How are poverty numbers calculated
Widespread poverty is the biggest challenge for India's policymakers. The government has drawn criticism for its inability to tackle the menace despite high economic growth. Some estimates place the number of poor at 40% of the population. ET looks at how poverty numbers are generated:
How is the poverty line defined?
The concept of poverty is associated with socially perceived deprivation with respect to basic human needs. Historically, India has followed a poverty line, which is based on a minimum number of calories that an individual should consume and a rupee amount was calculated on this basis. The existing rural and urban official poverty lines were originally defined in terms of per capita total consumer expenditure (PCTE) at 1973-74 market prices and is adjusted over time and across states for changes in prices.
The method still retains the original 1973-74 all-India reference poverty line baskets (PLB) of goods and services. These PLBs were derived separately for rural and urban areas, anchored in per capita calorie norms of 2400 (rural) and 2100 (urban) per day. People whose PCTE is below the required minimum are considered to be below the poverty line.
What is the international poverty line?
The common international poverty line is based on an income of around $1 a day. In 2008, the World Bank revised the figure to $1.25 at the 2005 purchasing power parity.
What is the new way to define the poor?
As the earlier estimates of poverty have been largely perceived as inadequate, a committee led by Suresh Tendulkar came up with a new way to define the poor. Tendulkar moved away from calorie anchor while testing the adequacy of actual food expenditure. The method uses same consumption basket for rural and urban poor, but applies different price levels of rural and urban areas to arrive at the poverty estimate. The major departure from the original method is the provision for including expenditure on health and education.
Does India need to redefine poor?
With India hitting a high growth trajectory, the living standards and consumption patterns in both urban and rural areas have changed, while existing data continues to use consumption baskets that reflect trends prevalent in 1973-74. Earlier poverty mechanisms also assumed that basic social services like health and education would be supplied by the state, therefore even as both were covered in base year 1973-74, no account was taken for the change in the proportion of expenditure in these services since then.
Widespread poverty is the biggest challenge for India's policymakers. The government has drawn criticism for its inability to tackle the menace despite high economic growth. Some estimates place the number of poor at 40% of the population. ET looks at how poverty numbers are generated:
How is the poverty line defined?
The concept of poverty is associated with socially perceived deprivation with respect to basic human needs. Historically, India has followed a poverty line, which is based on a minimum number of calories that an individual should consume and a rupee amount was calculated on this basis. The existing rural and urban official poverty lines were originally defined in terms of per capita total consumer expenditure (PCTE) at 1973-74 market prices and is adjusted over time and across states for changes in prices.
The method still retains the original 1973-74 all-India reference poverty line baskets (PLB) of goods and services. These PLBs were derived separately for rural and urban areas, anchored in per capita calorie norms of 2400 (rural) and 2100 (urban) per day. People whose PCTE is below the required minimum are considered to be below the poverty line.
What is the international poverty line?
The common international poverty line is based on an income of around $1 a day. In 2008, the World Bank revised the figure to $1.25 at the 2005 purchasing power parity.
What is the new way to define the poor?
As the earlier estimates of poverty have been largely perceived as inadequate, a committee led by Suresh Tendulkar came up with a new way to define the poor. Tendulkar moved away from calorie anchor while testing the adequacy of actual food expenditure. The method uses same consumption basket for rural and urban poor, but applies different price levels of rural and urban areas to arrive at the poverty estimate. The major departure from the original method is the provision for including expenditure on health and education.
Does India need to redefine poor?
With India hitting a high growth trajectory, the living standards and consumption patterns in both urban and rural areas have changed, while existing data continues to use consumption baskets that reflect trends prevalent in 1973-74. Earlier poverty mechanisms also assumed that basic social services like health and education would be supplied by the state, therefore even as both were covered in base year 1973-74, no account was taken for the change in the proportion of expenditure in these services since then.
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