Brief History of Measuring Poverty in India

Working Group (1962) : The Planning Commission constituted a Working Group in 1962 to find out a desirable minimum level of living for the population. The Working Group recommended that the national minimum consumption expenditure for a household of five persons (four adult consumption units) should be not less than Rs100 per month or Rs20 per capita per month in terms of 1960-61 prices. For urban areas, this figure was Rs125 per month or Rs25 per capita per month to cover the higher prices there.

• This Poverty Line excluded expenditure on health and education, both of which, it was assumed, were to be provided by the State.
• The Working Group (1962) appeared to have taken into account the recommendation of balanced diet made by the Nutrition Advisory Group of the Indian Council of Medical Research (ICMR) in 1958.

Alagh Task Force (1979): The Planning Commission in July 1977 constituted the Task Force on “Projections of Minimum Needs and Effective Consumption Demand” under the Chairmanship of Dr. Y. K. Alagh. The Task Force submitted its report in January 1979 and the Planning Commission accepted its recommendations in the same month.

• The average calorie requirements were estimated, separately for the all-India rural and urban areas as a population–weighted average of the age-gender-activity specific calorie allowances recommended by the Nutrition Expert Group (1968) by reference to the 1971 population Census.

The estimated calorie norm was 2400 kcal per capita per day in rural areas and 2100 kcal per capita per day in urban areas. To work out the monetary equivalent of these norms, 28th Round (1973-74) NSS data relating to household consumption both in quantitative and value terms were used. Based on the observed consumer behaviour in 1973-74 it was estimated that, on an average, consumer expenditure (food and non-food) of Rs.49.09 per capita per month was associated with a calorie intake of 2400 per capita per day in rural areas and Rs.56.64 per capita per month with a calorie intake of 2100 per day in urban areas.

• This Monthly Per Capita Expenditure (MPCE) was termed as poverty line.
• The poverty lines for later years were estimated by updating the poverty lines of the year 1973-74 for price changes.

Lakdawala Expert Group (1993) : The Expert Group submitted its Report in July 1993. The Government accepted the Expert Group methodology in March 1997 as the basis for computing the official estimates of poverty in India.

• The Expert Group (Lakdawala) did not redefine the poverty line, rather it retained the one defined by the Task Force (Alagh) which was at national level in rural and urban areas.
• It disaggregated these national poverty lines into state-specific poverty lines in order to reflect the inter-state price differentials.

The national rural poverty line of Task Force (Alagh) was disaggregated into state-specific poverty lines using inter-state price differentials measured by Fisher’s Index. These state-specific poverty lines of base year (1973-74) were updated for subsequent years using state-specific price indices especially constructed by taking weighted average of the commodity group-wise Consumer Price Index of Agricultural Labourers (CPIAL) of (a) food (b) fuel and light, (c) clothing and footwear and (d) miscellaneous with their respective weights in the national consumption basket of the poor in 1973-74.

Tendulkar Committee (2005) : The Expert Group under the chairmanship of Suresh D. Tendulkar was constituted by the Planning Commission in December 2005. The Expert Group (Tendulkar) submitted its report in November 2009 and the Planning Commission accepted its recommendations in January 2011. The Expert Group (Tendulkar) did not construct a poverty line. It adopted the officially measured urban poverty line of 2004-05 based on Expert Group (Lakdawala) methodology and converted this poverty line (which is URP-consumption based) into MRP-consumption.

The Tendulkar Committee had recommended four major changes in its report submitted in 2009. These were:

1. Calorie anchor should be done away with
2. To have a uniform ‘poverty line basket’ (PLB) for both the rural and urban population
3. A price adjustment procedure should be predominantly based in the same data set that underlies the poverty estimation
4. Health and education must be explicitly mentioned in price indices for private expenditure

The national urban poverty ratio in 2004-05 as per the Expert Group (Tendulkar) methodology was identical to the one estimated by the Expert Group (Lakdawala) methodology, which was 25.7%. The shift from MPCE estimates on URP (that underlay the poverty ratio with the Lakdawala methodology) to those on MRP in the Expert Group (Tendulkar) methodology significantly raised the all-India Urban poverty line level of MPCE from 538.60 to Rs 578.80.

In the Expert Group (Tendulkar) methodology, the all-India rural poverty ratio is obtained in the same way as in the Expert Group (Lakdawala). The all-India rural poverty ratio so derived, at 41.8 percent is one and a half times the estimate of Expert Group (Lakdawala) which was 28.3 percent.

The Expert Group (Tendulkar) outlined the methodology for updation of the state-specific rural and urban poverty lines of 2004-05 for future years. (The updation is carried out by adjusting the urban state-specific poverty lines of 2004-05 with the Fisher index of changes in state-level urban prices between 2004-05 and later years (for example, 2009-10 and 2011-12) to derive state-level urban poverty lines for later years.

The Planning Commission released estimates of poverty for 1993-94 and 2004-05 derived from the Expert Group (Tendulkar) method In January 2011. Subsequently, based on the same methodology, the poverty ratio for 2009-10 and 2011-12 were derived by the Planning Commission in March 2012 and July 2013 respectively.