According to the World Bank (2000), 'poverty is pronounced deprivation in well-being.' Well-being is defined as the command over commodities in general, so people are better of if they have a greater command over resources. #e main focus is on whether households or individuals have enough resources to meet their needs. Typically, poverty is then measured by comparing individuals' income or consumption with some defined threshold below which they are considered to be poor. This is the most conventional view'poverty is seen largely in monetary terms'and is the starting point for most analyses of poverty.

Perhaps the broadest approach to well-being is the one articulated by Amartya Sen (1987), who argues that wellbeing comes from a capability to function in society. Thus, poverty arises when people lack key capabilities, and so have inadequate income or education, or poor health, or insecurity, or low self-confidence, or a sense of powerlessness, or the absence of rights such as freedom of speech.

Reasons for Measurement of Poverty

There are four reasons to measure poverty: (i) To keep poor people on the agenda; (ii) To be able to identify poor people 34'Economic and Social Development and so as to be able to target appropriate interventions; (iii) To monitor and evaluate projects and policy interventions geared to poor people; (iv) To evaluate the effectiveness of institutions whose goal is to help poor people.

Aggregate Measures of Poverty

A number of aggregate measures of poverty can be computed. These are

Headcount Index

By far, the most widely used measure is the headcount index, which simply measures the proportion of the population that is counted as poor, often denoted by P0 .

The greatest advantages of the headcount index are that it is simple to construct and easy to understand. These are important qualities. However, the measure has at least three weaknesses: First, the headcount index does not take the intensity of poverty into account. Second, the headcount index does not indicate how poor the poor are, and hence does not change if people below the poverty line become poorer. Third, the poverty estimates should be calculated for individuals, not households.

Poverty Gap Index

Poverty Line Defining a poverty line is the first step in estimating poverty. A poverty line which distinguishes the poor from the non-poor is derived by estimating the value of the minimum required consumption levels of food, clothing, shelter, fuel and health care, etc. The definition of poverty line in the Indian context was attempted for the first time in 1962 by a Working Group of eminent economists and social thinkers after taking consideration of the Nutrition Advisory Committee of the Indian Council of Medical Research (ICMR, 1958) regarding balanced diet. #e Committee recommended (in 1962) that

  1. The national minimum for each household of 5 persons (4 adult consumption units) should be not less than Rs. 100 per month in terms of 1960-61 prices or Rs. 20 per capita. For urban areas, this figure will have to be raised to Rs.125 per month per household or Rs. 25 per capita to cover the higher prices of the physical volume of commodities on which the national minimum is calculated.
  2. This national minimum excludes expenditure on health and education, both of which are expected to be provided by the State according to the Constitution and in the light of its other commitments.
  3. An element of subsidy in urban housing will have to be included after taking Rs. 10 per month, or 10 per cent as the rent element payable from the proposed national minimum of Rs. 100 per month.

Dandekar and Rath in their seminal work on poverty used an average calorie norm of 2,250 calories per capita per day for both rural and urban areas, as a criterion to define the poverty line. On the basis of National Sample Survey data on consumer expenditure, the study revealed that, in rural area, the households with an annual per capita expenditure of Rs. 170.80 (or equivalently Rs. 14.20 per capita per month) at the 1960-61 prices consumed on an average food with calorie equivalent of 2250 per capita per day together with such non-food items as they chose. #e corresponding figures in the urban area were Rs. 271.70 and Rs. 22.60 at 1960-61 prices. Later, they revised the rural minimum slightly upwards to Rs. 180 per annum or Rs. 15 per month. Similarly, they rounded o$ the urban minimum to Rs. 270 per annum or Rs. 22.50 per month, both at 1960-61 prices.

The Task Force on Projection of Minimum Needs and Effective Consumption Demand constituted by the Planning Commission defined in 1979 the poverty line as per capita consumption expenditure level, which meets the average per capita daily calorie requirement of 2400 kcal per capita per day in rural areas and 2100 kcal per capita per day in urban areas along with a minimum of non-food expenditure.

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