Poverty Line and Two Important Committees Report
- G.S. Paper 2, Prelims
- About poverty line
- Poverty line in India and Method for constructing poverty line
- Poverty elimination in India (Tendulkar committee report and C Rangarajan committee report)
What is Poverty Line?
- It is a measure describing the minimum level of income that a person needs to live and separates the poor from the not-so-poor.
- It is the level of income to meet the minimum living conditions.
- Poverty line is the amount of money needed for a person to meet his basic needs.
- It is defined as the money value of the goods and services needed to provide basic welfare to an individual.
- Poverty line differs from one country to another, depending upon the idea of poverty
- Poverty line changes from one country to another.
- In developed countries, where there is advanced standard of living and welfare concepts, poverty line is high as basic standard to live include higher consumption requirements and accessibility to many goods and services.
- On the other hand, in many less developed countries, the basic requirements will be low and contains mostly essential consumption items needed to sustain life.
- This means that poverty line is set by the welfare standard in a particular society (economy).
- Poverty is ‘relative’ and what poverty in the US or in an advanced West European country may not be poverty in Bangladesh.
What is the Poverty line in India?
- India is having a well-designed poverty measurement mechanism under the erstwhile Planning Commission.
- The Planning Commission was the nodal agency for estimation of poverty.
- For setting poverty line and methodology of constructing it, the Planning Commission appointed Expert Groups from time to time.
- For example, the Rangarajan Committee is the latest among those Expert groups.
- Traditionally, the planning commission estimates the number of people below poverty line in states as well as the rural and urban areas based upon the prevailing poverty estimation methodology submitted by the expert groups.
What is the methodology for constructing the poverty line?
- The poverty estimation methodology was revised many times with new expert group/task force appointed by the Planning Commission to look into the matter.
- Each expert group/task force has devised certain methodology in determining the poverty line.
- For measuring poverty, a poverty line is set.
- The poverty line is the level of income needed to meet the minimum standard of living.
- People who have an income less than this is considered as below poverty line.
- The concept about minimum consumption standards and consumption levels were changed based upon recommendations of the various expert groups/task force.
- These expert groups use the NSS (National Sample Survey) estimate the consumption pattern of households from time to time.
- The NSS’s periodically makes extensive household surveys on expenditure.
- Here, from the consumption basket of the people, the expert groups pick up the most essential commodities.
- These commodities are placed under a poverty line basket (PLB).
- Minimum standard of living is thus expressed as the basket of goods and services commonly used by the people.
- Based on this consumption pattern, the Expert Groups estimate the minimum consumption levels (and the income needed to buy these) and the income needed to obtain these goods and services in both rural and urban areas.
- This income level acts as the poverty line.
Poverty Estimation In India – C Rangarajan and Tendulkar Committee
- Poverty in India is big issue for the government.
- To measures exact numbers of poor people and per capita expenditure various methods had been adopted by Government of India.
- The official measure of Indian government, before 2005, was based on food security and it was defined from per capita expenditure of a person to consume enough calories and be able to pay for associated essentials to survive.
- Since 2005, Indian government adopted the Tendulkar methodology which moved away from calorie anchor to a basket of goods and used rural, urban and regional minimum expenditure per capita necessary to survive.
- The Planning Commission has been estimating the number of people below the poverty line (BPL) at both the state and national level based on consumer expenditure information collected as part of the National Sample Survey Organization (NSSO) since the Sixth Five Year Plan.
- The latest available data from such surveys is from NSSO conducted in 2004-05.
The government Of India formed various committees for Poverty Estimation In India in the past:-
- Alagh Committee (1977),
- Lakdawala Committee (1989)
- Tendulkar Committee (2005)
- Saxena committee
- Hashim Committee
- C . Rangarajan Committee ( 2012)
Tendulkar committee report on poverty
In 2005, another expert group to review methodology for poverty estimation, chaired by Suresh Tendulkar, was constituted by the Planning Commission to address the following three shortcomings of the previous methods:
- Consumption patterns were linked to the 1973-74 poverty line baskets (PLBs) of goods and services, whereas there were significant changes in the consumption patterns of the poor since that time, which were not reflected in the poverty estimates;
- There were issues with the adjustment of prices for inflation, both spatially (across regions) and temporally (across time); and
- Earlier poverty lines assumed that health and education would be provided by the State and formulated poverty lines accordingly.
It also recommended four major changes:
- A shift away from calorie consumption based poverty estimation;
- A uniform poverty line basket (PLB) across rural and urban India;
- A change in the price adjustment procedure to correct spatial and temporal issues with price adjustment; and
- Incorporation of private expenditure on health and education while estimating poverty.
- The Committee recommended using Mixed Reference Period (MRP) based estimates, as opposed to Uniform Reference Period (URP) based estimates that were used in earlier methods for estimating poverty.
- It based its calculations on the consumption of the following items: cereal, pulses, milk, edible oil, non-vegetarian items, vegetables, fresh fruits, dry fruits, sugar, salt & spices, other food, intoxicants, fuel, clothing, footwear, education, medical (non-institutional and institutional), entertainment, personal & toilet goods, other goods, other services and durables.
- The Committee computed new poverty lines for rural and urban areas of each state.
- To do this, it used data on value and quantity consumed of the items mentioned above by the population that was classified as poor by the previous urban poverty line.
- It concluded that the all India poverty line was Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05.
C Rangarajan Committee
- This committee was set up by the erstwhile Planning commission In 2012 and it submitted its report In 2014.
- The Planning commission had set up the five-member expert group under Rangarajan to review the methodology for measurement of poverty.
- The committee was set up in the backdrop of national outrage over the Planning Commission’s suggested poverty line of Rs 22 a day for rural areas.
- The Rangarajan committee estimation is based on an independent large survey of households by Center for Monitoring Indian Economy (CMIE).
- It has also used different methodology wherein a household is considered poor if it is unable to save.
- The methods also include on certain normative levels of adequate nourishment, clothing, house rent, conveyance, education and also behavioral determination of non-food expenses.
- It also considered average requirements of calories, protein and fats based on ICMR norms differentiated by age and gender.
- Based on this methodology, Rangarajan committee estimated the number of poor were 19 per cent higher in rural areas and 41 per cent more in urban areas than what was estimated using Tendulkar committee formula.
- Tendulkar, an economist, had devised the formula to assess poverty line in 2005, which the Planning Commission had used to estimate poverty in 2009-10 and 2011-12.
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