An editorial in this newspaper, ‘Chasing a mirage: Govt alone can’t handle multidimensional poverty’ (August 8), argues that the national Multidimensional Poverty Index (MPI) includes too many indicators, such as having a bank account, clean cooking fuel, sanitation, assets, etc., to qualify as poor and that this may create a perverse incentive for governments trying to provide private goods with public money, burdening the fisc. The Edit may be conflating issues, and a few points demand attention.

Firstly, the MPI has three dimensions: health, education, and standard of living, with 12 weighted indicators. The weights range from 1/6 for nutrition to 1/21 for bank accounts, drinking water, assets, etc. A weighted deprivation score of 0.33 is required to qualify as MPI poor. Thus, not all deprivations have equal weightage. These deprivations are very basic (advisable to read 2.3 of NITI Aayog’s MPI report for specific indicators) and hence emblematic of real poverty besides informing policymaking on the necessities that are lacking in the country.

Second, poverty is about lacking purchasing power for an acceptable standard of living. What ‘acceptable’ means will vary from country to country. While consumption expenditure is a telling statistic, poverty is more than having a particular sum of money. As a thought experiment, if a household earning just enough to be above the poverty line does not have a functional tap water connection or sanitation facilities at home or if none of the members has a bank account, wouldn’t we say that the monetary yardstick is missing something? This used to be one of the criticisms of monetary poverty lines, but now with MPI showing significant improvements, the narrative seems to have flipped.

Third, if a government handout (subsidised cooking gas connection, health insurance and other subsidies) supplements one’s income, it is like an in-kind/in-cash transfer. It either supplements the purchasing power or obviates the need for purchasing power since the government provides those goods and services. Therefore, they are not ‘poor’.

Consequently, the consideration of the availability and enjoyment of these goods and services in estimating whether a household is poor or not — whether sourced with their own money or provided by the government — is valid. Moreover, goods such as an LPG connection have positive externalities, and their purchase is also an intra-household prioritisation exercise, i.e., women’s health and drudgery may or may not be the top priority for a resource-scarce household. Even if a government provides tap water connections (not unlimited free water) or LPG connections (not refills), it is creating massive societal gains, which are higher than private gains.

Now, whether these should be privately provided and the households have to earn on their own to pay for them, whether the said provision is an opportunity loss for the government undertaking capital expenditure or investment in general are separate issues. They do not undermine or diminish the relevance or validity of MPI.

Nageswaran is Chief Economic Advisor, Government of India, and Bisht is Officer, Indian Economic Service