Measuring Poverty in Nepal : Methodological Note for Poverty Estimation Using Nepal Living Standards Survey 2022-23

Overview & Synopsis

The Nepal Living Standards Survey (NLSS), first conducted in 1995-96, marked a significant step in objectively measuring Nepal's living standards and poverty levels. The survey covered a wide range of topics related to household welfare, including demography, consumption, income, access to facilities, housing, education, health, employment, credit, and remittances, among others. Subsequent survey rounds, NLSS-II and NLSS-III, were conducted in 2003-04 and 2010-11, respectively. Since 1996, the NLSS survey has been used to update official poverty measures and monitor and track improvements in people’s living conditions. Over this time, the methodology underlying how poverty is measured in Nepal has also been regularly updated to align with global best practices. The technical note is organized as follows. Section 2 discusses the poverty measurement methodology using the cost of basic needs approach used in Nepal (and other developing countries globally). In addition, it provides an overview of the sample and survey design, data collection, and data quality and describes the rationale behind updating the poverty line in 2023. Section 3 describes the methodology used to construct the welfare aggregate and its components. Section 4 details the spatial and temporal adjustments that need to be made to the welfare aggregate. Section 5 documents the steps in estimating the new official poverty line and highlights methodological departures from the previous method. Section 6 presents key data and statistics on the domain-level cost of basic needs, price deflators, new poverty lines, and poverty rates in Nepal in 2023. In addition, this section presents estimates of vulnerability to poverty and statistics on sampling variability. Section 7 shows the decline in poverty rates since 2011.