What is Poverty?
Poverty is a  state or condition in which a  person or community lacks the financial resources and  essentials to enjoy a  minimum standard of life and  well being that's considered acceptable in  society.

Types of poverty
Basically, poverty can be divided into two types:  Absolute Poverty and Relative Poverty.

Absolute Poverty:
• Absolute poverty 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.
• The basic needs include food and safe drinking water, shelter, clothing, sanitation facilities, quality and affordable healthcare and education facilities, access to information.
• This minimum amount of income that is needed  to fulfil the basic needs is decided upon by  each country by taking into account various factors.  We shall understand this clearly when  we are discussing about the Poverty Line in India.

Relative Poverty:
• Relative poverty is  closely associated with the issues of inequality.
• Relative poverty occurs when people in a country do not enjoy a certain  minimum level of  living standards as compared to the rest of the population and so would vary
from country to country, sometimes within the same country. Gini coefficient can be used to  measure poverty in the relative sense.

Gini coefficient:
The Gini-coefficient measures the inequality among values of a frequency distribution (for example,  levels of income). This is the most commonly used measure of inequality. The coefficient varies  between 0, which reflects complete equality and 1, which indicates complete inequality (one person has all the income or consumption and all others have none).

DIFFERENCE BETWEEN ABSOLUTE AND RELATIVE PVERTY:
ABSOLUTE POVERTY: This kind of poverty focusses on the basic needs  of an individual. The income level is highly considered in absolute poverty.Absolute poverty can change but relative poverty cannot.

RELATIVE POVERTY:

• This kind of poverty does not talk about the  basic needs and in fact it does not refer to the  lack of any specific need.
• It is important to highlight that one can be  meeting his or her biological needs but still be  considered as poor under relative poverty measurement.
• The income level is not considered in this type.
• People who have a considerable amount of  income can meet their basic needs, which  include food, shelter, and clothing and can even  go further to fund their   entertainment.
• However, one may be accomplishing these  factors but still be considered poor under the  relative poverty model.
• A government may put measures to ensure that  all its population can earn more than a certain  level of income per day, which will enable them  to meet basic commodities  like food, clothing,  and shelter. However, it is very difficult for the government  to alleviate all persons above relative poverty. This means that some people will always be poor  as compared to the rich people.

OTHER TYPES OF POVERTY:
Situational Poverty:
People or families can be poor because of some adversities like earthquakes, floods or a serious  illness. Sometimes, people can help themselves out of this situation quickly if they are given a bit of  assistance, as the cause of their situations was just one unfortunate event.

Generational Poverty:
This is when poverty is handed over to individuals and families from generations  before them. In  this type, there is usually no escape from it, as people are trapped in its causes and have no access  to tools that will help them get out of it.

Multidimensional Poverty:
• Multidimensional poverty is made up of  several factors that constitute poor people’s  experience of deprivation– such as  poor health, lack of education, inadequate living  standard, lack of income (as one of several factors considered),  disempowerment, poor  quality of work and  threat from violence .
• A multidimensional measure can incorporate a range of indicators to capture the complexity  of poverty and better inform policies to relieve it. Different indicators can be chosen  appropriate to the society and situation.
 •Multi-dimensional Poverty Index gives us a measure of the  extent of multi-dimensional poverty prevailing in various countries.

Measuring Poverty
Conventionally, poverty is measured by defining a  threshold level of expenditure (or  income)  required to  purchase goods and services necessary to satisfy basic needs at the minimal socially  acceptable level.  This threshold level of expenditure is called the  poverty line and the proportion of population living  below it is called the  poverty ratio.

Identification of poor in India:
In India, identification of poor is done by the State Governments based on information from Below  Poverty Line (BPL) censuses of which the latest is the Socio- Economic Caste Census 2011 (SECC  2011).
(A DETAILED STUDY NOTE ON SECC 2011 WILL BE PROVIDED SEPERATELY).

Committees for Poverty Estimation in India:
National Planning Committee:
• In 1938, Congress president  Subhash Chandra Bose set up the National Planning Committee (NPC) with Jawaharlal Nehru as chairman and Professor K. T. Shah as secretary for the  purpose of drawing up an economic plan with the fundamental aim to ensure an adequate  standard of living for the masses.
• The Committee regarded the irreducible minimum income between Rs. 15 to Rs. 25 per  capita per month at Pre-war prices. However, this was also not tagged something as a  poverty line of the country.

First Planning Commission working group:
• The concept of the poverty line was  first introduced by a working group of the Planning  Commission in 1962 and subsequently  expanded in 1979 by a task force.
• The 1962 working group recommended that the national minimum for each household of  five persons should be not less than Rs 100 per month for rural and Rs. 125 for urban at  1960-61 prices.
• These estimates excluded the expenditure on health and education, which both were expected to be provided by the state.

Y K Alagh Committee (1979):
• Till 1979, the approach to estimate poverty was traditional i.e. lack of income.
• It was later decided to measure poverty precisely as starvation i.e.  in terms of how much people eat.
• This approach was first of all adopted by the YK Alagh Committee’s recommendation in 1979 whereby, the people  consuming less than 2100 calories in the urban areas or less than 2400  calories in the rural areas are poor.
• Now these calorie requirements need some ‘monetary value’ which can be determined by  ascertaining ‘quantity’ of consumption and ‘prices/value’ of that quantity. Data relating to  quantity and value was provided by NSSO survey.
• It was estimated that, on an average, consumer expenditure (food and non-food) of Rs.49.09 per capita per month was associated with a calorie intake of 2400 per capita per day in rural areas and Rs.56.64 per capita per month with a calorie intake of 2100 per day in urban areas. This ‘Monthly Per Capita Expenditure’ was termed as poverty line.
• The logic behind the discrimination between rural and urban areas was that the rural people  do more physical work.
• Moreover, an implicit assumption was that the states would take care of the health and  education of the people. Thus, YK Alagh eventually defined the first poverty line in India.

NOTE: ABOUT NSSO
• The  National Sample Survey Office (NSSO) is headed by a  Director General and comes under  the  National Statistical Office of the Ministry of Statistics and Programme Implementation.
• It is responsible for conduct of large scale sample surveys in diverse fields on All India basis.
• Primarily data are collected through nation-wide household surveys on various socio-economic subjects, Annual Survey of Industries (ASI), etc.
• Besides these surveys, NSSO collects data on rural and urban prices and plays a significant  role in the improvement of crop statistics through supervision of the area enumeration and  crop estimation surveys of the State agencies.
• It also maintains a frame of urban area units for use in sample surveys in urban areas.

Lakdawala Committee (1993):
In 1993, an expert group was constituted to review methodology for poverty estimation, chaired by DT Lakdawala. The following were the suggestions made:
• Consumption expenditure should be calculated based on calorie consumption as used by the Alagh Committee.
• 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.
• The method of calculating poverty included first estimating the per capita household  expenditure at which the average energy norm is met, and then, with that expenditure as the poverty line, defining as poor as all persons who live in households with per capital expenditures below the estimated value.
• The fallout of the Lakdawala formula was that number of people below the poverty line got almost double. The number of people below the poverty line was 16 per cent of the  population in 1993-94. Under the Lakdawala calculation, it became 36.3 per cent.

Tendulkar Committee (2005):
Shortcomings of the previous methods:
1.Consumption patterns were 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.
2.There were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time).
3.Earlier poverty lines assumed that health and education would be provided by the State and formulated poverty lines accordingly.

The major changes recommended are:
• It adopted Mixed Reference Period in place of Uniform Reference Period. During previous  methodologies, a ‘uniform reference period’ was used that  included 30 days just before the  survey for all food and nonfood items. But Tendulkar group changed ‘reference period’ to  past one year for 5 nonfood items viz., clothing, footwear, durable goods, education and  institutional medical expenses. For other items 30 days reference period was retained. This is  called ‘Mixed reference period’.
• A  shift away from calorie  consumption-based poverty estimation.
• A  uniform poverty line basket (PLB) across rural and urban India.
• A change in the  price adjustment  procedure to correct spatial and temporal issues with price  adjustment.
• Incorporation of private expenditure on health and education while estimating poverty.
• Poverty line was in form of ‘ Rs per capita per month’.
• The Committee computed new poverty lines for  rural and urban areas of each state.

Rangarajan Committee:
C Rangarajan Committee was Set up By Planning commission in 2012 and submitted report in 2014.

Important points from the report are:
• The Rangarajan committee estimation is based on an independent large survey of households by Center for Monitoring Indian Economy (CMIE).
• It has also used different methodology wherein a household is considered poor if it is unable to save.
• Instead of ‘Mixed reference Period’ it recommended ‘Modified Mixed reference period’ in which reference periods for different items were taken as : 365-days for clothing, footwear,  education, institutional medical care, and durable goods, 7-days for edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants, and 30-daysfor the remaining food items, fuel and light, miscellaneous goods and services including non-institutional medical; rents and taxes.
• It not only takes normative levels (Normative means–what is ideal and desirable) for adequate nourishment, clothing, house rent, conveyance and education, but also considers  behaviourally-determined (Behavioral Means–What people use or consume as per general behavior) levels of other non- food expenses.
• The committee has estimated that almost 30 per cent of us were poor in 2011-12.It uses separate data sets for rural and urban parts.
• The panel computed the average requirements of calories, proteins and fats on the norms set by the Indian Council for Medical Research in 2010. These are differentiated by age, gender and activity for all-India rural and urban regions.
• Accordingly, the energy requirement as calculated by Rangarajan is 2,155 kcal per person per  day in rural areas and 2,090 kcal per person per day in urban areas. This is significantly lower  than the 2,400 kcal in rural areas and slightly less than 2,100 kcal in urban areas used by the  earlier Lakdawala panel.
• The reason given is that the age profile and working conditions have changed with time.
• The protein and fat requirements have been estimated on the same lines. These are 48g and 28g per  capita per day, respectively, in rural India and 50g and 26g per capita per day in urban areas.
• According to the report of the committee, the new poverty line should be Rs 32 in rural areas and Rs 47 in urban areas.