Defining Poverty

In the recent budget, there was a reference to “multidimensional poverty”. What exactly does that mean? Nithin Sasikumar explains it well. Note: As is his style, he is explaining what the concept is; not assessing the data used to come to any conclusion on poverty levels in the country.

 

When we think of poverty, we think of income, whether it is enough to cover basic expenses (roti, kapada, makaan). This is the classical definition of absolute poverty – below a certain income, one is considered BPL (Below the Poverty Line). The problem with this approach is that it doesn’t look at other aspects:

“But, say you live in a house with a leaking roof, you don’t have access to clean water, there’s no electricity, and you have a child who hasn’t seen a classroom in months because the nearest school is too far off. Are you not poor?”

 

It is to include these other aspects (besides income) that the Multidimensional Poverty Index (MPI) was created. So what is it exactly?

“India’s MPI takes into account 3 key parameters just like its global counterpart —  Health, Education, and Standard of Living  — that present a more holistic picture of where people might be lacking the basics. The three broad factors get equal weights in the calculation and are then dissected into 12 other parameters too. Including nutrition, childhood mortality, school attendance, sanitation, drinking water, housing and a few more.”

In fact, it even adds a few items to the standard global list:

“Globally, there are 10 parameters, but India has tacked on maternal health and bank accounts as part of the assessment too.”

 

Now to the updated categorization of who is counted as poor:

“To be “multidimensionally poor” in India, a household must be “deprived” in at least a third of these 12 indicators.”

The benefit of this new methodology isn’t just about counting it more accurately.

“Governments have more clear direction on what they have to focus on… If a district is “income-rich” but “water-poor,” the government knows to build a pipe.”

 

While definitely an improvement, it isn’t perfect obviously. It doesn’t factor in for people who are benefiting from free ration or direct benefit transfers. Or people who get electricity at home but say, only two hours a day. Then again, the model can be tweaked and improved to present a truer picture, a more actionable picture. As that saying goes, don’t let perfect be the enemy of good.