverty Index devised for measuring the extent of poverty with multidimensional aspect in it. The index is based on a range of deprivations at the household level, from education to health outcomes to assets and services. The education indicators include years of schooling and child enrolment. The health indicators used are child mortality and nutrition. The standard of living indicators include electricity and drinking water access, sanitation, flooring, cooking fuel and certain basic physical assets.

2010 UNDP HDR Report: The international standard for the poverty was defined on the basis of consumer expenditure per day. The people who lived on $1.25 or lesser on a day were considered poor. The new MPI were calculated and brought out for the various countries in 2010 UNDP report on human development. MPI is based on the multiple deprivations for income as well as other socio economic factors such as education, deprivation at household level, health and standard of living. Measures based on new MPI shows that almost 1.75 billion people live in 104 countries.

Poverty line: The social deprivation is determined on the basis of normative poverty line that describes the minimum and basic needs of individual for a decent living. These norms are those determined on the basis of consumer expenditure on food and basic amenities. However the concept has been expanded to include other social deprivation norms like education and health. It may vary on the basis of the agency such as international poverty line would be different from the national poverty line.

Head-count Measure: Incidence of poverty is measured by the head-count ratio which describes the percentage of the population whose per capita income or expenditure are below the poverty line. This is an indicative measurement as the population earning below this income are believed to find it unaffordable the basket of goods and basic amenities. The measure is simple and clear, and is the most commonly calculated poverty measure.

Poverty Gap: An indicator related to the depth of poverty is the income gap ratio, defined as the difference between the poverty line and the average income (or consumption) of the population living under the poverty line, expressed as a fraction of the poverty line.

Poverty gap index is another measure that captures the magnitude of poverty, considering both the number of poor people and how poor they are. It is the combined measurement of incidence of poverty and depth of poverty.

The severity of poverty is the average value of the square of the depth of poverty for each individual. The poverty severity index is based on weightage method adopted for measuring poverty and extent of poor people. As per the method, the poor people with severe deprivation are weighted more as compared to the other.

Poverty Line in India: The contemporary official estimates on poverty lines were defined in terms of per capita total consumer expenditure (PCTE) at 1973-74 market prices which was adjusted for time and across states for changes in prices.

Below Poverty line: In India the BPL represents the demarcation beyond which the person is considered to be poor. The BPL is specified in terms of calories intake or in terms of the consumer expenditure. As per calories norms the food intake below the 2400 calories norms in rural areas are considered to be poor whereas in urban areas BPL refers to calories intake below 2100 calories.