Poverty estimation in India has transitioned from a purely calorie-based approach to a more comprehensive “Poverty Line Basket” (PLB) methodology. Historically, the Planning Commission was the nodal agency for estimating poverty; this responsibility now rests with NITI Aayog, which utilizes data from the Household Consumption Expenditure Survey (HCES) conducted by the National Sample Survey Office (NSSO).
Pre-Independence Initiatives
The discourse on poverty began as a critique of colonial economic drain.
- Dadabhai Naoroji (1867-68): In his work Poverty and Un-British Rule in India, he proposed a poverty line based on the “jail cost of living” (₹16 to ₹35 per capita per year), reflecting the cost of a basic diet for prisoners.
- National Planning Committee (1938): Chaired by Jawaharlal Nehru, it defined a poverty line (₹15 to ₹20 per capita per month) based on a minimum standard of living rather than just subsistence.
- The Bombay Plan (1944): Suggested a poverty line of ₹75 per capita per year.
Post-Independence Expert Groups and Committees
Post-1947, estimation became more scientific, shifting toward nutritional requirements and price adjustments.
| Committee/Group | Year | Key Recommendations & Methodology |
| Planning Commission Working Group | 1962 | Proposed a national minimum consumption expenditure of ₹20/month for rural and ₹25/month for urban areas (excluding health/education). |
| VM Dandekar and N Rath | 1971 | First systematic assessment using NSS data. Established a criterion of 2,250 calories per day for both rural and urban areas. |
| Alagh Committee | 1979 | Constructed a poverty line based on nutritional requirements: 2,400 kcal (Rural) and 2,100 kcal (Urban). |
| Lakdawala Committee | 1993 | Introduced State-specific poverty lines. Used CPI-AL for rural poverty and CPI-IW for urban poverty. |
| Tendulkar Committee | 2009 | Shifted from “calorie anchor” to Private Expenditure on health and education. Introduced the concept of Mixed Reference Period (MRP). |
| Rangarajan Committee | 2014 | Reverted to a partial calorie norm plus essential non-food expenses. Suggested higher poverty lines (₹972 rural, ₹1,407 urban). |
The Tendulkar Committee Methodology (2009)
The Tendulkar Committee marked a paradigm shift by moving away from mere calorie counting.
- Uniform Poverty Line Basket (PLB): It recommended using the same consumption basket for both rural and urban areas, though the monetary value differed due to price variations.
- Inclusion of Services: It incorporated private expenditure on health and education, which were previously assumed to be provided by the state.
- Cost of Living Adjustment: It moved toward using the Fisher Index to allow for changes in consumption patterns.
- Reference Period: It shifted from the Uniform Reference Period (URP – 30 days) to the Mixed Reference Period (MRP) to capture consumption of low-frequency items like clothing and durables over a 365-day span.
The Rangarajan Committee Approach (2014)
The Rangarajan Committee was formed to review the Tendulkar methodology following public criticism regarding the low poverty threshold.
- Normative Levels: It defined poverty based on a combination of calorie norms (2,155 kcal rural, 2,090 kcal urban), protein norms, and fat norms.
- Behavioral Expenditure: It included a component for non-food expenses (clothing, house rent, transport) based on observed consumer behavior.
- Modified Mixed Reference Period (MMRP): It utilized a 7-day recall for perishables, 365-day for durables, and 30-day for the rest.
- Findings: Under this method, the poverty ratio was estimated at 29.5% for 2011-12, significantly higher than Tendulkar’s 21.9%.
Multidimensional Poverty Index (MPI)
India has recently adopted the Multidimensional Poverty Index to capture deprivations beyond income.
- Global MPI: Developed by UNDP and OPHI, it tracks 10 indicators across Health, Education, and Standard of Living.
- National MPI (NITI Aayog): India’s customized version adds two indicators—Antenatal Care and Bank Accounts—making a total of 12 indicators.
- Weightage: Health (1/3), Education (1/3), and Standard of Living (1/3).
- Significance: It helps identify overlapping deprivations, such as a household that has a bank account but lacks access to clean cooking fuel and nutrition.
Data Collection Mechanisms
- Uniform Reference Period (URP): Recalls consumption for all items over the last 30 days.
- Mixed Reference Period (MRP): Recalls five low-frequency items (clothing, footwear, durables, education, and institutional health) over the last 365 days and all other items over 30 days.
- Modified Mixed Reference Period (MMRP): Recalls perishables (edible oil, eggs, fish, meat, vegetables, fruits, spices, beverages) over 7 days, durables over 365 days, and all other items over 30 days.
Critical Facts and Trivia for UPSC
- Nodal Agency: The NITI Aayog Task Force on Elimination of Poverty in India, headed by Arvind Panagariya, was the most recent dedicated body to examine poverty estimation before the shift to MPI.
- Poverty Trap: A situation where an individual lacks the capital (financial or human) to escape poverty, often characterized by low savings and low investment.
- Head Count Ratio (HCR): The most common indicator, representing the percentage of the population living below the poverty line.
- World Bank Threshold: The international extreme poverty line is set at $2.15 per day (2017 PPP terms), updated from the previous $1.90.
- Vicious Cycle of Poverty: Proposed by Ragnar Nurkse, it explains how low income leads to low demand and low savings, hindering capital formation and keeping the economy stagnant.