Background :- 

Recently President Donald Trump on his visit to India praised India for having lifted “over 270 million people out of poverty” in “a single decade”. India has lifted around 12 persons every minute out of extreme poverty.

Definition of Poverty: - 

• Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living. Poverty means that the income level from employment is so low that basic human needs can't be met. 
• World Bank- “Poverty is defined as 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. 
• United Nations: -“Fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It means a lack of basic capacity to participate effectively in society.

Poverty Line: Poverty line is defined as the expenditure incurred to obtain the goods in a “poverty line basket” (PLB).

Poverty Ratio or Head Count Ratio (HCR): The proportion of the population below the poverty line is called the poverty ratio or headcount ratio (HCR). 

Way to measure poverty: 

Poverty can be measured in terms of the number of people living below the poverty line (with the incidence of poverty expressed as the headcount ratio).

Committees to estimate poverty :-

• Dadabhai Naoroji in his book, ‘Poverty and the Un-British Rule in India’. He formulated a poverty line ranging from Rs 16 to Rs 35 per capita per year, based on 1867-68 prices.
• Alagh Committee (1979): This task force constituted by the Planning Commission constructed a poverty line for rural and urban areas on the basis of nutritional requirements. For Urban area : - 2400 Calories and for Rural :- 2100 Calorie.
• Lakdawala Committee (1993): It 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.
• TENDULKAR COMMITTEE (2009): It was constituted by the Planning Commission to address the following shortcomings of the previous methods: 
• Consumption patterns were earlier linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates. There were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time).
• It is the current poverty estimation method used by the government. It recommended four major changes: Incorporation of private expenditure on health and education while estimating poverty. ,A change in the price adjustment procedure to correct spatial and temporal issues with price adjustment; and  A uniform poverty line baskets (PLB) across rural and urban India; A shift away from calorie consumption-based poverty estimation;  The Committee recommended using Mixed Reference Period (MRP) based estimates. The MRP measures consumption of five low-frequency items (clothing, footwear, durables, education, and institutional health expenditure) over the previous year, and all other items over the previous 30 days. It concluded that the all India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05.
• As per the Tendulkar committee, 21.9% of people in India live below the poverty line.
• Issues with Tendulkar poverty estimation: The main criticism of the Tendulkar line has been that it is too low. And it deprives many households in need of government assistance from such assistance by classifying them as above poverty line (APL) households. Uniform poverty line baskets for rural and urban areas-The methodology doesn’t take into account the differences between the two areas.
• RANGARAJAN COMMITTEE:  The new poverty line should be Rs 32/day in rural areas and Rs 47/day in urban areas.  The Rangarajan committee took the view that the consumption basket should contain a food component that satisfies certain minimum of 90 nutrition requirements, as well as consumption expenditure on essential non-food item groups (education, clothing, conveyance and house rent).
• The issue with the Rangarajan Committee: It was criticized for selecting the food component arbitrarily. The emphasis on food as a source of nutrition overlooks the contribution of sanitation, healthcare, access to clean water, and the prevalence of pollutants.
• The government did not take a call on the report of the Rangarajan Committee. Therefore, poverty is measured using the Tendulkar poverty line. 

What does the poverty line basket include?

• It comprises goods and services considered essential to a basic minimum standard of living — food, clothing, rent, conveyance, and entertainment. The price of the food component can be estimated using calorie norms or nutrition targets.
• Calorie method norms were used until the 1990s. However, there was an issue with the calorie method i.e:   This method does not consider the different food groups that are essential for health. The Tendulkar Committee targeted nutritional outcomes.Lakdawala Committee excluded expenditure on health and education by presuming that these are provided by the state. Eventually, Expenditure on health and education rose enormously and that is why the Tendulkar committee included them in the basket.
• After the revision and inclusion of health and education expenditure poverty line in 1993-94 rose from 35.97% to 45.3%.