MPSC 2024 Prelims Paper-I · Question 44 of 100

Correct — option (2). The Poverty Gap Index measures how far below the poverty line the poor actually are, not merely how many of them there are. For every poor person you take the shortfall between the poverty line and that person's income or consumption, divide it by the poverty line so that it becomes a proportion rather than a rupee amount, and then average those proportions over the entire population, counting everyone above the line as a zero shortfall. What comes out is a single number that answers exactly the question printed in option (2): multiply the index by the poverty line and by the total population and you have the aggregate income shortfall of the poor — the minimum sum of money that would have to reach them, if it could be delivered with perfect targeting and no leakage, to lift every poor person precisely to the poverty line and so eliminate income poverty. That is why the measure is described as the cost-of-eliminating-poverty index. It is the reason the index exists alongside the head-count ratio: the head-count ratio tells you the incidence of poverty and nothing about its depth, so a transfer that moves the very poorest a long way up without crossing the line leaves the head-count ratio completely unchanged, while the Poverty Gap Index falls. Gaurav Datt and Martin Ravallion — the paper prints the names as 'Gaurav Dutt and Martin Ravalin' — are the World Bank economists whose work on measuring and decomposing poverty in India made this family of measures standard in Indian poverty analysis.

• (1)How much calories deficit needs to be made up to eliminate poverty ? — This describes a calorie shortfall, and it is a plausible-looking trap in the Indian context because the official poverty line itself began as a calorie norm — the daily requirement of 2,400 calories in rural areas and 2,100 in urban areas, converted into the monthly expenditure needed to buy them. But the conversion runs one way only. Once the norm has been turned into a money line, every poverty measure built on it is measured in money, and the Poverty Gap Index is an expenditure gap, not a nutritional one. A calorie-deficit measure would also say nothing about the non-food component of the poverty line, which has grown steadily more important in successive Indian poverty estimates.
• (3)How much increase in per capita income will be required to eliminate poverty ? — Per capita income is an average taken over the whole population, and the arithmetic of the Poverty Gap Index deliberately avoids exactly that. An increase in average income can leave the poor untouched if the increase accrues to those already above the line, so no figure for the required rise in per capita income can be read off the index. The index measures the shortfall of the poor alone, which is a distributional quantity, and translating it into an average-income requirement would need an assumption about how any additional income is shared out — an assumption the measure is designed not to make.
• (4)None of these — 'None of these' can only be right if all three preceding statements fail, and the second of them states the standard interpretation of the index correctly. An escape option like this is worth taking seriously only when each of the substantive choices can be positively ruled out; here the money-shortfall reading is not merely defensible but is the reason the measure was constructed, so the escape route is closed.

Poverty measures answer three different questions and it is worth keeping them apart. The head-count ratio answers how many are poor: it is simply the proportion of the population below the poverty line, and it is the figure quoted in political debate. It is also crude, because it treats a person one rupee below the line and a person destitute as identical, and it can be improved most cheaply by helping those who were nearly out of poverty anyway. The Poverty Gap Index answers how poor the poor are: it averages the proportionate shortfall from the line across the whole population and so registers depth, which makes it fall whenever any poor person's income rises, whether or not they cross the line. The squared poverty gap goes further and answers how unequal poverty itself is, by weighting each shortfall by itself so that the position of the poorest counts most. These three sit in one family, the Foster-Greer-Thorbecke class, distinguished only by the power to which the proportionate gap is raised — zero, one and two respectively. The practical value of the middle measure is that it converts directly into money: aggregate poverty gap equals the index times the poverty line times the population, which is the minimum perfectly targeted transfer that would end income poverty.

MPSC's economy section tests poverty measurement as a set of distinctions rather than as a set of numbers, because the numbers change with every survey round while the distinctions do not. Questions typically ask what a named index measures, which committee fixed a particular line, or which measure is insensitive to the depth of poverty. The habit that pays is to read each index as the answer to a question — how many, how far below, how unequally spread — and to remember that the Poverty Gap Index is the one with a rupee interpretation attached to it. That interpretation is also the reason the measure appears in policy discussion: it puts a floor under the cost of any income-transfer approach to eliminating poverty, and the gap between that theoretical minimum and what schemes actually spend is a standing argument about targeting and leakage.

• The Poverty Gap Index is the mean proportionate shortfall of income or consumption below the poverty line, averaged over the entire population with the non-poor counted as zero shortfall.
• Multiplied by the poverty line and by the population it yields the aggregate poverty gap — the minimum perfectly targeted transfer that would raise every poor person exactly to the poverty line.
• The head-count ratio measures only the incidence of poverty and is unchanged by any improvement that does not carry a person across the line, which is the deficiency the Poverty Gap Index was designed to repair.
• The head-count ratio, the poverty gap and the squared poverty gap form the Foster-Greer-Thorbecke family of measures, differing only in the power to which the proportionate shortfall is raised.
• Gaurav Datt and Martin Ravallion are World Bank economists whose work on Indian poverty includes the decomposition of a change in poverty into a growth component and a redistribution component.

• Confusing the Poverty Gap Index with the head-count ratio, and so believing it reports how many people are poor rather than how far below the line they are
• Reading the index as a nutritional measure because India's poverty line originated in a calorie norm, when the index itself is measured entirely in money
• Assuming a rise in average per capita income can be inferred from the index, when the index is deliberately built to be a distributional rather than an average quantity
• Taking an escape option such as 'none of these' before positively ruling out each substantive choice

Poverty measurement recurs in MPSC papers as definitional recall — what does a named index measure, which committee recommended a particular line, what distinguishes absolute from relative poverty — and occasionally as an attribution question naming the economists associated with a measure. The Commission also has a habit of printing foreign names in unusual transliteration, so recognition should rest on the concept in the stem rather than on the exact spelling of the name attached to it. Expect the head-count ratio, the poverty gap and the multidimensional index to be worth holding as a compact set of one-line definitions, each with the question it answers.

No directly related past PYQ was found.

• practice — not a real PYQ

  Which of the following poverty measures remains completely unchanged when the income of a very poor household rises without crossing the poverty line ?

  • (a)Head-count ratio
  • (b)Poverty Gap Index
  • (c)Squared poverty gap
  • (d)Gini coefficient of the poor

  Answer(a) Head-count ratio — it counts only how many people lie below the line, so any improvement that does not carry a household across it leaves the ratio exactly where it was. The Poverty Gap Index and the squared poverty gap both fall, because both are built on the size of each shortfall rather than on a simple count.

• practice — not a real PYQ

  The aggregate amount of money required, under perfect targeting, to raise every poor person exactly to the poverty line is obtained from the Poverty Gap Index by multiplying it by which of the following ?

  • (a)The poverty line and the total population
  • (b)The head-count ratio alone
  • (c)Per capita national income
  • (d)The Gini coefficient

  Answer(a) The poverty line and the total population — the index is a mean proportionate shortfall, so restoring the rupee scale requires the poverty line, and restoring the aggregate requires the population. The product is the aggregate poverty gap, the theoretical minimum cost of eliminating income poverty by transfer.