Poverty and its measurement

The first principle

A poverty line is a choice: decide the minimum a person needs, price it, and count the people whose spending falls below it. Every dispute about how many Indians are poor is therefore a dispute about one of three things, namely the basket that defines the minimum, the survey that records what people spend, and the prices used to value both. Change any of the three and the count changes even if no one's life has changed, which is why a student must always ask which line, which survey and which year.

The core

What is measured

• Absolute and relative poverty. Absolute poverty is falling below a fixed minimum standard of living, while relative poverty is falling far below the typical person in one's own society, for example below half the median.
• Consumption, not income. India measures poverty by monthly per capita consumption expenditure (MPCE), because it is steadier than income and easier to recall for farmers and informal workers with irregular earnings.
• Three measures of poverty. The headcount ratio (HCR) is the share of people below the line. The poverty gap index measures depth: each poor person's shortfall as a share of the line, averaged over the whole population. The squared poverty gap measures severity by giving more weight to the poorest. These are the Foster–Greer–Thorbecke measures (1984).
• A worked example. Ten people spend 600, 750, 900, 950, 1,100, 1,300, 1,500, 1,800, 2,200 and 3,000 rupees a month, and the line is 1,000 rupees. Four are below it, so the HCR is 4 ÷ 10 = 40 per cent. Their shortfalls as a share of the line are 0.40, 0.25, 0.10 and 0.05, which add up to 0.80, so the poverty gap index is 0.80 ÷ 10 = 8 per cent. If 100 rupees moves from the person at 950 to the person at 600, the HCR and the poverty gap do not change, but the squared poverty gap falls from 2.35 to 1.85 per cent, which is why the headcount alone can hide real gains for the poorest.

How India drew its lines

• The calorie anchor. The Task Force of 1979 under Y. K. Alagh fixed the line as the spending at which people met 2,400 calories a day in rural areas and 2,100 in urban areas, which gave lines of Rs 49.09 and Rs 56.64 per person per month at 1973-74 prices.
• Lakdawala (1993). The Expert Group under D. T. Lakdawala kept the calorie anchored baskets but made the lines State specific, updated by the Consumer Price Index for Agricultural Labourers in rural areas and for Industrial Workers in urban areas. It put poverty at 36.0 per cent in 1993-94.
• Tendulkar (2009). The Expert Group under Suresh Tendulkar dropped the calorie anchor, because people were eating fewer calories as they grew richer and did less manual work. It used one reference basket for all States, including health and education, on the mixed reference period. Poverty in 2011-12 was 21.9 per cent, or 26.98 crore people, at lines of Rs 816 a month in rural areas and Rs 1,000 in urban areas, about Rs 27 and Rs 33 a day (Planning Commission, 2013).
• Rangarajan (2014). The Expert Group under C. Rangarajan returned to a basket that met norms for calories, protein and fat, added the non food spending of households in the median spending class, and used the modified mixed reference period. It put poverty in 2011-12 at 29.5 per cent, or 36.3 crore people, at Rs 972 rural and Rs 1,407 urban a month, about Rs 32 and Rs 47 a day. The government did not formally adopt it, and a task force of the National Institution for Transforming India (NITI Aayog) in 2016 did not settle the question, so India has had no official poverty estimate since 2011-12.
• Reference periods. The uniform reference period asks about the last 30 days for every item. The mixed reference period (MRP) uses 365 days for clothing, footwear, durables, education and hospital care. The modified mixed reference period (MMRP) further uses 7 days for some foods such as edible oil, eggs, fish, meat, vegetables and fruit, which captures more spending and so raises measured consumption.

Dimensions

• Multidimensional. Income is only one deprivation. The global Multidimensional Poverty Index (MPI) of the United Nations Development Programme and Oxford University, begun in 2010, counts overlapping deprivations, and NITI Aayog's national MPI uses 12 indicators across health, education and living standards, each dimension weighted one third, with data from the National Family Health Survey (NFHS). A person deprived in a third or more of the weighted indicators is poor. The MPI equals the headcount (H) times the average intensity of deprivation among the poor (A), which is the Alkire–Foster method.
• Vulnerability. Many people just above any line fall back after an illness, a crop failure or a job loss, so counting only those below the line understates the people at risk.
• Targeting. Lines decide who gets help. The National Food Security Act, 2013 covers up to 75 per cent of the rural and 50 per cent of the urban population, and free grain under the Pradhan Mantri Garib Kalyan Anna Yojana reaches about 81 crore people, coverage far wider than any poverty line; welfare schemes as social policy are covered in GS2.
• International. The World Bank's international poverty line converts a minimum into each country's currency at purchasing power parity (PPP), so countries can be compared; it is a global yardstick and not India's national line.

In practice

• Tendulkar line. Poverty fell from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12 (Planning Commission, 2013), which is about 2.2 percentage points a year.
• National MPI. The share of people multidimensionally poor fell from 24.85 per cent in 2015-16 to 14.96 per cent in 2019-21, so about 13.5 crore people left multidimensional poverty (NITI Aayog, 2023). A NITI Aayog discussion paper of January 2024 estimated a fall from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23, about 24.82 crore people, the last year projected from earlier survey trends.
• The World Bank's revised line. In June 2025 the World Bank raised the international extreme poverty line from 2.15 dollars a day at 2017 PPP to 3.00 dollars at 2021 PPP. On this line India's extreme poverty fell from 27.1 per cent in 2011-12 to 5.3 per cent in 2022-23, from about 34.4 crore to 7.5 crore people, using the new consumption survey.
• The consumption surveys. The Household Consumption Expenditure Survey (HCES) of 2022-23 and 2023-24, by the Ministry of Statistics and Programme Implementation (MoSPI), found average MPCE of Rs 4,122 in rural and Rs 6,996 in urban India in 2023-24, against Rs 3,773 and Rs 6,459 in 2022-23, without counting free items. Counting the value of free food and other items received through government schemes raises 2023-24 MPCE to Rs 4,247 and Rs 7,078. The urban–rural gap in MPCE narrowed from 84 per cent in 2011-12 to 70 per cent in 2023-24, and the poorest 5 per cent of rural Indians spent Rs 1,677 a month in 2023-24 (MoSPI, 2024).

Issues and way forward

• No official line for fourteen years. Without an agreed line, every estimate from the new surveys is private or international; an expert group to fix a line on the HCES, revisited every decade, is the obvious remedy.
• Surveys that cannot be compared. HCES 2022-23 changed the questionnaire and the number of visits, so its results are not strictly comparable with 2011-12; future rounds must keep the method stable or publish bridge estimates.
• Surveys miss spending. Consumption in household surveys is well below private consumption in the national accounts, mostly because rich households under report or refuse, so surveys may understate inequality more than poverty.
• Inputs are not outcomes. The MPI counts access to a toilet, a bank account or cooking gas, which can rise faster than their use or quality, so it should sit beside measures of nutrition and learning.
• Leaving poverty is not the same as being secure. Health insurance, crop insurance and steady work protect people near the line.

Common confusions

• Poverty line and below poverty line (BPL) lists. The line estimates how many are poor in the country; BPL lists, built from household surveys such as the Socio Economic and Caste Census of 2011, identify which households get benefits.
• Headcount ratio and MPI. The headcount counts people below a spending line, while the MPI counts people with overlapping deprivations in health, education and living standards, whatever their spending.
• Dollars at PPP and rupees at market rates. The 3.00 dollar line is converted at PPP, which values a rupee for what it buys in India, so it is not 3 dollars converted at the market exchange rate.
• MRP and MMRP. The mixed reference period changes recall for infrequent purchases only, while the modified mixed period also shortens recall for some foods to seven days, raising measured spending.
• A fall in poverty and a fall in vulnerability. Crossing a line does not mean security; many who cross it stay close enough to fall back.

For the exam

• Keyword bank: headcount ratio, poverty gap index, squared poverty gap, calorie norm, Tendulkar line, Rangarajan line, mixed reference period, modified mixed reference period, monthly per capita consumption expenditure, Household Consumption Expenditure Survey, imputed value of free items, multidimensional poverty index, Alkire–Foster method, international poverty line at 2021 PPP, vulnerability.
• Previous year questions: Practise the previous year questions on this topic →
• Use in an answer:
  • Introduction with data: On the World Bank's revised line of 3.00 dollars a day at 2021 PPP, India's extreme poverty fell from 27.1 per cent in 2011-12 to 5.3 per cent in 2022-23 (World Bank, June 2025).
  • Introduction with a report: NITI Aayog's national MPI shows multidimensional poverty falling from 24.85 per cent in 2015-16 to 14.96 per cent in 2019-21, with about 13.5 crore people leaving poverty (NITI Aayog, 2023).
  • Conclusion: India has cut poverty on every measure, but it needs an official line on its new surveys so that progress is judged by an agreed standard and not by competing estimates.
  • Conclusion: The task now moves from lifting people above a line to keeping them there, through jobs, insurance and better nutrition and learning.