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Difficulty: MediumPoverty Estimation, Inequality Metrics, and Inclusive Growth Strategies

Regarding economic inequality metrics and poverty estimation frameworks in India, which of the following statements are correct?

  1. NITI Aayog's National Multidimensional Poverty Index (MPI) incorporates 12 indicators across three dimensions, adding Maternal Health and Bank Account to the 10 indicators used in the Global MPI.Answer
  2. B
    A Gini coefficient value of 0 indicates absolute economic inequality, whereas a value of 1 signifies absolute economic equality.
  3. The Palma ratio measures economic inequality by comparing the income share of the top 10% of the population to the income share of the bottom 40%.Answer
  4. D
    Absolute poverty describes household income falling below a specified percentage of median national income, while relative poverty measures the inability to secure basic survival needs like food and shelter.

Answer

The correct statements are that NITI Aayog's National MPI adds Maternal Health and Bank Account to the Global MPI indicators, and the Palma ratio measures inequality by comparing the income share of the top 10% to the bottom 40%.
The statement regarding NITI Aayog's National MPI is accurate because it incorporates 12 indicators across Health, Education, and Standard of Living, specifically adding Maternal Health and Bank Account to the standard 10 UNDP/OPHI indicators. The statement regarding the Palma ratio is also correct as it measures the ratio of GNI share of the top 10% to the bottom 40%.

Step-by-Step Solution

1
Evaluate the National Multidimensional Poverty Index (MPI) statement
NITI Aayog's National MPI uses 3 dimensions (Health, Education, Standard of Living) with 12 indicators, adding Maternal Health (under Health) and Bank Account (under Standard of Living) to the Global MPI framework.
Verifying national modifications to international poverty metrics.
2
Analyze the Gini coefficient definition statement
The Gini coefficient ranges from 0 to 1, where 0 indicates perfect equality and 1 indicates perfect inequality. Stating 0 represents absolute inequality is incorrect.
Testing standard properties of income inequality metrics.
3
Evaluate the Palma ratio definition statement
The Palma ratio is defined as the ratio of the richest 10% of the population's share of gross national income divided by the poorest 40%'s share.
Verifying the ratio definition used in global inequality assessments.
4
Examine the definitions of absolute and relative poverty
Absolute poverty is measured against a fixed threshold required for basic subsistence (food, shelter, water). Relative poverty measures inequality relative to average/median income in a society. The statement swaps their definitions.
Checking conceptual clarity between absolute deprivation and relative disparity.

Key Concept

Multidimensional Poverty Index and Economic Inequality Metrics
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Topics

Poverty Estimation, Inequality Metrics, and Inclusive Growth Strategies