Poverty Estimates in India: Old and New Methods, 2004–2005

This article provides estimates of poverty and inequality across states as well as for different subgroups of the population for 2004–2005 by using the old and new methods of the Planning Commission. The new method is critically evaluated with the help of some existing literature, and its limitations are discussed with regard to doing away with calorie norm, use of median expenditure as a norm for education when the distribution is positively skewed, difficulty in reproducing results for earlier rounds acting as a constraint on comparisons, and using urban poverty ratio of the old method as a starting point to decide a consumption basket. More importantly, it discusses the implications on financial transfers across states if the share of poor is only taken into account without accounting for an increase in the total number of poor. Despite these limitations, on grounds of parsimony and prudence, the state‐specific poverty lines suggested in the new method, as also in the old method, are used to discuss implications on poverty for different subgroups of the population (i.e., NSS regions, social groups, and occupation groups). It also raises concerns on reducing a complex social phenomenon such as poverty to a narrow set of parameters and also its implications on policymaking.