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Poverty Line: Meaning, Background, Measurement & More | UPSC Notes
IMPORTANT LINKS
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GS Paper |
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Topics for UPSC Prelims |
Poverty Line, Status of Poverty in India, International Poverty Line, Social Justice and Poverty Alleviation |
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Topics for UPSC Mains |
Poverty Line in India, Poverty Estimation Methods, Challenges in Defining and Measuring Poverty, Poverty Alleviation Programs and Schemes |
Poverty Line Definition
The poverty line is a limit below which a person or family cannot be said to be earning an adequate amount of income or expenditure needed to continue with basic livelihood requirements-food, clothes, and shelter. In India, estimates of the poverty line are done in terms of consumption at different rates and are periodically revised from time to time according to cost of living and inflation. Definition of the poverty line helps in evaluating the proportion of the populations living below such threshold and needs to put appropriate interventions in place.
Background
The concept of the poverty line has evolved progressively over time, reflecting changes in economic circumstances, ways of life, and methodological approaches. Initial measures focused on basic caloric requirements and had an elementary nature. Through time, more comprehensive methodologies are being developed to capture a wider range, which includes health care, education, and housing. This seeks to provide a much more realistic and overall view of poverty.
Read the article on poverty and hunger issues!
Current Status of Poverty in India
Presently, based on recently available data, poverty continues to be a serious issue for India. According to the 2021 survey report by the World Bank, around 21.9% of the population in India has been estimated to live under the national poverty line. Although this figure is a little less compared to previous years-meaning some progress is being made in alleviating poverty-the regional disparity remains. In rural areas, this rate is higher compared to urban centers. The challenges have increased more with the COVID-19 pandemic, therefore resulting in higher economic vulnerabilities for the majority of the households.
Need for Defining a Poverty Line
It is useful to define a line of poverty for a number of reasons. It enables one to point out who the poor are and to target the resources channeled efficiently into favored welfare programs. It also offers a base with which one can monitor and assess the efficiency of measures taken to alleviate poverty. In addition, a well-defined poverty line will help in the overall comprehension of the disparities in socio-economic terms within a nation and the approach to take in coming up with an evidence-based policy aimed at combating such life challenges.
Factors Affecting the Estimation of the Poverty Line
The estimation of a poverty line considers:
- Cost of Living: The poverty line shall have to ensure that standards of living are comparable across regions.
- Inflation: It becomes important to periodically update so that changes due to variations caused by inflation still hold good.
- Consumption Patterns: If one knows the consumption pattern of an average person, then it would help in setting a more realistic poverty line.
- Economic Conditions: Macroeconomic conditions such as employment and wage levels determine poverty measures.
Read the article on the Causes of Poverty in India!
Measurement of Poverty Line
In India, the measurement of the poverty line is done by the following methodology:
- Consumption Expenditure Surveys: Household consumption data is gathered through surveys undertaken by the NSSO. These surveys provide inputs to help demarcate the poverty line based on minimum expenditure required to meet basic needs.
- The Cost of Basic Needs Method: This method determines the cost of a basket of goods and services that would ensure the fulfillment of a minimum acceptable level of living. It is further adjusted regionally to reflect differences in costs.
- Income-Based Measures: These measures estimate poverty based on levels of income that determine a basic standard of living.
Poverty Estimation Before Independence
Estimation of poverty in India was relatively crude before independence. During the period when India was under the British, the importance was given to administrative efficiency rather than taking a broad view with comprehensive measurements of poverty.
- Dadabhai Naoroji was among the first to point out the issues of poverty within India. In his 1871 book, "Poverty and Un-British Rule in India," he argues that British economic policy forms one of the major causes for Indian poverty. He estimated that a large portion of the Indian population was living below a subsistence level due to economic exploitation and mal-administration.
- National Planning Committee: The National Planning Committee was established in 1938, with chairman Jawaharlal Nehru, to work out the poverty issue in a less ad hoc manner. It provided the basis for post-independence poverty estimation and policy planning.
Read the article on poverty and deprivation!
Post-Independence Poverty Estimation
Planning Commission Expert Group (1962): The P. C. Mahalanobis-led committee was the first committee to work out the official poverty estimates post-Independence. The committee worked out the poverty estimates based on the minimum calorie requirements and the expenditure levels required to fulfill the calorie needs.
- VM Dandekar and N Rath (1971): This group followed and built on the work of the previous group. It inducted the far more inclusive considerations of both the consumption and the expenditure patterns into the entire poverty line-setting exercise. The group established considerable value in setting the poverty lines at the levels that directed to more genuine poverty thresholds.
- Y K Alagh Committee: A committee in 1993 under the leadership of Y. K. Alagh introduced a new methodology which took into account the regional variations in the level of poverty thus enhanced the level of poverty estimates with some significant degree of accuracy.
- Lakdawala Formula: The Lakdawala formula was established in the year 1993 and was in use till the year 2005 for the estimation of poverty. It was based upon the criteria known as the cost of a consumption basket, adjusted with inflation and regional differences.
- The Suresh Tendulkar Committee: The committee recommended a fresh methodology that took into consideration a broader basket of goods and services while estimating the extent of the poverty line. It attempts to capture the contemporary consumption pattern in a more realistic manner.
- Rangarajan Committee: Formed in 2012, this committee provided a poverty line that was higher in comparison to the past poverty line estimates. It recommended a more holistic approach to measuring poverty, which would take into account indicators such as access to basic services and living conditions.
- Arvind Panagariya Task Force: Formed in 2014, this task force reviewed methodologies of estimating poverty and recommended changes as and when needed to move with the national and international standards, and reflect the contemporary economic conditions.
International Poverty LineAccording to the World Bank, the international poverty line stands at $2.15 a day, according to purchase power parity terms, standing today in the year 2021. This is actually treated as a benchmark to gauge the poverty situation going on in different countries, wherein it is actually determined from the minimum income required to meet basic needs around the world. It also sets a level against which the poverty line is compared within a country in consonance with international goals on development. |
Read the article on how poor people are identified!
Challenges Associated with Defining a Poverty Line
Defining a poverty line is fraught with several problems.
- Dynamic Economic Conditions: Economic conditions keep on changing, and so do living standards. Setting a static poverty line, therefore, is difficult.
- Regional Disparities: The cost of living does vary regionally from one region to the other; so do the economic conditions warrant, accordingly, adjustments in the poverty line to account for these variances.
- Changing Consumption Patterns: More changing habits of consumption and life-style necessity also need a constant revision of methodology of measuring poverty.
- Data Limitations: The definition of an appropriate and relevant poverty line is extremely data-intensive. Accurate and comprehensive data collection is, therefore, a prerequisite for the definition of a poverty line, which can be highly challenging.
Read the article on the relevance of poverty alleviation programmes!
Way Forward
The enhanced measurement of poverty and effective poverty reduction have to be addressed in some ways:
- Revised More Often: Making changes in poverty lines quite regularly, as depicted by economic conditions and changing consumption patterns.
- Broad-based Measurement: A more comprehensive measure that includes different factors, such as access to education, healthcare, quality of lives, can offer a clear view.
- Regional Adaptation: Adapting the poverty line to reflect regional disparities can make the assessment more accurate and equitable.
- Strengthen Data Collection: Stronger data collection, along with accurate and up-to-date information, should be the base of improved poverty measurement and policy interventions.
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Key Takeaways for UPSC Aspirants
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Poverty Line UPSC FAQs
Why do different countries use different poverty lines?
Different countries use different poverty lines, which are based on their economic conditions, cost of living, and social standards. It provides tailoring of the national poverty lines for countries to reflect local realities and give relevant measures for policy and welfare programs.
How many people are below the poverty line in India?
As per the World Bank 2021 estimation report, using the current available data, around 21.9% of India's population lives below the national poverty line.
What is the World Bank's poverty line?
The World Bank's international poverty line is defined as $1.90 per day (2011 PPP prices) for 2020. It is a threshold established in support of the comparison of poverty levels across countries and in conformity with global development goals.
What is the poverty line in India?
Poverty line in India is a benchmark of the minimum income or expenditure required to support a basic standard of living. It is region-specific and updated every few years, based on consumption surveys with changing economic conditions.
Explain how India estimates the poverty line.
In India, the estimate of a poverty line is made using consumption expenditure surveys, cost of basic needs, and income-based measures. These methodologies consider factors like regional cost variations and minimum requirement of consumption.