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23 Oct

Poverty and developmental issues

  • Poverty is a multidimensional phenomenon in which a person or community lacks the financial resources and essentials for a minimum standard of living.
  • According to World Bank,Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.
  • Each nation may have its own threshold that determines how many of its people are living in poverty.

In India, 21.9% of the population lives below the national poverty line in 2011. In 2018, almost 8% of the world’s workers and their families lived on less than US$1.90 per person per day (international poverty line).

  • Measures of absolute poverty are usually based upon the idea of subsistence. In other Words, people are in poverty if they do not have the resources to maintain human life.
  • Supporters of the concept of relative poverty, however, tend to dismiss this view. They argue that a definition must relate to the standards of a particular society at a particular time
  Absolute povertyIt refers to a condition where a person does not have the minimum amount of income needed to meet the minimum requirements for one or more basic living needs over an extended period of time. It may be calculated in monetary terms, nutrition attainment or calories terms.For example: Homeless people living on the streets, families that cannot afford to buy food to feed themselves and their children are also examples of absolute poverty.
  Relative povertyIt occurs when people do not enjoy a certain minimum level of living standards as determined by government (and enjoyed by the bulk of population) that vary from country to country, which is said to be increasing and may possibly never be eradicated.For example: For example, in the UK relative poverty is defined as income 50% less than average incomes or someone living in a rich society may have a steady income and all the necessities for living, but because they do not have as many luxuries as others living in the society, they are said to be in relative poverty.


  • Pre-independence poverty estimates
  • Post-independence poverty estimates

Broadly, the poverty of a given society is expressed in terms of malnutrition, low consumption expenditure, low income, chronic illness or poor health, illiteracy, unemployment, unsanitary housing conditions, poor resources, high disparity income distribution.

Pre-independence poverty estimates:

Dada Bhai Naoroji(Book – Poverty and Un-British rule in India)·        Initially it was Dada Bhai Naoroji who estimated poverty in the second-half of 19th century.·        He concluded the base line in 1867-68 price which was based on the cost of a subsistence diet consisting of ‘rice or flour, daal, mutton, vegetables, ghee, vegetable oil and salt’.
1938·       Congress President Subhash Chandra Bose set up the National Planning Committee (NPC) with Jawaharlal Nehru as the Chairman. The Committee regarded the irreducible minimum income between Rs. 15 and Rs. 25 per capita per month at pre-war prices.
The Bombay Plan (1944)·        Bombay Plan proponents had suggested a poverty line of Rs.75 per capita per year.
The Bombay Plan was a set of a proposal of a small group of influential business leaders in Bombay for the development of the post-independence economy of India.

Post-independence poverty estimates:

Planning Commission 1962Planning Commission Expert Group (1962), constituted by the Planning Commission formulated the separate poverty lines for rural and urban areas (Rs.20 and Rs.25 per capita per year respectively).
Y. K. Alagh Committee (1979)By 1979, it was decided that poverty should be measured precisely based on starvation. Committee was constituted which gave its recommendation as the people consuming less than 2,100 calories in the urban areas or less than 2,400 calories in the rural areas are poor.
Lakdawala Committee (1993)In 1993, an expert group constituted to review methodology for poverty estimation, chaired by D.T. Lakdawala, made the following suggestions:·       Consumption expenditure should be calculated based on calorie consumption as earlier;·       State specific poverty lines should be constructed and these should be updated using the Consumer Price Index of Industrial Workers (CPI-IW) in urban areas and Consumer Price Index of Agricultural Labour (CPI-AL) in rural areas; and·       Discontinuation of ‘scaling’ of poverty estimates based on National Accounts Statistics.  This assumes that the basket of goods and services used to calculate CPI-IW and CPI-AL reflect the consumption patterns of the poor.
Suresh Tendulkar Committee (2005)·       In 2005, Suresh Tendulkar Committee was constituted by the Planning Commission.·       The current estimations of poverty are based upon the recommendations of this committee.·       This committee recommended to shift away from the calorie-based model and made the poverty line somewhat broad based by considering monthly spending on education, health, electricity and transport.·     It supported nutritional intake rather than caloric intake. The committee also drew a line based on cost of living. The Tendulkar panel stipulated a benchmark daily per capita expenditure of Rs. 27 and Rs. 33 in rural and urban areas, respectively.
C. Rangarajan Committee (2012-14)The committee raised the cost of living per day to Rs. 32 and Rs. 47 for rural and urban areas, respectively. Hence, the poverty percentage of India worked closely to 30% and in absolute terms close to 40 crores poor.
Arvind Panagariya Task Force (2015)The task force suggested setting up of committee to identify people “Below Poverty Line (BPL)” It also suggested participation of states. The paper talks of considering four options for tracking the poor.·  
First, continue with the Tendulkar poverty line.·       
Second, switch to the Rangarajan or other higher rural and urban poverty lines.·       
Third, bottom 30% of the population tracking over time·       
Fourth, tracking the bottom 30% on specific components, such as housing, sanitation, electricity, nutritional intake, etc.
NITI Aayog Task Force·       NITI Aayog favoured the Tendulkar line (21.9%)·       To remove any criticism that many poor would be left behind if poverty line as per Tendulkar committee is adopted, NITI Aayog has underlined that it will only be used to track progress in combating poverty rather than identifying the poor for entitlements.·       SECC data as suggested by Saxena and Hashim committee will be used for entitlements.·       Dr. N.C. Saxena Committee was set up by the Ministry of Rural Development to advise it on the suitable methodology for BPL Census and not for estimation of poverty.·       The Planning Commission constituted an Expert Group under the Chairmanship of Professor S. R. Hashim to recommend the detailed methodology for identification of families living Below Poverty Line in urban areas.
Challenges in Estimating Poverty:
  • Components of PLB à Determining components of Poverty Line Basket (PLB) is one of the challenges of poverty line estimation because of the price differentials (of constituents of basket) which vary from state to state and period to period.
  • Variations across states à Some states such as Odisha and West Bengal supported the Tendulkar Poverty Line while others such as Delhi, Jharkhand, Mizoram etc. supported Rangarajan report.
  • 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 criticised by many for being too low.
  • Demographic and Economic Dynamics à Further, consumption patterns, nutritional needs and prices of components keep on changing as per dynamics of macro economy and demography.
  • Lack of consensus among the states à over the acceptance of Tendulkar and Rangarajan committee report. Some states such as Odisha and West Bengal supported the Tendulkar Poverty Line while others such as DelhiJharkhand, Mizoram etc. supported Rangarajan report.
  • Most of the governments have mothballed the reports of committees and panels à because this issue is not only politically sensitive but also has deeper fiscal ramifications.
  • Problem of determining threshold à If the poverty threshold is high, it may leave out many needed people; while if it is low, then it would be bad for fiscal health of the government.

Way Forward:

  • Redefining Poverty lines à Poverty lines have to be recalibrated depending on changes in income, consumption patterns and prices.
  • Viable Poverty line à It makes sense to set the poverty line at a level that allows households to get two square meals a day and other basic necessities of life.
  • Hybrid of Absolute and Relative Measurement of Poverty à The hybrid approach which would measure poverty from the perspective of a common global standard of living and relative poverty within countries. The poverty line in case of hybrid model would be equivalent to the income required to achieve a certain welfare status, which includes basic nutrition and social inclusion.
  • Political Economic Equilibrium à Indian political, policy and administrative systems have to adjust to the new realities of the transition to a middle- income country, in which poverty does not mean living at the edge of hunger but, rather, lack of income to take advantage of the opportunities thrown up by a growing economy. The focus of government spending should be on the provision of public goods rather than subsidies.

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