Poverty Line in India

• Dadabhai Naoroji
• National Planning Committee
• First Planning Commission working group
• VM Dandekar and N Rath - 1971
• Y K Alagh Committee
• Lakdawala Committee
• Suresh Tendulkar Committee
• Rangarajan committee
• Arvind Panagariya Committee

Dadabhai Naoroji

(Dadabhai Naoroji is first seed to India freedom struggle on Political & Economical side. Raja ram Mohan Roy in Social Side)

• Poverty line based on 1867-68 prices.
• Subsistence cost based poverty line.
• It was based on the cost of a subsistence diet (bare wants of a human being, to keep him in ordinary good health and decency).
• Rice or flour
• Dhal
• Mutton
• Vegetables
• Ghee
• Vegetable oil
• Salt

National Planning Committee

• In 1938, Congress president Subhash Chandra Bose set up the National Planning Committee (NPC).
• Jawaharlal Nehru as Chairman.
• Purpose - Drawing up an Economic plan.
• Fundamental Aim - To ensure an adequate standard of living for the masses.
• Minimum income - Rs. 15 to Rs. 25 per capita per month at Pre-war prices.
• The Bombay Plan (1944) proponents had suggested a poverty line of ₹75 per capita per year.
• The Bombay Plan was a set of a proposal of a small group of influential business leaders in Bombay for the development of the post-independence economy of India.

First Planning Commission Working Group - 1962

• Poverty line was first introduced by a working group of the Planning Commission in 1962
• Recommendation- The national minimum for each household of five persons should be not less than Rs 100 per month for rural and Rs. 125 for urban at 1960-61 prices.
• Exclusion- the expenditure on health and education, which both were expected to be provided by the state.

VM Dandekar and N Rath - 1971

• VM Dandekar and N Rath (1971), made the first systematic assessment of poverty in India, based on National Sample Survey (NSS) data.
• Unlike previous scholars who had considered subsistence living or basic minimum needs criteria as the measure of poverty line, VM Dandekar and N Rath were of the view that poverty line must be derived from the expenditure that was adequate to provide 2250 calories per day in both rural and urban areas.
• Expenditure based Poverty line estimation, generated a debate on minimum calorie consumption norms.

Y K Alagh Committee 1979

• Till 1979, the approach to estimate poverty was traditional i.e. lack of income.
• It was later decided to measure poverty precisely as starvation i.e. in terms of how much people eat.
• This approach was first of all adopted by the YK Alagh Committee’s recommendation in 1979.
• Whereby less than,
• 2100 calories in the urban areas
• 2400 calories in the rural areas are poor.
• The logic behind the discrimination between rural and urban areas was that the rural people do more physical work.
• Moreover, an implicit assumption was that the states would take care of the health and education of the people.
• Thus, Y K Alagh eventually defined the first poverty line in India.

Lakdawala Committee (1993)

• Till as recently as 2011, the official poverty lines were based entirely on the recommendations of the Lakdawala Committee of 1993.
• 3 Suggestions
1. Consumption Expenditure
• 2400calories (Rural)
• 2100 calories (Urban)
• Addition to clothing and shelter.
2. State Specific Poverty Line-updated using CPI-IL (Consumer Price Index for Industrial Laborers) and CPI- AL (Consumer Price Index for Agricultural Labourers) for estimation.
3. Discontinuation of ‘Scaling’ of poverty estimates based on National Accounts Statistics.

Suresh Tendulkar Committee

• Expert group constituted by the Planning Commission and, chaired by Suresh Tendulkar, was constituted to review methodology for poverty estimation and to address the following shortcomings of the previous methods:
• Obsolete Consumption Pattern: Consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates.
• Inflation Adjustment: There were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time).
• Health and Education Expenditure: Earlier poverty lines assumed that health and education would be provided by the state and formulated poverty lines accordingly.
• This committee recommended to shift away from the calorie based model to monthly spending on education, health, electricity and transport also.
• It strongly recommended target nutritional outcomes i.e. instead of calories; intake nutrition support should be counted.
• It suggested that a uniform Poverty Basket Line be used for rural and urban region.
• Tendulkar adopted the cost of living as the basis for identifying poverty.
• Private Expenditure: Incorporation of private expenditure on health and education while estimating poverty.
• Price Adjustment Procedure: The Committee also recommended a new method of updating poverty lines, adjusting for changes in prices and patterns of consumption (to correct spatial and temporal issues with price adjustment), using the consumption basket of people close to the poverty line.
• Mixed Reference Period: The Committee recommended using Mixed Reference Period based estimates, as opposed to Uniform Reference Period based estimates that were used in earlier methods for estimating poverty.
• (Some commodity price change daily (fuel), Some change weekly (Vegetable) etc... So find the changing price and calculate it).

Rangarajan Committee

• The Tendulkar panel stipulated a benchmark daily per capita expenditure of Rs. 27 and Rs. 33 in rural and urban areas, respectively, and arrived at a cut-off of about 22% of the population below poverty line.
• However, this amount was such low that it immediately faced a backlash from all section of media and society.
• Since the numbers were unrealistic and too low, the government appointed another committee under Prime Minister’s Economic Advisory Council Chairman C. Rangarajan to review the poverty estimation methodology.
• The Rangarajan group took the view that the consumption basket should contain a food component that satisfied certain minimum nutrition requirements, as well as consumption expenditure on essential non-food item groups (education, clothing, conveyance and house rent) besides a residual set of behaviourally determined non-food expenditure.
• Normative and Behavioural level: Poverty line should be based on:
• Normative level of adequate nutrition: Ideal and desirable level of nutrition.
• Behavioral determination of non-food expenses: What people use or consume as per general behavior.
• Nutritional Requirement: For normative levels of adequate nutrition – average requirements of calories, proteins and fats based on Indian Council of Medical Research (ICMR) norms, differentiated by age, gender and activity for all-India rural and urban regions is considered:
• Calories: 2090 kcal in urban areas and 2155 Kcal in rural areas.
• Protein: For rural areas 48 gm and for urban areas 50 gm.
• Fat: For urban areas 28 gm and for rural areas 26 gm.
• Poverty Threshold: Persons spending below ₹47 a day in cities and ₹32 in villages be considered poor.
• Based on this methodology, Rangarajan committee estimated that the number of poor were 19% higher in rural areas and 41% more in urban areas than what was estimated using Tendulkar committee formula.
• Modified Mixed reference period: Instead of Mixed Reference Period (MRP) it recommended Modified Mixed Reference Period (MMRP) in which reference periods for different items were taken as:
• 365-days for clothing, footwear, education, institutional medical care, and durable goods.
• 7-days for edible oil, egg, fish and meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and intoxicants
• 30-days for the remaining food items, fuel and light, miscellaneous goods and services including non-institutional medical; rents and taxes.
• Criticism: Rangarajan committee missed the opportunity to go beyond the expenditure-based poverty rates and examine the possibility of a wider multi-dimensional view of deprivation.

Arvind Panagariya Committee

• Task force headed by NITI Aayog Vice-Chairman Arvind Panagariya to prepare a road map for elimination of poverty submitted its report to the Prime Minister's Office (PMO) on 11 September 2016.
• It has suggested setting up a committee to identify people Below Poverty Line (BPL). It also suggested participation from states in defining the BPL population.
• It asked for constitution of a new committee, which in participation with the states and other stakeholders should work on defining the BPL population and identify them.
• It also suggested four options for tracking the poor and they are (Only give idea)
• First: It asks to continue with the Tendulkar poverty line.
• Second: It asks to switch to the Rangarajan or other higher rural and urban poverty lines.
• Third: It calls to track the progress over time of the bottom 30 percent of the population.
• Fourth: It asks to track progress along specific components of poverty such as nutrition, housing, drinking water, sanitation, electricity and connectivity.

Socio Economic and Caste Census 2011

(Used this Census for Scheme implementation)

• The Ministry of Rural Development commenced the Socio Economic and Caste Census (SECC) in June 2011 through a comprehensive door to door enumeration across the country.
• This is the first time such a comprehensive exercise has been carried out for both rural and urban India.
• It has generated information on a large number of social and economic indicators relating to households across the country.
• SECC 2011 is also first paperless census in India conducted on hand-held electronic devices by the government in 640 districts.
• The rural development ministry has taken a decision to use the SECC data in all its programmers such as MGNREGA, National Food Security Act etc.
• SECC 2011 data will also be used to identify beneficiary and expand the direct benefit transfer scheme as part of its plans to build upon the JAM (Pradhan Mantri Jan Dhan Yojana-AadhaarMobile number portability) trinity.
• The feeling was that the current definition of poverty — which was derived by identifying a basket of essential goods and services and marking the point in India’s income distribution where that basket could be purchased by an individual — was missing too much.
• For one, the numbers seemed absurdly low — set at Rs.816 per person per month in rural areas and Rs. 1,000 in urban areas by the Planning Commission by updating the Tendulkar methodology, the numbers amounted to a daily expenditure of around Rs.30, which caused public indignation.
• A new committee was formed which drew a new line, but the Rangarajan methodology too wound up at a poverty line not very different from the Tendulkar line.
• So, a broader and more dynamic definition of poverty seemed important.
• Also, while the general census was about individuals, the SECC was based on households and this gives a more accurate picture of the economic status of families
• Criteria used in SECC 2011 SECC uses the parameters laid down by the S R Hashim committee appointed by the erstwhile Planning Commission of India i.e., automatic exclusion on the basis of 14 parameters, automatic inclusion on the basis of 5 parameters and grading of deprivation on the basis of seven criteria.

14 parameters of Automatic Exclusion: -

1. Motorized 2/3/4 wheeler/fishing boat.
2. Mechanized 3-4 wheeler agricultural equipment.
3. Kisan credit card with credit limit of over Rs. 50,000/-.
4. Household member government employee.
5. Households with non-agricultural enterprises registered with government.
6. Any member of household earning more than Rs. 10,000 per month.
7. Paying income tax.
8. Paying professional tax.
9. 3 or more rooms with pucca walls and roof.
10. Owns a refrigerator.
11. Owns landline phone.
12. Owns more than 2.5 acres of irrigated land with 1 irrigation equipment.
13. 5 acres or more of irrigated land for two or more crop season.
14. Owning at least 7.5 acres of land or more with at least one irrigation equipment

5 parameters of Automatic inclusion:

1. Households without shelter.
2. Destitute, living on alms.
3. Manual scavenger families.
4. Primitive tribal groups.
5. Legally released bonded labour.

Households based on 7 markers of deprivation: (Included)

1. Households with Kutchha house.
2. No adult member in working age.
3. Household headed by female and no working age male member.
4. Household with handicapped members and no able bodied adult.
5. Household with no literate over 25 years.
6. Landless households engaged in manual labour
7. SC/ST households.