Abstract:
This paper provides estimates of poverty and inequality across states as also for different sub-groups of
population for 2004-05 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 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 ration 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 calculate incidence,
depth (intensity) and severity (inequality among poor) estimates of poverty for different sub-groups of
population, viz., NSS regions, social groups and occupation groups.
