Introduction

Growth is not the sole objective of economic policy. It is necessary to ensure that the
benefits of growth accrue to all sections of the society. Eradication of poverty is thus
an important objective. Human beings need a certain minimum consumption of food
and non-food items to survive. However the perception regarding what constitutes
poverty varies over time and across countries. Nevertheless there is need for a
measure of poverty. Only then, it will be possible to evaluate how the economy is
performing in terms of providing a certain minimum standard of living to all its
citizens. Measurement of Poverty has, therefore, important policy implications.

Poverty can be defined as the inability of the people to attain a minimum standard of
living. In other words, poverty is a relationship between the essential needs of people
to survive and their ability to satisfy them. Those people who are unable to satisfy
some of the basic needs such as food, clothes, shelter, sanitation, etc. are called poor.
Poor people live without fundamental freedom of choice which makes their life better.
They face vulnerability to ill health, economic dislocation and natural disaster. In
other words of Amartya sen, a Nobel laureate in economics, poverty is a deprivation
of basic capabilities rather than merely a lowness of income.

Since gaining Independence in 1947, instead of being able to eradicate the poverty,
India has added poor’s and houses poorest people in the world. On the top of it, there
are millions of poor’s in India who are living below the poverty line which despite
having been drawn at a very low income requirement has not been able to bring the
poor’s above it during last 60 years.
 
Since 2001 and over the last decade, although poverty levels have declined from
37.2% in 2004-05 to 29.8% in 2009-10, a whopping number of 250 million poor
people is estimated to be living in India.
 
Definition of poverty
A definition of poverty in terms of subsistence level has had wide acceptance as it
seems to be in accordance with common sense which describes poverty as lack of the
income needed to acquire the minimum necessities of life. Poverty is an extremely
complex phenomenon, which manifests itself in a range of overlapping and
interwoven economic, political and social deprivations. These include lack of assets,
low income levels, hunger, poor health, insecurity, physical and psychological
hardship, social exclusion, degradation and discrimination, and political
powerlessness and disarticulation.

Poverty, the state of one who lacks a usual or socially acceptable amount of money
or material possessions. Poverty is said to exist when people lack the means to satisfy
their basic needs. In this context, the identification of poor people first requires a
determination of what constitutes basic needs. These may be defined as narrowly as
“those necessary for survival” or as broadly as “those reflecting the
prevailing standard of living in the community.” The first criterion would cover only
those people near the borderline of starvation or death from exposure; the second
would extend to people whose nutrition, housing, and clothing, though adequate to
preserve life, do not measure up to those of the population as a whole. The problem of
definition is further compounded by the noneconomic connotations that the word
poverty has acquired. Poverty has been associated, for example, with poor health, low
levels of education or skills, an inability or an unwillingness to work, high rates of
disruptive or disorderly behaviour, and improvidence. While these attributes have
often been found to exist with poverty, their inclusion in a definition of poverty would
tend to obscure the relation between them and the inability to provide for one’s basic
needs. Whatever definition one uses, authorities and laypersons alike commonly
assume that the effects of poverty are harmful to both individuals and society.
Types of Poverty

Absolute poverty is when household income is below a certain level, which makes it
impossible for the person or family to meet basic needs of life including food, shelter,
safe drinking water, education, healthcare, etc.

In this state of poverty, even if the country is growing economically it has no effect on
people living below the poverty line. Absolute poverty compares households based on
a set income level and this level varies from country to country depending on its
overall economic conditions.

Relative poverty is when households receive 50% less than average household
incomes, so they do have some money but still not enough money to afford anything
above the basics. This type of poverty is, on the other hand, changeable depending on
the economic growth of the country.

 Relative poverty is sometimes described as “relative deprivation” because the

people falling under this category are not living in total poverty, but they are
not enjoying the same standard of life as everyone else in the country. It can be
TV, internet, clean clothes, a safe home (a healthy environment, free from
abuse or neglect), or even education.
 Relative poverty can also be permanent, meaning that certain families have
absolutely no chance of enjoying the same standards of living as other people
in the same society currently have access to. They are basically “trapped” in a
low relative income box.

When the relative approach is used to measure poverty, there is another concept that
needs to be explored – persistent poverty. This is when households receive 50 or 60%
less income than average incomes every 2 out of 3 years. Since long-term poverty has
more impactful consequences on economic and social conditions, persistent poverty is
an important concept to bear in mind.
Measurement of Poverty
The first step in poverty measurement is the identification stage. In particular, the
poverty dimension(s) have to be picked and a threshold for each dimension must be
defined. This threshold services to identify the poor and differentiate them from the
non-poor. Poverty lines exist on both national levels, where they service to identify
the poor in a specific society and on international level where. There are long-standing
debates about which dimension(s) or welfare indicator(s) are to be used and where to
set the threshold for general poverty measurement. The two main approaches are
absolute and relative (to the standard e.g. the median or average) poverty lines. This
debate might be even trickier when it comes to children: What would be the right cut-
off point and what dimensions are important for measuring their pronounced
dependency on the direct environment.

1. Poverty Measures
One distinction between poverty measures is whether the metric used to assess
people’s conditions is monetary or non-monetary, and whether it refers to
inputs (i.e. the resources required to achieve well-being) or to outcomes (i.e.
the final conditions people achieve). Most poverty measures are monetary and
input based, with income measures as the most obvious example. Income-based
measures of poverty differ however in terms of the income-concept used (e.g.
income before taxes, as in most US analysis, or income after taxes, as in the
EU); the unit of analysis (whether you count the number of people who are
poor or the number of households or families in this conditions); and how to
account for differences in needs across households of various characteristics
(such as size and presence of children).

2. Income based measures of poverty

Income based measures of poverty can be further distinguished depending on
whether they rely on absolute or relative thresholds. Absolute thresholds are
typically expressed in the form of the cost of a basket of goods and services
deemed to be required to assure minimum living conditions, indexed for prices
changes over time (e.g. the United States). Absolute thresholds are also used
internationally (as in the case of the World Bank’s poverty lines of ‘one-dollar’
and ‘two-dollars’ per day and per person, measured at purchasing power
parities) to monitor progress by the international community in meeting
commitments to eradicate extreme poverty (to halve the 1990 $1 a day poverty
rate by 2015) in the context of the Millennium Development Goals.

Relative thresholds are set as a proportion of the income level that is most
typical in each country. While some observers may be uneasy about some of
the implications of using a relative threshold (as it implies that poverty will
decline even when the income of the poor is falling, provided that the income
of the non-poor is falling faster), this approach follows logically from Adam
Smith’s notion that the consumption standards prevailing in a community
 dictate which goods are viewed as essential and which ones are not. In the EU,
a community regulation has set this threshold at 60% of median household
disposable income, with each person being attributed the “adjusted” income of
the household to which he/she belongs (adjusted through the so-called
“modified OECD-scale”). This concept of the population “at risk of poverty” is
monitored through indicators of its prevalence (i.e. the number of people who
are poor, as a share of the total population) and severity (i.e. the gap between
the median income of the poor and the poverty line). EU countries also use
indicators of poverty based on a relative threshold “anchored” in time, so as to
highlight changes in the absolute income of the poor.

3. Non-monetary measures of poverty

Other approaches to the measurement of poverty rely on direct measures of
people’s access to the types of goods and activities deemed to be necessary to
enjoy a “decent” standard of living, rather than using income as an indirect
measure of the resources available to satisfy consumption. These approaches
generally assess the conditions of people through surveys designed to
distinguish between situations where the lack of a good or activity reflects the
preferences of each person and those where they reflect the lack of financial
resources to pay for them, and select these “necessary” items based on either
experts’ views or on surveys that elicit people’s consensus of which
consumption items are more critical to a decent standard of living. This
approach to the measurement of multidimensional poverty can be used either as
an alternative to income based measures or in combination to them, as in the
Irish definition of “consistent poverty” (which counts as consistent poor those
people who have both relative low income and who experience a given number
of deprivations). Other approaches to the construction of multidimensional
poverty are rooted in the notion of capabilities (the freedom of a person to
choose among the various things that he or she manages to do or be in leading a
life) but these have not yet lead to the development of measures that could be
reliably applied in comparative analyses.

4. Official measures of poverty

Several countries have official measures of poverty, typically defined as the
costs of a nutritionally adequate food bundle plus an allowance for non-food
poverty; in some of these countries, these official thresholds are also to define
the conditions of access to various types of benefits. The existence of an
official definition of poverty cut short all ambiguities as to its meanings. This,
however, generally comes at a price: politically, it has often proved difficult (if
not impossible) to change definitions when warranted by changed conditions.
One telling example of this difficulty is represented by the lack of agreement,
despite decades of discussion; on how to revise the US poverty line, which
dates back to the 1950s and whose value is today is equivalent to less than 40%
 of median income. The OECD, on his side, relies on measures of income
poverty based of several relative thresholds (set at 40%, 50% and 60% of
median household disposable income, and adjusted with a “square root”
elasticity) to benchmark countries performance, while also using alternative
measures (multidimensional) for some more specific applications.

Causes of Poverty

(i) Heavy pressure of population: Population has been rising in India at a rapid

speed. This rise is mainly due to fall in death rate and more birth rate. India’s
population was 84.63 crores in 1991 and became 102.87 crores in 2001. This pressure
of population proves hindrance in the way of economic development.

(ii) Unemployment and under employment: Due to continuous rise in population,

there is chronic unemployment and under employment in India. There is educated
unemployment and disguised unemployment. Poverty is just the reflection of
unemployment.

(iii) Capital Deficiency: Capital is needed for setting up industry, transport and other
projects. Shortage of capital creates hurdles in development.

(iv) Under-developed economy: The Indian economy is under developed due to low

rate of growth. It is the main cause of poverty.

(v) Increase in Price: The steep rise in prices has affected the poor badly. They have
become more poor.

(vi) Net National Income: The net national income is quite low as compared to size
of population. Low per capita income proves its poverty. The per capita income in
2003-04 was Rs. 20989 which proves India is one of the poorest nations.

(vii) Rural Economy: Indian economy is rural economy. Indian agriculture is

backward. It has great pressure of population. Income in agriculture is low and
disguised unemployment is more in agriculture.
(viii) Lack of Skilled Labour: In India, unskilled labour is in abundant supply but
skilled labour is less due to insufficient industrial education and training.

(ix) Deficiency of efficient Entrepreneurs: For industrial development, able and

efficient entrepreneurs are needed. In India, there is shortage of efficient
entrepreneurs. Less industrial development is a major cause of poverty.

(x) Lack of proper Industrialisation: Industrially, India is a backward state. 3% of

total working population is engaged in industry. So industrial backwardness is major
cause of poverty.

(xi) Low rate of growth: The growth rate of the economy has been 3.7% and growth
rate of population has been 1.8%. So compared to population, per capita growth rate
of economy has been very low. It is the main cause of poverty.

(xii) Out-dated Social institutions: The social structure of our country is full of

outdate traditions and customs like caste system, laws of inheritance and succession.
These hamper the growth of economy.

(xiii) Improper use of Natural Resources: India has large natural resources like iron,
coal, manganese, mica etc. It has perennial flowing rivers that can generate
hydroelectricity. Man power is abundant. But these sources are not put in proper use.

(xiv) Lack of Infrastructure: The means of transport and communication have not

been properly developed. The road transport is inadequate and railway is quite less.
Due to lack of proper development of road and rail transport, agricultural marketing is
defective. Industries do not get power supply and raw materials in time and finished
goods are not properly marketed.
Poverty estimation in India

The percentage of the population living below the poverty line in India decreased to
22% in 2011-12 from 37% in 2004-05, according to data released by the Planning
Commission in July 2013.  This blog presents data on recent poverty estimates and
goes on to provide a brief history of poverty estimation in the country. National and
state-wise poverty estimates The Planning Commission estimates levels of poverty
in the country on the basis of consumer expenditure surveys conducted by the
National Sample Survey Office (NSSO) of the Ministry of Statistics and Programme
Implementation.

The current methodology for poverty estimation is based on the recommendations of

an Expert Group to Review the Methodology for Estimation of Poverty (Tendulkar
Committee) established in 2005.  The Committee calculated poverty levels for the
year 2004- 05.  Poverty levels for subsequent years were calculated on the basis of the
same methodology, after adjusting for the difference in prices due to inflation. Table 1
shows national poverty levels for the last twenty years, using methodology suggested
by the Tendulkar Committee.  According to these estimates, poverty declined at an
average rate of 0.74 percentage points per year between 1993-94 and 2004-05, and at
2.18 percentage points per year between 2004-05 and 2011-12. 

Table no.1:- National Poverty estimates (% below poverty line) (1993-2012)

Year Rural Urban Total

1993-94 50.1 31.8 45.3

2004-05 41.8 25.7 37.2

2009-10 33.8 20.9 29.8

2011-12 25.7 13.7 21.9

Source: Press Note on Poverty Estimates, 2011 – 12, Planning Commission; Report of
the Expert Group to Review the Methodology for Estimation of Poverty (2009)
Planning Commission; PRS. State-wise data is also released by the NSSO. Table 2
shows state-wise poverty estimates for 2004-05 and 2011-12.  It shows that while
there is a decrease in poverty for almost all states, there are wide inter-state disparities
in the percentage of poor below the poverty line and the rate at which poverty levels
are declining.

Table2: State-wise poverty estimates (% below poverty line) (2004-05, 2011-12)

Poverty Line:
In India consumption-expenditure has been made the basis for the measurement of the
minimum standard. The usual method is to fix a poverty level. This level is expressed
in terms of an overall per capita consumption-expenditure.

This consumption-expenditure as such, is needed to ensure a certain minimum calorie

intake, which in turn is derived from the information on food articles.

In figures, the poverty norm is anchored in terms of daily intake of2400 calories in
rural areas and 2100 calories in urban areas. Those who are unable to incur this much
amount of consumption- expenditure are identified as poor. They are identified as
people living below the poverty line.

On the recommendations of Lakdawala Committee different poverty lines were

determined for different states.

Magnitude of Poverty in India:

The Uniform Recall Period (URP) consumption distribution data of NSS 61st round
places the poverty ratio at 28.3 per cent in rural areas, 25.7 per cent in urban areas and
27.5 per cent in the country as a whole.

The corresponding poverty ratios from the Mixed Recall Period (MRP) consumption
distribution data are 21.8 percent for rural areas, 21.7 per cent for urban areas and 21.8
per cent for the country as a whole.

The incidence of poverty is not same in all states. On the one hand we have states
where poverty ratio is very high, like Orissa (46.4), Bihar (41.4), Madhya Pradesh
(38.3), Assam (19.71), and Uttar Pradesh (32.8).
On the other hand we have states where poverty ratio is very low, Punjab (8.4),
Himachal Pradesh (10) and Haryana (14). There has been a significant reduction in
poverty ratio during 1993-94 to 2004- 05 in Himachal Pradesh, Haryana, Karnataka,
Kerala, Tamil Nadu and Union Territories. Reduction in poverty has been
unsatisfactory in Orissa, Madhya Pradesh, Uttar Pradesh and North East states.

One significant fact about poverty is that while the poverty ratio has been declining in
India, the absolute number of poor had remained more or less the same. Poverty ratio
was 36 per cent in 1993- 94 which means 32.0 crore people were below poverty line.
Though poverty ratio declined by 8.5 per cent between 1993-94 and 2004-05 but the
absolute number of poor was estimated at 30.2 crores persons.

The poor mostly belong to the weaker sections of the society like SC/ST, women,
handicapped, etc. In rural areas they are the landless labourers, small and marginal
farmers and rural artisans.

The urban poor, quite many of them are immigrants from villages, live in slums and
on pavements. The poor are weak not only economically but also socially and
politically.
Conclusion

Therefor we have been able to learned that poverty is one of the major issues in the
world that need to be address quickly in the poorest villages in which thousands of
people are dying, and most of these people are children’s. We have learned that
poverty refers to the condition of not having the means to afford basic human needs
such as clean water, nutrition, healthcare, clothing, food, and a place to live, poverty is
a deadly issue that’s killing our population slow and that we as the affected ones need
to take actions against it. We have also learned that poverty that affect mostly poor
people, because of the little resources they have, this means that poverty is an issue
that’s harming poor people that want to get out of poverty, but they can’t because they
don’t have the support of rich people. Even though there are a lot of people trying to
stop poverty, it is impossible to stop it without the support of rich countries, this is
because to fight poverty we have to fight it with a lot of money and their only a few
countries that could support us with this need. Something else that we have learned is
that poverty today is looking worst then when it first started; millions of kids are
living on piles of trash dying of starvation. The reason there are so many people living
in poverty is because millions of other people are spending money in things they don’t
need. (Article wave) this leads us to the effects of this issue that are deadly illnesses
that make people fall and give up on their life, we learned that poverty lead people to
abuse of drugs or to abuse of other people. And even though many people support the
idea of helping those people who live in poverty, there are also those that don’t
support people who are trying to stop poverty. And the most important thing that we
have all learned from this research is that poverty can be stop, but to be able to stop it
we must all support each other, with no hate or anything that could harm us. So for
those that are willing to help don’t help because you feel pressure, do it because you
want to and your heart is telling you to do it.