According to current estimates, almost a quarter of India’s rural population lives in poverty. In rural India, 25.7 percent of the population lives below the poverty level, compared to 13.7 percent in metropolitan regions. The percentage of people in a certain age group, whose income falls below the poverty line, is calculated by dividing the whole population’s median family income by half, which is recognised as the poverty ratio formula. Child poverty (0-17 year olds), working-age poverty, and senior poverty are all included (66 year-olds and older) while determining the poverty ratio of India. Two nations with the same poverty rates, on the other hand, may vary in terms of the poor’s relative income level.
Importance of Measuring Poverty Ratio
For many communities, it is difficult to establish which residents fall below the poverty level. People in poverty typically lack the necessary records to prove their savings or expenditure. It is important to understand why we must measure the poverty ratio of India, the many ways that have previously been used to measure poverty, and practical and effective ways to assess poverty.
Many industrialised nations measure poverty using the poverty line to determine eligibility for federal, state, and municipal assistance, such as food stamps and health insurance. Understanding poverty levels in low and middle-income nations is critical to formulate policy, focus on development efforts, and keep track of and assess economic growth over time. It may be assessed and used in the following ways and for the following purposes:
- To observe how poverty has changed through a certain period of time.
- To provide specific assistance. For example, microfinance groups will have the ability to target certain demographics with their services for programme goals.
- To track the progress of projects working in the areas of poverty. For example, if your organisation is interested in how many of its members or project beneficiaries are living in poverty, this information will be useful.
Types of Poverty Determination Methods
There are two types of poverty ratio determination methods, which are discussed below:
Poverty as a Statistical Concept
The UN World Summit for Economic Development defines absolute poverty as a serious lack of fundamental human requirements, including food, clean drinking water, sanitation facilities, health, and education. Income and access to social services have an important role. The monetary worth of necessary items (needed for basic requirements) is used as the poverty threshold in the absolute measurement of poverty. Any family whose income falls below this value is considered poor. The World Bank and developing nations utilise absolute poverty statistics, which measure poverty levels that stay constant across geographic regions and throughout time. The greater cost of living in more developed nations is not considered when calculating absolute poverty levels.
Comparative Poverty Ratio Measurement
When a household’s income falls below the country’s median, it is a low-income household. If a person is considered to be in ‘relative poverty’, they may not have access to necessities or be able to enjoy the same level of life as the rest of society. Poverty is defined as a proportion of the poorest 10% of the population. The method of determining the poverty ratio of India disregards the significance of an individual’s absolute standard of living in favour of focusing only on their relative one.
Poverty Ratio in Bihar 2011-12
In rural Bihar, as per the poverty ratio formula, the poverty rate was 55.7% in 2004-05, while the urban poverty rate was 43.7%. It dropped to 34.1 per cent for rural households and 31.2 percent for urban households in 2011-12, a dramatic decrease in only seven years. In 2011-12, 33.7 percent of the population of Bihar was living in poverty. Compared to India’s 25.7 percent rural poverty, 13.7 percent urban poverty, and 21.9 percent overall poverty rate in 2011-12, these numbers are astronomical. Bihar contains 13.3% percent of India’s poor population while having an 8.6% part of the country’s total population.
Poverty is a social phenomenon characterised by the inability of a segment of society to meet even its most basic needs. To determine poverty, the Planning Commission, Government of India organised a group called The Expert Group to Review the Methodology for Estimation of Poverty in 2009, chaired by Suresh D. Tendulkar. The committee chose a new technique, moving from calorie-based poverty calculation to nutrition, health, and other expenses like clothes and footwear-based estimation. A “Poverty Line Basket” (PLB) was included, which is a collection of items used to calculate a person’s level of material destitution.
This article provides us with a clear picture on why it is important to measure poverty levels, the different ways it can be measured and the various applications of this information. We can discover which anti-poverty measures succeed and which do not by tracking how many people live in poverty. Measuring the poverty ratio of India provides a framework for developing nations to evaluate their programmes and steer their development strategies in an ever-changing economic climate. The Indian political, policy, and administrative institutions must adapt to the new realities of the transition to a middle-income nation, where poverty does not imply living on the verge of starvation, but rather, a lack of money to take advantage of the possibilities that a developing economy provides. Public goods, not subsidies, should be the primary goal of government expenditure.