<u>Annex1</u> Page 1 Annex 1. Computation of Distribution of Household Income in AMC The principle source of household data for computing distribution of income by household is the National Sample Survey (NSS) data. The NSS rounds provide survey data on expenditure by household. The data is compiled by district, then divided into rural and urban samples. Therefore the closest approximation of the area of our study within the NSS framework is the Ahmedabad urban district, of which the AMC population is over 80% of total population. The NSS rounds of measuring household expenditure are available for 1999/2000, 2004/05 and most recently 2009/2010, which was released as this study was being prepared. It is generally recognized that the 1999/2000 round is not comparable with the more recent rounds so we did not use it for estimating household expenditure distribution for the start year of our study of 2001. Instead, we took the expenditure data from 2004/05 and rebased it to 2001 using the growth rate of nominal per capita income in Gujarat State between 2000/01 and 2004/05 as published by the Central Statistical Organization. Unfortunately, income growth for the AMC or Ahmedabad Urban Agglomeration is not published in Gujarat, unlike in some other states. Income growth in Ahmedabad could well have been higher over this period, since urban areas tend to grow more rapidly than rural areas. On the other hand, Gujarat has experienced exceptionally rapid agricultural growth over the last ten years, so the difference in Gujarat may not be as pronounced as it might be in other states. The correction factor applied for this purpose is 0.71. To estimate income distribution in 2011, we used data from the sample survey of the NSS 2009/10 round. This was then adjusted to 2011 by multiplying by the increase in net per capita income for the state of Gujarat between 2009/10 and 2010/11, which reflected growth of 14% in nominal terms. Since we measure affordability in relation to nominal housing prices, it is important to estimate the income distribution in nominal terms as well. As can be seen in Annex 2, prices of housing appear to be rising more rapidly than incomes for the state as a whole.

To test the slight difference in coverage between the AMC and the Ahmedabad urban area, we generated an expenditure distribution for the AMC area using the poverty mapping methodology prepared for the Planning Commission by the India Development Foundation based on mapping the 2001 census data and the 2004/05 NSS expenditure survey data<sup>33</sup> . To do this, we included those census areas that were outside the AMC in 2001 to obtain census data for 2001 covering the same geographical area as the current AMC. This methodology also permits us to increase the sample size considerably and hence improve the reliability of the estimates. This was compared to the expenditure distribution for the same area in 2004/05 using the NSS data. The difference between the NSS median expenditure for 2004/05 and the AMC estimates for 2004/05 using the poverty mapping methodology is 2.8%, which gives us confidence that we have a reasonably reliable estimate of the NSS expenditure distribution as of 2004/05. Using the NSS data for both 2004/05 and 2009/10, we were able to estimate two different expenditure distributions at two points in time and capture recent developments in the income distribution.

> 33 See Hentschel, Jesko, Jean Olson Lanjouw, Peter Lanjouw, Javier Poggi. (1998). “Combining Census and Survey Data to <u>Study Spatial Dimensions of Poverty and Inequality.”</u> _<u>The World Bank Economic Review</u>_ for a description of this method.  We are most grateful to the IDF and Ms. Purti Sharma of the IDF. She  applied their poverty mapping model  to the  AMC area for this purpose.