What is Sen Poverty Index (SPI) | UPSC Economy notes

Sen Poverty Index (SPI)

Step 1: The problem with normal poverty measures

• Headcount Ratio (HCR): tells us how many people are poor.
  👉 Example: 40 out of 100 people are poor → HCR = 40%.

• But this ignores how poor they are and differences among poor people.

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Step 2: What Sen did

Amartya Sen said:

“We should not just count poor people, but also see how much below the poverty line they are, and whether all poor are equally poor or some are much worse off.”

So, his index adds 3 things together:

1. How many are poor (Headcount).

2. How poor they are on average (Poverty Gap).

3. Inequality among the poor (some poor are closer to PL, others are far below).

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Step 3: Simple example

Suppose Poverty Line = ₹1,000 per month.

Case A:

• Poor people’s incomes = ₹900, ₹850, ₹870.

• All are just below PL.

• Inequality among poor is low.
  👉 Poverty is not very deep.

Case B:

• Poor people’s incomes = ₹900, ₹500, ₹300.

• Some are very far below PL.

• Inequality among poor is high.
  👉 Poverty is much worse.

⚡ Headcount (HCR) is the same in both cases. But Sen Index will give a higher value for Case B because poverty is deeper and more unequal.

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Step 4: Simple definition for UPSC

“The Sen Poverty Index, developed by Amartya Sen (1976), is a measure that combines the number of poor, the average depth of their poverty, and the inequality among them, giving a fuller picture of poverty than just headcount ratios.”

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👉 In short:

• HCR = how many are poor.

• PGI = how poor they are.

• Sen Index = how many + how poor + how unequal.

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Formula (don’t worry about exact maths, just concept):

$$Sen\ Index = H \left[ I + (1 - I) G_p \right]$$

Where:

• H = Headcount ratio (proportion of poor in population).

• I = Income gap ratio (average shortfall from PL).

• Gp = Gini coefficient among the poor (inequality among poor).