Socio economic status assessment in India: history and updates for 2024

INTRODUCTION

In India, assessing socio-economic status is a crucial endeavor for understanding the diverse economic and social landscape. Over the years, various methods have been employed to gauge the socio-economic conditions of individuals and households.

Numerous academics and specialists have endeavored to develop a common SES metric for semi-urban, urban, and rural regions. Some of the recognized SES scale consists of the following: the Bhardwaj scale (2001), the Jalota scale (1970), the Kulshrestha scale (1972), the Kuppuswamy scale (1976), the Udai Pareek scale (1964), the B. G. Prasad scale (1961), and the Rahudkar scale (1960).

Among the above, one of the commonly used scales are the B. G. Prasad's scale, devised in the 1960s, which considered per capita per month income and the Kuppuswamy scale, introduced in the 1970s, which incorporates parameters like education, occupation, and income of the head of the family.^1,2 The national sample survey organization (NSSO) in India has also played a pivotal role, employing its own set of criteria, including land ownership, housing characteristics, and possession of consumer durables, for the socio-economic classification.³

In recent times, there has been a shift towards more holistic approaches, such as the standard of living index, which encompasses not only income and occupation but also includes possession of assets, access to services, and overall quality of life indicators.⁴ The multidimensional aspect of these newer methods reflects an understanding that socio-economic status is not solely determined by financial metrics but also by factors like health, education, and living standards.⁵

Additionally, some surveys have adopted consumption expenditure-based measures, providing a direct insight into the spending patterns of households.⁶ This aligns with the idea that actual consumption behavior can offer a more accurate representation of economic well-being.

It is essential to note that the evolution of socio-economic assessment scales is ongoing, and researchers continue to refine and adapt these measures to capture the changing dynamics of the Indian population. Different surveys and studies may use variations of these scales based on their specific objectives and contexts. Here is a brief overview of the evolution from B. G. Prasad's scale to more contemporary standards of living assessments and also updates of these scales for the year 2024.

B. G. PRASAD SES SCALE

B. G. Prasad developed a scale in 1960.¹ It was later modified in 1968 and in 1970.^7,8 It is calculated based on per capita monthly income (per capita monthly income = total monthly family income/total family members above 1 year of age).

The 1960’s Prasad scale was constructed based on the cost-of-living index, by year 1993-94, the inflation rates were governed by the all-India whole price index series, the Laspeyres formula was used to adjust the changes occurring due to inflation and idea of the linking factors was introduced.⁹

Linking factors were added to the B. G. Prasad’s scale in 1982 and 2001 to transfer the CPI from the new base of 100 to the old base CPI (1960). The linking factors 4.63 and 4.93, were added to the years’ 1982 and 2001, respectively. The Ministry of Labor Bureau has again revised the base year, bringing it to 2016 and adding a linking factor of 2.88 in the process.^10,11

Calculation of updated B. G. Prasad scale

CPI for industrial workers for October 2023 = 138.4¹¹

Multiplication factor=current index value (138.4)/base index value in 2016 (100)=1.384

The new income value can now be calculated using the following equation:

New income value=Multiplication factor × old income value×4.63×4.93×2.88

Where 4.63, 4.93, and 2.88 are the linking factors given by the labor bureau for the years 1982, 2001, and 2016 respectively.

Thus, B. G. Prasad's SES scale updated for the year 2024 (base year 2016=100) is as follows:

The B. G. Prasad SES scale has the advantage of being easy to calculate and relying just on the income component. However, as inflation causes the rupee's value to fluctuate and the income criterion to become less relevant, the income section must be adjusted periodically. As a result, it is critical to regularly update the scale's revenue categories.¹²

MODIFIED KUPPUSWAMY SCALE OF SES

The other most well-known and extensively used scale to assess socio-economic status in India is modified Kuppuswamy scale. It is extensively used in Urban areas. Originally intended to measure individual socio-economic status, but later was modified to assess SES of the family. This scale originally created in 1976 has three index factors- 1. Education 2. Occupation and 3. Total income.²

Each parameter is divided into sub groups and each sub group is given a score. The first two index factors remain unchanged but the third index factor changes due to the economic indices i.e., inflation and per capita. The income scale is adjusted in accordance with the changes in the consumer price index for industrial workers as projected by the labour bureau, Government of India.¹¹

On the Kuppuswamy scale, families are divided into five categories: upper class, upper middle class, lower middle class, upper lower class, and lower class. A family’s total score can range anywhere from three to twenty-nine points, and it can only be determined by combining information about the members of the family’s education level, occupation level, and income level.²

The values of the CPI are explained in reference to a base year. In this article, we will use 2012 as the base year for calculating the income level of families to determine their SES.¹³ For calculation (conversion factor), the inflation rate of October 2023 is 4.45 has been considered.¹¹ If we multiply the generated income scale values of the year 2012 with the conversion factor of 4.45 that will update Kuppuswamy SES scale for October 2023. Conversion rate/ inflation rate is calculated using formula=

Inflation rate=b-a/a *100

b is CPI of current year (CPI for October 2023-138.4) and a is CPI of previous year (CPI for October 2022-132.5).¹¹

Inflation rate=138.5-132.5/132.5*100=4.45

On the Kuppuswamy scale, based on the total score including all the three parameters, the families are divided into five categories: upper class (26-29), upper middle class (16-25), lower middle class (11-15), upper lower class (5-10), and lower class (<5).

Strength and limitations

Although this scale has wide applicability in research, it does have lots of drawbacks. The occupation categories are not defined clearly which results in ambiguity. There is a confusion as to where to include homemakers and retired persons in categories. Similarly, education classes are also not defined clearly which degree comes in which category.

Education has a different context with certain issues like vary with culture and teaching methods as well as institutions. Individuals studying in madrasa or gurukul based on cultural or religious institutions would be difficult to classify in this type of the socioeconomic scale.¹⁴

UDAI PAREEK’S SCALE FOR ASSESSING SES

Udai Pareek’s scale is also a well-accepted measure for assessing socio economic status of rural population. The scale uses nine domains for assessing the socio-economic status i.e., caste, occupation, house, land, education, social participation, farm power, material possessions, and family member. After filling in the information and scoring the individual item, the total score is summed up and the result is interpreted.¹⁵

Limitations of the scale: The scale does not have any income domain which is crucial to maintain socioeconomic status. The scale is not applicable for urban populations.¹⁴

On the revised Udai Pareek socioeconomic status scale, based on the total score including all the parameters, the families are divided into five categories: upper class (>43), upper middle class (33-42), middle class (24-32), lower middle class (13-23) and the lower class (<13).

AGGARWAL SOCIO ECONOMIC SCALE

Flexibility and robustness of the above scales have often been questioned. Scales till date do not account for social mobility to great extent. Social mobility is the movement of individuals, families, households within or between social strata in a society. It is a change in social status relative to others’ social location within given society.¹⁷

To overcome these disadvantages, Aggarwal et al devised a new scale which measures the SES of families in both urban and rural areas. Focus was shifted from the head of the household to the highest achiever in the family and accounted for income from all sources. The scale is comprehensive and includes 22 items including various components such as owning agricultural lands, caste of family, type of locality the family is residing, income tax paid etc.; which are listed in table below.¹⁸ Inclusion of many parameters gave tool accuracy and complexity, making it time consuming and labor-intensive exercise.¹⁹

Strengths and limitations of Aggarwal scale

Strengths: Incorporation of several characteristics endowed instrument with precision, includes MPCI from all sources, includes caste of family, locality of household to understand their position in community.

Limitations: Very lengthy tool, challenging to use in field on a regular basis due to its intricacy, making it a tedious and time-consuming procedure. Collecting data about assets and income tax paid is tough as people do not want to disclose such information.

Total score is calculated and the household is classified as accordingly to socio economic status score as upper high >76, high 61-75, upper middle 46-60, lower middle 31-45, poor 16-30 and very poor or below poverty line ≤15

MONTHLY PER CAPITA CONSUMPTION EXPENDITURE USED IN NSSO SURVEYS

The NSSO is an organization under the ministry of statistics and programme implementation in India. It conducts large-scale sample surveys on various aspects of the Indian economy and society. The NSSO employs sampling techniques to ensure that the collected data is representative of the entire population. The surveys use a stratified random sampling approach, where the population is divided into strata, and samples are drawn from each stratum to ensure diversity.¹⁹

NSSO used monthly per capita consumption expenditure (MPCE) and ownership of assets to assess socio-economic status in its surveys. MPCE represents the average monthly expenditure incurred by an individual within a household. It is calculated by dividing the total monthly consumption expenditure of the household by the number of members in the household.²⁰

Breakdown of the components involved in calculating MPCE

Total consumption expenditure: This includes all expenditures incurred by the household on various goods and services during a specific period (usually a month). It encompasses both food and non-food items.

Number of household members: The total number of individuals in the household is used as the denominator. This is to calculate the per capita expenditure, i.e., the average expenditure per person.

The formula for calculating MPCE is as follows: MPCE=Number of household members/ total consumption expenditure.

MPCE is a crucial metric as it provides insights into the standard of living and economic well-being of households. It helps in assessing the distribution of income and consumption patterns among different sections of the population. When analyzing MPCE data, researchers and policymakers can identify trends, disparities, and areas that may need targeted interventions.²¹

Strength of MPCE

MPCE is often categorized based on rural and urban areas, allowing for a more detailed analysis of consumption patterns in different settings. Additionally, it is common to break down MCPE into various expenditure categories such as food, education, health, housing, etc., to gain a comprehensive understanding of how households allocate their resources. These indicators are amongst the most important measures of the level of living of the respective domains of the population and are crucial inputs for estimation of prevalence of poverty by the planning commission for planning, policy formulation, decision support and as input for further statistical exercises.²¹

Limitations of MPCE

The estimates of MPCE are sensitive to poor-coverage which can impact data quality and result in under-estimation of poverty.²²

STANDARD OF LIVING INDEX

In India, another method of assessing SES is by the Standard of living index. It is also used in NFHS, conducted by the government of India. The standard of living index (SLI) is determined by assessing the ownership of home items, including the kind of dwelling, toilet facility, source of lighting, type of fuel, and source of drinking water. Separate kitchen area, possession of house, possession of farmland, possession of animals, and possession of long-lasting assets. As shown in Table below.

The index scores span from 0 to 14 for a low standard of living index, 15 to 24 for a medium standard of living index, and 25 to 67 for a high standard of living index.⁴

Strengths

Simple for assessment of households by quantifying the items owned. No complex calculations involved. SLI can be applied in both rural and urban settings and is based on a scoring system which can be modified depending on the requirements. Thus, families classified under SLI are more in touch with reality.

Limitations

This scale does not take income into account; hence it does not address the ambiguities around that evaluation. Does not include parameters as education, occupation, caste, which indirectly reflect the individuals stand in the society.

MULTIDIMENSIONAL POVERTY INDEX⁵

Global multidimensional poverty index (MPI), based on the Alkire-Foster (AF) methodology, captures overlapping deprivations in health, education, and living standards. It complements income poverty measurements because it measures and compares deprivations directly. The national MPI model retains the ten indicators of the global MPI model, staying closely aligned to the global methodology. It also adds two indicators, viz., Maternal health and bank accounts in line with national priorities. As shown in (Figure 1), Like the global MPI, India’s national MPI has three equally weighted dimensions-health, education, and standard of living-which are represented by 12 indicators.

1. Health-nutrition, child and adolescent mortality, maternal health, 2. education-years of schooling, school attendance and 3. Standard of living-cooking fuel, sanitation, drinking water, housing, electricity, assets and bank account. Sub-indices of the national MPI includes: headcount ratio and intensity of the poverty.

Computing the MPI

Building a deprivation profile for each household-Each household is assigned a deprivation score based on its deprivation in each of the 12 indicators.

Identifying the poor-If the deprivation score of a household is above 33%, they are multidimensionally poor.

Indices of MPI

Headcount ratio (H): How many are poor?

Proportion of multidimensionally poor in the population, which is arrived at by dividing the number of multidimensionally poor persons by total population.

Intensity of poverty (A): How poor are the poor?

Average proportion of deprivations which is experienced by multidimensionally poor individuals. To compute intensity, the weighted deprivation scores of all poor people are summed and then divided by the total number of poor people.

MPI is arrived at by multiplying headcount ratio (H) and intensity of poverty (A).

MPI = H×A

The MPI ranges from 0 to 1.

Strength and limitations

The MPI as a measure of multiple dimensions of poverty complements monetary poverty statistics, enables close monitoring of individual indicators and dimensions which overlap with several SDGs. It measures the overlapping deprivations in health, education, and living standards. It complements income poverty measurements because it measures and compares deprivations directly. It is not applicable for the whole population when we look at India’s diversity.²³

CONSUMPTION EXPENDITURE BASED MEASURES FOR POVERTY LINE ESTIMATION

Poverty is a condition in which a person or a household is unable to afford a basic minimum standard of living. However, the perception regarding what constitutes poverty varies globally. The traditional method of calculating poverty is to set a minimum amount of money (or income) needed to buy a basket of goods and services that are required to meet fundamental human needs (Poverty line basket (PLB)). A poverty line is calculated based on the consumption required for maintaining some minimum standard of living in the country. The government of India makes use of several parameters to recognize the below poverty line (BPL) population and they vary for rural and urban and from state to state.^6,24

In 1971, Dandekar and Rath (1971), made the first systematic assessment of poverty in India, based on national sample survey (NSS) data. They considered the energy requirement of 2250 calories as the basic need per day per person. According to them this minimum level of consumption would require an expenditure of Rs.20/- per head per month for rural areas and Rs. 22.50/- for urban areas according to 1960-61 prices.^25,26

In India, in the year 2011, the poverty line was redefined by the Suresh Tendulkar committee, which determined the poverty line based on the monthly expenses on food, education, health, transport and electricity. According to this committee, an individual spending Rs. 32/- a day in urban areas and Rs. 26/- a day in rural areas live below the poverty line which came to Rs. 816/capita/month for rural areas and Rs.1,000/capita/month for urban areas.^25,26

Due to widespread opposition to the Tendulkar committee recommendations, the government set up Rangarajan committee in 2012 which gave its report in 2014. It suggested creating distinct consumption baskets for urban and rural that contained non-food commodities including clothes, housing, healthcare, education, and transportation as well as food products that ensured recommended intake of calories, protein, and fat. The committee recomputed the average requirements of calories, proteins and fats, per- capita per-day based on the 2010 ICMR norms differentiated by age, gender and activity-status as below: Calories: 2155 kcal in rural areas and 2090 Kcal in urban areas. Protein: For rural areas 48 gm and for urban areas 50 gm. Fat: For urban areas 28 gm and for rural areas 26 gm.

This committee also raised the daily per capita expenditure to Rs 47/- for urban and Rs 32/- for rural respectively which came to MPCE of Rs. 972/- in rural areas and Rs. 1407/- in urban areas.²⁶

Modified mixed reference period (MMRP)

The national sample survey organization based on the Rangarajan committee (2012) recommendation started using MMRP method in its surveys which measures consumption of five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) over the previous year (365-days), oil, egg, fish, and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants over 7-days and all other food items, fuel and light, miscellaneous goods and services including non-institutional medical; rents and taxes over the previous 30 days.^25,26

Challenges in poverty line estimation

Poverty line basket estimation: Determining components of PLB is one of the challenges of poverty line estimation because the price components of basket varies from period to period and from state to state.

Demographic and economic dynamics: Consumption patterns, nutritional needs and prices of components keeps on changing as per dynamics of macro economy and demography.

Lack of consensus: The current official measures of poverty are based on the Tendulkar poverty line, fixed at daily expenditure of ₹27.2 in rural areas and ₹33.3 in urban areas is criticized by many for being too low. Thus, some states such as Odisha and West Bengal support the Tendulkar Poverty Line while others such as Delhi, Jharkhand, Mizoram etc. support Rangarajan report.

Political economic equilibrium: Indian political, policy and administrative systems need to understand poverty does not mean living at the edge of hunger but rather lack of income. Thus, the government needs to focus on the provision of public goods rather than subsidies.

Way forward

Redefining Poverty lines: Poverty lines must be recalibrated depending on changes in income, consumption patterns and prices, as India is now a middle-income country, with an estimated per capita income of around $9,000 in purchasing power parity. It seems logical to define the poverty line at a level that enables households to afford at least two meals/day and essentials of life.

DISCUSSION

SES is a vital indicator of an individual's standing within the social hierarchy. It delineates the spending and consuming habits of a person or household. The many techniques used to evaluate socio-economic status in India demonstrate the ever-changing character of the country's socio-economic environment. Each of the a forementioned approaches has its own advantages for measuring the SES, but they also have their own limits.

The progression from earlier scales such as B. G. Prasad's, which were created in the 1960s, to more current measures illustrate the continuous endeavor to include the many dimensions of socio-economic situations. The enduring nature of B. G. Prasad's scale serves as evidence of its straight forwardness and efficacy in offering a rapid evaluation, especially in contexts with limited resources. Nevertheless, with the evolution of social structures and economic situations, other methodologies like the Kuppuswamy scale have emerged to include supplementary aspects, recognizing the need for more intricate categorizations. Frequent and current adjustment of the income range, as determined by the AICPI, is essential for these scales.^1,2,27

The NSSO has been essential in creating socio-economic evaluation in India, using a customized set of criteria that is specifically designed to suit the country's distinctive circumstances. This underscores the need of using context-specific approaches that take into account the complexities of India's heterogeneous population.^3,22

The introduction of the standard of living index and the focus on multidimensional measurements represent a significant change in perspective towards a more inclusive comprehension of socio-economic status. These techniques acknowledge that money alone is not sufficient to fully measure well-being. Instead, they take into account other characteristics such as access to services, ownership of assets, and general quality of life.^4,24

Furthermore, the inclusion of indicators based on consumer spending is in line with a worldwide tendency to recognize that the things people and families purchase provide useful insights into their economic circumstances. Assessing poverty by considering both a universal worldwide standard of living and relative poverty within nations is recommended. This technique would determine the money required to achieve a specified level of well-being, including social inclusion and basic sustenance.²⁸

CONCLUSION

As India progresses in its journey of socio-economic development, the selection of evaluation methodologies becomes more vital. The continual discourse between traditional and modern techniques demonstrates a dedication to improving methodology in order to precisely portray the intricacies of socio-economic realities in this expansive and varied country. Each socioeconomic scale comes up with its own strengths and limitations. The challenge moving forward lies in ensuring that assessment tools remain agile, responsive to change, and inclusive of the myriad factors that shape the socio-economic status of India. In order to quantify SES consistently and accurately, it is up to the users discretion to apply these scale in appropriate context.

Funding: No funding sources

Conflict of interest: None declared

Ethical approval: Not required

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