Income-based Approach

The income-based approach is a traditional and widely used method for measuring poverty. It relies on setting a poverty line, which is the minimum level of income or expenditure necessary to purchase basic goods and services essential for survival and maintaining a minimum standard of living. This approach considers several factors:

1. Poverty Line: The poverty line is the threshold used to distinguish between those who are considered poor and those who are not. In India, the Planning Commission historically used calorie intake norms to set these lines, with distinct thresholds for rural and urban areas due to different cost structures.
2. Consumer Price Indices: These indices track changes in the price levels of a basket of consumer goods and services purchased by households. Adjusting the poverty line using these indices ensures it reflects current costs of living and inflation.
3. Basic Calorie Intake: Originally, the poverty line was tied to calorie intake requirements, which were set at 2,400 calories per person per day in rural areas and 2,100 calories per person per day in urban areas. This was intended to ensure that individuals could meet their basic nutritional needs.
4. Expenditure Surveys: Household expenditure surveys, conducted by organizations such as the National Sample Survey Office (NSSO), collect data on the spending patterns of households. This data helps in estimating the proportion of the population below the poverty line.

Multidimensional Poverty Index (MPI)

The Multidimensional Poverty Index (MPI) was introduced by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) as a more comprehensive measure of poverty. The MPI assesses poverty through multiple indicators that cover various dimensions of human life, recognizing that income alone is not sufficient to capture the true extent of deprivation. The MPI considers the following:

1. Health:
   • Nutrition: Whether any household member is malnourished.
   • Child Mortality: Whether any child in the household has died before the age of five.
2. Education:
   • Years of Schooling: Whether any household member has completed at least six years of schooling.
   • School Attendance: Whether any school-aged child is not attending school up to the age at which they should finish class 8.
3. Living Standards:
   • Cooking Fuel: The type of cooking fuel used (e.g., whether it is clean or polluting).
   • Sanitation: Access to improved sanitation facilities.
   • Drinking Water: Access to clean drinking water.
   • Electricity: Access to electricity.
   • Housing: The quality of housing (e.g., whether the floor is made of natural materials).
   • Assets: Ownership of key assets like a radio, television, telephone, bike, motorbike, or refrigerator.

Comparing the Two Approaches

Income-based Approach:

• Advantages:
  • Simplicity: Easy to understand and communicate.
  • Tradition: Widely used and accepted, with extensive historical data.
• Disadvantages:
  • Narrow Focus: Does not capture non-income dimensions of poverty.
  • Static Nature: May not reflect changes in living standards due to changes in non-income factors.

Multidimensional Poverty Index (MPI):

• Advantages:
  • Holistic View: Captures a broad range of deprivations, providing a more comprehensive picture of poverty.
  • Policy Relevance: Identifies specific areas of deprivation that can be targeted by policies.
• Disadvantages:
  • Complexity: More complex to calculate and interpret.
  • Data Requirements: Requires extensive data collection across multiple indicators.