Indian Economy

Poverty

In almost all underdeveloped countries where per capita income is very low, income inequality has resulted in a number of evils, of which poverty is certainly the most serious one. In India, even now in spite of all the development during the past five and a half decades, 34.3 per cent of the population was getting less than $1(PPP) a day in 2004-05.’ This percentage of population was considered to be poor on an international criterion suggested by World Development Report. Most of the time this population suffered from extreme destitution.

THE CONCEPT OF POVERTY LINE

It is generally agreed in this country that only they who fail to reach a certain minimum consumption standard should be regarded as poor. But the experts who have examined the question of poverty quantitatively find it difficult to agree on the amount of income that will ensure the minimum consumption standard at a point of time. The Planning Commission has adopted definition of poverty provided by the “Task Force on Projections of Minimum Needs and Effective Consumption Demand”. Using the income poverty method, the Task Force had defined the poverty line as the midpoint of the monthly per capita expenditure class having a daily calorie intake of 2,400 per person in rural areas and 2,100 in urban areas. On this basis, the cut-off points turn out to be Rs. 49.09 for rural areas and Rs. 56.64 for urban areas at 1973-74 prices.

These figures constituted ‘the official poverty lines’ for that year. The poverty lines for later years were obtained by adjusting the 1973-74 poverty lines for inflation. An expert group of the Planning Commission proposed introduction of State specific price changes in the adjustment of the poverty lines. Thus, State specific poverty lines were obtained. However, no adjustments were made for changes in consumers’ preferences reflecting a switch away from cereals and overall switch from food to non-food items. In fact, official poverty lines seriously underestimate the true cost of attaining the minimum energy requirements. Jaya Mehta and Shanta Venkataraman in their study have pointed out that in 1993-94 the official poverty line was sufficiant to purchase only 1968 kcal (daily) per capita in rural areas and 1890 kcal (daily) per capita in urban areas. A recent study by Ranjan Ray and Geoffrey Lancaster also raises serious questions on the official poverty line as a measure of the true cost of obtaining the minimum calorie requirements today. The paper provides robust evidence to prove that poverty situation in India is worse than indicated by official poverty statistics - adjusted or not.’

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