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Multidimensional Poverty isn’t a poverty line, lacks ‘information content' — Surjit Bhalla & Pronab Sen

In a conversation with INDIANEXPOSE, the two economists talked about how India needs a national poverty line, an updated Census, and must focus on releasing more data instead of less.

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New Delhi: The Multidimensional Poverty Index (MPI), introduced by the United Nations and adapted for India by NITI Aayog, is not a poverty index, and has “very little information content”, according to former IMF executive director Surjit Bhalla and Standing Committee on Statistics Chairman Pronab Sen.

In fact, India currently does not have a poverty line and critically needs one, they asserted, adding that an updated Census was also necessary and crucial.

Speaking at a discussion hosted by INDIANEXPOSE, the two economists and statisticians criticised the Ministry of Finance’s decision to discontinue the release of detailed monthly Goods and Services Tax (GST) revenue data, asserting that this data had been very useful in the past.

Also Read: Embarrassment of riches? Govt halts monthly GST releases as high collections ‘creating resentment’

MPI is not a poverty line

Sen, who is also a former chief statistician of India, explained that the MPI is not a poverty index. “It is a deprivation index. (It measures whether) you don't have a house, you don't have education, you don't have this, you don't have that. It doesn't say anything about your income.”

The MPI is a globally recognised index that was established by the UN in 2010 and uses a variety of metrics, including standard of living, health, and education, to quantify deprivation levels.

For India, this index has been published since 2021 by NITI Aayog. The most recent estimate, released in January, states that between 2013-14 and 2022-2023, 248.2 million Indians are estimated to have emerged from multidimensional poverty.

During the conversation, Bhalla — who has also been a member of the Prime Minister's Economic Advisory Council (EAC-PM) — agreed with Sen’s assertions on the shortcomings of the MPI, adding that it needs to be revamped.

“In my view, it (the MPI) is much ado about nothing,” Bhalla said. “It has very little information content. It doesn’t communicate.”

Bhalla further said that he was yet to see the data from an MPI and feel that he has learnt something new about the society in question.

Sen added that the MPI was structured in such a way that in its deprivation measure, not having children was actually beneficial. This was because the index measures whether a household has children who are not going to school. If there are no children in that household, they are automatically considered not deprived in the education metric of the index.

Last month, chairman of the EAC-PM Bibek Debroy also said that the MPI was “not quite a poverty line”, adding that India needs a new poverty line, an assertion both Bhalla and Sen agreed with.

‘India does not have a poverty line’

“Absolutely we need a new poverty line,” Bhalla said. “Because the existing poverty line essentially says we have eliminated extreme poverty…. According to the latest data, it is less than 2 percent of the population. What’s the point of having policies dictated towards the bottom 2 percent? That’s why you need a poverty line so that you have a respectable number that is informative for policy purposes.”

Sen asserted that India currently doesn’t even have a poverty line.

“We have a World Bank poverty line, but we do not have a national poverty line,” he explained. “The Tendulkar Committee poverty line, in a sense, ceased to exist from 2014. It’s there in the academic literature, officially, as a nation, we do not have our own poverty line.

He further said India needs a policy to develop its own poverty line, and the country could decide to adopt the World Bank poverty line. But he had “very serious” reservations about that.

“Poverty is a very emotive term,” Sen said. “It’s not something that you can throw around loosely. Whatever poverty line you use should resonate with people with them saying ‘yes, this is a good way to define poverty’. That’s a debate we need to have.”

An updated Census is crucial

Both economists agreed that India needs an updated Census, since the latest one provides data for 2011 and is severely outdated.

“We need a Census, but for many different reasons than to help in informing us about the number of people,” Bhalla said.

Sen further asserted that the Census was, in fact, crucial for even the various sample surveys the government was conducting to gauge levels of income and expenditure in the country, such as the Household Consumption Expenditure Survey.

“One of the critical elements of any survey is whether the sample you have chosen is representative,” Sen explained. “And we use the Census data to select the sample. We are using, at the moment, the 2011 Census. We are already selecting samples which are becoming less and less representative.

“Till we get the next Census, the representativeness of our sample just becomes worse and worse,” Sen added.

Govt needs to disclose more data, not less

The other area where the two economists agreed was in criticising the government’s move to discontinue the release of detailed monthly GST revenue data, including the state-level data.

“We still don’t understand why they are doing this,” Sen said. “Because that data would make life easier, not just for measuring consumption and incomes or whatever, it would just make the calculation of a lot of things so much easier. We have no idea about the inter-state flows at the moment. GST data gives you that.

“There are all kinds of really, really important economic activities which the GST data would have helped (measure),” he added.

Bhalla added that information processing and data availability is much more robust now and the next step should be on how to use this efficiently.

“You can answer several questions (with the data),” he said. “Let graduate students look at it, which is what happens in the rest of the world. The data gets released and then they figure out all kinds of things the policymakers had never even thought of.”

(Edited by Radifah Kabir)

Also read: Arvind Subramanian on India having missed its chance to rationalise GST rates — ‘moment has passed’

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