What is Poverty Gap?

Economy and Finance

What is Poverty Gap?

12 Jul 2023 Zinkpot 259

The Poverty Gap is the ratio that presents the average population’s shortfall from the poverty line. Poverty line is the minimum level of income required to meet basic survival needs. In simple terms, it is defined as the extent to which individuals, on average, fall below the poverty line.
It is the measure of how severe poverty is in the country. In other words, it represents the intensity of a nation’s poverty. It is expressed in the form of a percentage.
The World Bank Development Research Group, creates the poverty gap indicator. It calculates poverty by looking at household income and consumption per capita.
The poverty gap index is an additive measure, which means that it can be used as an overall measure of poverty, as well as subdivided by location, industry, education level, gender, age, or ethnic group.
Higher poverty gap shows a deep level of distress and higher poverty for those who are under the poverty line. In such a case, the government must transfer more income to bring the people above the poverty line.
The other method used to determine poverty is the poverty headcount ratio, which provides a simple count of all the people below the poverty line in a given population, considering them equally poor. For this reason, it is deemed by some to be a flawed measurement.
On the other hand, the poverty gap can be used to get the total amount of money needed to bring the poor population out of extreme poverty and up to the poverty line via calculating the poverty gap index.
There are at least five estimates of the number of poor people in India which put the number of poor in India between 34 million to 373 million. This puts the number of poor between 2.5% of the population to 29.5% based on different estimates between 2014 and 2022.
There have been no official updates to India’s poverty estimates since 2011 when there were about 269 million people below the poverty line.
India has the maximum number of poor people in the world, followed by Nigeria. As many as 415 million people exited multidimensional poverty in India in 15 years, As per United Nations Development Programee.