New OPHI article analyses poverty in India using Multidimensional Poverty Index vs headcount ratio

22 March, 2021

A new article by Sabina Alkire, Christian Oldiges and Usha Kanagaratnam of the Oxford Poverty and Human Development Initiative (OPHI) analyses what different measures reveal about poverty reduction in India during the period 2005/6-2015/16.

Following Amartya Sen’s pioneering ideas on poverty and inequality measurement, the development economics literature proposes diverse classes of measures as well as poverty orderings. Yet in the Sustainable Development Goals (SDGs), the headcount ratio (H) is the primary statistic for measuring monetary and multidimensional poverty.

Rigorously analysing the trends of multidimensional poverty for India between 2005/6 and 2015/16, the authors illustrate how the headcount ratio is not able to observe certain centrally important requirements of the SDGs – such as whether anyone is being left behind, or how deprivations are interlinked. They propose using the adjusted headcount ratio or Multidimensional Poverty Index (MPI) as the primary poverty measure for policy assessment, supplemented by the headcount ratio, intensity, number of poor, and composition of poverty, to provide more accurate analyses.

Exploiting cross-sectional data comprising more than 3 million individuals and a panel of 29 states and several socio-economic subgroups, they show empirically how the reduction of multidimensional poverty by 271 million unfolded within a decade. In contrast to earlier periods in time, they find that the poorest of the poor saw the largest reductions in multidimensional poverty due to falling levels of intensity – a feature the headcount ratio alone cannot portray.

Despite the importance of the MPI, they recognise the inherent and enduring need to probe the headcount ratio and number of poor statistics. Hence they corroborate these stark findings with an assessment of the dominance of the distribution of attainment scores which establishes the relationship between MPI and H in both periods. To assess the robustness of the number of poor leaving poverty, 19 additional MPIs are constructed, each having different indicator definitions and combinations, and it is found that in all but one of these, more than 270 million people left poverty.

Sabina Alkire, Christian Oldgies and Usha Kanagaratnam (2021) 'Examining multidimensional poverty reduction in India 2005/6–2015/16: Insights and oversights of the headcount ratio', World Development, DOI: 10.1016/j.worlddev.2021.105454