The 2015 Sveriges Rikzbank prize in economic sciences in memory of Alfred Noble (popularly known as the Nobel Prize for Economics) was awarded to British-American economist Angus Deaton for his exemplary work on consumption theory, poverty and welfare. Recognition of Mr Deaton’s work comes at a time when there is a rising interest and popularity in the studies on inequality and welfare economics across the globe.

Now, why are we (here both as Indians and practitioners in the “Bottom of Pyramid” space) more gung-ho about this year Nobel Prize for Economics going to Deaton’s body of work rather than any other random advancement in economic theory. Firstly, let’s answer why his research stands important in the Indian Economy policy framing space.

Deaton’s long association with India and his research impact on the India’s policy making landscape

Deaton’s profile in the Princeton University website states; “My current research focuses on the determinants of health in rich and poor countries, as well as on the measurement of poverty in India and around the world”. Deaton has authored several papers on Indian poverty and statistics to measure it in a more efficient manner. His impact on the Indian Policy landscape has been in two broad fronts. First, his seminal work has guided the policy makers on how they should map the poor and disadvantaged. And second, his fresh insights on the changing health and nutrition landscape in India, has challenged the basic acceptance of traditional models of mapping nutritional status in India.

Secondly, let’s brief out why Deaton’s body of work holds significance in understanding the “Bottom of Pyramid” space particularly in India and how it helps in redefining the elements of welfare economics.

Linking Detailed Individual Choices to Aggregated Outcomes

Deaton’s ingenious of work using household data collected in India by the National Sample Surveys(NSS) has help refine the understanding of how different consumers can form their demand of goods and services based on their individual and current needs rather than going by the simplistic notion of a ‘representative consumer behaviour’.

The real measurement of Indian Poverty vis-à-vis GDP Growth

As per Deaton, the poverty rates in India has declined but much more slowly than what the increasing GDP growth would suggest to warrant. In a recent interview to a news channel NDTV, he pointed out the very serious discrepancies between numbers collected to calculate GDP (coming from the National Accounts) and the numbers used to define poverty lines (coming from NSS Data on household spending and consumption).

The 2015 Economics Noble Prize to Angus Deaton is a reminder to the policy making circles about the notions of “ideal welfare economic” and its application in developing countries like India. The key is to take clues form Deaton’s work on how to better understand the dimensions of poverty and take the effective steps to eradicate it.