Poverty is an unsettled issue that affects the Indian population to this day; even more so is the identification and estimation of those who are affiliated with poverty. Poverty is defined as a circumstance in which a person is unable to obtain the bare essentials of existence. It is a situation when a person lacks insufficient funds to cover basic requirements such as food, clothing, and shelter. on the other hand, Poverty is much more than a lack of resources.

According to recent reports, more than a quarter of the population living in rural areas of India is below the poverty line. In rural areas of India, 25.7% are living below the poverty line, whereas in urban areas it is 13.7%.

 

What is Poverty Estimation?

The income or consumption levels are a typical measure used to evaluate poverty in India, and if the income or consumption goes below a certain minimal level, the household is considered to be below the poverty line (BPL).

• Poverty Line Calculation: Poverty assessment in India is presently carried out by the NITI Aayog task force using data collected by the National Sample Survey Office under the National Bureau Of statistics Implementation to calculate the poverty line (MOSPI).
• The Planning Commission, which was formerly in charge of establishing the poverty line in India, has been replaced by NITI Aayog as a policy think tank. 
• Consumer vs. Income Level: In India, poverty lines are calculated based on consumption spending rather than income levels for the following reasons:
  • Income Variation: The income of self-employed persons, daily wage laborers, and others is extremely changeable both in time and space, although consumption patterns are rather consistent.
  • Additional Income: Even for normal-salary workers, there are often additional side revenues, which might be difficult to account for. 
  • Data collection: In the case of a consumption-based poverty line, sample-based surveys employ a reference period (say, 30 days) in which families are questioned about their consumption in the previous 30 days, which is then used to reflect general consumption. It is not feasible to trace the main trend of revenue. The reference period refers to the time frame in which NSSO staff conduct the survey and ask specific questions about homes. 

Measurement of Poverty Line

Different poverty lines are presented that are compiled according to the different approaches to poverty:

Absolute Poverty Lines

These lines tell us about the value of the resources needed to maintain a minimum level of welfare. The main motive is to measure the cost involved in purchasing a basket of essential products, which allows a person to reach minimum levels of satisfaction in terms of their basic needs.

One of the important characteristics of absolute poverty lines is that results could be used from them that are important to the economic development, although shared out homogeneously to the population.

Relative Poverty Lines

These lines classify people in the society under study into two groups; those most disadvantaged, called “poor” and the rest. These lines are used as indicators based on monetary variables like income and expenditure.

Subjective Poverty Lines

The concept of poverty used in these lines to divide the population into poor and not poor is based on the perception of households and individuals themselves in relation to what they perceived to be poor.

Need for Poverty Estimation

It is vital  to identify and estimate the poor in India because of the following reasons:

For Knowing the Impact of Welfare Schemes

It helps to keep track of the impacts and successes of various government schemes that have been introduced over the years to eliminate poverty. It also helps to estimate the shortcoming of the same.

For Generation of New Poverty Estimation Plans

New plans would be formulated more cautiously, keeping in mind all the important points and shortcomings.

Constitutional Requirement

A just and equitable society is guaranteed by the Constitution of India, the estimation of poverty paves a way for such a society as it helps in the identification of vulnerable society.

Data Collection Methods for Poverty Estimation

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

Uniform Resource Period (URP)

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

Mixed Reference Period (MRP)

From the year 2000 onwards, NSSO relied on an MRP method which measured consumption of five- low-frequency items over a period of 30 days. These items include durables, clothing, education, and health expenditure.

Estimates of Poverty in India

Pre- Independence Estimation of Poverty

Dadabhai Naoroji took concrete steps in identifying the poor people in India. He had formulated a plan that ranged from Rs 16 to Rs 35 per capita per year based on 1867-68 prices of subsistence diet, In the year 1938, 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 are very important.

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

Post- Independence Estimation of Poverty in India

Based on the calorific consumption or per capita expenditure, poverty line estimation is calculated by several committees.

VN Dandekar and N Rath

They made a systematic study of poverty in 1971. The previous estimation has stressed subsistence living as a criterion of the poverty line, they suggested that the poverty line’s criteria must be based on expenditure that would provide 2250 calories per day in both rural and urban areas.

Alagh Committee ( 1979)

It 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 of inflation.

Lakdawala Committee (1993)

The Lakdawala Committee is based on assumption that the basket used to calculate the Consumer Price Index- Industrial Workers (CPI-IW) AND the Consumer Price Index- Agricultural Labourers ( CPI-AL) reflected the consumption pattern of the poor. The Lakdawla Committee report submitted in 1993 suggested and recommended:

• Poverty Line Approach
• State-Specific Poverty Lines
• Expert Group recommended only NSS data should be relied on.

Tendulkar Committee (2009)

This Committee by Suresh Tendulkar gave the following recommendation:

• A shift from calorie consumption-based poverty estimation
• Uniform Poverty Line Basket (PLB) across rural and urban areas. 
• Changes in Price adjustment procedure.
• Incorporation of private expenditure on health and education while estimating poverty
• They used the Mixed Reference Period.

C Rangarajan Committee (2012)

• A new panel was created by Planning Commission that would estimate poverty:
• Provide an alternate method to identify poverty levels
• Examine divergences of data provided by NSSO and National aggregates
• Review International poverty estimation methods
• Recommend how these methods can be linked to eligibility for various poverty elimination schemes.

FAQs on Poverty Estimation

Question 1: What is the present methodology of poverty estimation in India?

Answer:

Poverty estimation in India is now carried out by NITI Aayog’s task force through the calculation of poverty line based on data by National Sample Survey Office.

Question 2: What is the basis of poverty estimation in India?

Answer:

Monthly per capita consumption expenditure of Rs. 972 in rural areas and Rs. 1407 in urban areas is recommended as poverty line at all India level.

Question 3: Do you think the present methodology of poverty estimation is appropriate?

Answer:

No, it is not so appropriate as it takes into account only the basic needs, not so much about the quality of these basic necessities is the lowest quality available is not appropriate.

Question 4: What are the principal measures taken in West Bengal to reduce poverty?

Answer: 

The principal measure taken in West Bengal to reduce poverty is land reforms as they helped in the reduction of poverty.

Operation Barga has started which encourages and protects the interest of sharecroppers and prevents them from the exploitation of landowners.

Question 5: Explain colonial rule as the cause of poverty.

Answer:

This is one of the most important causes of poverty in India as the British colonial government has reformed the policies to increase their economic growth which result in a decline of economic growth of India, This government have also ruined the Indian traditional handicrafts industry and discouraged the development of industries like textile and cottage.