Poverty: Definitions, Measurement and Controversies | Part 1

Read about what poverty is, the concept of poverty line and the controversies around it.

Index

  • Why in news
  • Concept of poverty
  • concept of poverty line
  • Criticism of poverty line
  • Recall Period

Why in news

1. The government may soon come out with a new definition of poverty, with the Niti Aayog likely to set up a panel of experts to formulate a new poverty line. The new line, which will be different from the existing Tendulkar line and Rangarajan line, will also be based on the latest consumption expenditure survey.

2. Reasons: To set a target for poverty reduction while preparing its first 15-year vision document and 7-year strategy paper, which have replaced the 5-year plan Also, to measure the impact of the government’s anti-poverty schemes and other welfare initiatives.

Concept of poverty

Poverty refers to a situation when people are deprived of basic necessities of life. It is often characterized by inadequacy of food, shelter and clothes. In other words, poverty refers to a state of privation where there is a lack of essential needs for subsistence. It can be further subdivided into absolute poverty and relative poverty.

  • Absolute poverty includes the lack of biological necessities, such as food, water, clothing, housing, and sanitation, whereas, relative poverty (or extreme poverty) refers to a poverty line, and is a definition of the amount of income a person needs to satisfy basic needs.
  • In basic terms, absolute poverty is a having a lack of basic resources, and relative poverty is more to do with income inequality.
  • Absolute poverty refers to a set condition, which is the same in every country, and does not change over a period of time. Relative poverty, on the other hand, refers to conditions which are subjective to the society in which the person lives, and therefore, does vary between countries, and can change over time e.g. more urban cities will have greater education, energy, and transportation costs, so the poverty line will be higher in this country, compared to poorer countries.

Concept of poverty line

1. What is a poverty line – The poverty line defines a threshold income. Households earning below this threshold are considered poor. Different countries have different methods of defining the threshold income depending on local socio-economic needs.

2. Who brings out the poverty estimates in India – The erstwhile Planning Commission used to release the poverty measures.

3. How is it measured – Poverty is measured based on consumer expenditure surveys of the National Sample Survey Organisation. A poor household is defined as one with an expenditure level below a specific poverty line.

4. What’s the Indian poverty line –

  • Earlier, India used to define the poverty line based on a method defined by a task force in 1979. It was based on expenditure for buying food worth 2,400 calories in rural areas, and 2,100 calories in urban areas.
  • In 2011, the Suresh Tendulkar Committee defined the poverty line on the basis of monthly spending on food, education, health, electricity and transport. According to this estimate, a person who spends Rs. 27.2 in rural areas and Rs. 33.3 in urban areas a day are defined as living below the poverty line. For a family of five that spends less than Rs. 4,080 and Rs. 5,000 in rural and urban areas respectively is considered below the poverty line.
  • This has been criticised for fixing the poverty line too low. According to a committee headed by former Reserve Bank governor C Rangarajan, there were 363 million people, or 29.5% of India’s 1.2 billion people, who lived in poverty in 2011-12. The Rangarajan panel considered people living on less than Rs. 32 a day in rural areas and Rs. 47 a day in urban areas as poor.

5. Why has there been so much criticism about the poverty line in India – According to critics, the government has deliberately kept the poverty line low. A low poverty line has enabled the government to show that millions have moved out of poverty. This, critics say, is factually incorrect as the definition of poverty line is disputed. They also say that the data lacks statistical rigour and has been released to gain political mileage.

Criticism of poverty line concept

1. Even though based on calorie approach, the poverty line is not a true indicator of malnourishment because of interpersonal variations in good habits.

2. The notion of absolute poverty is inadequate because relative poverty is also an equally important.

3. The poverty line, quantified as a number is reductionist. It does not capture important aspects of poverty — ill health, low educational attainments, geographical isolation, ineffective access to law, powerlessness in civil society, caste and/or gender based disadvantages, etc.

4. The poverty line provides the conceptual rationalization for looking at the poor as a “category” to be taken care of through targeted ameliorative programmes, ignoring structural inequalities and other factors which generate, sustain, and reproduce poverty.

5. Poverty line derived from personal consumption patterns and levels do not take into account items of social consumption such as basic education and health, drinking water supply, sanitation, environmental standards, etc. in terms of normative requirements or effective access.

6. The head-count ratio based on the poverty line does not capture the severity of poverty in terms of the poverty deficit (total shortfall from the poverty line) or additionally the distribution of consumption expenditure among the poor. It is insensitive to mobility within the below poverty line group. It is also invariant to upward and downward mobility across the poverty line so long as such mobility takes place in equal measure.

7. In a country of India’s continental size and diversity, poverty line based on aggregation at all-India level ignores State-specific variations in consumption patterns and/or prices.

Recall period – Uniform Reference Period (URP) vs Mixed Reference Period (MRP)

It is important to understand that a poverty line is essentially a monetary value. The idea is to collect data on people’s consumption expenditure, and to ascertain how many people surveyed fall below that poverty line. In India, there were two main ways of collecting data: Uniform Reference Period (URP) and Mixed Reference Period (MRP). Until 1993-94, consumption information collected by the NSSO was based on the Uniform Reference Period (URP), which measured consumption across a 30-day recall period. That is, survey respondents were asked about their consumption in the previous 30 days. From 1999-2000 onwards, the NSSO switched to a method known as the Mixed Reference Period (MRP). 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. That is to say, for the five items, survey respondents are asked about consumption in the previous one year. For the remaining items, they are asked about consumption in the previous 30 days.

In the next series we write about how poverty is measured starting from Dadabhai Naoroji till present. Read it here.

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