CONCEPT OF POVERTY AND POVERTY LINE
Concept of Poverty
Poverty in India has been defined as that situation in which an individual fails to earn income sufficient to buy him minimum means of subsistence.
The minimum means of subsistence includes:
(a) a reasonable satisfactory level of nutritional diet,
(b) minimum required clothing, housing and furniture, and (c) minimum level of health facilities, clean water and education
Relative and Absolute Poverty–
A distinction is necessary between two types of poverty:
- Relative Poverty 2. Absolute Poverty
1 .Relative Poverty. It refers to poverty of people in comparison to other people, regions or nations. Relative poverty indicates that a group or class of people belonging to the lower income groups is poorer when compared to those belonging to higher income groups. Such poverty of one group is only relative to the affluence of the other group. And since incomes are unequally distributed in almost all the countries, whether developed or Underdeveloped, relative poverty exists in every country, be it USA or India.
Relative poverty can be measured by the concept of Lorenz Curve and Gini Coefficient .In terms of Gini coefficient, India’s inequality was 33.6 for the year 2012 (Economic Survey 2015-16).
2 .Absolute Poverty. It refers to the total number of people living below the poverty line. It is a state of absolute deprivation. The concept is relevant for less developed countries. In India, the concept of absolute poverty is used to measure poverty. Absolute poverty can be measured by Headcount Ratio, Multidimensional Poverty Index (MPI) and the concept of Poverty Line. In poverty line, minimum level of consumption standard is laid down. All those people who fail to reach this minimum consumption level are ‘poor’. In India, nearly 21.9 per cent of the total population is absolutely poor (Economic Survey 2014-15).
Different Norms/Methods of Fixing Poverty Line
Various attempts have been made to develop a scale to measure poverty. Some of them are:
1 .Dadabhai Naoroji’s ‘Jail Cost of Living’. In pre-independent India, Dadabhai Naoroji was the first to measure poverty. He used the ‘jail cost of living’ to calculate the poverty line. He used the menu for a prisoner and used appropriate prevailing prices to arrive at the cost of consumption of an adult prisoner. He divided the population into two parts:
(a) One-third population consisted of children. Out of this, half of them consumed very little while the other half consumed half of the adult diet.
(b) Two-third population consisted of adults. Adults consumed full diet.
The average poverty line comes out to be three-fourth of the adult jail cost of living.
2. Task Force on Projection of Minimum Needs and Effective Consumption Demand. In post-independent era, several attempts were made to identify the number of poor in the country. In 1979, Task Force on Projection of Minimum Needs and Effective Consumption Demand’ was formed. It determined poverty line in terms of minimum nutritional level of food energy required for subsistence. It is expressed in terms of minimum daily intake of calories. Thus, Poverty line is defined on the basis of recommended nutritional requirements of 2400 calories per person per day for rural areas and 2100 calories for urban areas. The poverty line has been defined in terms of food poverty.
3 .Monthly Per Capita Consumption Expenditure (MPCE). Cost of purchasing the consumption-basket which would provide the minimum calorie-intake is estimated by using price indices separately for rural and urban areas. This gives us the per capita consumption expenditure for the rural and urban areas which is needed to ensure the minimum calorie intake.
This minimum Monthly Per Capita Consumption Expenditure (MPCE) forms the poverty line. The Planning Commission (Tendulkar committee) had worked out this cost at ₹816 per person per month in rural areas and ₹1000 per person per month in urban areas in 2011-12. Thus, those persons whose monthly consumption expenditure is less than ₹816 in rural area and ₹1000 in urban areas are considered below the poverty line and are classified as ‘poor’. (Source: Economic Survey 2015-16)
MAGNITUDE AND NATURE OF POVERTY
Head Count Ratio measures number of poor as the proportion of people living below the poverty line.
In India, the official data on poverty is made available by the Planning Commission. It is estimated on the basis of household consumption expenditure data collected by the National Sample Survey Organisation (NSSO).
- Poverty Ratio and Number of Poor
As per the latest estimates (Tendulkar method) of poverty by the Planning Commission based on 68th round of NSSO (2011-12), there was a significant decline in the proportion of people living below poverty line in the last two decades.
Source: Economic Survey 2015-16 Following pattern emerges in absolute poverty, according to Economic Survey 2013-14:
- The annual average decline during 2004-05 to 2011-12 was by 2.18 percentage points per annum.
- Poverty has declined from 37.2 per cent in 2004-05 to 21 9 per cent in 2011-12.
Rural-Urban Break-up of Poverty
Following pattern emerges:
1. The decline in poverty was comparatively much more in rural areas where the percentage of people living below poverty line fell to 25.7 per cent (2011-12) from 41.8 per cent (2004-05).
2. In urban areas, percentage of people living below poverty line fell to 13.7 per cent (2011-12) from 25.7 per cent in 2004-05.
- The number of people living below poverty line was estimated at 269.3 million in 2011-12. The decline is by 137.8 million during the period 2004-05 to 2011-12.
Regional Variation in Incidence of Poverty (Showing relative poverty)
Incidence of poverty varies from state to state. It is clear from the following (Source: Economic Survey 2015-16)
- Bihar is the poorest state with 33.7 per cent of people living below the poverty line followed by Odisha (32.6 per cent) and Assam (32.0 per cent).
2 .Poverty level is lowest in Kerala (7.1 per cent people living below poverty line) followed by Himachal Pradesh (8.1 per cent).
3 .In Delhi, 1.6 million people are living below poverty line.
4 .Nature of Poverty
In the rural areas, poor people are those who are landless agricultural labourers, small and marginal farmers .In the urban areas, poor people are those who are unemployed, underemployed or employed in low productivity occupations with very low wages.
Around three-fourth of the poor in India reside in rural areas. Also, poverty, prevailing predominantly in rural areas, has shifted to urban areas.