Poverty and the Poverty Line

The starting point, 1962. The Perspective Planning Division of the Planning Commission discussed poverty against 20 rupees rural and 25 rupees urban per person per month at 1960-61 prices. It was never an official poverty line, and saying so is worth a mark.

1. The Alagh Committee. Appointed by the Planning Commission in 1977 under Y. K. Alagh, reported in 1979. It set the rural line at 49.09 rupees and the urban at 56.64 rupees per person per month at 1973-74 prices, using a different poverty line basket for rural and for urban consumption, anchored on calorie norms. These lines remained the national basis until 2004-05.

2. The Lakdawala Committee. Set up in 1989 under D. T. Lakdawala, reported in 1993. It retained the Alagh Committee's national rural and urban lines, and added two things: a methodology for updating the lines over time, and a method for extending them to individual States using appropriate price indices. That is why the Planning Commission from then on published State specific poverty lines alongside national ones.

3. The Tendulkar Committee. Appointed in December 2005 under Suresh Tendulkar, reported in 2009. It took the consumption basket underlying the Alagh and Lakdawala national urban line of 2004-05 as the poverty line basket, and aligned the rural line to it using a price index, so that rural and urban lines rested on one common basket for the first time. The effect was to raise the national rural line and therefore the rural poverty estimate. The official estimates for 1993-94, 2004-05, 2009-10 and 2011-12 rest on the Tendulkar line.

4. The Rangarajan Committee. Appointed in 2012 under C. Rangarajan, reported in June 2014. It recommended separate consumption baskets for rural and urban areas again, each containing food items sufficient for recommended calorie, protein and fat intake together with non food items covering clothing, education, health, housing and transport, thereby de-linking the two lines that Tendulkar had joined.

Its arithmetic, which is the most quotable thing in the topic. At 2011-12 prices it raised:

And the national poverty estimate for 2011-12 rose from 21.9 per cent on the Tendulkar line to 29.5 per cent on the Rangarajan line.

The Rangarajan recommendations were not adopted as the official line. The last official poverty estimates remain those based on the Tendulkar methodology, and the Rangarajan report is where, as NITI Aayog puts it, the matter stands. An answer that presents Rangarajan as the current official line is wrong.

Where the numbers stand now

The Economic Survey 2025-26 reports four separate measures, and the honest answer gives them as four rather than picking one.

1. The World Bank's international poverty line. In June 2025 the World Bank raised it from 2.15 to 3.00 United States dollars a day, adjusted for purchasing power at 2021 prices. On the revised line, India's poverty rates for 2022-23 are 5.3 per cent for extreme poverty and 23.9 per cent at the lower middle income line.

2. The World Bank's multidimensional poverty measure for India stood at 15.5 per cent in 2022-23.

3. NITI Aayog's Multidimensional Poverty Index, which measures non monetary poverty through education, health and living conditions rather than through spending. It fell from 55.3 per cent in 2005-06 to 14.96 per cent in 2019-21, and is estimated to have fallen further to 11.28 per cent in 2022-23.

4. Estimates on the Tendulkar line by researchers, cited in the Survey: from 21.9 per cent in 2011-12 to 4.7 per cent in 2022-23 and 2.3 per cent in 2023-24.

Why the four differ so much, and this is the examinable point. They are not four attempts at the same number. One is a dollar line at purchasing power parity; one counts deprivations rather than money; one is a rupee consumption line drawn in 2009; and they use different surveys and different years. A student who reports one figure as "India's poverty rate" has not understood the topic. A student who reports the range and says what each measures has.

The Multidimensional Poverty Index, explained

Because MU's own syllabus is silent on it and every current source uses it.

The idea. Money measures what a household can buy. It does not measure whether the children are in school, whether the house has a toilet, whether cooking is done on clean fuel, or whether anyone is undernourished. A household may be above the money line and deprived on several of those at once.

How it works. A set of indicators is grouped under health, education and standard of living. Each household is scored on the indicators on which it is deprived, each indicator carrying a weight. A household deprived on more than a threshold share of the weighted indicators is counted as multidimensionally poor. The index is the head count multiplied by the average intensity of deprivation, so unlike a simple head count ratio it does register depth.

Why it matters for policy. It says which deprivation to attack. A fall driven by sanitation and cooking fuel tells a government something different from a fall driven by school attendance.

A worked example: two households and three lines

Household A, rural. Five persons. Total monthly consumption expenditure 6,000 rupees, so 1,200 rupees per person. The children are in school, the house has electricity, a toilet and a gas connection.

Household B, urban. Four persons. Total monthly consumption expenditure 6,000 rupees, so 1,500 rupees per person. Two children have left school to work, cooking is on firewood, and the household shares a toilet with the lane.

Against a money line. Household B spends more per person than Household A. On a consumption line alone, B looks better off, and if the line is drawn between them, A is poor and B is not.

Against a multidimensional measure. Household B is deprived on schooling, on cooking fuel and on sanitation; Household A on none of them. B is multidimensionally poor and A is not.

What the example shows. The two approaches can rank the same two households in opposite directions, and both rankings are defensible, because they answer different questions. It also shows why India now reports both, and why a scheme that raises cash incomes may leave the multidimensional figure untouched, while one that builds toilets and connects gas may move it sharply without changing anybody's income.

What beginners get wrong

"The poverty line is a measure of income." It is a measure of consumption expenditure per person per month in India, not of income. Consumption is measured more reliably in a household survey than income is, particularly where most workers are self employed.

"Rangarajan is the current official poverty line." It is not. The Rangarajan Committee reported in June 2014 and its recommendations were not adopted; the last official estimates rest on the Tendulkar methodology.

"The Tendulkar line was lower than the Lakdawala line." For rural India it was higher: aligning the rural line to the urban basket raised it, and raised the measured rural poverty rate with it.

"India's poverty rate is x per cent." There are at least four current figures on four different bases. Name the basis or do not use the number.

"A falling head count ratio means the poor are better off." It means fewer people are below the line. The head count says nothing about how far below the line the remaining poor are, which is why the poverty gap and the multidimensional index exist.

Criticism of the poverty line approach

It is a line, and a line is arbitrary. A rupee on either side of it changes a household's classification and nothing about the household.

Calorie norms are contested. People in the same society with the same calorie intake can be in quite different conditions, and calorie requirements differ by work and by age.

It does not capture depth or distribution among the poor. Hence the poverty gap ratio and the squared poverty gap.

It is a household average. Consumption is measured for the household and divided by its members, so unequal distribution within a household, which usually falls on women and girls, is invisible.

The survey basis changed. The Household Consumption Expenditure Survey was redesigned, so estimates before and after are not strictly comparable, and much of the argument about how fast poverty has fallen is an argument about comparability rather than about poverty.

Quick revision

1. Absolute poverty is measured against a fixed basket; relative poverty against others in the society. India measures absolute poverty.
2. A poverty line has two parts: the poverty line basket, and its valuation at stated prices. Every dispute is about one of them.
3. Head count ratio: persons below the line as a percentage of population. It ignores depth.
4. Alagh Committee, appointed 1977, reported 1979: rural 49.09, urban 56.64 rupees per person per month at 1973-74 prices, separate baskets.
5. Lakdawala Committee, set up 1989, reported 1993: retained those lines, added a method to update them over time and to extend them to States by price indices.
6. Tendulkar Committee, appointed December 2005, reported 2009: took the 2004-05 urban basket as the common basket and aligned the rural line to it, raising the rural line. Official estimates for 1993-94, 2004-05, 2009-10 and 2011-12 are on this basis.
7. Rangarajan Committee, appointed 2012, reported June 2014: separate rural and urban baskets again. Rural line 816 to 972 rupees (up 19 per cent) and urban 1,000 to 1,407 rupees (up 41 per cent) at 2011-12 prices; national estimate for 2011-12 21.9 to 29.5 per cent. Not adopted.
8. Current figures, Economic Survey 2025-26: World Bank line raised June 2025 from 2.15 to 3.00 dollars a day at 2021 purchasing power, giving India 5.3 per cent extreme and 23.9 per cent lower middle income poverty in 2022-23; World Bank multidimensional measure 15.5 per cent; NITI Aayog MPI 55.3 per cent in 2005-06 to 14.96 per cent in 2019-21 and an estimated 11.28 per cent in 2022-23; Tendulkar based research estimates 21.9 per cent in 2011-12 to 4.7 per cent in 2022-23 and 2.3 per cent in 2023-24.
9. The MPI measures health, education and standard of living, and is head count multiplied by intensity, so it registers depth.

Test yourself

1. Define poverty and the poverty line, and distinguish absolute from relative poverty. Poverty is the condition of being unable to secure the minimum consumption necessary for a socially acceptable standard of living. The poverty line is the level of per capita monthly consumption expenditure, valued at the prices of a stated year, taken to represent that minimum, and those consuming below it are counted as poor. Absolute poverty is measured against a fixed basket of goods, so that it can in principle be eliminated; relative poverty is measured against the position of others in the same society, for instance those below half the median income, and on that definition some poverty always remains. India measures absolute poverty; most developed countries measure relative poverty.

2. Trace the four committees on the measurement of poverty in India. The Alagh Committee, appointed by the Planning Commission in 1977 and reporting in 1979, set rural and urban lines of 49.09 and 56.64 rupees per person per month at 1973-74 prices, on separate rural and urban baskets anchored in calorie norms. The Lakdawala Committee, set up in 1989 and reporting in 1993, retained those national lines but added a methodology for updating them over time and extending them to individual States by price index, which is why State specific lines began to be published. The Tendulkar Committee, appointed in December 2005 and reporting in 2009, adopted the consumption basket underlying the 2004-05 national urban line as a single common basket and aligned the rural line to it, raising the rural line and the rural poverty estimate; official estimates for 1993-94, 2004-05, 2009-10 and 2011-12 rest on it. The Rangarajan Committee, appointed in 2012 and reporting in June 2014, restored separate rural and urban baskets containing food sufficient for recommended calorie, protein and fat intake together with clothing, education, health, housing and transport.

3. What did the Rangarajan Committee recommend, and what would its adoption have changed? It recommended de-linking the rural and urban poverty lines, which the Tendulkar Committee had joined, and building each on its own consumption basket combining a nutritional norm with essential non food items. At 2011-12 prices it raised the national rural line from 816 to 972 rupees per person per month, an increase of 19 per cent, and the national urban line from 1,000 to 1,407 rupees, an increase of 41 per cent. Applying it would have raised the national poverty estimate for 2011-12 from 21.9 per cent to 29.5 per cent. The recommendations were not adopted, and the last official estimates continue to rest on the Tendulkar methodology.

4. Why do current estimates of Indian poverty differ so widely? Because they measure different things on different bases. The World Bank's international poverty line is a dollar figure converted at purchasing power parity, raised in June 2025 from 2.15 to 3.00 dollars a day at 2021 prices, and it gives 5.3 per cent for extreme poverty and 23.9 per cent at the lower middle income line for India in 2022-23. NITI Aayog's Multidimensional Poverty Index counts deprivations in health, education and standard of living rather than money, and gives 14.96 per cent for 2019-21 and an estimated 11.28 per cent for 2022-23. Estimates on the Tendulkar consumption line give 4.7 per cent for 2022-23 and 2.3 per cent for 2023-24. They also draw on different surveys and different years. The correct approach is to state which measure a figure comes from rather than to speak of a single national poverty rate.

5. What is the Multidimensional Poverty Index, and what does it add to a consumption line? It is a measure of non monetary poverty which scores each household on indicators grouped under health, education and standard of living, counts a household as poor if it is deprived on more than a threshold share of the weighted indicators, and reports the head count multiplied by the average intensity of deprivation. It adds two things to a consumption line. It captures deprivations that money measures miss, such as children out of school, an undernourished member, absence of sanitation or of clean cooking fuel, which a household above the money line may well suffer. And because it multiplies head count by intensity it registers the depth of deprivation, whereas a head count ratio treats a household a rupee below the line and a destitute household alike.

6. Criticise the poverty line as a tool. It draws a sharp boundary across a continuous distribution, so that a rupee decides a household's classification while changing nothing about its condition. Its calorie norms are contested and vary with age and occupation. It measures consumption for the household and divides by the number of members, so unequal distribution within the household, which typically disadvantages women and girls, is invisible. As a head count it says nothing about how far below the line the poor are, which is why the poverty gap and squared poverty gap measures were developed. And because the underlying consumption survey has been redesigned, estimates across the change are not strictly comparable, so part of the public dispute about the pace of poverty reduction is really a dispute about comparability.