How are 'absolute' and 'relative' poverty measured? What modification in it has been suggested by Amartya Sen? What are the recent advances in the area of poverty measurement? Discuss.

Poverty, a complex socio-economic phenomenon, remains a significant challenge globally, and particularly in a developing nation like India. Measuring poverty accurately is crucial for designing effective policies and monitoring their impact. Traditionally, poverty has been understood through two primary lenses: absolute and relative poverty. While absolute poverty focuses on a minimum standard of living, relative poverty defines deprivation in relation to the prevailing living standards within a society. Recent years have witnessed a shift towards more nuanced and comprehensive approaches to poverty measurement, spearheaded by economists like Amartya Sen, and reflected in indices like the Multidimensional Poverty Index (MPI). Absolute Poverty Measurement Absolute poverty refers to a condition where a household lacks the minimum resources necessary to fulfill basic needs like food, shelter, clothing, healthcare, and education. It is defined by a specific poverty line, typically based on a minimum calorie intake or a minimum expenditure level. Measurement Techniques: The most common method is the headcount ratio, which calculates the percentage of the population below the poverty line. Other measures include the poverty gap (the average distance of the poor from the poverty line) and the squared poverty gap (giving more weight to those furthest below the line). Indian Context: In India, the poverty line is defined by the consumption expenditure level, determined by the National Sample Survey Office (NSSO). The Rangarajan Committee (2014) revised the poverty line to ₹32 per day in rural areas and ₹47 per day in urban areas (based on the 2011-12 prices). Limitations: Absolute poverty measures are criticized for being insensitive to changes in societal norms and relative deprivation. They also fail to capture non-monetary aspects of poverty. Relative Poverty Measurement Relative poverty defines poverty in relation to the economic status of other members of the society. It focuses on income inequality and social exclusion. Measurement Techniques: Common measures include the income quintile share (the proportion of total income held by the poorest 20% of the population) and the Gini coefficient (a measure of income inequality). Poverty lines are often set as a percentage of the median income (e.g., 50% or 60% of the median income). Indian Context: While India primarily focuses on absolute poverty, relative poverty is increasingly recognized as an important dimension of deprivation. Data from the World Inequality Database highlights the growing income inequality in India. Limitations: Relative poverty measures do not necessarily indicate a lack of basic necessities. A person can be relatively poor in a wealthy country while still having access to adequate food, shelter, and healthcare. Amartya Sen’s Capability Approach Amartya Sen, a Nobel laureate, critiqued traditional poverty measures for their focus on income or consumption. He proposed the ‘capability approach,’ which emphasizes the importance of functionings (what people are able to do and be) and capabilities (the set of functionings a person can achieve). Modifications: Sen argued that poverty is not simply a lack of income but a deprivation of capabilities. He introduced the concept of ‘poverty of capabilities,’ which refers to the inability to achieve valuable functionings like being healthy, educated, and participating in social life. Human Development Index (HDI): Sen’s work significantly influenced the development of the Human Development Index (HDI), which combines indicators of life expectancy, education, and income to provide a more holistic measure of well-being. Impact: The capability approach shifted the focus of poverty reduction from economic growth to human development, emphasizing the importance of investing in health, education, and social services. Recent Advances in Poverty Measurement Recognizing the limitations of traditional measures, several advancements have been made in poverty measurement in recent years. Multidimensional Poverty Index (MPI): Developed by the Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Programme (UNDP), the MPI captures multiple deprivations at the household level across three dimensions: health, education, and standard of living. MPI in India: The National Multidimensional Poverty Index (NMPI) released by NITI Aayog provides a comprehensive picture of poverty in India, revealing significant variations across states and districts. According to the NMPI (2023), 21.8% of India’s population is multidimensionally poor. Consumption Expenditure Surveys: Periodic Consumption Expenditure Surveys (CES) conducted by the NSSO provide crucial data for estimating poverty levels. However, the CES has faced challenges in recent years, with the 2017-18 survey being the latest released. Nighttime Light Data: Researchers are increasingly using satellite imagery, particularly nighttime light data, as a proxy for economic activity and poverty levels. High-Frequency Data: Utilizing data from mobile phones, financial transactions, and other sources to track poverty in real-time. Poverty Measure Focus Limitations Absolute Poverty Minimum standard of living Ignores relative deprivation, doesn't capture non-monetary aspects Relative Poverty Income inequality Doesn't necessarily indicate lack of basic necessities Capability Approach Functionings and capabilities Data intensive, can be subjective Multidimensional Poverty Index Multiple deprivations Requires detailed household data, can be complex to interpret Measuring poverty is a complex undertaking, and no single measure can fully capture the multifaceted nature of deprivation. While absolute and relative poverty measures provide valuable insights, Amartya Sen’s capability approach and recent advancements like the MPI offer a more nuanced and comprehensive understanding of poverty. Continued refinement of poverty measurement methodologies, coupled with robust data collection and analysis, is essential for designing effective poverty reduction strategies and achieving inclusive growth. The focus should be on moving beyond mere income-based measures to encompass broader aspects of human well-being and empowerment.

What is the difference between poverty and inequality?

Poverty refers to a lack of basic necessities, while inequality refers to the unequal distribution of resources within a society. They are related but distinct concepts. A society can reduce poverty without necessarily reducing inequality, and vice versa.

Poverty Measurement: Absolute, Relative & Sen's Modifications

Poverty, a complex socio-economic phenomenon, remains a significant challenge globally, and particularly in a developing nation like India. Measuring poverty accurately is crucial for designing effective policies and monitoring their impact. Traditionally, poverty has been understood through two primary lenses: absolute and relative poverty. While absolute poverty focuses on a minimum standard of living, relative poverty defines deprivation in relation to the prevailing living standards within a society. Recent years have witnessed a shift towards more nuanced and comprehensive approaches to poverty measurement, spearheaded by economists like Amartya Sen, and reflected in indices like the Multidimensional Poverty Index (MPI).

Absolute Poverty Measurement

Absolute poverty refers to a condition where a household lacks the minimum resources necessary to fulfill basic needs like food, shelter, clothing, healthcare, and education. It is defined by a specific poverty line, typically based on a minimum calorie intake or a minimum expenditure level.

Measurement Techniques: The most common method is the headcount ratio, which calculates the percentage of the population below the poverty line. Other measures include the poverty gap (the average distance of the poor from the poverty line) and the squared poverty gap (giving more weight to those furthest below the line).
Indian Context: In India, the poverty line is defined by the consumption expenditure level, determined by the National Sample Survey Office (NSSO). The Rangarajan Committee (2014) revised the poverty line to ₹32 per day in rural areas and ₹47 per day in urban areas (based on the 2011-12 prices).
Limitations: Absolute poverty measures are criticized for being insensitive to changes in societal norms and relative deprivation. They also fail to capture non-monetary aspects of poverty.

Relative Poverty Measurement

Relative poverty defines poverty in relation to the economic status of other members of the society. It focuses on income inequality and social exclusion.

Measurement Techniques: Common measures include the income quintile share (the proportion of total income held by the poorest 20% of the population) and the Gini coefficient (a measure of income inequality). Poverty lines are often set as a percentage of the median income (e.g., 50% or 60% of the median income).
Indian Context: While India primarily focuses on absolute poverty, relative poverty is increasingly recognized as an important dimension of deprivation. Data from the World Inequality Database highlights the growing income inequality in India.
Limitations: Relative poverty measures do not necessarily indicate a lack of basic necessities. A person can be relatively poor in a wealthy country while still having access to adequate food, shelter, and healthcare.

Amartya Sen’s Capability Approach

Amartya Sen, a Nobel laureate, critiqued traditional poverty measures for their focus on income or consumption. He proposed the ‘capability approach,’ which emphasizes the importance of functionings (what people are able to do and be) and capabilities (the set of functionings a person can achieve).

Modifications: Sen argued that poverty is not simply a lack of income but a deprivation of capabilities. He introduced the concept of ‘poverty of capabilities,’ which refers to the inability to achieve valuable functionings like being healthy, educated, and participating in social life.
Human Development Index (HDI): Sen’s work significantly influenced the development of the Human Development Index (HDI), which combines indicators of life expectancy, education, and income to provide a more holistic measure of well-being.
Impact: The capability approach shifted the focus of poverty reduction from economic growth to human development, emphasizing the importance of investing in health, education, and social services.

Recent Advances in Poverty Measurement

Recognizing the limitations of traditional measures, several advancements have been made in poverty measurement in recent years.

Multidimensional Poverty Index (MPI): Developed by the Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Programme (UNDP), the MPI captures multiple deprivations at the household level across three dimensions: health, education, and standard of living.
MPI in India: The National Multidimensional Poverty Index (NMPI) released by NITI Aayog provides a comprehensive picture of poverty in India, revealing significant variations across states and districts. According to the NMPI (2023), 21.8% of India’s population is multidimensionally poor.
Consumption Expenditure Surveys: Periodic Consumption Expenditure Surveys (CES) conducted by the NSSO provide crucial data for estimating poverty levels. However, the CES has faced challenges in recent years, with the 2017-18 survey being the latest released.
Nighttime Light Data: Researchers are increasingly using satellite imagery, particularly nighttime light data, as a proxy for economic activity and poverty levels.
High-Frequency Data: Utilizing data from mobile phones, financial transactions, and other sources to track poverty in real-time.

Poverty Measure	Focus	Limitations
Absolute Poverty	Minimum standard of living	Ignores relative deprivation, doesn't capture non-monetary aspects
Relative Poverty	Income inequality	Doesn't necessarily indicate lack of basic necessities
Capability Approach	Functionings and capabilities	Data intensive, can be subjective
Multidimensional Poverty Index	Multiple deprivations	Requires detailed household data, can be complex to interpret

How are 'absolute' and 'relative' poverty measured? What modification in it has been suggested by Amartya Sen? What are the recent advances in the area of poverty measurement? Discuss.

Model Answer

Introduction

Absolute Poverty Measurement

Relative Poverty Measurement

Amartya Sen’s Capability Approach

Recent Advances in Poverty Measurement

Conclusion

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