ASSIGNMENT ON

DEFINE MEASURE TO DEFINE

POVERTY, POVERTY LINE & VARIOUS
APPROACHES
By
NEHA SACHDEVA, SEC B
Roll No: - A3256119078

SUBMITTED TO: - DR. CHANDRIKA

POVERTY
Poverty is a state or condition in which a person or community lacks the financial
resources and essentials for a minimum standard of living. Poverty means that the
income level from employment is so low that basic human needs can't be met.
Poverty-stricken people and families might go without proper housing, clean water,
healthy food, and medical attention. Each nation may have its own threshold that
determines how many of its people are living in poverty.
Types of Poverty:
Poverty implies low income and struggling to meet basic needs. There are two main
types of poverty
 Absolute poverty – income below a certain threshold necessary to meet basic
necessities of life (food, shelter, clothing, rent)
 Relative poverty – Individuals receiving income a certain level (e.g. 50%)
below the median income of the general population

POVERTY ESTIMATION

A common method used to estimate poverty in India is based on the income or

consumption levels and if the income or consumption falls below a given minimum
level, then the household is said to be Below the Poverty Line (BPL).
MEASURES TO DEFINE POVERTY

Pre-Independence Poverty Estimation

 Dadabhai Naoroji through his book, “Poverty and Unbritish Rule in

India” made the earliest estimation of poverty line (₹16 to ₹35 per capita
per year).

 National Planning Committee’s (1938) poverty line (ranging from ₹15 to

₹20 per capita per month) was also based on a minimum standard of
living perspective in which nutritional requirements were implicit.

 The Bombay Plan (1944) proponents had suggested a poverty line of ₹75

per capita per year.

Post-Independence Poverty Estimation

 Planning Commission Expert Group (1962), working group constituted by
the Planning Commission formulated the separate poverty lines for rural and
urban areas (₹20 and ₹25 per capita per year respectively).
 VM Dandekar and N Rath (1971), made the first systematic assessment of
poverty in India, based on National Sample Survey (NSS) data.
 Alagh Committee (1979): Task force constituted by the Planning
Commission under the chairmanship of YK Alagh, constructed a poverty line
for rural and urban areas on the basis of nutritional requirements and related
consumption expenditure
 Lakdawala Committee (1993): Task Force chaired by DT Lakdawala, based
on the assumption that the basket of goods and services used to
calculate Consumer Price Index-Industrial Workers (CPI-IW) and Consumer
Price Index- Agricultural Labourers (CPI-AL) reflect the consumption patterns
of the poor
 Tendulkar Committee (2009) Expert group constituted by the Planning
Commission and, chaired by Suresh Tendulkar, was constituted
to review methodology for poverty estimation and to address the
following shortcomings of the previous methods:
1. Obsolete Consumption Pattern: Consumption patterns were linked to the
1973-74 poverty line baskets (PLBs) of goods and services, whereas there were
significant changes in the consumption patterns of the poor since that time,
which were not reflected in the poverty estimates.
2. Inflation Adjustment: There were issues with the adjustment of prices for
inflation, both spatially (across regions) and temporally (across time).
3. Health and Education Expenditure: Earlier poverty lines assumed that health
and education would be provided by the state and formulated poverty lines
accordingly.

 Rangarajan Committee The committee was set up in the backdrop of

national outrage over the Planning Commission’s suggested poverty line of
₹22 a day for rural areas.

Measures of poverty

 Income based measures of poverty

Income based measures of poverty can be further distinguished depending on

whether they rely on absolute or relative thresholds. Absolute thresholds are
typically expressed in the form of the cost of a basket of goods and services
deemed to be required to assure minimum living conditions, indexed for prices
changes over time (e.g. the United States)

Relative thresholds are set as a proportion of the income level that is most typical
in each country. While some observers may be uneasy about some
of the implications of using a relative threshold (as it implies that poverty will
decline even when the income of the poor is falling, provided that the income of
the non-poor is falling faster)

 Non-monetary measures of poverty

Other approaches to the measurement of poverty rely on direct measures of

people’s access to the types of goods and activities deemed to be necessary to
enjoy a “decent” standard of living, rather than using income as an indirect
measure of the resources available to satisfy consumption. This approach to the
measurement of multidimensional poverty can be used either as an alternative to
income based measures or in combination to them

 Official measures of poverty

Several countries have official measures of poverty, typically defined as the costs
of a nutritionally adequate food bundle plus an allowance for non-food poverty; in
some of these countries, these official thresholds are also to define the conditions
of access to various types of benefits.
Poverty line is the level of income to meet the minimum living conditions.

Poverty Line
Poverty line is the amount of money needed for a person to meet his basic needs. It
is defined as the money value of the goods and services needed to provide basic
welfare to an individual.

Poverty line differs from one country to another, depending upon the idea of
poverty
Poverty line changes from one country to another. In developed countries, where
there is advanced standard of living and welfare concepts, poverty line is high as
basic standard to live include higher consumption requirements and accessibility to
many goods and services.

On the other hand, in many less developed countries, the basic requirements will
be low and contains mostly essential consumption items needed to sustain life.
This means that poverty line is set by the welfare standard in a particular society
(economy).

Approaches of poverty

 Basic Needs approach

Basic needs are defined as minimum quantities of such things as food, clothing,
shelter, water and sanitation, access to basic education and health services and
security to prevent ill health, undernourishment, or under- and unemployment
(Streeten et al. 1981). It is based on a broader understanding of well-being and
includes access to different goods and services and related achievements, such as
adequate nutrition, life expectancy mortality

 Capabilities approach

Income and basic needs approaches look at ‘inputs’ rather than ‘outcomes’.
Knowing the level of a household’s income does not tell us anything about the
well-being of this household .The capabilities approach provides a framework for
analysing poverty.

 Participatory approach

The participatory approach defining poverty is not a specific way of

conceptualising poverty, but a means of determining who should do the
conceptualisation. It advocates that poverty and deprivation should not be defined
by outsiders – as the above described approaches all do – but by people themselves
through a participatory Poverty Assessment (PPA) process (Shaf- fer, 2001). It was
strongly advocated by Chambers, who criticised current approaches to defining
poverty as universal,

reductionist, standardised and stable, whereas the realities of poor people are local,
complex, diverse and dynamic. When poor people themselves are asked to describe
dimensions of poverty, many aspects are mentioned that define ill-being: social
inferiority, isolation ,physical weakness, vulnerability, seasonal deprivation,
powerlessness or humiliation

 The right approach

These four approaches to poverty have different focuses and note many important
aspects of what poverty is. But we would be reducing it if we were to equate one of
those aspects to poverty itself. Rather, the variety of focuses should lead us to
conclude first that poverty is not about the lack of one thing, but of many. In other
words, poverty is multidimensional.

A second conclusion would be that experts may not always be capable of

understanding or conveying all that poverty is. The monetary approach clearly
does not encompass all the poor suffer, nor is social exclusion the only or even
main struggle of the poor (in communities with great social cohesion there could
be many poor). Just as the participatory approaches and the capability approach
suggest, we should also listen to what the people themselves experience and value.
Only then would we be able to understand what poverty is.

CONCLUSION

Poverty is eradicated when there is a surplus in the economy and you allow for
wealth inequality. However wealth inequality destabilizes the society. Poverty is
often the result of personal failure but it is also the result of bad luck. People born
with low IQs will often be poor because they won’t be able to create as much value
as those lucky to be born smart. If you allow the smart to create and be motivated to
succeed you get the poor having a living standard that is better than the one who
kings enjoyed 100 years ago. But you also have to take into account the strain that
inequality creates on the psyches of young men. Its not an easy problem to solve.