What are the limitations of inflation-adjusted poverty lines in India? Examine the price-basket based indexation method recently applied to update the Rangarajan poverty line. Assess its robustness as a framework for future poverty measurement in the country.
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources
Topic: Indian Economy and issues relating to planning, mobilization of resources
Q6. What are the limitations of inflation-adjusted poverty lines in India? Examine the price-basket based indexation method recently applied to update the Rangarajan poverty line. Assess its robustness as a framework for future poverty measurement in the country. (15 M)
Difficulty Level: Difficult
Reference: IE
Why the question Poverty measurement debates in India have resurfaced after the RBI economists updated the Rangarajan poverty line, raising questions about the validity of inflation-adjusted methods and the future of poverty metrics. Key Demand of the question The question requires analysing the shortcomings of using inflation-adjusted poverty lines, explaining the price-basket based indexation approach, and critically assessing whether it can serve as a robust framework for future poverty measurement. Structure of the Answer: Introduction: Briefly highlight why poverty measurement methodology matters for welfare targeting. Body Limitations of inflation-adjusted poverty lines– issues of mismatch, outdated consumption patterns, and policy risks. Price-basket based indexation method – describe the approach, how it differs from CPI, and its benefits. Robustness as a framework – assess strengths, shortcomings, and need for multidimensional integration. Conclusion: Forward-looking, suggesting integration of basket-based indexation with multidimensional poverty metrics for holistic policymaking.
Why the question Poverty measurement debates in India have resurfaced after the RBI economists updated the Rangarajan poverty line, raising questions about the validity of inflation-adjusted methods and the future of poverty metrics.
Key Demand of the question The question requires analysing the shortcomings of using inflation-adjusted poverty lines, explaining the price-basket based indexation approach, and critically assessing whether it can serve as a robust framework for future poverty measurement.
Structure of the Answer:
Introduction:
Briefly highlight why poverty measurement methodology matters for welfare targeting.
• Limitations of inflation-adjusted poverty lines– issues of mismatch, outdated consumption patterns, and policy risks.
• Price-basket based indexation method – describe the approach, how it differs from CPI, and its benefits.
• Robustness as a framework – assess strengths, shortcomings, and need for multidimensional integration.
Conclusion:
Forward-looking, suggesting integration of basket-based indexation with multidimensional poverty metrics for holistic policymaking.