Poverty and Deprivation in India

Poverty in India has been widely measured in terms of the headcount below poverty line based on consumption expenditure. The method has been the subject of considerable debate since V M Dandekar and N Rath (1971) first defined the poverty line in terms of the expenditure levels that ensured standard per capita calorie consumption per day. Much of this debate has been on the quality of estimates of the poverty line without challenging the use of consumption expenditure as the basis for estimating poverty. This has ensured that a question which has found mention in the larger theoretical literature on poverty does not have a prominent place in the Indian debate: How would our assessment of the extent of poverty in India, and its regional variation, change if we used a measure based on assets instead of consumption?

This paper seeks to address these questions by first summarising the theoretical arguments that have been made against consumption-based estimates of poverty and, in particular, the headcount ratio in these estimates; arguments that have contributed to the development of an asset-based measure of deprivation. It then measures poverty across states in India using this asset-based index of the distance from absolute deprivation. This helps to identify specific differences that emerge between consumption-based estimates of the proportion below the poverty line and the estimates of the distance from absolute deprivation. The paper concludes by pointing to some aspects of the relationship between consumption and deprivation in India.