Sunday 30 August 2015

Income based poverty line vs Consumption based poverty line

Even though NSSO captures consumption expenditure which used by Planning commission to determine poverty line. An alternative way of calculation of poverty line can be one based on Income of the population. But till now all committees have favoured consumption based poverty line due to following factors –
  1. Huge majority of population has irregular income, most of them are in informal sector which consists of self-employed people, daily wage laborers etc. Income of this group is highly variable both temporally and spatially, while consumption pattern are comparatively much stable.
  2. Even in case of regular wage earners, there are additional side incomes in many cases, which is difficult to take into account.
  3. For e.g. MGNREGA provides employment for about 100 days, for rest of the time too people will earn something.
  4. NSSO’s sample based surveys use a ‘reference period’ (say 30 days). They will ask households under survey about their consumption in last 30 days. This they will take a representative of general consumption of that household. This is not possible in case of income.

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