The Poverty Line in India: A Comprehensive Overview

What is the definition of the poverty line?

The poverty line represents the minimum income level necessary to meet basic life necessities, including food, shelter, clothing, and access to essential services. This measure can be viewed in nominal terms or purchasing power parity (PPP) terms, and it varies across different countries. In India, the poverty line is largely based on a calorie-based consumption basket.

What are the World Bank’s classifications for income groups?

The World Bank identifies countries within four income categories based on per capita gross national income (GNI) using the Atlas method:

• Low-income
• Lower-middle-income
• Upper-middle-income
• High-income

Currently, India is classified as a lower-middle-income country but is projected to transition to upper-middle-income status by 2030, requiring a per capita income of over $4,256, compared to its current level of approximately $2,389.

What poverty lines does the World Bank use?

The World Bank utilizes three main poverty lines:

• $2.15/day (PPP): Extreme poverty threshold.
• $3.65/day (PPP): Applicable to lower-middle-income countries like India.
• $6.85/day (PPP): For upper-middle-income countries.

These lines facilitate international comparisons and are regularly adjusted for inflation and changes in purchasing power.

What are India’s official poverty lines historically?

India has historically relied on recommendations from expert committees for its poverty line assessments. Key efforts include:

• Tendulkar Committee (2009)
  • Established a uniform poverty line for rural and urban India based on monthly per capita expenditure.
  • Set poverty line: Urban: Rs 1,000/month; Rural: Rs 816/month, translating to Rs 33/day (urban) and Rs 27/day (rural), which faced public criticism.
• Rangarajan Committee (2014)
  • Revised methodologies to account for higher calorie needs and essential services.
  • Increased the poverty line to Urban: Rs 1,407/month; Rural: Rs 972/month.
  • Estimated that 29.5% of the population was below the poverty line in 2011-12, surpassing Tendulkar’s estimate of 21.9%.
• Multidimensional Poverty (MDP) Index
  • Developed by UNDP and OPHI, and adopted by NITI Aayog in India.
  • Utilizes indicators beyond income, including health, education, and standard of living.
  • The 2021 report indicated that 25% of the population was multidimensionally poor, showing improvement over recent years.

Why is the poverty line in India criticised?

• The methodology often relies on outdated consumption data (the last comprehensive NSSO survey was in 2011-12).
• It overlooks the rising costs associated with health, education, and transportation.
• The current framework inadequately reflects the urban-rural price disparities.
• There is a need for alignment with international benchmarks like $3.65/day PPP, rather than solely $2.15.

What role does the IMF play in assessing poverty?

The International Monetary Fund (IMF) monitors macroeconomic advancements and shares economic forecasts. Recently, it estimated India’s GDP to reach $6.7 trillion by 2030, with a per capita income of $4,468, surpassing the upper-middle-income threshold. However, it does not establish national poverty lines; this responsibility lies with national governments and institutions such as the World Bank for comparative analysis.

What are the limitations of using $2.15 as the poverty line in India?

• The $2.15/day threshold is primarily meant for extreme poverty and is more suitable for low-income countries.
• India's status as a lower-middle-income nation warrants the consideration of $3.65/day, as recommended by the World Bank.
• Relying on $2.15 grossly underrepresents the poverty situation and may create a misleading narrative about poverty alleviation.

What is the present status of India’s poverty estimation?

• India has not published official poverty estimates post-2011-12.
• Two household surveys (2017-18 and 2022-23) have been executed, but public access to the findings and poverty estimates remains pending.
• Recent reports suggest that only 2.3% of Indians lived below $2.15/day (PPP), while 28.7% resided below $3.65/day (PPP), which is a more relevant benchmark for the current context.

Why is there a need to redefine the poverty line now?

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