Notes on Poverty:

Concept, Measurement
and Issues

Vishal Thakare
MA Berlin School of Economics
Who is poor?
Defining Poverty
Poverty can be defined as material
deprivation of an individual
characterized by inability to feed
oneself

It means having an income level that

does not allow an individual to cover
certain basic necessities,

Broadened definition of poverty

includes feeling of
powerlessness/constrained capability
to participate, not to be beaten up,
freedom from fear (Sen)
 Absolute or Relative

Absolute poverty – is a condition where household

income is below a necessary level to maintain basic
living standards (food, shelter, housing). ...

Relative poverty – A condition where household

income is a certain percentage below median
incomes
 Concepts and Measurement

• Basic Needs approach based on food

energy method ( calorie norm) Calorie
requirement

• 2400 calories in rural and 2100 in urban

and required per capita expenditure
(Planning commission, 1979)

• Based on 1973-74 consumer behaviour

data, it was Rs. 49.09 per month in rural
and 56. 64 per capita per month in urban
areas
 What happened in last 40
years

• Rural poverty declined from 45.61 per cent

in 1983 to 28.30 per cent &
• Urban poverty declined from 42.15 per cent
to 25.70 per cent between 1983 and 2004-
05
• Based on consumer price indices
(consumption basket of necessary goods)
but consumption basket does not include
health/education

• Updated in 2004-05 to Rs. 356.30 in rural

areas and 538.60 in urban areas per capita
per month

• Share of population below poverty line

(Head count ratios: HCR) was estimated to
28.7% in rural and 25% in urban areas

• 356.30 per month, so per day is just 11.90

& 17 in urban
 Tendulkar Committee

• Reviewed this methodology and broadened

it up in narrow sense

• Abandoning of calorie-norm with All India

urban poverty line as the basis for
estimating poverty in country (based on
Purchasing Power Parity)

• Urban population consumed 1776 calories

per capita per day
• Using this method, poverty line was updated
to Rs.446.68 in rural area & 578.80 in rural
area

• Accounting 41.8 % in rural & 25.7% in urban,

increasing to total no of poor from 403
million in 1993 to 407 million in 2004-05

• Household spends 60% of its earnings on

food (Long term grain policy, 2002)

• Added dimension- not just adequate to cover

normative food intakes but also the “private
expenditure on education and health”
No of Poors Using Tendulkar Method
 Poorest of poor survive on Rs. 17 a day villages: NSSO,
2012


5% population on the bottom had an average monthly per
capita expenditure (MCPE) of Rs 521.44 in rural areas and
Rs 700.50 in urban areas


On the other end of the spectrum, top five per cent of the
population had an MPCE of Rs 4,481 in rural areas and Rs
10,282 in urban areas


On an average on the all-India basis, MPCE was around
Rs 1,430 for rural India and about Rs 2,630 for urban India


The survey said only about 10 per cent of the rural
population reported household MPCE above Rs 2,296 and

For the average rural Indian, food accounted for 52.9 per
cent of the value of consumption during 2011-12. This
included 10.8 per cent for cereals and cereal substitutes, 8
per cent for milk and milk products, 7.9 per cent on
beverages, refreshments and processed food, and 6.6 per
cent on vegetables, the release said.

Among non-food item categories, fuel and light for
household purposes (excluding transportation) accounted
for 8 per cent, clothing and footwear 7 per cent, medical
expens

For the average urban Indian, 42.6 per cent of the value of
household consumption was accounted for food, including
9 per cent by beverages, refreshments and processed
food, 7 per cent by milk and milk products, and 6.7 per cent
by cereals and cereal substitutes.

Education accounted for 6.9 per cent, fuel and light 6.7 per
Consumption Distribution

https://timesofindia.indiatimes.com/india/Economic-
gap-between-upper-castes-and-dalits-
persists/articleshow/46914577.cms?from=mdr
• Richest 1% own 58% of total
wealth in India (Oxfam, 2018)

• Total 84 billionaire wealth USD 248

out of USD
3.1 trillion India’s total wealth

• 57 billionaires wealth, USD 216 billion

= India’s bottom 70 per cent
population
Rich Poor disparity
Source: Bharti Nitin, Wealth Inequality, Class and Caste in India, 1961-2012,
World Inequality Lab, Nov. 2018