Poverty and Associated Issues


Poverty is a social condition that is characterised by the lack of resources necessary for basic survival or necessary to meet a certain minimum level of living standards. Poverty is not only a condition of economic insufficiency; it is also social and political exclusion.

Types of Poverty

  • Absolute poverty:  It refers to the inability of a person or a household to provide even the basic necessities of life, such as food, clothing and shelter. It is also known as “subsistence poverty”.
  • Relative Poverty: – it is the condition in which people lack the minimum amount of income needed to maintain the average standard of living in the society in which they live. Relative poverty is measured in terms of judgements by members of a particular society of what is considered a reasonable and acceptable standard of living according to the conventions of the day.
  • Situational poverty: It is generally caused by a crisis or loss and is often temporary. Events causing situational poverty include environmental disasters, divorce, or severe health problems.

Causes of Poverty:

The causes of poverty lie in the institutional and social factors that mark the life of the poor. The poor are deprived of quality education and unable to acquire skills that fetch better incomes. Also, access to health care is denied to the poor. The main victims of caste, religion and other discriminatory practices are poor.

These can be caused because of:

Economic causes of poverty:

  • Slow Economic growth and development
  • Increasing unemployment
  • Decreased Agricultural Output
  • Under-developed infrastructure
  • Inadequate industrialization in certain areas
  • Inadequate production of essential items
  • Deprivation of resources
  • The uneven concentration of wealth and resources
  • Economic inflation
  • Population Pressure

Social Causes of Poverty:

  • Social evils like untouchability, caste system
  • Lack of proper education and illiteracy
  • Lack of social mobility of disadvantaged castes and communities
  • Discrimination or lack of civil and political freedoms
  • Lack of access to resources, nutrition etc.
  • Ill health
  • High divorce rates and Feminization of Poverty
  • Inequality of available opportunities
  • Poverty Trap

Geographical Factors:

  • Density of population
  • Selective fertility of the land
  • Uneven distribution of fertile land
  • Variable farm output
  • Differential rural and urban poverty
  • Environmental and climatic factors

The vicious cycle of poverty

The ‘Vicious circle’ theory of poverty argues that the various circumstances of the poor combine to maintain them in poverty. The poor are trapped in a situation with little chance of escaping.

  • Poor nutrition during pregnancy can hinder foetal brain development and increase the possibility of premature birth. Protein deficiency during early childhood can retard brain development. An inadequate diet can lead to low energy levels which can hinder progress at school and work.
  • Over-crowded and unsanitary conditions, in which the poor live, constitute a health hazard and reinforce the danger to health caused by inadequate diet.
  • Poverty is expensive– the Poor pays more because
  • Poor tend to buy smaller quantities and this raises the per-unit price of goods
  • A high rate of interest is charged on credit due to the increased risk of default
  • Poor tends to do high-risk jobs which makes them vulnerable to health hazards and pay more to healthcare than non-poor.

This is how various circumstances in the life of the poor combine to maintain poverty.

Poverty Estimation in India

The poverty line or poverty threshold is the monetary value of some normative expenditure that is essential for satisfying basic needs. It is the minimum level of income a person or a family needs to live on. A minimum income level is used as an official standard for determining the proportion of a population living in poverty.

Pre-Independence Poverty Estimation

  • Poverty and Unbritish Rule in India (1901): Dadabhai Naoroji’ in his book ‘Poverty and Un-British Rule in India,’ made the earliest estimate of the poverty line at 1867-68 prices based on the cost of a subsistence diet for the emigrant coolies during their voyage.
  • National Planning Committee (1938): In 1938, the National Planning Committee set up under the chairmanship of Jawaharlal Nehru suggested a poverty line based on a minimum standard of living.
  • The Bombay Plan (1944): Bombay Plan proponents suggested a poverty line that was much more modest than that of the NPC.

Post- Independence Poverty Estimation

Various expert groups constituted by the Planning Commission have estimated the number of people living in poverty in India:

Working Group (1962):

  • The poverty line in India was quantified for the first time by this Group in terms of a minimum requirement (food and non-food) of individuals for healthy living.
  • Separate poverty lines for rural and urban areas.
  • The poverty line excluded expenditure on health and education, both of which, it was assumed, were to be provided by the State.

Y.K. Alagh committee (1979):

  • Official poverty counts began for the first time in India based on the approach of this Task Force.
  • The poverty line was defined as the per capita consumption expenditure level to meet 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.
  • different poverty line baskets (PLBs) for rural and urban consumption.

Until the 1990s, no attempt was made to capture differences in prices or differences in consumption patterns across states or over time. Poverty estimates were revised with each quinquennial NSS survey and price indices were used to adjust for price changes over time. So, it was regarded by some as inappropriate in giving a true picture of poverty in the country.

Lakdawala Expert Group (1993):

  • It did not redefine the poverty line and retained the poverty lines recommended by the Alagh Committee at the national level based on minimum nutritional requirements.
  • However, it disaggregated them into state-specific poverty lines to reflect the inter-state price differentials.
  • It also suggested updating of poverty line using the CPI-IW in urban areas and CPI-AL in rural areas rather than using National Accounts Statistics if the basket of goods and services used to calculate CPI-IW and CPI-AL reflect the consumption patterns of the poor.

Tendulkar Expert Group (2009):

  • It recommended the incorporation of private expenditure on health and education while estimating poverty.
  • It also recommended a shift away from basing the poverty lines based on intake norms to targeted outcomes.

E.g., Shift from basing the poverty lines on calorie norms used in all poverty estimations since 1979 and towards targeting nutritional, educational and health outcomes respectively.

  • Instead of two separate PLBs for rural and urban poverty lines, it recommended a uniform all-India urban PLB across rural and urban India.
  • It recommended using Mixed Reference Period (MRP) based estimates, as opposed to Uniform Reference Period (URP) based estimates used in earlier methods for estimating poverty.
  • Rangarajan Committee (2014):
  • It reverted to the practice of having separate all-India rural and urban poverty estimates.
  • Recommended separate consumption baskets for rural and urban areas which include food items that ensure recommended calorie, protein & fat intake and non-food items like clothing, education, health, housing and transport.

The government did not take a call on the report of the Rangarajan Committee. In July 2013, based on the Tendulkar poverty line, Planning Commission released poverty data for 2011-12. The number of poor in the country was pegged at 269.8 million or 21.9% of the population. After this, no official poverty estimates in India have been released.

Uniform Resource Period (URP):

Till 1993-94, the poverty line was based on URP data, which involved asking people about their consumption expenditure across a 30-day recall period, i.e., information was based on the recall of consumption expenditure in the previous 30 days.

Mixed Reference Period (MRP):

From 1999-2000 onwards, the NSSO switched to an MRP method which measures consumption of five low-frequency items (clothing, footwear, durables, education and institutional health expenditure) over the previous year, and all other items over the previous 30 days.

The existing poverty line approach has its inherent limitations. The criteria/approach recommended by various expert groups set up from time to time for determining the “poverty line” have failed in capturing the actual incidence of poverty in the country.

Important aspects such as ill health, low educational attainments, geographical isolation, powerlessness or dis-empowerment in civil society, caste or gender-based inherent disadvantages etc. remain to be conclusively captured in identifying and enumerating the poor. Government programmes can be more effectively delivered if the multiple dimensions of poverty are recognized and the criteria nuanced accordingly.

Multi-dimensional poverty

Most countries around the world define poverty as the lack of money. However, the poor themselves consider their experience of poverty much more broadly. A person who is poor can suffer multiple disadvantages at the same time – like poor health or malnutrition, lack of clean water or electricity, poor quality of work or little schooling. Focusing on one factor alone, such as income, is not enough to capture the true reality of poverty. Multidimensional poverty measures can be used to create a more comprehensive picture. They not only reveal who is poor but also how they are poor. MPI serves as a complementary measure to the more traditional measures that are based on income or consumption.

MPI is the product of the incidence of multidimensional poverty (proportion of multidimensionally poor people) and the intensity of multidimensional poverty.

Global Multidimensional Poverty Index

The global Multidimensional Poverty Index (MPI), released by UNDP annually, measures acute multidimensional poverty across more than 100 developing countries. It does so by measuring each person’s deprivations across 10 indicators in three equally weighted dimensions: Health, Education and Standard of living. In the global MPI, people are counted as multidimensionally poor if they are deprived in one-third or more of 10 indicators.

DimensionsIndices and Weightage
HealthNutrition (1/6th)
Child mortality (1/6th)
EducationYears of Schooling (1/6th)
School attendance (1/6th)
Standard of LivingCooking fuel (1/18th)
Drinking water (1/18th)
Electricity (1/18th)
Housing (1/18th)

India’s MPI

NITI Aayog was identified as the nodal agency for the Multidimensional Poverty Index (MPI). It is responsible for constructing an indigenised index for monitoring the performance of States and Union Territories and ranking them. India’s MPI is more comprehensive than the index prepared by UNDP.

DimensionIndicator and WeightageDeprivation
HealthNutrition (1/12th)The household does not have access to improved drinking water or safe drinking water and is at least a 30-minute walk from home.
Child & Adolescent mortality (1/12th)A child/adolescent under 18 years of age has died in the family in the five-year period preceding the survey.
Antenatal care (1/12th)A household is deprived if any woman in the household who has given birth in the 5 years preceding the survey, has not received at least 4 antenatal care visits for the most recent birth, or has not received assistance from trained skilled medical personnel during the most recent childbirth.
EducationYears of schooling (1/6th)Not even one member of the household aged 10 years or older has completed six years of schooling.
School attendance (1/6th)Any school-aged child is not attending school up to the age at which he/she would complete class 8.
Standard of livingCooking fuel (1/21)A household cooks with dung, agricultural crops, shrubs, wood, charcoal or coal.
Sanitation (1/21)The household has unimproved or no sanitation facility or it is improved but shared with other households.
Drinking water (1/21)The household has inadequate housing: the floor is made of natural materials, and the roof or wall are made of rudimentary materials.
Electricity (1/21)The household has no electricity.
Housing (1/21)The household has inadequate housing: the floor is made of natural materials, and the roof or wall is made of rudimentary materials.
Assets (1/21)The household does not own more than one of these assets: radio, TV, telephone, computer, animal cart, bicycle, motorbike, or refrigerator; and does not own a car or truck.
Bank account (1/21)No household member has a bank account or a post office account.

BPL Census for Identification of Poor Households

Identification of poor households is a prerequisite for proper targeting of beneficiaries under pro-poor programmes. While the erstwhile Planning Commission estimated poverty, the actual identification of the “Below the Poverty Line (BPL)” households in rural areas was done by the Ministry of Rural Development (MoRD). Whereas for the identification of BPL families in urban areas, the Ministry of Housing and Urban Affairs is the nodal agency.

Socio-Economic Caste Census Survey (SECC) 2011

The SECC 2011 ranked households in three categories:

  • Automatically Excluded: Households meeting exclusion criteria – any of the 13 assets and income-based parameters are automatically excluded from welfare benefits.
  • Automatically Included: Households satisfying inclusion criteria – any one of the 5 acute social destitution parameters are automatically included for welfare benefits.
  • Others: “Others” are ranked based on 7 indicators of deprivation and would, resources permitting be eligible for welfare benefits.

SECC-2011 allows for the first time to track the deprivation of households and address gaps effectively, focusing on the multi-dimensionality of poverty. The Government has used SECC data for the identification of beneficiary households while implementing its social welfare programmes including PMAY-G, DAY-NRLM, PMJAY-Ayushman Bharat etc.

Limitations of SECC

  • It does not collect information on the overall income or expenditure of the household.
  • Over time, there is also a high risk of household responses getting biased since the households know that their responses determine whether they receive benefits.
  • After many years, all that is still available are the rural SECC results; no urban SECC results have yet been made public.

An Alternative:

Track the Progress of the Bottom 30% If we did not want to commit to a poverty line, an alternative would be to track the economic progress of the bottom 30% of the population over time. Rising incomes of this group would imply declining poverty.

The World Bank has recently adopted this approach (it tracks the incomes of the bottom 40%) The main limitation of this approach is that it will not allow us to answer questions such as how far we from are eliminating poverty or how much have we reduced it.

Dr Amartya Sen’s capability approach to understanding poverty goes beyond income and stresses the whole range of means, available to achieve human capabilities such as literacy, longevity and access to income.

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