Absolute poverty

Topic: Poverty and Inequality: Measurement and Policy · NCERT: Beyond NCERT

Meaning

Absolute poverty means that a person's income or consumption is below a fixed minimum. This minimum is the money needed to buy a basic bundle of necessities: food, clothing, shelter, health and education. The line stays the same no matter how rich or poor the rest of society is.

• Tool: a poverty line (the money cost of that minimum bundle).
• Formula: absolute poverty is counted with the Headcount Ratio (HCR) = (number of people below the poverty line ÷ total population) × 100.

It matters because the poverty line decides who is counted as poor. That in turn decides whom welfare schemes reach, such as food rations and housing.

Explanation

How it works

• Step 1: Fix a basket. Decide the minimum goods a person needs to survive with dignity.
• Step 2: Put a price on it. The money cost of this basket is the poverty line.
• Step 3: Count. Anyone whose income or spending is below the line is "absolutely poor".
• Worked example (HCR):
• A district has 10 lakh people. 1.5 lakh of them are below the line.

• HCR = 1.5 ÷ 10 × 100 = 15%.

• Limit of HCR: it does not show how far below the line the poor are. A person ₹1 below the line and a person ₹1,000 below it count the same.

The World Bank's International Poverty Line (IPL)

• June 2025 revision: the IPL went up from $2.15/day (2017 PPP) to $3.00/day (2021 PPP) [1][2].

• PPP (Purchasing Power Parity): an exchange rate that makes $1 buy the same basket of goods in every country. This way, a poverty line means the same living standard everywhere.

• How the $3.00 line is set: it is the median of the national poverty lines of the 23 low-income countries. The median value was Burkina Faso's 2022 line ($3.04), rounded to $3.00 [1].

• Why the line rose by $0.85 [1]:
• about $0.35 came from new PPP prices;

• about $0.50 came because poor countries raised their own national poverty lines.

• Higher lines for richer countries (2021 PPP) [1]:

• Lower-middle-income countries: $4.20/day (earlier $3.65).

• Upper-middle-income countries: $8.30/day (earlier $6.85).

• Global count: about 838 million people lived in extreme poverty in 2022 at $3.00/day. This is about 125 million more than the earlier estimate at $2.15/day [1].

What makes it rise or fall

• Growth can end absolute poverty.
• Incomes of the poor rise → they cross the fixed line → the HCR falls.

• Example: a family spends ₹2,500 a month and the fixed line is ₹3,000, so it is poor. If its spending doubles to ₹5,000, it crosses the line. The line did not move, so the family is no longer poor.

• Raising the line increases poverty on paper.

• Higher line → more people counted as poor → schemes must cover more people.

• Changing the survey method changes the count, even when lives do not change.

• A new survey method records more consumption → fewer people fall below the line.

• India's 2011-12 poverty rate at the $2.15 line fell from 22.9% to 16.22% only because the survey method changed [2].

• Shocks can push people back below the line. Illness, crop failure, job loss or a sudden rise in prices can do this. This kind of poverty is called transient poverty.

In India

• National lines: India's absolute poverty lines were the Tendulkar and Rangarajan lines.
• Survey method change: in 2011-12, India moved from URP to MMRP. URP (Uniform Reference Period) uses one recall period, such as the last 30 days, for every item. MMRP (Modified Mixed Recall Period) uses a shorter recall period for items people buy often. Recorded consumption went up, so the poverty rate at $2.15 fell from 22.9% to 16.22% [2].
• India's extreme poverty (World Bank PIP 2025, reported by PIB) [2]:

Year	Line	Poverty rate	People below the line
2011-12	$2.15 (2017 PPP)	16.22%	~20.59 crore
2011-12	$3.00 (2021 PPP)	27.12%	~34.45 crore
2022-23	$2.15 (2017 PPP)	2.35%	~3.36 crore
2022-23	$3.00 (2021 PPP)	5.25%	~7.52 crore

• India's role in the global revision: the higher line alone would have added 226 million poor people worldwide. India's revised data cut the count by 125 million, so the net global rise was only 125 million [2].
• Dated framing: NCERT (Class 11, Rural Development) says "one-fourth of rural India still lives in abject poverty". Newer data put extreme poverty at about 5.25% for all of India in 2022-23 [2].

Don't confuse with

• Relative poverty: the line is a share of the median income (EU = 60%, OECD = 50%), so it rises when the median rises. Growth can end absolute poverty. It cannot end relative poverty, which really measures inequality.
• Societal Poverty Line (World Bank, 2018): a hybrid of absolute and relative lines. The formula is max[$2.15, $1.15 + 0.5 × median], so it has an absolute floor but rises as the country gets richer [3][4].
• Multidimensional poverty / capability view (Amartya Sen): looks at lack of health, schooling and living standards together, not just money. It is the basis of the HDI and MPI. Absolute poverty is a one-dimensional money measure.
• Chronic vs transient poverty: these describe how long people stay poor (always poor vs moving in and out, called "churning"). They do not describe how the line is drawn.

Prelims Hooks

• World Bank IPL (June 2025): $3.00/day at 2021 PPP, up from $2.15/day at 2017 PPP. The LMIC line is $4.20 and the UMIC line is $8.30 [1].
• Trap: the IPL is the median of the national poverty lines of low-income countries (23 countries), not an average of all countries [1].
• India's extreme poverty at $3.00/day: 27.12% (2011-12) → 5.25% (2022-23) [2].
• HCR counts how many people are poor, but not how poor they are. A person ₹1 below the line and a person ₹1,000 below count the same.
• Trap: absolute poverty can be removed by growth, because the line is fixed. Relative poverty cannot, because its line moves with the median.
• MMRP replaced URP in India's surveys. Measured consumption rose and measured poverty fell (22.9% → 16.22% in 2011-12) [2].

Mains Points

• Measurement drives policy. India's 2011-12 poverty rate fell from 22.9% to 16.22% only because the survey method changed [2]. The choice of line and method decides who gets food rations, housing and other targeted benefits. So changes in how poverty is counted must be kept separate from real gains in welfare.
• A low line can hide vulnerability. In 2022-23, India's poverty rate was 2.35% at $2.15 but 5.25% at $3.00 [2]. Many households sit just above the lowest line, and one illness or crop failure can push them back below it. As India moves toward middle-income status, the $4.20 LMIC line or a societal line gives a more honest picture [1][3].
• Income alone is not enough. A falling absolute poverty rate can still leave gaps in health, schooling and urban services. Money-based lines should therefore be used together with capability-based measures such as the MPI, and with safety nets and asset building for people close to the line.

Related concepts

• Poverty
• Relative poverty
• Chronic poverty
• Transient poverty

Read more

• What is poverty? Absolute, relative, chronic and transient