Poverty line redrawn, 3 in 10 Indians are poor: Rangarajan Report

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. 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. 

In  India  we  have  had  a  long  history  of  studies  on  measurement  of  poverty. There are in fact many approaches to it.  Some analysts focus on deprivations. There  are  however  many  problems  associated  with  this  approach  including difficulties in aggregating deprivations on several scores derived from different data  sources.  Perhaps  the  best  approach  is  look  at  it  in  terms  of  a  certain minimum consumption expenditure per person or preferably per household. Any household failing to meet this level of consumption expenditure can be treated as  a  poor  household.  This  minimum  level  of  consumption  expenditure  can  be derived, in turn, in terms of minimum expenditure on  food and non-food items. Minimum  food  consumption  is  related  to  fulfilling  certain  nutritional  standards.

Based on the analysis presented in the Report, monthly  per capita consumption expenditure of Rs. 972 in rural areas and Rs. 1407 in urban areas is treated as the poverty line at the all India level. This implies a monthly consumption expenditure of Rs. 4860 in rural areas or Rs.  7035 in urban areas for a family of five at 2011-12 prices.

The  Expert  Group  (Rangarajan)  therefore  estimates  that  the  30.9%  of  the  rural population  and  26.4%  of  the  urban  population  was  below  the  poverty  line  in 2011-12. The all-India ratio was 29.5%. In rural India, 260.5 million individuals were below poverty and in urban India 102.5 million were under poverty. Totally, 363 million were below poverty in 2011-12.

The poverty ratio has declined from 39.6% in 2009-10 to 30.9% in 2011-12 in  rural India and from 35.1% to 26.4% in urban India. The decline was thus a uniform 8.7 percentage points over the two years. The all-India poverty ratio fell from 38.2% to  29.5%.  Totally,  91.6  million  individuals  were  lifted  out  of  poverty  during  this period.

The  poverty  line  should  be  based  on  certain  normative  levels  of  adequate nourishment,  clothing,  house  rent,  conveyance  and  education,  and  a behaviorally determined level of other non-food expenses.The Expert Group (Rangarajan) computed the average requirements of calories, proteins  and  fats  based  on  ICMR  norms  differentiated  by  age,  gender  and activity  for  all-India  rural  and  urban  regions  to  derive  the  normative  levels  of nourishment.  Accordingly,  the  energy  requirement  works  out  to  2,155  kcal  per person per day in rural areas and 2,090 kcal per person per day  in urban areas.

The protein and fat requirements have been estimated on the same lines as for energy.  These  requirements  are  48  gms  and  28  gms  per  capita  per  day, respectively, in rural areas; and 50 gms and 26 gms per capita per day in urban areas.

The median fractile (45-50%) values of clothing expenses, rent, conveyance and education expenses are treated as the normative requirements of the basic non-food  expenses  of  clothing,  housing,  mobility  and  education  of  a  poverty  line basket. This works out to Rs.141 per capita per month in rural areas and Rs.407 in urban  areas.  The  observed  expenses  of  all  other  non-food  expenses  of  the fractile classes that meet the nutrition requirements are considered as part of t he poverty line basket. This works out to Rs.277 per capita per month in rural areas and Rs.344 in urban areas.

Compared to the poverty lines based on the methodology of the Expert Group (Tendulkar),  the  poverty  lines  estimated  by  the  Expert  Group  (Rangarajan)  are 19%  and  41%  higher  in  rural  and  urban  areas,  respectively.

The Expert Group (Rangarajan) recommends the updation of the poverty line in the  future  using  the  Fisher  Index.