In general, poverty can be defined as a situation when people are unable to satisfy the basic needs of life. The definition and methods of measuring poverty differs from country to country. The extent of poverty in India is measured by the number of people living below the Poverty Line.
The Poverty Line defines a threshold income. Households earning below this threshold are considered poor. Different countries have different methods of defining the threshold income depending on local socio-economic needs. The Planning Commission releases the poverty estimates in India.
Poverty is measured based on consumer expenditure surveys of the National Sample Survey Organisation (NSSO). A poor household is defined as the one with an expenditure level below a specific poverty line.
Earlier, India used to define the poverty line based on a method defined by a task force in 1979. It was based on expenditure for buying food worth 2,400 calories in rural areas and 2,100 calories in urban areas. In 2009, the Suresh Tendulkar Committee defined the poverty line on the basis of monthly spending on food, education, health, electricity and transport.
The Planning Commission has updated the poverty lines and poverty ratios for the year 2009-10 as per the recommendations of the Tendulkar Committee. It has estimated the poverty lines at all India level as an MPCE (monthly per capita consumption expenditure) of ₹673 for rural areas and ₹860 for urban areas in 2009-10. So a person who spends ₹673 in rural areas and ₹860 in urban area per month is defined as living below the poverty line.
Based on these cut-offs, the percentage of people living below the poverty line in the country has declined from 37.2 per cent in 2004-5 to 29.8 per cent in 2009-10. Even in absolute terms, the number of poor people has fallen by 52.4 million during this period. Of this, 48.1 million are rural poor and 4.3 million are urban poor. Thus poverty has declined on an average by 1.5 percentage points per year between 2004-5 and 2009-10. The annual average rate of decline during the period 2004-5 to 2009-10 is twice the rate of decline during the period 1993-4 to 2004-5.
Bibliography : NIOS – Economics