Poverty -Definition of poverty – POVERTY IN INDIA


There are two concepts of poverty; absolute poverty and relative poverty.

The absolute poverty is also known as biological poverty and relative poverty is also known as social or psychological poverty.

The concept of absolute poverty is relevant for underdeveloped countries while the concept of relative poverty is relevant for developed countries.

In order to measure absolute poverty first of all sub-minimum standard of living is decided. This minimum standard may be in terms of income or consumption expenditure. This standard is known as poverty line and those people who fail to reach this standard of living are regarded as  people below poverty line or poor people.

In order to measure relative poverty income distribution of population in different Fractile groups is estimated and a comparison of the income of  people in the top 5% to 10% is made with the income of people in the bottom 5% to 10%. For example, if top 10% people in a country get 30% of National income and the lowest 10% people get 5% of  National income then it gives an idea about the relative poverty. Gini Coefficient is used to measure the relative poverty.

Poverty studies in India:

The studies on poverty in India were initiated by Prof. Dandekar and Prof. Rath in the year 1971. Later on the problem was studied by writers like Profs. Minhas, Sukhatme, Bardhan, Madalgi, Ahluwalia, etc. and by the institutions like 7th Finance commission, World Bank, Planning Commission etc.


The approach of planning commission in the 6th plan. It is generally agreed that only those people who fail to reach a certain minimum level of consumption standard should be regarded as poor. Different economists have defined poverty line in different ways. The  Planning  Commission has adopted the definition provided by the Task force on Projections of Minimum Needs and Effective Consumption Demand’ according to which, a person is below the poverty line if his daily consumption of calories is less than 2400 in rural areas and 2100 in urban areas. On the basis of this, the monthly cut-off points turned out to be 76 for rural areas and 88 for urban areas at 1979-80 prices.

For some times, these cut offs were used by converting them into current rupees using the implicit price deflator of consumption in the  national l Accounts. This process had the disadvantage of ignoring interstate differences in price levels as well as variations from state to state in urban to rural price differentials.

Recent Poverty Estimates: The National Sample Survey Office (NSSO) undertakes surveys from time to time in order to Analyse the expenditure pattern of people in rural and urban areas.

It uses two types of recall periods – uniform recall period (URP) and mixed recall period (MRP). While the URP uses 30-day recall/ reference period for all items of consumption, MRP uses 365 day recall/reference period for five infrequently purchased non-food items namely, clothing, footwear, durable goods, education and institutional medical expenses,

Planning Commission Estimates of Poverty: The  Planning Commission, the nodal agency for estimating the number and proportion of people living below the poverty line at national and state levels reviews the methodology for estimating poverty from time to time. It constituted an Expert Group under the Chairmanship of Professor Suresh D. Tendulkar which submitted its report in December 2009. The Committee recommended that poverty estimates should be based on MRP based NSSO data on private household consumer expenditure and calorie intake norms should be done away with.

As per the Tendulkar Committee Report, the national poverty line at 2004-5 prices was a monthly consumption expenditure of Rs. 446.68 in rural and Rs. 578.80 in urban areas in 2004-05. In order to have comparative data, the Expert Group re-estimated poverty for 1993 94. After 2004-05, this survey has been conducted in 2011-12. The  Planning commission has updated the Poverty lines and poverty ratios as per the recommendations of the Tedulkar Committee using NSS 66th round (2011-12) data from the Household Consumer Expenditure Survey It has estimated the poverty lines at all India level as an monthly per capita expenditure (MPCE) of RS 816 for rural area and Rs 1000 for urban areas in 2009-10.

Based on these cut offs, the percentage of people below the poverty line declined from 37.2 per

cent in 2004-05 to 21.9 per cent in 2011-12 Table 9 shows the poverty data for 1993-94, 2004-05 and 2011-12 as given by the Tendulkar Committee and accepted by the Planning Commission.

Table 8: Poverty Ratio

thy MRP Method)

 1993 942004-052011-12
Rural 50.141.825.7
Urban 31.825.713.7
Total 45.337.221.9


Source: Economic Survey 2010-11. Twelfth Five year plan

According to this estimate, in 1999, 45.3 per cent of the total population was below poverty line. In 2011-12, this ratio came down to 21.9 per cent showing a fall of 233 percentage point in the poverty data

Malnutrition Problem: While poverty rates have declined, the malnutritum has remained stubbornly high. Around 40 per cent children below 3 years of age were underweight and malnourished in 2005-06 compared to 43 per cent in 1998-99.

Multidimensional Poverty Index (MPI): The Human Development Report (HDR) 2010

measures povertys in terms of a new parameter namely Multidimensional Povertys Index (MIT) The MPI shows the share of population which is multidimensionally poor in terms of living standards, health and education. According to this parameter, India has a povertys index of 0.283.

Causes of Poverty: Many factors are responsible for povertys. (May be ignored by the students)

Economic causes:

1 More than 50% of working population is in agriculture but that sector gets only 12.3% of national income.

2 Upto 1991 the rate of economic growth was very low (around 4% per year)

3 Population has been growing very rapidly particularly in the rural areas

4 A large majority of agricultural holdings are very small A large number of farmers are small and marginal farmers majority of whom are poor

5 Irrigation facilities are not available to about 2/3rd of agricultural lands in India.

6 Enough financial resources are not available for investment in agriculture 7 Productivity of labour and amount of income obtained by the agricultural workers

are very low. There are great inequalities in the distribution of agricultural lands Economic conditions of people in the rural areas in non agricultural activities are 88 also highly unsatisfactory

  There are serious problems of seasonal and disguised unemployment in the rural areas

Political Causes:

  In India politics is caste-based.

 . Poverty has become a vested interest for politicians as well as the poor There is rampant corruption in poverty removal programmes.

Social Causes:

 Wide spread illiteracy among the poor.

Large size of poor families: Distorted social priorities 

 Negative human attitudes generally supported by the existing religious values.

Lack of motivation on the part of the poor to improve their economic conditions Immobility of labour due to caste system.

Poverty removal strategy in India:

Povertys alleviation and raising the average standard of living (economic growth with social justice) have always been stated as the central aims of economic planning in India The plan strategies to achieve these aims can be broadly divided into three phases

In the first phase, the prime emphasis was on growth. It was expected that growth through improvement in infrastructure and heavy industries will take care of the problems of unemployment and povertys.

In the second phase, beginning with Fifth Plan, povertys alleviation came to be adopted as an ‘explicit objective of economic planning. Several specific programmes for povertys alleviation and employment generation directed towards selected target groups were Imunched.

In the third and final (present) phase, emphasis shifted to ‘growth’ and poverty alleviation as two complementary actions. The various recent programmes for povertys alleviation and as follows.

The earlier such programmes have been streamlined and merged into these programmes.

(1) The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) The MGNREG Act was notified in 2006 in selected districts and was later extended throughout the country in 2008. It aims at enhancing livelihood security of households in rural areas of the country by providing at least 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work.

During 2013-14, more than 4.78 crore households were provided employment under the scheme.

(2) Swaran Jayanti Gram Swarozgar Yojana (SGSY): This was introduced in April, 1999 as a result of restructuring and combining the Integrated Rural Development Programme (IRDP) and allied programmes and Million Wells Scheme (MWS). It is the only selfemployment programme for the rural poor. It aims at bringing the self employed above the poverty line by providing them income generating assets. During2013-14, more than 4.78 lakh households have been assisted. The SGSY was restructured as the National Rural Livelihoods Mission (NRLM) and now has been renamed as Aajeevika. The NRLM aims at reducing poverty by enabling poor households to access gainful self-employment and skilled wage employment opportunities

(3) The Swarna Jayanti Shahari Rozgar Yojana (SJSRY): The SISRY which came into operation from December 97, sub-summing the earlier urban poverty alleviation programmes viz., Nehru Rozgar Yojana (NRY), Urban Basic Services Programmes (UBSP) and Prime Minister’s Integrated Urban Poverty Eradication Programme (PMIUPEP). The scheme which was revamped in 2009, aims to provide gainful employment to the urban unemployed or underemployed poor by encouraging the setting up of self-employment ventures or provision of wage employment. The SJSRY was replaced by National Urban Livelihood Mission (NULM) in 2013. The NULM will focus on organizing urban poor in self Help Groups (SHGs). creating opportunities for skill development leading to market based employment ventures by ensuring easy access to credit. A total of about 8,00,000 beneficiaries have been assisted in 2013-14.

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