How Are Poor People Identified?

Poverty is a contentious issue that affects the Indian population to this day. Even more, so is that fact in the identification and estimation of those afflicted by poverty. Different countries have their own definition of poverty, and since poverty is a broad concept, some of these definitions will vary from nation to nation.

Keeping the Indian context in mind, this article will elaborate upon how are poor people identified when it comes to poverty identification and estimation.

The information from this article will be useful for candidates writing the civil services examination this year.

UPSC 2021

Poverty Estimation in India

In India, the most commonly used method to estimate poverty is through the measurement of income and consumption levels. A person is considered poor if his/her income level falls below a minimum level that fails to meet his/her basic needs. This minimum level is known as the ‘poverty line’. When the income or consumption of an individual or the household he/she belongs to fall below minimum level then they are designated to be Below the Poverty Line

The Poverty Line calculation is now carried out by the NITI Aayog (the successor to the erstwhile Planning Commission of India) through the calculation of the poverty line based on the data collected by the National Sample Survey Office (NSSO).

Know the difference between NITI Aayog and the Planning Commission

It should also be noted that even though both income and consumption levels are measured while identifying the poor in India, its consumption expenditure that is taken primarily into account because of the following reasons:

Fluctuation in income: Income of those who are daily wage labourers, contract workers etc, vary factoring in the availability of work and the income offered although the consumption pattern is comparatively much stable

Additional Income: It’s not always necessary that daily wage labourers or contract employees will have a single source of income. There will be other avenues from which they can earn their wages and this will be difficult to take into account

Collection of Data: Sample-based surveys use a reference period of 30 days when estimating a consumption level of a household and are taken as the representation of a general consumption pattern as tracing the income pattern is not possible.

Candidates can know the difference between absolute poverty and relative poverty by visiting the linked article

Why is it important to identify the poor in India?

Poverty estimation in India is important for the following reasons:

To Measure the Impact of Welfare Schemes: It is important to estimate poverty as it helps to keep track of the impact and success of various government schemes that have been introduced to eliminate poverty. In addition, these schemes can be tweaked to address any shortcomings if any.

Its a part of a Poverty Elimination of Plan: The poverty estimates are used to formulate new plans that will ensure the elimination of poverty from the society.

It’s a Constitutional Requirement: As the Constitution of India promises a just and equitable society, estimation of poverty paves the way for such a society as it helps in identifying the vulnerable sections of society an easy task.

To know what are the main causes of poverty in India, visit the linked article.

Data Collection Methods for Poverty Estimation

The following are the data collection methods used to identify the poor in India

Uniform Resource Period (URP): From 1993 -1994, the poverty line was based on a Uniform Resource Period, which involved asking people about their consumption expenditure across a period of over 30-days

Mixed Reference Period (MRP):  From 2000 onwards, the NSSO relied on an MRP method which measured consumption of five-low frequency items over a period of 30 days. These items are clothing, durables, education and institutional health expenditure.

Pre-Independence Estimation of Poverty

It was Dadbhai Naoroji who took concrete steps in identifying the poor in India. He formulated a poverty line that ranged from Rs 16 to Rs 35 per capita per year based on 1867-1868 prices of subsistence diet such as rice, flour, dhal, mutton, vegetable, ghee, vegetable oil and salt

In 1938, the National Planning Committee devised a poverty line ranging from Rs 15 to Rs 20 per capita per month. It was based on a minimum standard of living where nutritional requirements were important.

In 1944, the Bombay Plan suggested a poverty line of Rs 75 per capita per year.

Know more about the various poverty alleviation schemes in India, by visiting the linked article.

Post-Independence Estimation of Poverty in India

Poverty Line Estimation or calculating the number of poor in India was done by several committees on basis of calorific consumption or per capita expenditure.

VM Dandekar and N Rath

Based on the data from the National Sample Survey (NSS) data VM Dandekar and N Rath made a systematic assessment of poverty in 1971. While the previous estimations had stressed on subsistence living or basic minimum needs as a criterion for the poverty line, VM Dandekar and N Rath suggested that the poverty line’s criteria must be based on the expenditure that would provide 2250 calories per day both in rural and urban areas.

Alagh Committee (1979)

The Taskforce constituted by the Planning Commission under the direction of YK Alagh, constructed a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure. The estimates in the ensuing years would be adjusted taking into account the price level for inflation.

Lakdawala Committee (1993)

 The Lakdawala committee based their findings on the assumption that the basket used to calculate Consumer Price Index-Industrial Workers (CPI-IW) and Consumer Price Index-Agricultural Labourers (CPI-AL) reflected the consumption pattern of the poor

Expert Group on ‘Estimation of Proportion and Number of Poor’ – Chaired by Prof DT Lakdawala (former Deputy Chairman Planning Commission)

The Lakdawala Committee submitted the report in 1993 and recommended:

  • Poverty Line approach can be continued based on calorie consumption (fixed consumption basket)
  • State-specific poverty lines should be constructed and these should be updated using the CPI-IW in urban areas and CPI-AL in rural areas
  • Scaling of poverty estimates should not be based on National Accounts Statistics. The Expert Group recommended only NSS data should be relied upon.

The Indian Government accepted the Lakdawala Committee recommendations with minor modifications in 1997.

To know more about CPI (Consumer Price Index), visit the linked article.

Tendulkar Committee (2009)

 This committee chaired by Suresh Tendulkar gave the following recommendations

  1. A shift away from calorie consumption-based poverty estimation
  2. A uniform poverty line basket (PLB) across rural and urban India
  3. A change in the price adjustment procedure to correct spatial and temporal issues with price adjustment
  4. Incorporation of private expenditure on health and education while estimating poverty

The committee used the Mixed Reference Period as opposed to Universal Reference Period used by earlier committees. Using this method the committee arrived at a conclusion that the poverty line was at Rs. 446.68 per capita per month in rural areas and Rs. 578.80 per capita per month in urban areas from 2004-2005. In 2009-2010 it was  Rs. 859.6 in urban areas while it was Rs.672.8 in rural areas. In 2010-2011 it was Rs. 1000 for urban and Rs. 816 for rural areas.

C Rangarajan Committee (2012)

The Planning commission created a new panel on poverty estimation that would

  1. Provide an alternate method to identify poverty levels
  2. Examine divergences between the consumption data provided by the NSSO and the National Accounts aggregates
  3. Review of international poverty estimation methods
  4. Recommend how these methods can be linked to eligibility for various poverty elimination schemes created by the government of India

The committee submitted its final report on 2014. The report dismissed the Tendulkar Committees estimation of the poverty level in India. The report said that was much higher in 2011-2012 at 29.5% of the population, which means that three out of 10 people in India were poor.

To know more in detail about the UPSC Syllabus, candidates can visit the linked article. Candidates can find more links related to UPSC exam preparation in the table given below:

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