POVERTY ESTIMATION (Syllabus: GS Paper 3 – Economy)

Context: Recently, the statistics office released the latest survey of household consumption expenditure in New Delhi, indicating that rural consumption has remained robust, narrowing the gap with urban areas, potentially leading to a sharp reduction in the country's poverty levels, stated the Niti Aayog CEO.

Key Point of Survey

• Declining Share of Food Expenditure: Rural India has experienced a significant milestone as food expenditure fell below 50%, while urban India witnessed a decline below 40%, marking a remarkable transformation in spending habits.
• Evolution of Food Consumption Patterns:  In rural India, the share of food expenditure has transitioned from 59.4% in 1999-2000 to 46.38% in 2022-23, indicating a noteworthy decline over the years. Similarly, urban households have seen a shift from 48.06% to 39.17% in the average monthly per capita consumption expenditure on food.
• Reviewing the Inflation Basket: Inflation is calculated based on changes in price levels of items in a large basket reflecting consumption patterns.
• The Consumer Price Index (CPI) relies on a 2012 basket, but the latest Household Consumption Expenditure (HCE) Survey 2022-23 suggests significant changes.
• Imputed and Non-Imputed Average MPCE Data:

oThe HCE Survey 2022-23 includes imputed values for items received free via social welfare programs.

oThese items range from food staples to electronic devices and clothing.

oMPCE data are segmented into fractile classes to analyze population distribution.

• Disparity in MPCE Among Population Segments: The bottom 5% of India's rural population, based on MPCE ranking, had an average MPCE of ₹1,373, while it was ₹2,001 for the same urban population segment. 

oConversely, the top 5% in rural and urban areas had significantly higher average MPCE of ₹10,501 and ₹20,824, respectively.

NITI Ayog

• About: It is the premier policy ‘Think Tank’ of the Union Government, providing both directional and policy inputs.
• Establishment: In 2015 via an executive resolution by replacing the Planning Commission of India
• Objective: To develop a common vision for both the Central and State governments, recognizing that robust states are the foundation of a robust nation.