Poverty and developmental issues

INTRODUCTION, MEANING AND MEASUREMENT OF POVERTY

“Poverty is the worst form of violence.” — Mahatma Gandhi

  Poverty is not merely the absence of income. It is a condition in which individuals or households lack the resources, capabilities and opportunities required to live a life of dignity, security and meaningful participation.

A poor person may suffer simultaneously from:

• Hunger and malnutrition
• Inadequate housing
• Poor health
• Illiteracy
• Unemployment or insecure work
• Social exclusion
• Lack of political voice
• Vulnerability to shocks
• Absence of dignity and choice

Therefore, poverty must be understood as a multidimensional deprivation, rather than only an income deficit.

Meaning of Poverty

Poverty refers to a situation in which a person is unable to secure the minimum resources necessary to satisfy basic needs and achieve an acceptable standard of living.

These needs include:

• • Food
  • Clothing
  • Shelter
  • Healthcare
  • Education
  • Sanitation
  • Safe drinking water
  • Energy
  • Social security
  • Human dignity

    “Poverty is a state of deprivation in which individuals lack adequate income, capabilities, access to basic services and opportunities necessary for a life of dignity.”

The uploaded notes also define poverty through inadequate income, hunger, poor access to education and healthcare, social marginalisation and exclusion from decision-making.

Poverty versus Development

Meaning of Development

Development refers to a sustained improvement in the economic, social, political and environmental conditions of people.

It is broader than economic growth.

Economic Growth

Economic growth generally refers to:

• • Increase in GDP
  • Increase in production
  • Rise in income
  • Expansion of economic activity

Development

Development includes:

• • Reduction in poverty
  • Better healthcare
  • Quality education
  • Gender equality
  • Employment
  • Social justice
  • Environmental sustainability
  • Political participation
  • Human freedom

A country may record high GDP growth while continuing to face:

• • Malnutrition
  • Joblessness
  • Regional inequality
  • Gender discrimination
  • Poor learning outcomes
  • Informal employment

Thus, growth without inclusion may not eliminate poverty.

Poverty as Capability Deprivation

Economist Amartya Sen viewed poverty as a deprivation of capabilities, rather than merely low income.

A person is poor when they lack the freedom or real opportunity to:

• Live a healthy life
• Receive education
• Participate in society
• Secure dignified employment
• Exercise meaningful choices

Example

Two persons may have the same income, but one may face:

• • Disability
  • Poor healthcare access
  • Social discrimination
  • Greater family responsibilities
  • Remote geographical location

Therefore, equal income does not always create equal capabilities.

Capability Deprivation

This approach transformed poverty analysis from:

Income deficiency
↓
Multiple deprivation
↓
Lack of capabilities and freedom

Major Dimensions of Poverty

1. Economic Poverty

It refers to insufficient income or consumption to meet basic needs.

It may involve:

• Low wages
• Unemployment
• Indebtedness
• Lack of productive assets
• Irregular income

2. Social Poverty

It includes deprivation arising from:

• Caste discrimination
• Gender inequality
• Tribal marginalisation
• Disability
• Social exclusion
• Lack of social mobility

3. Human Poverty

It refers to deprivation in:

• Education
• Health
• Nutrition
• Life expectancy
• Basic living conditions

4. Political Poverty

It refers to the absence of:

• Voice
• Representation
• Participation
• Legal awareness
• Access to justice

5. Environmental Poverty

Poor communities often suffer disproportionately from:

• Pollution
• Drought
• Floods
• Land degradation
• Water scarcity
• Climate change

6. Digital Poverty

In the contemporary period, deprivation also includes lack of access to:

• Internet
• Digital devices
• Digital literacy
• Online education
• Digital banking
• E-governance services

Types of Poverty

1. Absolute Poverty

Absolute poverty refers to the inability to meet minimum basic needs necessary for physical survival.

It is assessed against a fixed minimum threshold such as:

• • Minimum food requirement
  • Basic shelter
  • Essential clothing
  • Healthcare
  • Basic consumption expenditure

Key characteristic

The minimum standard remains broadly fixed, although it may be adjusted for inflation.

2. Relative Poverty

Relative poverty refers to deprivation compared with the average standard of living in a society.

A person may meet basic survival needs but remain poor relative to the society in which they live.

Example

A household without internet access or adequate education may be considered relatively deprived in an advanced urban economy, even if it has sufficient food.

Importance

Relative poverty highlights:

• • Inequality
  • Social exclusion
  • Unequal opportunities
  • Differences in living standards

3. Chronic Poverty

Chronic poverty persists over a long period and may continue across generations.

It is often associated with:

• Landlessness
• Illiteracy
• Low skills
• Poor health
• Social discrimination
• Lack of assets

4. Transient Poverty

Transient poverty is temporary and results from sudden shocks such as:

• Illness
• Job loss
• Natural disaster
• Crop failure
• Pandemic
• Conflict

A household may move into poverty after a shock and recover later if adequate support is available.

5. Rural Poverty

Rural poverty is commonly associated with:

• Landlessness
• Small and fragmented holdings
• Agricultural underemployment
• Low productivity
• Indebtedness
• Poor infrastructure
• Dependence on the monsoon

6. Urban Poverty

Urban poverty is associated with:

• Slum residence
• Informal employment
• High housing costs
• Lack of social protection
• Homelessness
• Insecure tenure
• Limited access to urban services

The source notes identify the urban poor mainly as persons engaged in low-paid or informal work, including slum and pavement dwellers.

7. Multidimensional Poverty

Multidimensional poverty measures simultaneous deprivation in several areas, such as:

• Health
• Education
• Nutrition
• Housing
• Sanitation
• Electricity
• Drinking water
• Cooking fuel
• Assets

This approach recognises that poverty cannot be accurately understood through income alone.

Poverty Line

A poverty line is a threshold used to distinguish the poor from the non-poor.

Those whose income or consumption falls below the threshold are classified as poor.

Why is a Poverty Line Required?

It helps the government to:

• Estimate the number of poor
• Identify vulnerable groups
• Design welfare programmes
• Allocate public resources
• Monitor poverty reduction
• Compare poverty across regions

Approaches to Measuring Poverty

1. Income Approach

Under this method, a person is considered poor when income falls below a specified minimum level.

Limitations

• Income may fluctuate
• Informal workers may not report income accurately
• It ignores access to public services
• It does not capture non-monetary deprivation

2. Consumption Expenditure Approach

India has traditionally relied largely on household consumption expenditure rather than reported income.

Consumption may include expenditure on:

• Food
• Clothing
• Housing
• Education
• Healthcare
• Transport
• Fuel

Why consumption is preferred

For many informal-sector households:

• Income is irregular
• Earnings are seasonal
• Income records are unavailable
• Consumption is relatively easier to estimate

3. Calorie-Based Approach

Earlier poverty estimates were linked with minimum calorie requirements.

The traditional calorie norms were broadly associated with:

• Higher calorie requirement in rural areas due to manual labour
• Lower requirement in urban areas

Criticism

The calorie-based approach is inadequate because poverty also involves:

• • Education
  • Healthcare
  • Housing
  • Sanitation
  • Transportation
  • Energy
  • Communication

4. Multidimensional Approach

This method assesses poverty through several indicators instead of relying only on expenditure.

It provides a more realistic picture of deprivation.

Poverty Estimation in India: Major Committees

1. Working Group, 1962

One of the earliest official attempts to develop a national poverty threshold.

It focused on minimum consumption requirements.

2. V. M. Dandekar and Nilakantha Rath

Their influential study linked poverty with calorie-based minimum consumption.

They highlighted the scale of poverty and the need for redistribution and employment-oriented growth.

3. Y. K. Alagh Committee, 1979

The committee developed separate rural and urban poverty lines linked to calorie requirements.

4. Lakdawala Committee, 1993

The committee retained calorie-based norms but introduced state-specific poverty lines.

Contributions

• State-specific price indices
• Separate rural and urban estimates
• Greater recognition of regional differences

Limitations

• Continued excessive reliance on calorie norms
• Did not adequately account for private health and education expenditure

5. Tendulkar Committee, 2009

The committee marked an important change in poverty estimation.

Major recommendations

• Move away from direct calorie anchoring
• Use a broader consumption basket
• Include private expenditure on health and education
• Adopt a uniform poverty-line basket across rural and urban areas
• Adjust for spatial price differences

Importance

The committee recognised that households increasingly had to pay privately for essential services.

Criticism

The resulting poverty threshold was criticised as being too low to represent a dignified standard of living.

6. Rangarajan Committee, 2014

The committee proposed a higher poverty threshold and a revised consumption basket.

It included expenditure on:

• • Food
  • Clothing
  • Housing
  • Education
  • Health
  • Transport

Significance

It attempted to provide a broader minimum consumption standard than the Tendulkar methodology.

Limitation

India has not adopted a new official national poverty line based on recent consumption surveys in a manner comparable to earlier Planning Commission estimates.

International Poverty Lines

The World Bank uses international poverty lines for cross-country comparison.

In June 2025, the World Bank updated the international extreme-poverty line to $3.00 per person per day, based on 2021 purchasing-power-parity prices. It also uses higher thresholds for lower-middle-income and upper-middle-income economies.

Important caution

International poverty lines:

• Help in global comparison
• Do not replace national poverty lines
• Must not be interpreted as literal market exchange-rate income
• Are based on Purchasing Power Parity

Purchasing Power Parity

Purchasing Power Parity, or PPP, adjusts currencies according to the amount of goods and services they can purchase in different countries.

Therefore, a dollar-based global poverty line is not converted by using the ordinary market exchange rate.

Headcount Ratio

The Headcount Ratio measures the proportion of the population living below the poverty line.

Formula

Headcount Ratio = Population below poverty line ÷ Total population × 100

Advantage

• Easy to understand
• Useful for comparison

Limitation

It does not indicate:

• • How poor the poor are
  • The depth of poverty
  • Inequality among poor households

Poverty Gap

The Poverty Gap measures how far the income or consumption of poor persons falls below the poverty line.

It captures the depth of poverty.

Example

Two regions may have the same headcount ratio, but in one region the poor may be only slightly below the poverty line, while in another they may face extreme deprivation.

Severity of Poverty

The severity measure gives greater weight to those who are far below the poverty line.

It captures:

• • Depth of poverty
  • Inequality among the poor
  • Extreme deprivation

Multidimensional Poverty Index

 The Multidimensional Poverty Index, or MPI, identifies persons suffering overlapping deprivations.

India’s national MPI uses three broad dimensions:

A person is classified as multidimensionally poor when their weighted deprivation score crosses the prescribed cut-off.

Updated Poverty Picture

National Multidimensional Poverty

NITI Aayog estimated that India’s multidimensional poverty headcount declined from 29.17% in 2013–14 to 11.28% in 2022–23, with approximately 24.82 crore people moving out of multidimensional poverty during that period.

The earlier NITI Aayog MPI based on NFHS data estimated a decline from 24.85% in 2015–16 to 14.96% in 2019–21.

Interpretation

This reflects improvements in areas such as:

• • Sanitation
  • Electricity
  • Housing
  • Banking access
  • Nutrition
  • Education
  • Cooking fuel

However, a decline in the national average does not eliminate:

• Interstate disparity
• Rural-urban differences
• Tribal deprivation
• Gender vulnerability
• Exposure to economic and climatic shocks

Global MPI 2025

The Global Multidimensional Poverty Index 2025 estimated that around 1.1 billion people across the covered countries experienced acute multidimensional poverty, with children forming more than half. The report also examined how poverty overlaps with climate hazards such as heat, drought, floods and air pollution.

Its India country profile estimated that 16.4% of India’s population was multidimensionally poor in 2023, while an additional 18.7% was vulnerable to multidimensional poverty. This estimate uses the global MPI methodology and should not be confused with NITI Aayog’s national MPI.

National MPI versus Global MPI

Household Consumption Expenditure Survey

The Household Consumption Expenditure Survey 2023–24 estimated average monthly per-capita consumption expenditure at:

• ₹4,122 in rural India
• ₹6,996 in urban India

These are averages, not official poverty lines.

Significance

The survey helps in:

• • Measuring living standards
  • Updating consumption patterns
  • Revising inflation weights
  • Analysing inequality
  • Informing future poverty estimation

Difficulties in Measuring Poverty

1. Poverty is Multidimensional

Income alone cannot capture deprivation in:

• Health
• Education
• Housing
• Dignity
• Security

2. Regional Price Differences

The cost of living varies among:

• States
• Rural and urban areas
• Metropolitan and smaller settlements

3. Informal Economy

Irregular and undocumented earnings make income measurement difficult.

4. Intra-Household Inequality

Household-level data may hide unequal distribution of resources between:

• Men and women
• Adults and children
• Elderly and younger members

5. Temporary Shocks

A household may fall into poverty due to:

• Medical emergency
• Disaster
• Job loss
• Crop failure

Static data may fail to capture such movement.

6. Access versus Ownership

A household may have access to a public service without privately purchasing it. Income-based measurement may underestimate its real welfare.

7. Quality of Services

Having access to a school or health centre does not ensure:

• • Quality education
  • Effective treatment
  • Availability of teachers
  • Availability of medicines

8. Hidden Vulnerability

A household just above the poverty threshold may fall below it after a minor economic shock.

Poverty and Vulnerability

Vulnerability refers to the risk that a person or household may fall into poverty in the future.

Vulnerability may arise from:

• • Informal employment
  • Lack of savings
  • Absence of insurance
  • Climate hazards
  • Illness
  • Debt
  • Price rise
  • Displacement

High-scoring distinction

Poverty Trap

A Poverty Trap is a self-reinforcing situation in which poverty generates conditions that perpetuate poverty.

Flowchart

Low income
↓
Low savings
↓
Low investment in health and education
↓
Low productivity
↓
Low employability and earnings
↓
Persistent poverty

Intergenerational Cycle of Poverty

Poverty may be transmitted from one generation to the next.

Poor Parents
     ↓
Malnutrition and Poor Health
     ↓
Low Educational Attainment
     ↓
Low Skills
     ↓
Informal and Low-Paid Employment
     ↓
Poor Household
     ↓
Poverty Passed to the Next Generation

Breaking this cycle requires early investment in:

• Maternal health
• Child nutrition
• Foundational learning
• Social protection
• Skills
• Employment

Poverty as a Cognitive Tax

Persistent financial insecurity imposes a cognitive burden.

Poor households must continuously worry about:

• • Food
  • Rent
  • Medical expenses
  • Debt
  • Employment
  • School fees

This constant stress reduces the mental capacity available for:

• Long-term planning
• Education
• Productive decision-making
• Risk management

Poverty and Sustainable Development Goals

SDG 1

End poverty in all its forms everywhere.

Associated goals include:

• SDG 2: Zero Hunger
• SDG 3: Good Health and Well-being
• SDG 4: Quality Education
• SDG 5: Gender Equality
• SDG 6: Clean Water and Sanitation
• SDG 8: Decent Work
• SDG 10: Reduced Inequalities
• SDG 11: Sustainable Cities