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Poverty level significantly down to 5%, says Niti CEO

Published:

NEW DELHI: The latest survey of household consumption expenditure released by the

statistics office

has shown that

rural consumption

has remained robust, narrowing the gap with urban, and the numbers could mean a sharp reduction in the

poverty level

in the country, the

Niti Aayog

CEO said. “Based on this data, poverty levels in the country could be closer to 5% or less,” B V R Subrahmanyam said, adding that rural deprivation has almost disappeared going by the data.
The numbers could have an implication for interest rate setting by RBI as the share of food and cereals is lower in the retail inflation index, he said, asserting the data has dispelled doubts about the state of the rural economy.

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Poverty level is calculated on the basis of consumption expenditure data and there has been a sharp debate about the number of poor. Data for 2017-18 was not released, so this is the latest data after 2011-12.

‘Food spend in rural India 46.4% in 2022-23 from 53% in 2011-12’
Latest data on household consumption expenditure showed significant shifts in rural and urban consumption, with share of food and cereals coming down. Spending on non-food items such as fridge, television, beverages and processed food, medical care and transportation have increased in this period while expenditure on food such as cereals and pulses has slowed.

The survey showed that at current prices, rural monthly per capita consumption spending rose 164% from Rs 1,430 in 2011-12 to Rs 3,773 in 2022-23 while in urban centres, it shot up 146%, from Rs 2,630 in 2011-12 to Rs 6,459 in 2022-23.
In rural areas, the share of food in monthly consumption has slowed to 46.4% in 2022-23 from 53% in 2011-12 while spending on non-food items rose to 54% from 47.15. In urban centres the same trend was visible with spending on food slowing to 39.2% in 2022-23 from 43% in 2011-22 while non-food expenditure rose to 60.8% in 2022-23 from 57.4% in 2011-12 according to the survey.

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“In food, consumption of beverages, processed food, milk and fruits is growing – an indication of more diverse and balanced consumption,” said Niti Aayog CEO B V R Subrahmanyam. He said the latest data would lead to a recasting of the

consumer price index

which measures retail inflation, as the share of cereals and food will go down.
“This means the contribution of food to CPI inflation will be lower and probably was lower in earlier years also. This means inflation was being overstated and is probably less as food has been a major contributor,” said Subrahmanyam, adding that this could have implications for RBI’s monetary policy.
In 2014, a panel headed by ex-RBI governor C Rangarajan had estimated poverty line as monthly per capita expenditure of Rs 1,407 in urban areas and Rs 972 in rural. Latest data showed that bottom 5-10% of the population had an average monthly consumption expenditure of Rs 1,864 in rural areas and Rs 2,695 in urban centres.
“Going by Rangarajan definition, the survey data shows that poverty levels in India are now significantly lower. As per the panel’s definition, a person spending Rs 47 per day in cities and Rs 32 in villages is below the poverty line. As per latest MPCE data, consumption expenditure of bottom 5-10% shows that poverty rates in India are now in low single-digit,” said Soumya Kanti Ghosh, part-time member of 16th Finance Commission and group chief economic adviser of SBI.

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