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HomeLearnEconomyPoverty : Concept and its Variants

Poverty : Concept and its Variants

The phrase Economic Growth is meaningless if a large segment of the society suffers bereavement. Growth is changed into development only when poverty is eradicated.

In independent India programmes of development were initiated with socialistic pattern of society as its core objective. Concentrating on the eradication of poverty the programmes sought to attain economic and social equality. However, there has been not much progress in the area of economic and social equality, even when GDP (Gross Domestic Product) has recorded a momentous growth. For the planners and politicians poverty continues to be a major challenge as it persists as a social menace. It is ipso facts, disgraceful for a nation that has emerged as the 10th largest industrial economy in the world.

What is Poverty?

Poverty is the disability to meet the minimum requirements of life; these minimum and requirements consist of food, clothing, housing, education and health facilities. Human beings go through pain and suffering if these minimum needs are not accomplished. Due to loss of health and efficiency, sickness and disabilities make the poor helpless in all walks of life. The poor, generation after generation, live, grow and die in poverty. So it can be proverbed “Poverty breeds Poverty”.

Must Read: Poverty Alleviation Programs in India

Variants of Poverty

There are two variants of poverty – Relative Poverty and Absolute Poverty.

Relative Poverty

It treats poverty in relation to different classes, regions or countries. The country or class of people, with a low level of living is considered as poor or relatively poor in comparison to the country or class of people, who has high level of living. A recent report of published by UNO stats:

‘those countries are considered relatively poor where per capita income is less than $ 1.25 per day or about US $455 per annum. India ranks, according to this benchmark, very low in terms of quality of life with per capita income of only US $ 1,180 per annum. Per capita income of even countries like Sri Lanka, Egypt and Pakistan is higher than that of India.

In the US per capita per annum is $ 3,590; this data is enough to show that India is one of the poorest countries of the World.

Relative poverty is also measured in terms of inequality of income within the country. To put an example – in India the share of 20% of low income group of people in national income is barely 8.1% while that of 20% of high income group is 45.3%.

In the context of unequal distribution of income of the people of an area, poverty is usually measured by using the concept of Lorenz Curve and Ginni coefficient.

Absolute Poverty

In order to measure absolute poverty in India a concept of poverty line is used. This Poverty line indicates the cutoff point, defined in terms of per capita expenditure, that separates people of a region as poor or non-poor.

Recently the Indian Planning Commission recommended the country’s poverty line at Rs. 28.35 a day for urban areas and Rs. 22.42 in rural areas. The person whose monthly consumption expenditure falls below this line is treated as absolutely poor. Based on the official poverty line of 2009-2010, rate of poverty in India is estimated to be 29.8 per cent. In terms of number of absolutely poor, 29.8 per cent in India is equal to 50 per cent of the absolutely poor in the world.

Also Read: Important Government Schemes for Poverty Eradication

Fixing Poverty Line in India

In the estimation of consumption cut-off, in the process of fixing poverty line, only private consumption expenditure is taken into consideration. In private consumption expenditure, not only food items but also non-food items are taken into consideration. Consumption of food items is based on per capita consumption of calories. Non-food items connect basically to education and health.

Frequencies are registered against each class interval showing a particular level of consumption. Each frequency computes the number of heads belonging to a particular consumption class.

Lastly, head count ratio is worked out that show poor and non-poor (according to the poverty line cut-off), separately for the rural and urban areas. The ratio displays the percentage of population below poverty line.

Don’t Miss:  Niti Aayog Task Force on Eliminating Poverty