Poverty Line: Meaning, Determination, Types and Criticism

Poverty refers to a state in which an individual is unable to fulfil even the basic necessities of life. The minimum requirements include food, clothing, shelter, education, and health facilities. A nation suffers from a cycle of poverty when a large portion of the population is deprived of even the most basic necessities of life for an extended period. If the minimum needs are not fulfilled, a person has to undergo pain and suffering. Sickness and disabilities render him helpless in all aspects of life. Generation after generation person who lives in poverty grows in poverty and dies in poverty. The population either breeds or multiplies itself.

What is Poverty Line?

The adequate minimum threshold income level or per capita expenditure for a country’s population is known as Poverty Line. Simply put, it is a cut-off point on the Line of Distribution that divides a country’s population into poor and non-poor. Poverty Line is determined in terms of Monthly Per Capital Expenditure (MPCE) or Calorie Intake. 

Poverty Line is the amount of money an individual requires to meet his basic needs. Hence, it is defined as the money value of goods and services required by an individual to provide basic welfare. Poverty Line is used for the measurement of the extent of poverty in a country. People who are living or have income below the poverty line are known as Poor. However, people who are living or have income above the poverty line are known as Non-poor. Mass poverty is a situation in which a large section of people in the economy is deprived of basic necessities. 

Poverty Lines of different countries are different and depend upon their idea of poverty. In developed countries with advanced living standards and welfare concepts, the poverty line is high. It is because the basic standard of living in developed countries consists of higher consumption requirements and accessibility to different goods and services. However, in less developed countries, the basic requirements of people are low and mostly include essential consumption goods that they need to sustain life. Therefore, the poverty line in these countries is set by the welfare standard in the economy.

Determination of Poverty Line

In India, poverty is determined using Monthly Per Capita Expenditure Method. In this method, the monetary value per capita expenditure of the minimum calorie intake is calculated.

Minimum Calorie Intake: The Planning Commission of India (currently known as NITI Aayog, has used recommended nutritional requirements (2,400 calories per person per day for rural areas and 2,100 calories per person per day for urban areas) as the basis for defining the poverty line. The calorie intake for rural areas is fixed at a higher rate because the rural workers have to do more physical work as compared to the urban workers.

Monetary Value of Minimum Calorie Intake: According to NITI Aayog (Planning Commission), the minimum Monthly Per Capita Consumption Expenditure (MPCE) in the year 2011-12 was ₹816 per person in rural areas and ₹1,000 in urban areas.

Poverty Line divides the Poor from the Non-poor: The poverty line divides the poor from the non-poor. There are various kinds of poor and non-poor. Poor includes absolutely poor, very poor, and poor. However, Non-poor includes Billionaires, Millionaires, Very Rich, Rich, Upper Middle Class, Middle Class, and Not so Poor.

In order to take care of the changes in the price levels of a country, the method of calculating the poverty line is updated from time to time.

Types of Poverty

Poverty can be categorised in different ways:

1. Chronic Poor: Chronic Poor includes two types of people; viz., Always Poor and Usually Poor. The former includes those people who are always poor; such as rag pickers. However, the latter includes those people who are usually poor but sometimes may have more income than the poverty line; such as casual workers.
2. Transient Poor: Transient Poor includes two types of people; viz., Churning Poor and Occasionally Poor. The former includes those people who on a regular basis move in and move out of the property; such as seasonal workers. However, the latter includes those people who are most of the time rich; i.e., have income more than the poverty line; but, due to a bad phase in their lives have income below the poverty line. For example, at the time of COVID, many people lost their jobs and many of them had to shut their businesses down.
3. Non-Poor: These are the people who are never poor. 

Criticism of Poverty Line

The MPCE (Monthly Per Capital Expenditure) Method of calculating the Poverty Line is criticized because of the following reasons:

1. The MPCE method groups all the poor together in one category and does not differentiate them between the very poor and other poor.

2. Other than income and assets, various factors such as accessibility to health care, basic education, etc., are also associated with poverty and are ignored under the MPCE Method.

3. Also, the method only categorises the poor as a group which are to be taken care of by the Government. However, it does not identify the poor who needs the help of the Government, the most.

4. There are certain social factors such as illiteracy, lack of access to resources, discrimination, ill health, or lack of political and civil freedoms that are responsible for poverty. These factors are not considered under the MPCE Method.

Because of these limitations in the estimation of poverty done officially, various scholars have tried to find other ways to determine poverty. For example, Amartya Sen, a noted Nobel Laureate, developed an index; Sen Index. Besides this, there are other tools like Squared Poverty Gap and Poverty Gap Index.

Has the Poverty Level decreased?

According to the government, there has been a decline in the poverty levels of India because of higher economic growth rate, rise in agricultural production, provision of employment in rural areas, and 1991 economic reform. However, the economists argued that while determining poverty line and number of poor, the methods used for the same are manipulated to arrive a reduced figure of the number of poor in India. Also, they believed that the aim of poverty alleviation schemes of the government should be improvement in human lives by reducing different obstacles, such as illiteracy, lack of access to resources, discrimination, ill health, or lack of political and civil freedoms. 

Even though the incidence of poverty has reduced over the years (especially in 80s), the problem of poverty still prevails.