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Poverty: Types & Committees

1 Poverty

2 Types of Poverty in India

2.1 Absolute Poverty

2.2 Relative Poverty

2.3 Situational Poverty

2.4 Generational Poverty

2.5 Multidimensional Poverty

3 Committees for Poverty Estimation in India

3.1 National Planning Committee

3.2 First Planning Commission working group

3.3 Y K Alagh Committee (1979)

3.4 Lakdawala Committee (1993)

3.5 Tendulkar Committee (2005): 5

3.6 Rangarajan Committee: 6

4 Concept Check 8

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 Types of Poverty Important Committees for Poverty Estimation

Poverty: Types & Committees

1. Poverty

Poverty is a state or condition in which a person or community lacks the nancial resources
and essentials to enjoy a minimum standard of life and well-being that's considered
acceptable in society.

In other words, unemployment means only involuntary unemployment wherein a person who is
willing to work at the existing wage rate does not get a job.

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 Types of Poverty Important Committees for Poverty Estimation

2. Types of Poverty in India

2.1 Absolute Poverty:

Absolute poverty refers to a condition where a person does not have the minimum amount of

income needed to meet the minimum requirements for one or more basic living needs over

an extended period of time.

The basic needs include food and safe drinking water, shelter, clothing, sanitation facilities,

quality and affordable healthcare and education facilities, access to information.

This minimum amount of income that is needed to ful l the basic needs is decided upon by

each country by taking into account various factors. We shall understand this clearly when we

are discussing about the Poverty Line in India.

2.2 Relative Poverty:

Relative poverty is closely associated with the issues of inequality.

Relative poverty occurs when people in a country do not enjoy a certain minimum level of

living standards as compared to the rest of the population and so would vary from country to

country, sometimes within the same country.

Gini-coe cient can be used to measure poverty in the relative sense.

Gini-coe cient:

The Gini-coe cient measures the inequality among values of a frequency distribution (for
example, levels of income). This is the most commonly used measure of inequality. The
coe cient varies between 0, which re ects complete equality and 1, which indicates complete
inequality (one person has all the income or consumption and all others have none).

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 Types of Poverty Important Committees for Poverty Estimation

2.3 Situational Poverty:

People or families can be poor because of some adversities like earthquakes, oods or a
serious illness. Sometimes, people can help themselves out of this situation quickly if they are
given a bit of assistance, as the cause of their situations was just one unfortunate event.

Generational Poverty:

This is when poverty is handed over to individuals and families from generations before them.
In this type, there is usually no escape from it, as people are trapped in its causes and have no
access to tools that will help them get out of it.

2.5 Multidimensional Poverty:

Multidimensional poverty is made up of several factors that constitute poor people’s

experience of deprivation – such as poor health, lack of education, inadequate living

standard, lack of income (as one of several factors considered), disempowerment, poor

quality of work and threat from violence.

A multidimensional measure can incorporate a range of indicators to capture the complexity

of poverty and better inform policies to relieve it. Different indicators can be chosen

appropriate to the society and situation.

Multi-dimensional Poverty Index gives us a measure of the extent of multi-dimensional

poverty prevailing in various countries.

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 Types of Poverty Important Committees for Poverty Estimation

3. Committees for Poverty Estimation in India:

3.1 National Planning Committee:

In 1938, Congress president Subhash Chandra Bose set up the National Planning Committee

(NPC) with Jawaharlal Nehru as chairman and Professor K. T. Shah as secretary for the

purpose of drawing up an economic plan with the fundamental aim to ensure an adequate

standard of living for the masses.

The Committee regarded the irreducible minimum income between Rs. 15 to Rs. 25 per capita

per month at Pre-war prices. However, this was also not tagged something as a poverty line of

the country.

3.2 First Planning Commission working group:

The concept of the poverty line was rst introduced by a working group of the Planning

Commission in 1962 and subsequently expanded in 1979 by a task force.

The 1962 working group recommended that the national minimum for each household of ve

persons should be not less than Rs 100 per month for rural and Rs. 125 for urban at 1960-61

prices.

These estimates excluded the expenditure on health and education, which both were

expected to be provided by the state.

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 Types of Poverty Important Committees for Poverty Estimation

3.3 Y K Alagh Committee (1979):

Till 1979, the approach to estimate poverty was traditional i.e., lack of income.

It was later decided to measure poverty precisely as starvation i.e. in terms of how much

people eat.

This approach was rst of all adopted by the YK Alagh Committee’s recommendation in 1979

whereby, the people consuming less than 2100 calories in the urban areas or less than 2400

calories in the rural areas are poor.

Now these calorie requirements need some ‘monetary value’ which can be determined by

ascertaining ‘quantity’ of consumption and ‘prices/value’ of that quantity. Data relating to

quantity and value was provided by NSSO survey.

It was estimated that, on an average, consumer expenditure (food and non-food) of Rs.49.09

per capita per month was associated with a calorie intake of 2400 per capita per day in rural

areas and Rs.56.64 per capita per month with a calorie intake of 2100 per day in urban areas.

This ‘Monthly Per Capita Expenditure’ was termed as poverty line.

The logic behind the discrimination between rural and urban areas was that the rural people

do more physical work.

Moreover, an implicit assumption was that the states would take care of the health and

education of the people. Thus, YK Alagh eventually de ned the rst poverty line in India.

Lakdawala Committee (1993):

In 1993, an expert group was constituted to review methodology for poverty estimation,
chaired by DT Lakdawala.

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 Types of Poverty Important Committees for Poverty Estimation

Recommendations:

Consumption expenditure should be calculated based on calorie consumption as used by the

Alagh Committee.

State speci c poverty lines should be constructed, and these should be updated using the

Consumer Price Index of Industrial Workers (CPI-IW) in urban areas and Consumer Price

Index of Agricultural Labour (CPI-AL) in rural areas.

The method of calculating poverty included rst estimating the per capita household

expenditure at which the average energy norm is met, and then, with that expenditure as the

poverty line, de ning as poor as all persons who live in households with per capita

expenditures below the estimated value.

The fallout of the Lakdawala formula was that number of people below the poverty line got

almost double. The number of people below the poverty line was 16 per cent of the population

in 1993-94. Under the Lakdawala calculation, it became 36.3 per cent.

Tendulkar Committee (2005):

Why the need for this committee

: In 2005, another expert group to review methodology for poverty estimation, chaired by
Suresh Tendulkar, was constituted by the Planning Commission to address the
three shortcomings of the previous methods

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 Types of Poverty Important Committees for Poverty Estimation

Shortcomings of the previous methods:

1. Consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and

services, whereas there were signi cant changes in the consumption patterns of the poor since that

time, which were not re ected in the poverty estimates.

2. There were issues with the adjustment of prices for in ation, both spatially (across regions) and

temporally (across time).

3. Earlier poverty lines assumed that health and education would be provided by the State and

formulated poverty lines accordingly.

Recommendations:

It adopted Mixed Reference Period in place of Uniform Reference Period. During previous

methodologies, a ‘uniform reference period’ was used that included 30 days just before the

survey for all food and nonfood items. But Tendulkar group changed ‘reference period’ to past

one year for 5 nonfood items viz., clothing, footwear, durable goods, education and

institutional medical expenses. For other items 30 days reference period was retained. This is

called ‘Mixed reference period’.

A shift away from calorie consumption-based poverty estimation.

A uniform poverty line basket (PLB) across rural and urban India.

A change in the price adjustment procedure to correct spatial and temporal issues with price

adjustment.

Incorporation of private expenditure on health and education while estimating poverty.

Poverty line was in form of ‘ Rs per capita per month’.

The Committee computed new poverty lines for rural and urban areas of each state.

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 Types of Poverty Important Committees for Poverty Estimation

National Poverty Lines (in Rs per capita per month) for the years 2004-05, 2009-10 and
2011-12:

Year Rural Urban

2004-05 446.7 578.8

2009-10 672.8 859.6

2011-12 816.0 1000.0

The following table outlines the manner in which the percentage of population below the
poverty line changed after the application of the Tendulkar Committee’s methodology. (For the
year 2004-05)

Committee Rural Urban Total

Lakdawala Committee 28.3 25.7 27.5

Tendulkar Committee 41.8 27.5 37.2

Rangarajan Committee:

C Rangarajan Committee was Set up By Planning commission in 2012 and submitted report in
2014.

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 Types of Poverty Important Committees for Poverty Estimation

Recommendations:

The Rangarajan committee estimation is based on an independent large survey of

households by Center for Monitoring Indian Economy (CMIE).

It has also used different methodology wherein a household is considered poor if it is unable

to save.

Instead of ‘Mixed reference Period’ it recommended ‘Modi ed Mixed reference period’ in

which reference periods for different items were taken as : 365-days for clothing, footwear,

education, institutional medical care, and durable goods, 7-days for edible oil, egg, sh and

meat, vegetables, fruits, spices, beverages, refreshments, processed food, pan, tobacco and

intoxicants, and 30-days for the remaining food items, fuel and light, miscellaneous goods

and services including non-institutional medical; rents and taxes.

It not only takes normative levels (Normative means – what is ideal and desirable) for

adequate nourishment, clothing, house rent, conveyance and education, but also considers

behaviorally-determined (Behavioral Means – What people use or consume as per general

behavior) levels of other non-food expenses.

The committee has estimated that almost 30 per cent of us were poor in 2011-12. It uses

separate data sets for rural and urban parts.

The panel computed the average requirements of calories, proteins and fats on the norms set

by the Indian Council for Medical Research in 2010. These are differentiated by age, gender

and activity for all-India rural and urban regions.

Accordingly, the energy requirement as calculated by Rangarajan is 2,155 kcal per person per

day in rural areas and 2,090 kcal per person per day in urban areas. This is signi cantly lower

than the 2,400 kcal in rural areas and slightly less than 2,100 kcal in urban areas used by the

earlier Lakdawala panel.

The reason given is that the age pro le and working conditions have changed with time.

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 Types of Poverty Important Committees for Poverty Estimation

The protein and fat requirements have been estimated on the same lines. These are 48g and

28g per capita per day, respectively, in rural India and 50g and 26g per capita per day in urban

areas.

According to the report of the committee, the new poverty line should be Rs 32 in rural areas

and Rs 47 in urban areas.

The table given below shows the total number of poor as per both the committees’
estimations.

Committee No. of Rural No. of urban Total Percent of

poor poor poor

Rangarajan 260.5 million 102.5 million 363 29.5

committee million

Tendulkar 216.5 million 52.8 million 269 21.9%

Committee million

Difference 44 million 49.7 million 93.7

million

The Rangarajan report has added 93.7 million more to the list of the poor assessed last year
as per the Suresh Tendulkar committee formula.

Now the total number of poor has reached 363 million from 269 million in 2011-12.

Differences between Rangarajan and Tendulkar Committee:

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 Types of Poverty Important Committees for Poverty Estimation

To understand the recommendations of Rangarajan Committee better, we will study the

differences between the recommendations of Tendulkar Committee and Rangarajan
Committee.

Committees Tendulkar Rangarajan

Set up by Planning Planning

Commission Commission

Set up in 2005 2012

Submitted report 2009 2014

Poverty estimation method Per capita Monthly

Expenditure Expenditure of
monthly family of five

Urban Poverty Line Per Day 33 47

Per Person

Urban Poverty Line Per Month 1000 1407

Per Person

Urban Poverty Line Per Month, 5000 7035

Family of Five Members

Rural Poverty Line Per Day 27 32

Per Person

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 Types of Poverty Important Committees for Poverty Estimation

Rural Poverty Line (Rs) 816 972

Per month Per Person

Rural poverty line (Rs) 4080 4860

Per month Family of five
members

BPL (Below Poverty 27 crore 37 crore

Line) in crore

Calorie Expenditure Only calorific value in Calorie + Protein

expenditure + Fat

Calories in rural areas 2400 2155

Calories in urban areas 2100 2090

Main Focus areas Only counts expenditure 1. Food

on food, health, 2. Non – food items
education, clothing such as education
3. Healthcare
4. Clothing
5. Transport
6. Rent
7. Non-food items
that meet
nutritional
requirements.

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 Types of Poverty Important Committees for Poverty Estimation

Concept Check

Q. Workers temporarily unemployed but who normally nd jobs quickly are called

(a) Cyclically unemployed

(b) Seasonally unemployed

(c) Structurally unemployed

(d) Frictionally unemployed

(e) None of the above

Answer: D

Q. Which of the following is an example of structural unemployment?

(a) Red Taxi lays off 500 taxi drivers and replaces them with automated self-driving cars. The
taxi drivers look for work in another industry.

(b) The economy is experiencing a slowdown, so Red Taxi closes down 10 dispatch o ces
and lays off taxi drivers.

(c) Each month, on average three Res Taxi drivers quit their jobs in the city to move to their
village and start searching for work in their own native place.

(d) Each month, on average, one of the Red Taxi drivers who quits and moves to the country
will decide to stop job searching for a new job and retire.

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 Types of Poverty Important Committees for Poverty Estimation

(e) None of the above

Answer: A

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