In academic circles, as well as among policy-makers, poverty has been a major issue for debate. The debate became politicised with the “Garibi Hatao” campaign of the seventies, “India Shining” of first decade of twenty first century and “Skill India” of second decade of twenty first century, and took it out of the confines of an economic problem. Not surprisingly, there seems to be no consensus regarding either its extent, or the nature of the mechanisms necessary to get rid of it. Nevertheless, all agree that poverty continues to be an important issue that needs to be tackled.

For the sake of completeness, it is best to start with how poverty is measured. Most official estimates, and the major part of the academic literature, start with the definition of a poverty line ( absolute). In simple terms, this is the money equivalent of a minimal set of goods and services that are considered essential for human existence. That part of the populace whose money equivalent of consumption is below this value, are termed poor. It is immediately obvious that the poverty line is a subjective norm. While scientists can determine biological standards for food intakes, it is difficult to fix the amounts and qualities of minimum clothing, housing, medical facilities, etc., on a purely objective basis. Much of the debate on poverty hinges on this particular aspect.

The concept of “poverty line” used inIndia fixed an income. If people fall below this line, they areconsidered to be poor.Poverty can be viewed as a level of living that is so low that it inhibitsthe physical, mental and social development of human personality.It is now realized that there are sociological, political, psychological andgeographical reasons as well as attitudes or value systems that need to beconsidered to understand poverty. Self-respect and opportunities for social mobility andparticipation in many forms of decision-making are also important. What is being stated here isthat in dealing with poverty one is not only concerned with the income butalso with the individual’s political role, opportunities for his children and selfrespect.

Poverty is not only a condition of economic insufficiency; it is alsosocial and political exclusion. Poverty is therefore to be seen not only merelyin economic terms but also in its social and political aspects.

Thus poverty has been related to the prevailing socio-economic structure ofthe society. Experts on poverty have broadly used two approaches.

First thenutritional approach. Here poverty is measured on the basis of minimum foodrequirements.

Second, the relative deprivation approach. Here poverty is seenin terms of relative deprivation of a section of population against thepredeveloped sections. We shall be discussing these matters in detail in oursection on the measurement of poverty.

Approaches- An analysis

There are various approaches for the measurement of poverty. The major factorconsidered in measuring poverty is income. The question that is asked is, whatresources can a particular income command? Does the income allow forobtaining the basic necessities? Consequently, it has also been suggested thatthe actual intake of food should be the criteria. If an adult person is unable tohave a certain number of calories (2,250) a day he is considered to be poor.

The economic aspect usually involves the judgment of basic needs and ismentioned in terms of resources required to maintain health and physicalefficiency. Such an approach is now being questioned. Among the basic needsare also include, education, security, leisure, recreation. When the resourcescommanded by average individuals are so low that they are in effect excludedfrom living patterns, customs and activities of the society, they are said to beliving in poverty. Among the ideas which have an objective and dependablemeasurement of poverty is a concept of PQLI — (Physical quality of liveindex). The three indicators used in PQLI are life expectancy at age one, infantmortality and literacy. An index number is to be calculated for all countriesbased on the performance of each country in these areas. The worst performancewould be designated by the in index number zero and the best performance by100. In the 70s, the PQLI index for India was 43. Various important studieshave been conducted in India for the measurement of poverty. For exampleOjha in his study has used the average calorie intake as the basis for definingpoverty. To him persons who are below the poverty line have an intake of lessthan, 2,250 calories per capita per day. Dandekar and Rath (1971) haveestimated the value of the calories (2,250) in terms of 1960-61 prices. Theyobserve that there would be variation in the extent of rural and urban povertyin terms of financial index. Here they suggested that whereas the PlanningCommission accepts Rs.20/- per capita per month or Rs.240/- per annum asthe minimum desirable standard, it would not be fair to use this figure both forrural and urban areas. They suggested a lower minimum of rupees 180/- forthe rural population and a higher amount of Rupees 270/- per annum at 1960-61 prices.

Absolute Poverty

Absolute poverty refers to the inability of a person or a household to provideeven the basic necessities of life. It refers to conditions of acute physical wants,starvation, malnutrition, want of clothing, want of shelter, total lack of medicalcare. At times “absolute poverty” is also called “subsistence poverty”, since itis based on an assessment of minimum subsistence requirement. Nutrition ismeasured by intake of calories and proteins, shelter by quality of dwelling anddegree of over-crowding, and the rate of infant mortality and the quality ofmedical facility. With the broadcasting of the definition of poverty it is alsosuggested that one should go beyond the physical need and also include culturalneeds—education, security, leisure and recreation.

It is difficult to fully accept the argument. The nourishment needs of a farmlabourer would be different from those of a clerk in an office. Similarly clothingrequirements will also differ. If cultural needs are also included thenmeasurements become more complex.

Rangarajan Report on Poverty (2014)

The Expert Group under the Chairmanship of Dr. C. Rangarajan to Review the Methodology for Measurement of Poverty in the country constituted by the Planning Commission in June 2012 has submitted its report on 30th June 2014. In a written reply to a question in the Rajya Sabha today, the Minister of State (Independent Charge) for Planning, Statistics and Programme Implementation and Defence Shri Rao Inderjit Singh has said that as per the report, poverty line is estimated as Monthly Per Capita Expenditure of Rs. 1407 in urban areas and Rs. 972 in rural areas. The highlights of the report are:

i.    The Expert Group (Tendulkar) had used the all-India urban poverty line basket as the reference to derive state-level rural and urban poverty. This was a departure from the earlier practice of using two separate poverty line baskets for rural and urban areas. The Expert Group (Rangarajan) reverts to the practice of having separate all-India rural and urban poverty basket lines and deriving state-level rural and urban estimates from these.

ii.   The Expert Group (Tendulkar) had decided not to anchor the poverty line to the then available official calorie norms used in all poverty estimations since 1979 as it found a poor correlation between food consumed and nutrition outcomes. However , on a review of  subsequent research,  the Expert Group (Rangarajan) took a considered view that  deriving the food component of the Poverty Line Basket  by reference to the  simultaneous satisfaction of all three nutrient -norms would be appropriate when seen in conjunction with the emphasis on a full range of policies and programmes for child-nutrition support and on  public provisioning of a range of public goods and services aimed at the amelioration of  the disease-environment facing the population.

iii.        Estimates of consumption expenditure seen in the National Accounts Statistics and as inferred from the sample surveys of the National Sample Survey Organisation show a large and growing variance. The Expert Group (Rangarajan) prefers NSSO’s estimates and decides not to use the NAS estimates. This is in line with the approach taken by Expert Group (Lakdawala) and Expert Group (Tendulkar).

iv.   The capture of spatial and temporal variation in prices in estimating the State-level and rural-urban poverty levels (given all-India rural and urban estimates) has undergone substantial refinement since 1979. The Expert Group (Rangarajan) agrees with the methodology adopted by the Expert Group (Tendulkar) in this regard. This overcomes the limitations of using fixed base-year weights by using a combination of unit values derived from successive NSSO’s Consumer Expenditure Surveys and price-relatives derived from the Consumer Price Indices.

v.   Public expenditure on social services has increased substantially in recent years. These expenses are not captured, by design, in the NSSO’s Consumer Expenditure Surveys and the poverty line derived from these is thus lower than the services actually consumed.

vi   The Expert Group (Rangarajan) is of the considered view that the deployment of criteria other than consumption expenditure in the measurement of poverty raises several issues regarding measurement and aggregation and that these render such exercises impractical. However, the Expert Group (Rangarajan) has considered an alternate view in estimating the poverty line by reference to the ability of households to save.

2.   The Methodology recommended by the Expert Group (Rangarajan) for estimation of poverty is as follows:

• The poverty line should be based on certain normative levels of adequate nourishment, clothing, house rent, conveyance and education, and a behaviorally determined level of other non-food expenses.
• The Expert Group (Rangarajan) computed the average requirements of calories, proteins and fats based on ICMR norms differentiated by age, gender and activity for all-India rural and urban regions to derive the normative levels of nourishment. Accordingly, the energy requirement works out to 2,155 kcal per person per day in rural areas and 2,090 kcal per person per day in urban areas.  For reasons elaborated in the text , the Expert  Group ( Rangarajan)  views the Calorie norm not as a single number but as an average in a band of +/- 10 per cent of these values and  with intakes even at  the lower end still being  adequate enough to not adversely affect health and work.
• The protein and fat requirements have been estimated on the same lines as for energy. These requirements are 48 gms and 28 gms per capita per day, respectively, in rural areas; and 50 gms and 26 gms per capita per day in urban areas.
• A food basket that simultaneously meets all the normative requirements of the three nutrients defines the food component of the poverty line basket proposed by the Expert Group (Rangarajan). These nutrient norms are met for persons located in the sixth fractile (25-30%) in rural areas and for those in the fourth fractile (15-20%) in urban areas in 2011-12.
• The average monthly per capita consumption expenditure on food in these fractile classes is Rs.554 in rural areas and Rs.656 in urban areas (NSS 68^th Round).
• The median fractile (45-50%) values of clothing expenses, rent, conveyance and education expenses are treated as the normative requirements of the basic non-food expenses of clothing, housing, mobility and education of a poverty line basket. This works out to Rs.141 per capita per month in rural areas and Rs.407 in urban areas. The observed expenses of all other non-food expenses of the fractile classes that meet the nutrition requirements are considered as part of the poverty line basket. This works out to Rs.277 per capita per month in rural areas and Rs.344 in urban areas.
• The new poverty line thus work out to monthly per capita consumption expenditure of Rs.972 in rural areas and Rs.1,407 in urban areas in 2011-12. For a family of five, this translates into a monthly consumption expenditure of Rs.4,860 in rural areas and Rs.7,035 in urban areas.
• Estimations of the poverty line made for the Expert Group (Rangarajan) based on an independent large survey of households by CMIE and using a different methodology wherein a household is considered poor if it is unable to save, yields results that are remarkably close to those derived using the NSSO data. This provides additional evidence in support of the poverty line derived by the Expert Group (Rangarajan).
• Compared to the poverty lines based on the methodology of the Expert Group (Tendulkar), the poverty lines estimated by the Expert Group (Rangarajan) are 19% and 41% higher in rural and urban areas, respectively. The Expert Group (Rangarajan) uses the Modified Mixed Recall Period consumption expenditure data of the NSSO as these are considered to be more precise compared to the MRP, which was used by the Expert Group (Tendulkar) and the URP, which was used by earlier estimations. 67% of the increase in the rural poverty line and 28% of the increase in the urban poverty line is because of the shift from MRP to MMRP.
• The national rural and urban poverty lines computed as above were used to derive the state-wise poverty lines by using the implicit price derived from the quantity and value of consumption observed in the NSSO’s 68^th Round of Consumer Expenditure Survey (2011-12) to estimate state relative to all-India Fisher price indices. Using these and the state-specific distribution of persons by expenditure groups (NSS), state-specific ratios of rural and urban poverty were estimated. State-level poverty ratio was estimated as weighted average of the rural and urban poverty ratios and the national poverty ratio was computed again as the population-weighted average of state-wise poverty ratios.
• The Expert Group (Rangarajan) therefore estimates that the 30.9% of the rural population and 26.4% of the urban population was below the poverty line in 2011-12. The all-India ratio was 29.5%. In rural India, 260.5 million individuals were below poverty and in urban India 102.5 million were under poverty. Totally, 363 million were below poverty in 2011-12.
• The poverty ratio has declined from 39.6% in 2009-10 to 30.9% in 2011-12 in rural India and from 35.1% to 26.4% in urban India. The decline was thus a uniform 8.7 percentage points over the two years. The all-India poverty ratio fell from 38.2% to 29.5%. Totally, 91.6 million individuals were lifted out of poverty during this period.
• The Expert Group (Rangarajan) recommends the updation of the poverty line in the future using the Fisher Index. The weighting diagram for this effort can be drawn from the NSSO’s Consumer Expenditure Survey. For the Food–group, the Expert Group (Rangarajan) recommends that the current practice of relying on the unit values derivable from the NSSO Consumer Expenditure Surveys should continue till such time a new CPI of CSO with a weighting diagram based on the 2011-12 pattern of consumption becomes available. In respect of non-food- items, the price indices available in the exiting CSO Consumer Price Indices can be used in the construction of   requisite Fisher indices. Once the new series of Consumer Price Index numbers (with 2011-12 as the base year) become available, it may be used if the extent of change in the structure of consumption at that point in time relative to the 2011-12 structure of consumption is not very different.