Understanding poverty debates in India is essential in the context of growing debate related to different estimates of poverty in India.
The extreme poverty level in India declined from 431 million in 1990 to almost 129 million in 2024, the World Bank said in a report. However, the International Day for the Eradication of Poverty (IDEP) – observed annually on October 17 since 1992 – seeks to highlight the negative attitudes towards the people living below the poverty line.
The theme for 2024 IDEP is “Ending Social and Institutional Maltreatment, Acting Together for Just, Peaceful, and Inclusive Societies”. To understand the theme better, it is important to analyse how policymakers have conceptualised poverty.
What is poverty?
The reasons for the existence of poverty are analysed differently by different schools of thought. One influential school of thought sees poverty to be a result of the actions taken by the poor people themselves. The “blaming poor people for their poverty” approach looks at poor people as “lazy”, “imprudent”, or “unwilling to take risks”.
Martin Ravallion, one of the important economists who have worked on poverty, noted that “blaming poor people for poverty has long provided a justification for public inaction against poverty.” Such negative attitudes reflected in the social and institutional mistreatment of the poor not only deepen systemic injustice but also undermine their chances of getting out of poverty.
The World Bank updated the global poverty line in September 2022 to $2.15 per person per day, replacing the 2017 poverty line of $1.90, based on purchasing power parity (PPP).
According to recent estimates, 8.5 per cent of the world’s population lives in extreme poverty – which is around 682 million people. Notably, China and India are among the countries experiencing the greatest national reduction in people living below the poverty line. It is estimated that more than 1 billion people living in China and India have moved out of extreme poverty between 1990 and 2022, despite being slowed by the Covid-19 pandemic.
Poverty measurement in India
According to the Household Consumption Expenditure Survey for 2022-23, less than 5 per cent of Indians are now expected to live below the poverty line. However, the release of the report set in motion debates around the poverty line used to estimate the extent of deprivation in India.
The poverty line is a threshold used to classify people as poor or not based on their income or consumption levels. The poverty line represents the minimum income level necessary to meet basic needs, and varies across countries depending on their overall economic conditions.
On the other hand, economists and policymakers estimate “absolute” poverty as the shortfall in consumption expenditure from a threshold called the “poverty line”. Absolute poverty captures the basic needs satisfaction, like nutrition and clothing. It relies on a fixed consumption threshold, meaning the real value associated with the absolute poverty threshold remains constant across different societies.
A uniform increase in income levels in society leads to a decline in the percentage of people living below the absolute poverty line. This measure is sensitive to economic growth since as overall incomes rise, fewer people remain under the poverty line.
On the other hand, a relative poverty line, which is not fixed, captures a form of “social inclusion”, the cost of which in terms of consumption increases with an increasing standard of living. In other words, even if everyone’s income increases equally, some may still be considered poor relative to others if their income remains below the rising standard of living.
For instance, even a 10 per cent rise in the income of all households provides an unchanged relative poverty line. India’s poverty estimation has evolved significantly.
The evolution of poverty estimates in India
In 1971, V N Dandekar and N Rath defined the poverty line based on calorie consumption (2,250 calories per person per day, based on National Sample Survey data of 1960-61), setting it at Rs 15 for rural and Rs 22.5 for urban areas.
In 1979, the Y K Alagh Task Force set poverty lines based on calorie needs of 2,400 calories (rural) and 2,100 calories (urban), which remained the official method until the 1990s. However, this methodology for estimating poverty at the national and state levels has been critiqued by many for giving an inappropriate picture of poverty in the country.
In 1989, the Planning Commission formed the Lakdawala Expert Group to “look into the methodology of estimating poverty and to redefine the poverty line, if necessary”. The Lakdawala Committee in 1993 introduced state-specific poverty lines, adjusting for regional price differences, but faced criticism for not maintaining the original calorie norms.
With the criticisms for the Lakdawala Committee mounting, the Tendulkar Expert Group was formed in 2005 to review the methodology for poverty estimation. The Tendulkar Committee recommended five main changes:
(i) A shift away from poverty lines based on calorie consumption towards target nutritional outcomes
(ii) A uniform poverty line basket for both rural and urban areas
(iii) A change in the price adjustment procedure to correct spatial and temporal issues with price adjustment
(iv) Incorporation of private expenditure on health and education while estimating poverty; and
(v) The use of Mixed Reference Period instead of Uniform Reference Period
Debates around India’s poverty line
In 2009, the Tendulkar Committee submitted its report of estimated poverty lines for rural and urban areas in all states. It concluded that the all India poverty line in 2004-05 was Rs 446.68 and Rs 578.80 per capita per month in rural and urban areas respectively.
According to the Lakdawala Committee, the percentage of the population living below the poverty line in 2004-05 was 28.3 per cent in rural areas and 25.7 per cent in urban areas. The same according to the Tendulkar Committee report was 41.8 per cent in rural areas and 25.7 per cent in urban areas.
The Tendulkar Committee further recommended a new method to update the poverty lines, adjusting for changes in prices and patterns of consumption, using the consumption basket of people close to the poverty line.
The Tendulkar Committee report faced widespread criticism and the Rangarajan Committee was set up in 2012 to address these issues. The report was submitted in 2014 and the old practice of having separate all-India rural and urban poverty line baskets and deriving state level poverty lines from these was brought back. The report raised the monthly per capita consumption expenditure to Rs 972 and Rs 1407 in rural and urban areas respectively.
The government, however, did not take a call on the Rangarajan Committee report. The last official poverty data was released in July 2013 which was estimated based on the Tendulkar line for 2011-12. According to this, 21.9 per cent of the population in India lived below the poverty line. A leaked data from the 2017-18 National Sample Survey showed a 3.7 per cent decline in real consumption over six years, but the survey was never released.
The poverty debate
The initial debate around poverty in India is based on two issues – first, if economic growth has led to a reduction in poverty, and second, whether economic growth has led to a rise in income and consumption inequality. This has been famously referred to as the Great Poverty Debate 1.0, similar to the worldwide debate around globalisation and its effect on poverty and inequality.
As India’s gross domestic product (GDP) grew rapidly in the second half of the 1990s, the official numbers published showed a reduction of poverty from 36 per cent to 26 per cent between 1993-94 and 1999-2000.
The debate includes whether agriculture growth has improved or worsened the relative position of the rural poor in the country, marked by different interpretations of survey data. On one hand, some economists have talked about how agricultural growth in the country has led to the “trickling down” of benefits for all classes of people.
On the other hand, some others have talked about the growth process as a generator of poverty and even an acceleration of agricultural growth not being able to make a dent in rural poverty.
Hence, statistical debates around poverty estimates in India have underlined the importance of survey data. Angus Deaton writes, “Good annual surveys, even if not comprehensive, are an insurance against (statistical) problems.”
However, India has seen an absence of poverty data in recent years as Consumption Expenditure Surveys have not been published between 2011-12 and 2022-23. Resultantly, the new poverty debates are surrounded by the issue of data limbo.
Mains Practice Questions
1. How can the social and institutional mistreatment of the poor hinder their ability to escape poverty, and what measures can be taken to address these issues?
2. Has economic growth contributed to increasing income and consumption inequality in India?
3. Evaluate major recommendations made by the Tendulkar Committee on Poverty estimates.
Global Hunger Index
Poverty debates in India
Poverty and Inequality
Rural Poverty
