Which one of the following is a possible reason for underestimation of the official poverty ratio in India?
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1 mark, −0.333Economics of Growth and DevelopmentPoverty, inequality and human developmentPoverty estimation in IndiaModerateabout 1 min
IIT JAM 2021 Question 6: Poverty, inequality and human development
Answer and worked solution
Answer: (B)
If the price indices used to update the poverty line do not fully capture the actual rise in the cost of living, the line is set too low.
A line that is too low classifies fewer people as poor, so poverty is underestimated. The answer is (B). India's official lines are in fact state-specific and differ for rural and urban areas, so (C) and (D) are factually off.
The trap: (D) Existence of identical poverty lines for rural and urban areas
India does not use a single identical line across states or across rural and urban areas, so (C) and (D) describe a situation that does not hold.
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What this question tests
This question is on Poverty estimation in India, part of Poverty, inequality and human development in Economics of Growth and Development.
How India's poverty line has been set and re-estimated over time.
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