The release of the 2022–23 Household Consumption Expenditure Survey (HCES) in February last year had reignited debates about poverty in India. Following this release, B.V.R. Subrahmanyam, CEO of NITI Aayog, claimed that the poverty headcount ratio had declined as low as 5% of the population.
This claim relied on adjusting the 2011–12 poverty line (set by the Tendulkar Committee) for inflation using the Consumer Price Index and applying it to the 2022–23 HCES data. This success was attributed to the success of flagship welfare schemes and rapid economic growth.
Yet, an analysis done by C. A. Sethu, L. T. Abhinav Surya and C. A. Ruthu, using the Rangarajan Method and the same 2022-2023 HCES data, reveals that a staggering 26.4% of Indians are below the poverty line – a gap of over 21 percentage points from the government’s claims.
According to this analysis, 27.4% of the population in rural areas, where the cut-off is set at Rs 2,515 per capita per month, and 23.7% in urban areas, with a cut-off of Rs 3,639 per capita per month, is below the poverty line. This contrasts sharply with the government’s claims of near-eradication of poverty and raises questions about the accuracy and intent of its statistics.
This contradiction stems from methodological differences. The government’s approach of inflating older poverty lines fails to capture the rising costs of non-food essentials, such as healthcare, education and housing. In contrast, the Rangarajan method uses updated nutritional norms and a more detailed consumption basket (including essential non-food expenses), making it a more accurate reflection of current realities.
Understanding the Rangarajan method
The Rangarajan Committee, formally known as the ‘Expert Group to Review the Methodology for the Measurement of Poverty’, was constituted by the Planning Commission of India in 2012. It was tasked with revisiting and refining the methodology for estimating poverty in India, addressing criticisms of the earlier poverty measurement method proposed by the Tendulkar Committee in 2009.
The Tendulkar committee (2009) estimated poverty based on per capita consumption expenditure, anchored in nutritional and calorie requirements. However, it faced criticism for setting poverty lines that were considered too low, potentially underestimating poverty levels.
Given the concerns about the inadequacy of the Tendulkar committee’s poverty thresholds and their inability to reflect actual living costs, the Rangarajan committee was established to revisit and propose a more comprehensive poverty estimation methodology.
Also read: The Truth Behind the Government’s Claim That Poverty Has Fallen to Just 5%
The Rangarajan committee submitted its report in 2014 and proposed a new methodology that defined poverty based on a broader basket of consumption expenditure, including essential non-food items. The methodology incorporated three major components:
- Food expenditure: Based on nutritional norms tailored to gender, age and activity levels.
- Essential non-food expenditure: Items such as clothing, shelter and education, calculated using median consumption levels.
- Other expenditures: A normative calculation of additional behavioural expenses linked to food adequacy.
The Rangarajan committee’s estimates showed a higher poverty line compared to the Tendulkar committee. The poverty headcount ratio, or the percentage of people below the poverty line, for 2011–12 was revised from 21.9% (Tendulkar) to 29.5% under the Rangarajan methodology.
Despite these revisions, the Union government did not officially adopt the Rangarajan Committee’s recommendations and poverty estimates have been contested since then due to a lack of consistent survey data.
Why the decline wasn’t real
There was a decade-long gap between the last Consumer Expenditure Survey (2011–12) – data that has formed the basis for various poverty estimation exercises – and HCES 2022–23. Hence the headcount ratios of poverty calculated during this time were mere shots in the dark.
After the release of HCES 2022-23, the government’s claim of the decline in poverty headcount ratio to 5% of the population – based on inflation-adjusted poverty lines and outdated consumption patterns – is fundamentally flawed. It assumes that the prices of goods consumed by the poor rise in tandem with general inflation.
However, research has shown that the poor face disproportionately higher costs for essential goods and services, making these estimates grossly inaccurate. Furthermore, the government’s narrative of a poverty-free India ignores the widening inequality in access to basic necessities like education, healthcare and sanitation.
Programs like the Public Distribution System (PDS), while critical, focus narrowly on food security (and not nutrition security) and fail to address the broader dimensions of poverty. For instance, the increasing privatisation of healthcare and education has led to these services being disproportionately expensive for the poor. Additionally, by excluding health expenses from “essential non-food items,” the methodology risks underestimating poverty levels.
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Furthermore, wages in rural India stagnated in this period and the informal sector, where the majority of India is employed, struggled with declining incomes and enterprise closures.
The per capita energy consumption for the poorest quartile in rural India declined by 2.6% between 2011–12 and 2022–23, signalling that rising nominal incomes have not translated into better nutrition. This directly contradicts claims of substantial poverty reduction, as improving nutrition is a critical indicator of poverty alleviation.
The way forward
The contradiction between the government’s claims and the findings of the Rangarajan method highlights the urgent need for a more honest appraisal of India’s poverty crisis. While official narratives celebrate progress, the reality for millions of Indians tells a different story.
In this regard, India must adopt dynamic methodologies, such as the Rangarajan method, that account for changing consumption patterns, nutritional norms and the rising costs of essential non-food items like healthcare and education.
A shift to multidimensional poverty indices, which consider health, education and living standards, would provide a holistic view of deprivation. Future challenge lies in translating this understanding into actionable policies that prioritise the needs of the country’s most vulnerable populations.
Payal Seth is a consultant at Tata-Cornell Institute, Cornell University, USA, and a PhD Scholar at Bennett University.
