Poverty and the Poverty Line

In one line

The poverty line is the level of monthly spending below which a person is counted as poor, and the whole difficulty of the subject is that four Indian committees have drawn it in four different places.

In the wording a student can write in an exam: poverty is the condition in which a person is unable to secure the minimum requirements of consumption necessary for a socially acceptable standard of living; the poverty line is the level of per capita monthly consumption expenditure, valued at prices of a stated year, which is taken to represent that minimum, and a person whose consumption falls below it is counted as poor.

Absolute and relative poverty

Absolute poverty measures deprivation against a fixed standard, a defined basket of goods, and asks whether a person can afford it. The standard does not change when everybody's income rises together. Every Indian poverty line described below is an absolute measure.

Relative poverty measures deprivation against other people in the same society, for example counting as poor everybody with less than half the median income. On this measure poverty can never be eliminated, because there is always a bottom half.

Which India uses, and why. India measures absolute poverty, because the policy question has been whether people can meet a minimum, not how far they are behind the median. Developed countries generally measure relative poverty, because absolute deprivation of that kind is rare there. An examiner likes the observation that the two measures answer different questions and that a country can reduce absolute poverty while relative poverty worsens, which is what happens when growth is unequal.

What a poverty line actually is

A poverty line has two parts, and separating them is what makes the committee disputes intelligible.

1. The poverty line basket. A list of goods and services taken to be the minimum: so many calories a day, some protein and fat, and non food items such as clothing, fuel, housing, education, health and transport.

2. The valuation. What that basket costs, at the prices of a stated place and a stated year, expressed as rupees per person per month.

Every controversy is about one of those two: what should be in the basket, and at whose prices it should be valued.

Head count ratio. The usual measure derived from the line: the number of persons below the line as a percentage of the population. Its weakness is that it counts heads and not depth, so a person a rupee below the line and a person destitute are counted alike, and a policy that lifts those just below the line performs best on it.

The four committees

This is the block an examiner marks. Every figure below is from NITI Aayog's own account.