If India is to solve the problem of poverty, it has to find viable and sustainable strategies to address the causes of poverty and design schemes to help the poor out of their situation. However, for these schemes to be implemented, the government needs to be able to identify who the poor are. For this there is need to develop a scale to measure poverty, and the factors that make up the criteria for this measurement or mechanism need to be carefully chosen.
In pre-independent India, Dadabhai Naoroji was the first to discuss the concept of a Poverty Line. He used the menu for a prisoner and used appropriate prevailing prices to arrive at what may be called ‘jail cost of living’. However, only adults stay in jail whereas, in an actual society, there are children too. He, therefore, appropriately adjusted this cost of living to arrive at the poverty line. For this adjustment, he assumed that one-third population consisted of children and half of them consumed very little while the other half consumed half of the adult diet. This is how he arrived at the factor of three-fourths; (1/6)(Nil) + (1/6)(Half) + (2/3)(Full) = (¾) (Full). The weighted average of consumption of the three segments gives the average poverty line, which comes out to be three-fourth of the adult jail cost of living.
In post-independent India, there have been several attempts to work out a mechanism to identify the number of poor in the country. For instance –
- in 1962, the Planning Commission formed a Study Group.
- In 1979, another body called the ‘Task Force on Projections of Minimum Needs and Effective Consumption Demand’ was formed.
- In 1989, an ‘Expert Group’ was constituted for the same purpose.
Besides these bodies, many individual economists have also attempted to develop such a mechanism.
For the purpose of defining poverty we divide people into two categories; the poor and the non-poor and the poverty line separates the two.
- However, there are many kinds of poor; the absolutely poor, the very poor and the poor.
- Similarly there are various kinds of non-poor; the middle class, the upper middle class, the rich, the very rich and the absolutely rich.
Think of this as a line or continuum from the very poor to the absolutely rich with the poverty line dividing the poor from the non-poor.
There are many ways to categorise poverty. In one such way people who are always poor and those who are usually poor but who may sometimes have a little more money (example: casual workers) are grouped together as the chronic poor. Another group are the churning poor who regularly move in and out of poverty (example: small farmers and seasonal workers) and the occasionally poor who are rich most of the time but may sometimes have a patch of bad luck. They are called the transient poor. And then there are those who are never poor and they are the non-poor.
The Poverty Line
How to determine the poverty line?
There are many ways of measuring poverty. One way is to determine it by the monetary value (per capita expenditure) of the minimum calorie intake that was estimated at 2,400 calories for a rural person and 2,100 for a person in the urban area. Based on this, in 1999-2000, the poverty line was defined for rural areas as consumption worth Rs 328 per person a month and for urban areas it was Rs 454.
Though the government uses Monthly Per Capita Expenditure (MPCE) as proxy for income of households to identify the poor, do you think this mechanism satisfactorily identifies the poor households in our country?
Scholars state that a major problem with this mechanism is that it groups all the poor together and does not differentiate between the very poor and the other poor. Though this mechanism takes consumption expenditure on food and a few select items as proxy for income, economists question its basis. This mechanism is helpful in identifying the poor as a group to be taken care of by the government, but it would be difficult to identify who among the poor need help the most.
There are many factors, other than income and assets, which are associated with poverty; for instance, the accessibility to basic education, health care, drinking water and sanitation. The mechanism for determining the Poverty Line also does not take into consideration social factors that trigger and perpetuate poverty such as illiteracy, ill-health, lack of access to resources, discrimination or lack of civil and political freedoms.
The aim of poverty alleviation schemes should be to improve human lives by expanding the range of things that a person could be and could do, such as to be healthy and well-nourished, to be knowledgeable and participate in the life of a community. From this point of view, development is about removing the obstacles to the things that a person can do in life, such as illiteracy, ill-health, lack of access to resources, or lack of civil and political freedoms.
Though the government claims that higher rate of growth, increase in agricultural production, providing employment in rural areas and economic reform packages introduced in the 1990s have resulted in a decline in poverty levels, economists raise doubts about the government’s claim. They point out that the way the data are collected, items that are included in the consumption basket, methodology followed to estimate the poverty line and the number of poor are manipulated to arrive at the reduced figures of the number of poor in India.
Due to various limitations in the official estimation of poverty, scholars have attempted to find alternative methods. For instance, Amartya Sen, noted Nobel Laureate, has developed an index known as Sen Index. There are other tools such as Poverty Gap Index and Squared Poverty Gap.
Bibliography : NCERT – Indian Economic Development