A Very Simple Money-Metric Welfare Indicator for India Based on the Quintile Income Statistic

Kaushik Basu’s work on what he has called ‘the quintile income statistic’, and more recently, an ‘index of shared prosperity’, moves away from the standard practice of identifying an economy’s welfare with its mean per capita income to a more poverty-focused indicator that concentrates attention on the average income of the poorest 20 % of a country’s population. This indicator, arguably, furnishes a more directly and purely income-related assessment of poverty than do indices based on the standard ‘identification-cum-aggregation’ approach to measuring poverty. The latter entail the computation of a headcount ratio of the population below a ‘poverty line’, which is subject to alternative arbitrary specifications that can cause vast divergences in calculated magnitudes and trends. In this brief note we advance an extremely simple quintile-income related indicator of welfare which may be of interest and use for national and international agencies in tracking an aspect of money-metric poverty. © 2015, The Indian Econometric Society.