A Poverty Line is defined as the basic needs that an individual requires to sustain his or her livelihood. A person who is able to earn enough money to cover his basic needs is considered to be above the poverty line (APL), while those who are unable to do so are said to be below it (BPL). In this article, we will study the Poverty line which is important for the UPSC examination.

What is the Poverty Line?

• Poverty lines are defined as a level of income or spending below which it is reasonable to conclude that someone is poorer than the rest of society.
• It is a measure of income or consumption spending that distinguishes the poor from the rest of the population.
• The Tendulkar Committee proposed a poverty level of Rs 29 per person per day in urban areas and Rs 22 per person per day in rural areas.
• There are two reasons for choosing a poverty line.
  • To create policies that are tailored to the needs of the poor.
  • To determine if government programs have been successful or unsuccessful over time.

Poverty Line – Background

• Over one-third of the world's poor people live in India.
• When we include the poor of Pakistan and Bangladesh, we discover that these three countries account for about half of all global poverty.
• Sub-Saharan Africa is the next major hotspot for poverty.
• However, in India, calculating poverty is a difficult subject.
• Dadabhai Naoroji was the first to estimate a poverty line in the nineteenth century, though he did not use the term "poverty line" himself.

Dadabhai Naroji

• Poverty assessment in India dates back to the 19th century when Dadabhai Naoroji's efforts and careful research led him to establish a subsistence-based poverty level at 1867-68 prices, though he never used the term "poverty line."
• It was calculated using the cost of a subsistence diet of "rice or flour, dhal, mutton, vegetables, ghee, vegetable oil, and salt."
• According to him, subsistence is what a human being requires to meet his basic needs and maintain his normal health and decency.
• His research included diet scales, and he arrived at a poverty level based on subsistence prices that ranged from Rs.16 to Rs.35 per capita per year in diverse parts of India. England's per capita income was Rs. 450 at the time.
• However, because India's essentials were only approximately a third of what they were in England at the time, the real differential in terms of buying power parity was only five times, not fifteen.

National Planning Committee

• Subhash Chandra Bose, the president of the Congress, established the National Planning Committee (NPC) in 1938, with Jawaharlal Nehru as chairman and Professor K. T. Shah as secretary, to create an economic plan with the primary goal of ensuring a sufficient quality of living for the masses.
• At pre-war prices, the Committee considered the irreducible minimum income to be between Rs. 15 and Rs. 25 per capita per month.
• However, this was not labelledas a country's poverty line.

First Planning Commission working group

• The concept of the poverty line was first introduced by a Planning Commission working group in 1962 and then expanded by a task force in 1979.
• At 1960-61 prices, the national minimum for each household of five people should be Rs 100 per month in rural areas and Rs 125 in urban areas, according to the 1962 working group.
• The expenditures on health and education, which were both supposed to be provided by the state, were not included in these estimations.

Y K Alagh Committee

• Until 1979, the standard method of calculating poverty was based on a lack of money.
• Later, it was decided to assess poverty in terms of starving, i.e. how much people eat.
• The YK Alagh Committee's suggestion in 1979, which said that persons who consume less than 2100 calories in urban areas or less than 2400 calories in rural regions are poor, was the first to use this approach.
• The discrimination between rural and urban areas was based on the fact that rural people do more physical labour.
• Moreover, it was assumed that the states would look for the people's health and education.
• As a result, YK Alagh established India's first poverty line.

Lakdawala Formula

• Official poverty lines were based exclusively on the recommendations of the Lakdawala Committee from 1993 until 2011.
• This poverty limit was chosen such that anyone earning more than it could afford 2400 and 2100 calories worth of food, clothing, and shelter in rural and urban regions, respectively.
• These calorie intakes were obtained solely from the YK Alagh committee.
• A poor person, according to the Lakdawala Committee, is one who is unable to meet these average energy needs.
• However, in comparison to earlier models, the Lakdawala formula differed in the following ways.
• Both health and education were previously removed from the estimates because they were assumed to be provided by the states.
• The poverty line was established by this committee based on household per capita consumption expenditure.
• The poverty line was calculated using the CPI-IL (Consumer Price Index for Industrial Laborers) and CPI-AL (Consumer Price Index for Agricultural Laborers) indexes.
• The approach for assessing poverty includes first estimating the per capita household spending at which the average energy norm is satisfied, and then using that expenditure as the poverty line, defining the poor as all people living in homes with per capita expenditures less than the estimated value.
• As a result of the Lakdawala formula, the number of individuals living in poverty nearly doubled.
• In 1993-94, the number of individuals living in poverty was 16.7% of the population. According to the Lakdawala formula, it was 36.3%.

Suresh Tendulkar Committee

• The Planning Commission established the Suresh Tendulkar committee in 2005.
• The current poverty estimates are based on the committee's recommendations.
• This committee suggested discarding the calorie-based methodology in favour of a more broad-based poverty level that included monthly spending on education, health, electricity, and transportation.
• It was highly advised to focus on nutritional outcomes rather than calories, i.e., intake nutrition support should be counted instead of calories.
• It was proposed that a single Poverty Basket Line be applied to both rural and urban areas.
• It advocated for a change in how prices are adjusted, as well as an explicit provision in the Poverty Basket Line to account for private health and education expenditures.
• Tendulkar used the cost of living as a method for evaluating poverty.
• The Tendulkar panel set a daily per capita expenditure benchmark of Rs. 27 in rural regions and Rs. 33 in urban areas, respectively, and arrived at a poverty cut-off of around 22% of the population.
• For the fiscal year 2004-05, the Lakdawala and Tendulkar Committees calculated the percentage of the population living below the poverty line.

However, because the amount was so small, it drew swift criticism from all corners of the media and society.

• The government formed a new committee to study the poverty measurement technique, led by Prime Minister's Economic Advisory Council Chairman C. Rangarajan, because the statistics were unrealistic and too low.
• Despite the Tendulkar Committee's objections, the Rangarajan Committee increased these limitations to Rs. 32 and Rs. 47, respectively, and calculated a poverty line of over 30%.
• Poverty was estimated to be over 30% in 2011-12, according to the Rangarajan committee. In 2011-12, India's poor were estimated to number 36.3 crore.

Current Status: Arvind Panagariya Task Force

• The discussions over the Lakdawala Formula, the Suresh Tendulkar Committee, and the Rangarajan Committee indicate that setting a poverty line in India has been a controversial topic in India since the 1970s.
• Rangarajan Formula was the most recent poverty line to be established. This report, however, did not satisfy the critics. This report was also rejected by the new NDA government.
• To establish the poverty level, the NDA government formed a 14-member task force led by Arvind Panagariya, vice-chairman of the NITI Aayog, to make proposals for a realistic poverty limit.
• This task force likewise failed to reach a consensus on a poverty level after one and a half years of effort.
• It proposed to the government in September 2016 that another panel of experts is called to conduct this job if the poverty level was to be defined.
• This committee formally supported the poverty limit proposed by the Tendulkar Committee.

The NITI Aayog released a National Multidimensional Poverty Index in 2021 by ranking states and indices on 12 parameters divided among Health, Education and Standard of Living. The NITI Aayog pegs that nearly 25% of the Indian population is Multidimensionally poor.

World Bank Poverty Line

• The World Bank Poverty Line is otherwise called as the International Poverty Line.
• In 2008, it was set at consumption levels of $1.25 per day. In 2015, it was updated to $1.90 per day which means that anyone living below that threshold level is considered to be in extreme poverty.
• The World Bank defines poverty as having incomes between $3.20 and $5.50 per day, as well as a multidimensional spectrum that includes access to education and basic infrastructure.
• The global extreme poverty rate is expected to rise by 1.3 percent to 9.2 percent in 2020. If the pandemic had not occurred, the poverty rate was expected to fall to 7.9 percent in 2020.
• The World Bank releases a biennial Poverty and shared prosperity report highlighting the poverty scenario across the world.
• According to the 2020 report, 9.2% of the world's population was in extreme poverty in 2017.

Why is defining the poverty line a controversial issue?

• Because this topic is not only politically sensitive but also has deeper fiscal repercussions, most governments have put the recommendations of committees and panels on hold.
• If the poverty line is set too high, many people will be left out; on the other hand, if it is set too low, the government's fiscal health will suffer. Finally, there is a lack of agreement among states.
• Some states, such as Odisha and West Bengal, backed the Tendulkar Poverty Line, whilst others, such as Delhi, Jharkhand, and Mizoram, backed the Rangarajan Poverty Line.
• As a result, no one, even NITI Aayog, wants to be the first to tally the number of poor people in the country.

Conclusion

Under the erstwhile Planning Commission, India has a well-designed poverty assessment mechanism. The Planning Commission served as the main organisation for poverty estimation. The Planning Commission appoints Expert Groups from time to time to define the poverty level and the technique for calculating it. The Rangarajan Committee, for example, is the most recent of these Expert panels. Traditionally, the planning commission uses the current poverty measurement technique given by expert groups to estimate the number of persons living in poverty in states, as well as in rural and urban areas.

FAQs

Q1: What is the poverty line in India?

Q2: How is the poverty line determined in India?

Q3: What are the major factors influencing the poverty line in India?

Q4: How does the poverty line impact government policies in India?

Q5: What are the criticisms of the current poverty line measurement in India?

MCQs

1. What was the main criterion for determining the poverty line in India as per the Tendulkar Committee?

A) Income levels

B) Monthly per capita expenditure

C) Land ownership

D) Employment status

2. Which of the following is a government scheme aimed at poverty alleviation in India?

A) Goods and Services Tax (GST)

B) Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

C) Make in India

D) Digital India

3. How does inflation affect the poverty line in India?

A) It has no impact.

B) It raises the poverty line.

C) It lowers the poverty line.

D) It reduces the number of people living below the poverty line.

4. Which committee recommended the measurement of poverty based on consumption rather than income?

A) Sarkaria Commission

B) Rangarajan Committee

C) Tendulkar Committee

D) Kothari Commission

5. What is the primary purpose of establishing a poverty line?

A) To promote industrialization

B) To allocate budget for luxury goods

C) To identify the poor for welfare schemes

D) To increase tax revenue

GS Mains Questions and Model Answers

Q1. Discuss the significance of the poverty line in formulating government policies in India.

Answer: The poverty line serves as a critical benchmark for formulating and implementing government policies aimed at poverty alleviation in India. It helps identify individuals and households who are economically vulnerable and require assistance. By providing a clear measure of poverty, the government can allocate resources effectively to various welfare programs, such as the Public Distribution System (PDS), which aims to provide subsidized food grains to those below the poverty line.
Furthermore, the poverty line informs the design of employment generation schemes, like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which provides a safety net for rural households. Understanding the dynamics of poverty allows policymakers to assess the impact of economic growth on different segments of society and to address regional disparities.
However, the effectiveness of poverty measurement relies on accurate data and updated methodologies. Criticism regarding the inadequacy of the current poverty line measurement underscores the need for regular assessments to reflect the changing economic landscape. Ultimately, a well-defined poverty line is essential for ensuring targeted interventions and sustainable development.

Q2. Analyze the challenges in measuring poverty and the implications for policy-making in India.

Answer: Measuring poverty in India presents several challenges that complicate policy-making. One significant issue is the reliance on outdated methodologies that may not adequately capture the complexities of poverty. For instance, the current poverty line often fails to account for regional disparities, variations in living standards, and the rising cost of living, leading to an underestimation of the actual number of people living in poverty.
Another challenge is the dynamic nature of poverty, influenced by factors such as inflation, unemployment, and economic fluctuations. Policies based on static poverty measurements may not address the immediate needs of vulnerable populations effectively. Additionally, the lack of comprehensive data on income, consumption, and demographic factors hampers the ability to formulate targeted interventions.
These challenges have implications for policy-making, as they can lead to ineffective allocation of resources and insufficient targeting of welfare programs. Policymakers must prioritize developing a more nuanced understanding of poverty that considers its multidimensional aspects, enabling them to design more effective and responsive poverty alleviation strategies.

Q3. Evaluate the role of social welfare programs in alleviating poverty in India.

Answer: Social welfare programs play a vital role in alleviating poverty in India by providing essential services and financial assistance to economically disadvantaged populations. Programs such as the Public Distribution System (PDS), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and direct cash transfer schemes are designed to address immediate needs and enhance livelihoods.
The PDS provides subsidized food grains to low-income households, ensuring food security and reducing malnutrition among vulnerable groups. MGNREGA, on the other hand, offers guaranteed employment, empowering rural households and providing them with a steady source of income. These programs not only alleviate poverty but also contribute to the overall economic development of communities.
Moreover, social welfare programs promote financial inclusion by providing access to banking services, credit, and skill development initiatives. This empowerment allows beneficiaries to improve their livelihoods and escape the cycle of poverty. However, the effectiveness of these programs depends on proper implementation, efficient monitoring, and addressing issues such as corruption and bureaucratic inefficiencies.
In conclusion, social welfare programs are essential tools for poverty alleviation in India, fostering economic resilience and improving the quality of life for marginalized communities.

Previous Year Questions on  Poverty Line

1. UPSC CSE 2021

Question. Discuss the effectiveness of poverty alleviation programs in India. 

Answer: The effectiveness of poverty alleviation programs in India has been a subject of considerable debate and analysis. Programs such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), National Food Security Act (NFSA), and various state-level initiatives have been introduced to combat poverty and enhance the living standards of the underprivileged. MGNREGA, for instance, has been successful in providing a safety net for rural households by guaranteeing at least 100 days of unskilled wage employment per year. This not only ensures income but also helps in developing rural infrastructure.
However, challenges such as inadequate implementation, corruption, and lack of awareness among beneficiaries have hindered the full realization of these programs' potential. While the NFSA aims to provide subsidized food to the poor, discrepancies in identification of beneficiaries have led to exclusion errors, where many deserving households remain uncovered.
Additionally, the impact of these programs varies across regions due to differences in governance, infrastructure, and economic conditions. Therefore, continuous monitoring, reforms, and community engagement are crucial to enhance the effectiveness of poverty alleviation initiatives. Ultimately, while India has made significant strides in reducing poverty, sustained efforts and targeted interventions are necessary to ensure long-term success.

2. UPSC CSE 2019

Question. Analyze the impact of economic policies on poverty alleviation in India. 

Answer: Economic policies in India have a profound impact on poverty alleviation, shaping the landscape of opportunities and resources available to disadvantaged populations. Policies aimed at economic liberalization, such as the introduction of the New Economic Policy in 1991, have stimulated economic growth and created job opportunities, particularly in sectors like services and manufacturing. This growth has contributed to a reduction in poverty levels over the past few decades.
However, the benefits of economic growth have not been uniformly distributed. Disparities in access to resources, education, and employment opportunities persist, especially in rural areas and among marginalized communities. Policies that focus solely on economic growth without addressing these inequities can exacerbate poverty and widen the gap between different socio-economic groups.
Social welfare programs that complement economic policies are essential for addressing the needs of the poor. For instance, direct cash transfer schemes and employment generation initiatives can provide immediate relief and empower individuals to improve their livelihoods. Additionally, investing in education, healthcare, and skill development is crucial for creating a more equitable society and sustainable poverty alleviation.
In conclusion, while economic policies can significantly influence poverty levels in India, a holistic approach that integrates social welfare measures is necessary to ensure that growth translates into improved living standards for all citizens.