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PovertyOf all the people who live below $1 a day, India accounts for 20%. While growth is considered essential for poverty reduction, it alone is not enough; poverty reflects other kinds of non-income deprivations as well, and fruits of economic growth do not always go towards expanding basic services that aid in better living standards. During 1980-2005, while GDP growth has been accelerating at a fairly high rate, the decline in poverty has not kept pace (it has declined, but not at a similarly increasing rate as increase in GDP).Measurement of poverty in India:Poverty lines, in some sense, provide the understanding of a basic minimum standard of living. Poverty ratios are usually affected by the following three factors:Nutrition normPrice deflatorused to update the poverty line, andPro-rata adjustment in the number of households in different expenditure classes to determine the number of households below and above the poverty lineSince 1993 (after the Lakdawala committee), there is no countrywide poverty line as such. Poverty lines are defined at the state level, separately for urban and rural households. An aggregation of these gives the lines we hear of as all-India lines. 2005 Tendulkar Committee improved upon the Lakdawala committee methodology, but didn’t really change anything. Just the bundle of consumption (which was based on 1973 consumption patterns in Lakdawala) was updated to a 2003 bundle (and at the national level), to reflect changes in consumption patterns. Differences in estimates arise from the 2 different committees, but the extent of poverty decline is roughly similar in percentage point terms. Tendulkar’s estimates are as follows:YearPoverty Ratio (Rangarajan estimates in bracket)RuralUrbanTotal1993-945032452004-054226372011-1226 (31)14 (26)22 (30)However, there were complaints that Tendulkar committee had no new normative content, and was still relying on old methodology of consumption basketonly(based on calorific value).The Rangarajan Committee (2014) extended the line to consider (calories + proteins + fat), and also include expenditure on basic items such as clothing, education, rent, conveyance etc. Based on this method, the 2011-12 numbers are mentioned in brackets above. Note that rural poverty is similar, but urban nearly doubles. Overall poverty estimates also go up significantly. InequalityMeasures of inequality:Gini coefficient: deviation of distribution of income/ consumption among individuals from equal distribution. Income Gini coefficient was 33.4 in India in 2011 (41 in USA).Human Development Report: Considers 2 indicators- Income Gini coefficient, and ‘Quintile Income Ratio’, which is ratio of average income of the richest 20% to the poorest 20% (even the latter is lower in India than many developed countries)Trends in inequality in India:Since the 1990s, India has seen fairly high levels of growth. This growth has contributed to some poverty reduction, but also to increasing inequality:There is strong evidence of divergence in per-capital consumption across statesThere is significant increase in rural-urban inequalities There is also strong evidence of strong increase ininequality within urban areas tooIncreasing inequality has moderated the effects of growth on poverty reduction ................
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