Vulnerability as an Ex Ante Measure of Poverty

Over the last three decades, India’s economy has grown rapidly and the incidence of poverty has declined drastically in the post-liberalisation period. As long as poverty reduction is a major goal, measuring poverty accurately is also of paramount importance. Several committees were established after independence that proposed alternative methodologies in order to accurately compute the poverty line for the country. The Alagh Committee (1979) and Lakdawala Committee (1993), primarily, focused on nutritional and calorie-based poverty thresholds, while the Tendulkar Committee (Planning Commission 2009), chaired by Suresh Tendulkar, instead, used spatial and temporal variations to monitor the prices across regions and time. The Tendulkar Committee also incorporated private expenditures on health and education, while estimating poverty. On the other hand, the Rangarajan Committee (2014) provided an alternative method for identifying poverty levels by examining the divergence in the consumption data provided by the National Sample Survey Office (NSSO) and the national accounts aggregates. However, the poverty approaches used by these committees conceptualise poverty as an ex post phenomenon and ignore the notion of vulnerability as an ex ante measure of poverty. The present article highlights this unexplored notion.

We can distinguish vulnerability as an ex ante measure of poverty from an ex post measure, as there are households or individuals who are currently non-poor but can become poor in the near future due to a variety of shocks, such as changes in macro-level policies, weather events, or the illness or death of the head of the household (Imai et al 2011). Ex ante vulnerability to poverty is a dynamic concept that reflects the stochastic nature of poverty and the fluctuating levels of household earnings; today’s poor may or may not be tomorrow’s poor. On the contrary, currently non-poor households who face a high probability of large adverse shocks may, upon experiencing such shocks, become poor tomorrow. The dynamic nature of poverty in the Indian context has also been highlighted by the Department for International Development (Loughhead 2001).