Syllabus: GS3/ Economy
Context
- The recent revision of the International Poverty Line by the World Bank has reignited the global debate on how poverty should be defined and tracked.
Background
- The World Bank has announced a major revision to global poverty estimates, raising the International Poverty Line (IPL) from $2.15/day (2017 PPP) to $3.00/day (2021 PPP).
- While the change led to a global increase in the count of extreme poverty by 125 million, India witnessed a massive reduction in poverty.
What is a Poverty Line?
- A poverty line is a threshold level of income or consumption used to determine whether an individual or household is poor.
- Anyone living below this threshold is considered unable to afford basic necessities such as food, shelter, clothing, education, and healthcare.
- It helps the government;
- to gauge the extent of poverty and shape welfare policies for the poor.
- to understand whether a set of policies has actually worked over time to reduce poverty and improve wellbeing.
India’s Revised Poverty Profile
- India’s latest Household Consumption Expenditure Survey (HCES) adopted the Modified Mixed Recall Period (MMRP) method, replacing the outdated Uniform Reference Period (URP). This shift:
- Used shorter recall periods for frequently purchased items.
- Captured more realistic estimates of actual consumption.
- In 2011–12, applying MMRP reduced India’s poverty rate from 22.9% to 16.22%, even under the older $2.15 poverty line.
- In 2022–23, poverty under the new $3.00 line stood at 5.25%, while under the older $2.15 line it dropped further to 2.35%.
Why Does India Use the World Bank’s Poverty Line?
- India last officially updated its poverty line in 2011–12 (Tendulkar method).
- A committee led by C. Rangarajan in 2014 proposed higher thresholds (₹47 urban and ₹33 rural/day), but the recommendation was never adopted. Since then:
- India has lacked a nationally accepted poverty line.
- In its place, NITI Aayog’s Multidimensional Poverty Index (MPI) and World Bank estimates have filled the vacuum.
| Committees for Poverty Estimation Lakdawala Committee (1993) – It was constituted in 1993, made the following suggestions: 1. consumption expenditure should be calculated based on calorie consumption as earlier; 2. state specific 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; and 3. discontinuation of ‘scaling’ of poverty estimates based on National Accounts Statistics. – This assumes that the basket of goods and services used to calculate CPI-IW and CPI-AL reflect the consumption patterns of the poor. Tendulkar Committee (2009) – It was constituted in 2005 and submitted its report in 2009. – The Committee recommended a shift away from calorie consumption based poverty estimation and incorporation of private expenditure on health and education while estimating poverty. – Instead of monthly household consumption, consumption expenditure was broken up into per person per day consumption, resulting in the figure of Rs 32 and Rs 26 a day for urban and rural areas. – The national poverty line for 2011-12 was estimated at Rs. 816 per capita per month for rural areas and Rs. 1,000 per capita per month for urban areas. Rangarajan Committee (2014) – It was constituted in 2012 and submitted its report in 2014. – The Committee recommended separate consumption baskets for rural and urban areas. – This committee raised the daily per capita expenditure to Rs 47 for urban and Rs 32 for rural. – The government did not take a call on the report of the Rangarajan Committee, therefore, poverty is measured using the Tendulkar poverty line. |
Government steps for Poverty elevation
- Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): Guarantees 100 days of unskilled work/year. Builds durable assets in rural areas.
- National Food Security Act (NFSA), 2013: It gives legal entitlement to 67% of the population (75% in rural areas and 50% in urban areas) to receive highly subsidized foodgrains.
- Pradhan Mantri Ujjwala Yojana (PMUY) (2016): This initiative was introduced to provide LPG (liquefied petroleum gas) connections to women belonging to Below Poverty Line (BPL) families.
- Deendayal Antyodaya Yojana-National Rural Livelihood Mission (DAY-NRLM): It aims to reduce poverty by enabling the poor household to access gainful self-employment and skilled wage employment opportunities resulting in sustainable and diversified livelihood options for the poor.
- Ayushman Bharat scheme: It offers health insurance coverage of up to ₹5 lakh per family per year to shield beneficiaries from the financial burden of expensive medical treatments, thereby preventing them from falling deeper into poverty due to healthcare costs.
Concluding remarks
- India’s poverty decline is a story of technical refinement meeting policy results. In the face of a raised poverty benchmark, India showed that more honest data, not diluted standards, can reveal real progress.
- As the global community recalibrates poverty goals, India’s example sets a precedent: evidence-based governance, sustained reforms, and methodological integrity can together deliver transformational outcomes.
Source: IE
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