The National Multidimensional Poverty Index (MPI), developed by NITI Aayog, is based on the internationally recognized Alkire-Foster methodology.
However, unlike the global MPI, which considers 10 indicators, the National MPI evaluates poverty using 12 indicators. This study examines the reduction in poverty rates and the decline in the number of multidimensionally poor individuals over different time periods.
The latest National MPI report is based on data from the National Family Health Surveys 4 (2015-16) and 5 (2019-21). Since there is no data available for the years between 2005-06 and 2015-16, as well as after 2019-21, poverty levels for 2013-14 and 2022-23 have been estimated using the compound growth rate of poverty reduction observed between 2005-06 and 2015-16 and between 2015-16 and 2019-21.
The findings reveal that multidimensional poverty in India dropped significantly from 29.17% in 2013-14 to 11.28% in 2022-23, with approximately 24.82 crore people overcoming poverty during this period.
At the state level, Uttar Pradesh recorded the highest number of people escaping poverty at 5.94 crore, followed by Bihar with 3.77 crore and Madhya Pradesh with 2.30 crore. Additionally, all 12 indicators of MPI showed significant improvement over this period.
Measuring Poverty
- Traditional Approach: Poverty has historically been assessed by evaluating the financial resources available to an individual or household. The most common monetary indicators have been household income or consumption expenditure.
- Criticism of Monetary Measures: This method has been criticized for failing to capture the various deprivations individuals may face throughout their lives. Economic progress is not the sole indicator of development; rather, development involves expanding people’s ability to utilize resources effectively to achieve valuable outcomes.
- Limitations of Monetary Metrics: Conventional monetary poverty measures have several shortcomings:
- Income and Well-being: While income is essential, it does not necessarily ensure overall well-being. In certain cases, household income is spent on items that do not contribute to the welfare of the family.
- Consumption Expenditure Issues: Due to the unavailability of precise income estimates, monetary poverty measurements often rely on consumption expenditure. However, this may not accurately reflect a household’s actual income, particularly when borrowed funds are used for consumption. Consequently, expenditure can exceed or fall below actual earnings, depending on a household’s borrowing, lending, and saving patterns.
- State Contributions Overlooked: A household’s welfare is influenced not only by its own spending but also by government interventions aimed at improving well-being. Monetary poverty indicators fail to account for benefits provided by the state, such as subsidized food, housing, sanitation, free education, healthcare, and nutritional programs.
- Multidimensional Poverty Index (MPI): The MPI is regarded as a more comprehensive and direct measure of deprivation and poverty. It effectively captures the impact of economic growth, income distribution, and government development initiatives. Additionally, global consensus acknowledges that non-monetary indicators complement monetary measures in providing a holistic understanding of poverty across multiple dimensions.
Multidimensional Poverty Index
- Global MPI Framework: The global Multidimensional Poverty Index (MPI) is formulated using the Alkire and Foster (AF) methodology. This approach classifies individuals as poor or not poor through a dual-cutoff counting method. It serves as a universally recognized metric for assessing acute poverty, offering an alternative perspective to conventional monetary-based poverty assessments.
- Dimensions and Indicators: The global MPI evaluates poverty across ten indicators within three key dimensions:
- Health Dimension: Includes Nutrition and Child & Adolescent Mortality indicators.
- Education Dimension: Consists of Years of Schooling and School Attendance indicators.
- Standard of Living Dimension: Encompasses six household-specific indicators—Housing, Household Assets, Type of Cooking Fuel, Access to Sanitation, Drinking Water, and Electricity.
- Identification of MPI Poor: The MPI evaluates poverty at an individual level. A person is categorized as ‘MPI poor’ if they experience deprivation in at least one-third of the ten weighted indicators.
- MPI Calculation: The index is determined by multiplying the incidence of multidimensional poverty (H) with the intensity of poverty (A), expressed as MPI = H × A.
- Incidence (H): Represents the percentage of the population classified as multidimensionally poor.
- Intensity (A): Reflects the percentage of weighted deprivations that an average multidimensionally poor person endures.
- MPI Value: Represents the proportion of total weighted deprivations among multidimensionally poor individuals relative to the entire population.
- Adjusted Headcount Ratio: The MPI is also referred to as the adjusted headcount ratio, as it encapsulates both the proportion of individuals experiencing multidimensional poverty and the severity of their deprivation.
Constructing India’s Multidimensional Poverty Index
- Role of NITI Aayog: Over time, both NITI Aayog and its predecessor, the Planning Commission, have systematically generated poverty estimates to address the complexities of poverty in India. As part of the Global Indices for Reform and Action (GIRG) initiative, NITI Aayog has been assigned the responsibility of developing a localized index for measuring multidimensional poverty.
- Methodological Approach: The national MPI follows the dual-cutoff methodology of the Alkire and Foster (AF) approach, aligning with the methodology used in the global MPI report.
- Indicators Used in National MPI: While retaining all ten indicators from the global MPI, the national MPI incorporates two additional indicators—Maternal Health and Bank Accounts—to reflect India’s specific developmental priorities.
- Need for a Refined Policy Tool: Given India’s vast administrative structure, which consists of 36 States and Union Territories and over 700 districts, a comprehensive and refined tool is essential for data-driven policymaking and sector-specific interventions at the sub-national level.
- Advantages Over Monetary Poverty Measures: Unlike traditional monetary poverty assessments that rely on consumption surveys, the national MPI examines deprivations at the district level, offering a more detailed and nuanced perspective on poverty.
- Significance of Granular Analysis: In India’s diverse socio-economic landscape, this detailed approach enables targeted policy interventions to combat acute poverty. It aligns with the principle of inclusivity, ensuring that no individual is excluded from development efforts.
- Assessing Overlapping Deprivations: The national MPI identifies multiple deprivations across health, education, and standard of living, providing a comprehensive understanding of factors that impact people’s quality of life and overall well-being.
Estimates Of National Multidimensional Poverty
- Data Sources and Estimation Process: Multidimensional poverty estimates for India for the years 2005-06, 2015-16, and 2019-21 were derived using data from the National Family Health Survey (NFHS) rounds 3, 4, and 5. These estimates were calculated with due consideration to the harmonization of indicators across the different survey rounds.
- Trends in Multidimensional Poverty: In 2005-06, more than half of India’s population (55.34%) was classified as multidimensionally poor, with an intensity of poverty also at 55%. Over time, the proportion of the multidimensionally poor declined significantly, dropping to 24.85% in 2015-16 and further to 14.96% in 2019-21.
- Decline in Poverty and Deprivation Intensity: Between 2005-06 and 2019-21, India reduced its multidimensional poverty headcount ratio by 40.38 percentage points. Meanwhile, the intensity of poverty, which reflects the average deprivation score among the poor, decreased by 10.57 percentage points, from 54.96% in 2005-06 to 44.39% in 2019-21. This suggests that not only has the proportion of poor people declined, but the extent of deprivation among them has also lessened.
- MPI Value Reduction: The Multidimensional Poverty Index (MPI), which considers both the incidence and severity of poverty, improved substantially. The MPI value dropped from 0.304 in 2005-06 to 0.117 in 2015-16 and further to 0.066 in 2019-21, indicating significant progress in poverty alleviation.
- Pace of Poverty Reduction: The rate of decline in multidimensional poverty has varied across different periods:
- The headcount poverty ratio fell at an annual rate of 7.7% between 2005-06 and 2015-16.
- The decline accelerated significantly in the next phase, from 2015-16 to 2019-21.
- The intensity of deprivation decreased at a slightly lower rate between 2015-16 and 2019-21 compared to the previous decade.
- However, MPI witnessed a 31% higher rate of reduction after 2015-16 than in the 2005-06 to 2015-16 period, demonstrating faster progress in reducing multidimensional poverty in recent years.
- Alignment with Sustainable Development Goals (SDGs): The decline in MPI underscores India’s commitment to achieving Target 1.2 of the Sustainable Development Goals (SDGs), which aims to reduce by at least half the proportion of men, women, and children of all ages living in poverty in all its dimensions by 2030.
- Findings from NITI Aayog’s 2023 Report: The 2023 report, National Multidimensional Poverty: A Progress Review, based on NFHS-4 and NFHS-5 data, highlights that 13.5 crore people escaped multidimensional poverty between 2015-16 and 2019-21.
- Rural vs. Urban Poverty Reduction: Rural poverty declined more significantly than urban poverty during this period:
- Rural poverty dropped from 32.59% to 19.28%.
- Urban poverty decreased from 8.65% to 5.27%.
- Key Indicators of Improvement: All 12 MPI indicators showed improvement, with notable reductions in deprivation between 2015-16 and 2019-21:
- Sanitation Deprivation: Reduced by 21.8 percentage points.
- Cooking Fuel Deprivation: Declined by 14.6 percentage points.
- Primary Drivers of MPI Reduction: The overall decline in the MPI value can be primarily attributed to improvements in nutrition, years of schooling, sanitation, and access to clean cooking fuel. However, further progress is still required.
- States with the Fastest MPI Reduction: The most significant reduction in the proportion of multidimensionally poor people occurred in:
- Uttar Pradesh
- Bihar
- Madhya Pradesh
- Odisha
- Rajasthan
- States with the Largest Decline in Poverty: Bihar, which had the highest MPI value in NFHS-4 (2015-16), recorded the steepest decline in the headcount ratio. Madhya Pradesh and Uttar Pradesh followed closely in terms of the largest reductions in multidimensional poverty.
- States with the Most People Escaping Poverty: In terms of absolute numbers, the highest number of people escaping multidimensional poverty were:
- Uttar Pradesh: 3.43 crore people.
- Bihar: 2.25 crore people.
- Madhya Pradesh: 1.36 crore people.
Do You Know?
The National Multidimensional Poverty Index (MPI) for India was first introduced in 2021. The second edition of the MPI was published in 2023.
Computing MPI For 2013-14 And 2022-23
- Purpose of Estimating MPI for 2013-14 and 2022-23: Evaluating poverty and deprivation for these years provides insights into the impact of various policy initiatives over the past decade. Although estimates for 2015-16 and 2019-21 already indicate an accelerated decline in MPI post-2015-16 compared to 2005-06 to 2015-16, assessing 2013-14 and 2022-23 enables a broader analysis of long-term trends.
- Methodology for Estimations: The estimates for 2013-14 were interpolated using an annual compound reduction rate of 7.69% based on trends observed between 2005-06 and 2015-16. The estimates for 2022-23 were extrapolated by applying the annual reduction rate of 10.66% recorded between 2015-16 and 2019-21. This method accounts for the real-world observation that the annual rate of poverty reduction tends to decrease as poverty levels decline, avoiding reliance on a linear trend.
- Projected Headcount Ratios: Based on these calculations:
- The estimated headcount ratio for 2013-14 was 29.17%.
- The projected multidimensional poverty for 2022-23 stood at 11.28%, indicating substantial progress toward poverty reduction.
- Progress Toward 2030 SDG Target: With these projections, India is significantly ahead of its goal of reducing multidimensional poverty by half before 2030. The estimated absolute reduction in headcount ratio from 2013-14 to 2022-23 is 17.89 percentage points, which translates to approximately 24.82 crore individuals escaping multidimensional poverty over the nine-year period.
- Considerations Affecting Poverty Reduction: While the projected decline is substantial, actual reductions may vary due to multiple factors, including economic fluctuations, policy interventions, and external shocks. The method used ensures that the rate of decline, rather than an absolute percentage point reduction, is applied, accounting for the natural deceleration of poverty reduction over time.
- Impact of the COVID-19 Pandemic: Since parts of the NFHS-5 data were collected before the pandemic, these estimates may not fully capture the economic impact of COVID-19 and subsequent government interventions.
- Comparison with World Bank Monetary Poverty Estimates: The World Bank defines the international poverty line as US $2.15 per day (2017 PPP). According to the latest World Bank data, India’s poverty headcount ratio at this threshold declined from 18.73% in 2015 to 11.9% in 2021 (Poverty and Inequality Platform, World Bank). Given the ongoing rate of multidimensional poverty reduction, India is projected to achieve single-digit poverty levels by 2024-25.
- State-wise Trends in MPI Reduction: Similar to national projections, estimates for poverty reduction at sub-national levels highlight significant progress:
- Uttar Pradesh: Largest reduction, with 5.94 crore people escaping poverty between 2013-14 and 2022-23.
- Bihar: Second highest reduction, with 3.77 crore people escaping poverty.
- Madhya Pradesh: Third highest, with 2.30 crore individuals rising above multidimensional poverty.
- Rajasthan: Also witnessed substantial progress in poverty reduction.
- Inter-State Poverty Differentials Declining: States with historically high poverty levels have experienced the fastest reductions in headcount poverty ratios. The strong correlation (0.939) between the incidence of poverty in 2013-14 and the subsequent percentage point reduction by 2022-23 indicates that the gap in multidimensional poverty levels across states is narrowing over time.
- Trends in Indicator-wise Deprivation: A comparative analysis of deprivation levels across three NFHS survey years (2005-06, 2015-16, and 2019-21) reveals significant improvements in multiple dimensions:
- Highest Deprivation in 2005-06:
- Cooking Fuel: 74.40%
- Sanitation: 70.92%
- Bank Account: 58.11%
- Lowest Deprivation in 2005-06:
- Child & Adolescent Mortality: 4.84%
- School Attendance: 21.27%
- Drinking Water: 21.34%
- Latest Estimates (2019-21) Indicating Persistent Deprivation:
- Cooking Fuel: 43.90% (still the highest deprivation)
- Housing: 41.37%
- Lowest Deprivation Levels (2019-21):
- Child & Adolescent Mortality: 2.06%
- Electricity: 3.27%
- Bank Account: 3.69%
- Highest Deprivation in 2005-06:
Government Interventions To Reduce MPI
- Commitment to SDG 1.2: The Government of India has made significant efforts to enhance the quality of life for millions, aligning with Sustainable Development Goal (SDG) 1.2, which aims to halve poverty in all its dimensions.
- Health and Nutrition Interventions:
- Poshan Abhiyan & Anaemia Mukt Bharat: These programs have played a critical role in improving access to healthcare, significantly reducing deprivation in health indicators.
- Mission Poshan 2.0 & Saksham Anganwadi: These initiatives integrate key nutrition schemes, including POSHAN Abhiyaan, Anganwadi Services, and the Scheme for Adolescent Girls.
- Poshan Vatikas (Nutri-Gardens): Established across the country, these provide easy and affordable access to nutritious fruits, vegetables, and medicinal plants.
- Anganwadi Services: With nearly 14 lakh Anganwadi centres, the program reaches 10 crore beneficiaries, including 8.87 crore children under six years and 1.1 crore pregnant and lactating mothers.
- Nutrition Support:
- 93 lakh beneficiaries receive hot cooked meals.
- 2.7 crore beneficiaries receive take-home rations.
- Pradhan Mantri Poshan Shakti Nirman (PM POSHAN): The world’s largest school feeding scheme provides hot cooked meals to 11.80 crore children in 11.20 lakh schools, including pre-primary children.
- Maternal Health Improvements:
- Pradhan Mantri Surakshit Matritva Abhiyan: Offers universal and quality antenatal care on the 9th of every month. So far, 3.94 crore free antenatal checkups have been conducted.
- Food Security Measures:
- Targeted Public Distribution System (TPDS): One of the world’s largest food security programs, 5.4 lakh fair price shops ensure food grain distribution.
- National Food Security Act (NFSA): Covers 81.35 crore beneficiaries, reaching 75% of the rural and 50% of the urban population.
- Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY): From January 1, 2024, the government will continue free food grain distribution to NFSA beneficiaries for five years.
- Energy and Clean Cooking Fuel Access:
- Ujjwala Yojana:
- Provided 10 crore LPG connections, benefiting 31 crore individuals.
- Reduced smoke-related health issues, improving respiratory health.
- Freed women from fuel collection tasks, enabling participation in economic activities.
- Saubhagya Scheme:
- Achieved nearly 100% electricity coverage, benefiting 2.86 crore households.
- Eliminated kerosene dependency, improving respiratory health and eyesight.
- Ujjwala Yojana:
- Sanitation and Clean Water Initiatives:
- Swachh Bharat Mission (SBM): Constructed 11.33 crore Individual Household Latrines (IHHLs) in rural areas.
- Jal Jeevan Mission (JJM): Provided 14 crore tap water connections, ensuring access to safe drinking water.
- Financial Inclusion & Economic Empowerment:
- Pradhan Mantri Jan Dhan Yojana (PMJDY):
- Opened over 50 crore bank accounts, integrating millions into the formal financial system.
- Facilitated access to government schemes, savings, and credit.
- Housing and Livelihood Security:
- Pradhan Mantri Awas Yojana (PMAY):
- Provided over 4 crore homes for underprivileged families in both urban and rural areas.
- Ensured secure and dignified living conditions for millions.
- Pradhan Mantri Awas Yojana (PMAY):
- Pradhan Mantri Jan Dhan Yojana (PMJDY):
Read The Original Report Here.