The first step in estimating poverty is to define the poverty line in monetary terms.
The Task Force on ‘Projection of Minimum Needs and Effective Consumption Demand’, constituted by the Planning Commission in 1979, defined the poverty line based on caloric norms:
Rural areas: 2400 calories per capita per day
Urban areas: 2100 calories per capita per day
The calorie requirements were derived using age-sex-activity specific allowances recommended by the Nutrition Expert Group (1968), and adjusted for population structure.
This method provided a monetary equivalent of required calorie intake and included minimum non-food consumption (clothing, shelter, transport).
Based on 28th Round NSS data, the Task Force estimated monthly per capita expenditure thresholds:
Rural: Rs. 49.09 for 2400 kcal/day
Urban: Rs. 56.64 for 2100 kcal/day
This uniform national poverty line was applied across all States/UTs, though it was later recognized that inter-state price variations made this approach less accurate.
The Expert Group (1989) realized the need to adjust poverty lines for state-level price differences.
They disaggregated the national poverty line using state-specific cost of living indices for rural and urban areas separately.
The poverty line was updated using inflation and price indices, varying from state to state.
The evolution of the official poverty line (in Rs. per capita per month):
| Year | Rural (Rs.) | Urban (Rs.) |
|---|---|---|
| 1973-1974 | 49.63 | - |
| 1977-1978 | 56.76 | 56.84 |
| 1983 | 70.33 | 89.50 |
| 1987-1988 | 115.65 | 115.20 |
| 1993-1994 | 162.16 | 205.84 |
| 1999-2000 | 281.35 | 454.11 |
| 2004-2005 | 356.30 | 538.60 |
Source: Planning Commission (1997), PIB (2001, 2007)
The Planning Commission appointed an expert group under Prof. Suresh Tendulkar to revise the poverty estimation methodology.
The Tendulkar Committee (2009) used the NSSO quinquennial survey and adopted the Mixed Reference Period (MRP) method.
Poverty Line Basket (PLB) included household goods/services consumed by households at the poverty threshold, not just calorie-based items.
New price indices were computed from the 61st Round NSS data using unit-level household values for food and non-food items.
The method is not directly comparable with earlier headcount ratios due to changes in the reference basket and deflators.
The poverty line and percentage of population below it (in Rs. monthly per capita and %):
| Year | Rural (Rs.) | Urban (Rs.) | Rural (% below poverty) | Urban (% below poverty) |
|---|---|---|---|---|
| 2004-05 | 446.68 | 578.80 | 41.8 | 25.7 |
| 2009-10 | 672.80 | 859.60 | 33.8 | 20.9 |
Income poverty in India has witnessed a significant decline between 1973-74 and 2004-05. The incidence of poverty dropped from 54.9% to 27.5%, while the absolute number of poor decreased from 321.3 million to 301.7 million. In rural areas, poverty reduced from 56.4% to 28.3%, and in urban areas from 49% to 25.7%. However, the pace of poverty reduction varied—there was an increase of 7.6 million poor from 1973-74 to 1977-78, followed by a significant decrease of 21.8 million between 1983 and 1987-88, and a further reduction of 6.4 million until 2004-05.
In 1973-74, rural poverty stood at 56.4%, urban at 49%, and total at 54.9%, with 261.3 million rural poor and 60.1 million urban poor. By 2004-05, rural poverty had declined to 28.3% and urban to 25.7%, with 220.9 million and 80.8 million poor respectively. The highest reduction occurred during 1983–1987-88, reflecting targeted efforts and economic changes.
The Planning Commission sourced data clearly shows that the share of rural poverty was around 81% in 1973-74, which fell to 73% by 2004-05. Meanwhile, the urban poor increased by 10.6 million between 1973-74 and 1987-88, indicating shifting demographic and employment trends.
Head Count Ratio (HCR) across social groups from 1983 to 2004-05 reveals stark contrasts. Among Scheduled Tribes (STs), poverty declined by 19.5 percentage points (63.9% to 44.7%), while for Scheduled Castes (SCs) the decline was 20.5 points (58.4% to 37.9%). For other castes, the reduction was 18.4 points. In rural areas, ST poverty went from 63.9% to 44.7%, SC from 59.0% to 37.1%, and other castes from 40.8% to 22.7%. In urban areas, STs saw a fall from 55.3% to 34.3%, SCs from 55.8% to 40.9%, and other castes from 39.9% to 22.7%. Overall, the total HCR for all social categories fell from 45.6% to 27.5% across India during this period.
As per 2004-05 data, poverty was highest among Buddhists (40.59%) and Zoroastrians (36.02%), while it was lowest among Sikhs (5.0%) and Jains (2.59%). Additionally, poverty remained geographically concentrated: in 1983, the four states of Bihar, Madhya Pradesh, Odisha, and Uttar Pradesh accounted for 49.8% of rural poor. This share increased to 55% in 1993-94 and to 61% by 2004-05.
The poverty gap ratio measures the intensity of poverty by estimating the shortfall from the poverty line. In 1973-74, 16.56% of total rural consumption was needed to bridge this gap, which fell to just 5.70% in 2004-05. Similarly, urban poverty gap reduced from 13.64% to 6.12% over the same period. Year-wise, the rural poverty gap dropped from 16.56% (1973-74) to 4.84% (2004-05), and urban from 13.64% to 6.12%. This downward trend signals improved welfare and targeted anti-poverty schemes.
While the poverty ratio is a vital indicator of living standards, it does not capture non-income dimensions of poverty such as health, education, nutrition, and gender inequality. These are crucial to understanding the broader reality of poverty in India. Non-income indicators include Human Development Index (HDI), Human Poverty Index (HPI), and Gender Inequality Index (GII), which provide a more multidimensional perspective.
The National Human Development Report prepared by the Planning Commission in 2001 presents HDI data for major states and HPI for all states. Backward states like Bihar (0.367), Uttar Pradesh (0.388), Madhya Pradesh (0.394), and Odisha (0.404) show poor HDI performance. In contrast, developed states like Kerala (0.638), Punjab (0.537), and Tamil Nadu (0.531) demonstrate significantly better human development.
In terms of Human Poverty Index, the most deprived states include Bihar (52.34), Uttar Pradesh (48.27), Odisha (49.85), Madhya Pradesh (43.47), and Rajasthan (46.67). In contrast, the least deprived states are Kerala (19.93), Punjab (25.06), Maharashtra (29.25), Gujarat (29.46), and Tamil Nadu (29.28), reflecting better socio-economic conditions and infrastructure.
India performs poorly on capability poverty measures that consider nutritional and health outcomes. Based on Body Mass Index (BMI), 35.6% of women have a BMI below 18.5 kg/m², indicating chronic energy deficiency. This percentage has remained nearly unchanged since 1998-99. In 2005-06, Bihar had the highest percentage of underweight women, while Sikkim had the lowest.
Key anthropometric indicators include weight-for-age (underweight), height-for-age (stunting), and weight-for-height (wasting), which reflect the nutritional status of children. In 2005-06, 42.5% of Indian children were underweight, down only 11 percentage points since 1992-93. Madhya Pradesh recorded the highest percentage of underweight children, and Uttar Pradesh had the highest stunting rate at 48.0%.