(Online Cours) CAPF Assistant Commandant: Indian Economy – Poverty

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Indian Economy

Poverty

In almost all underdeveloped countries where per capita
income is very low, income inequality has resulted in a number of evils, of
which poverty is certainly the most serious one. In India, even now in spite of
all the development during the past five and a half decades, 34.3 per cent of
the population was getting less than $1(PPP) a day in 2004-05.’ This percentage
of population was considered to be poor on an international criterion suggested
by World Development Report. Most of the time this population suffered from
extreme destitution.

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THE CONCEPT OF POVERTY LINE

It is generally agreed in this country that only they who
fail to reach a certain minimum consumption standard should be regarded as poor.
But the experts who have examined the question of poverty quantitatively find it
difficult to agree on the amount of income that will ensure the minimum
consumption standard at a point of time. The Planning Commission has adopted
definition of poverty provided by the “Task Force on Projections of Minimum
Needs and Effective Consumption Demand”. Using the income poverty method, the
Task Force had defined the poverty line as the midpoint of the monthly per
capita expenditure class having a daily calorie intake of 2,400 per person in
rural areas and 2,100 in urban areas. On this basis, the cut-off points turn out
to be Rs. 49.09 for rural areas and Rs. 56.64 for urban areas at 1973-74 prices.

These figures constituted ‘the official poverty lines’ for
that year. The poverty lines for later years were obtained by adjusting the
1973-74 poverty lines for inflation. An expert group of the Planning Commission
proposed introduction of State specific price changes in the adjustment of the
poverty lines. Thus, State specific poverty lines were obtained. However, no
adjustments were made for changes in consumers’ preferences reflecting a switch
away from cereals and overall switch from food to non-food items. In fact,
official poverty lines seriously underestimate the true cost of attaining the
minimum energy requirements. Jaya Mehta and Shanta Venkataraman in their study
have pointed out that in 1993-94 the official poverty line was sufficiant to
purchase only 1968 kcal (daily) per capita in rural areas and 1890 kcal (daily)
per capita in urban areas. A recent study by Ranjan Ray and Geoffrey Lancaster
also raises serious questions on the official poverty line as a measure of the
true cost of obtaining the minimum calorie requirements today. The paper
provides robust evidence to prove that poverty situation in India is worse than
indicated by official poverty statistics – adjusted or not.’

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