Poverty and Inequality: Measurement and Policy

1. What is poverty? Absolute, relative, chronic and transient

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Core idea: what we choose to count decides how much poverty we find and how policy targets it.

• Poverty means lacking the income or consumption needed for basic needs such as food, clothing, shelter, health and education. It can be measured in absolute, relative or multidimensional terms.
• Two views of poverty:
• Income or consumption view. A person is poor if their spending is below a money threshold. This is easy to measure and to compare over time.
• Capability view (Amartya Sen). Poverty is the lack of real freedoms: being well-fed, healthy, literate and able to take part in society. Money is only a means. This view underlies the HDI and the MPI.

Absolute vs relative poverty

	Absolute poverty	Relative poverty
Meaning	Income or consumption below a fixed minimum bundle of basic needs	Income below a share of the median living standard of that society
Tool	A poverty line (a money value of the minimum bundle)	Percentage of median income
Examples	India's Tendulkar and Rangarajan lines; World Bank $3.00/day	EU "at-risk-of-poverty" line = 60% of median equivalised income; OECD uses 50%
Where used	Standard in developing countries	Rich countries
Can growth end it?	Yes, if the incomes of the poor rise	No. The line moves up with the median, so it is really a measure of inequality

• The World Bank's societal poverty line blends the two. It is the higher of (a) the international poverty line or (b) a fixed amount plus half of median consumption. So it rises as countries get richer but never falls below the absolute floor.

Chronic vs transient poverty

• Chronic poverty: households stay poor for long periods or across generations (the "always poor" and "usually poor" in the Chronic Poverty Research Centre typology). Short-term growth or relief does little for them.
• Transient poverty: households move in and out of poverty ("churning") after shocks such as illness, crop failure, job loss or price spikes.
• Vulnerability: the risk of falling below the line in future. Many households just above the line are vulnerable.
• Policy follows the type:
• Chronic poverty needs asset building (land, livestock, skills), human capital (health, schooling) and long-term social protection (pensions).
• Transient poverty needs insurance (crop, health), employment guarantees and safety nets that switch on during shocks.

Where the poor live

• Rural concentration. Class 11, Rural Development says "the majority of the poor live in rural areas where they do not have access to the basic necessities of life". It also says "one-fourth of rural India still lives in abject poverty". This is NCERT framing and is dated; compare the HCES and MPI estimates in Sections 4 and 5.
• Urban poverty. Urban poverty shows up in slums, insecure informal work and weak access to housing, water and sanitation. The Hashim Committee (2012), set up by the Planning Commission, suggested identifying the urban poor through residential, occupational and social vulnerability rather than income alone.

2. Measuring poverty: head-count ratio, poverty gap and the FGT family

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Head-count ratio (HCR)

• Head-count ratio H = q / n, where q is the number of people below the poverty line and n is the total population. It is the share of people who are poor.
• Strengths: simple and easy to communicate. It is the official Indian headline measure and the World Bank's headline measure.
• Weaknesses:
• It ignores depth. A person ₹1 below the line counts the same as one ₹500 below.
• It ignores distribution among the poor.
• It breaks Sen's monotonicity axiom: making a poor person poorer should raise poverty, but HCR does not change.
• It breaks Sen's transfer axiom: a transfer from a poorer to a less-poor person should raise poverty, but HCR may not change, or may even fall.

• Perverse incentive: a government can cut HCR fastest by helping people just below the line, not the poorest.

• Ratio vs number. The ratio can fall while the absolute number of poor rises, if population grows fast enough. Always check both.

Poverty gap and severity

• Poverty gap index (PGI): the average shortfall of the poor's income or consumption from the line, as a share of the line. The non-poor count as zero shortfall. It measures the depth of poverty.

• PGI × poverty line × population = the minimum cost of ending poverty with perfect targeting.

• Squared poverty gap index (SPG): each person's shortfall is squared before averaging. This gives more weight to the poorest and captures inequality among the poor, i.e. the severity of poverty.

The Foster-Greer-Thorbecke (FGT, 1984) family

Pα = (1/n) Σ (i = 1 to q) [(z − yᵢ) / z]^α, where z is the poverty line and yᵢ is the income of a poor person i.

α	Measure	Captures
0	Head-count ratio	Incidence
1	Poverty gap index	Depth
2	Squared poverty gap	Severity

• Sen index (1976): S = H [I + (1 − I) Gₚ], where I is the average income-gap ratio of the poor and Gₚ is the Gini among the poor. It combines incidence, depth and inequality among the poor.

Worked example

Poverty line z = 100. Four people have incomes 60, 90, 120 and 150.

Person	Income	Poor?	Gap ratio (z − y)/z	Squared gap
1	60	Yes	0.40	0.16
2	90	Yes	0.10	0.01
3	120	No	0	0
4	150	No	0	0

• HCR = 2/4 = 50%
• PGI = (0.4 + 0.1)/4 = 0.125
• SPG = (0.16 + 0.01)/4 = 0.0425

Lesson: if person 1 fell from 60 to 40, HCR stays at 50%, but PGI rises to 0.175 and SPG to 0.0925. Only the gap measures notice that the poorest person got poorer.

3. India's poverty line: from Naoroji to Rangarajan

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A poverty line is the minimum income or consumption spending needed to meet basic needs. People below it are counted as poor (BPL). India's lines were set by expert groups, not written into law.

Early estimates

• Dadabhai Naoroji, Poverty and Un-British Rule in India (1901). He costed a subsistence "jail diet" at about ₹16–35 per head per year at 1867-68 prices. Per capita income was only about ₹20, so most Indians could not afford even what prisoners ate. For the colonial drain, see colonial-economy-1947.
• National Planning Committee (1938) and the Bombay Plan (1944). The Bombay Plan put the minimum at about ₹75 per head per year.
• Planning Commission Working Group (1962): ₹20 rural and ₹25 urban per capita per month at 1960-61 prices.
• Dandekar-Rath (1971): a norm of 2,250 kcal, giving ₹15 rural and ₹22.5 urban per month (1960-61 prices). This was the first systematic estimate based on NSS data.

The calorie-norm era

• Alagh Task Force (1979). This created the calorie-based poverty line: the spending needed for a minimum daily calorie intake.
• The norms were 2,400 kcal rural and 2,100 kcal urban per person per day.
• The lines were ₹49.09 rural and ₹56.64 urban per capita per month at 1973-74 prices (NSS 28th round).

• Later years were updated only for prices, so the basket stayed frozen at 1973-74.

• Lakdawala Expert Group (1993):

• Kept the Alagh basket but made the lines state-specific.
• Updated them with CPI-AL (rural) and CPI-IW (urban).

• Did not scale NSS consumption up to national-accounts consumption (earlier practice had done so).

• Critique: the "calorie puzzle" (Deaton-Drèze). Real spending per head rose, but average calorie intake fell. The likely reasons are less heavy manual work, better health and a more varied diet. A calorie anchor therefore mis-measures poverty.

Tendulkar Expert Group (2009)

• Dropped the calorie anchor. It used one all-India urban basket, anchored to Lakdawala's 2004-05 urban poverty rate (25.7%).
• Used the MRP (mixed recall period): a 365-day recall for rarely bought items and a 30-day recall for others.
• Explicitly counted health and education spending.
• Took price differences across states and between rural and urban areas from NSS unit values.
• 2011-12 lines: ₹816 rural and ₹1,000 urban per person per month (about ₹27 / ₹33 a day).

Year	HCR (Tendulkar)
2004-05	37.2%
2009-10	29.8%
2011-12	21.9% (rural 25.7, urban 13.7; about 27 crore poor)

• The "₹32 a day" row (2011). The Planning Commission's Supreme Court affidavit implied an urban line of about ₹32 a day. The public backlash led to the Rangarajan group.

Rangarajan Expert Group (2014)

• Went back to a normative food basket: 2,155 kcal rural and 2,090 kcal urban, plus protein and fat norms.
• Added essential non-food spending (clothing, housing, education, conveyance) as observed in the median fractile.
• Lines: ₹972 rural and ₹1,407 urban per month (about ₹32 / ₹47 a day).
• HCR 2011-12: 29.5% (rural 30.9, urban 26.4; 36.3 crore poor).
• It was never formally adopted.
• NITI Aayog's Task Force on Elimination of Poverty (chaired by Arvind Panagariya, 2016) did not recommend a line. So India has had no official poverty line or estimate since 2011-12.

NCERT error

• Class 11, Comparative Development Experiences of India and its Neighbours, Table 8.5, lists India's national BPL share as 21.9% for "2019-21". It also shows 21.9% for Pakistan.
• 21.9% is actually the Tendulkar estimate for 2011-12. Do not quote it as a recent figure.

4. How poor is India now? HCES evidence and international poverty lines

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Household Consumption Expenditure Survey (HCES) 2022-23 and 2023-24 (NSO, MoSPI)

• Redesigned survey:
• MMRP (modified mixed reference period).
• Several visits per household.

• Separate estimates that impute the value of free items received through social schemes (PDS grain, laptops, bicycles, uniforms, etc.).

• Average monthly per capita consumption expenditure (MPCE), without imputation:

	Rural	Urban	Urban-rural gap
2011-12	—	—	about 84%
2022-23	₹3,773	₹6,459	about 71%
2023-24	₹4,122	₹6,996	about 70%

• No official line, so estimates compete:
• Tendulkar line updated for prices: poverty below about 5%. The NITI Aayog CEO said this in 2024 for 2022-23. SBI Research put it at about 4.9% rural and 4.1% urban for 2023-24 (verify).

• Rangarajan-type line: about 10% (Rangarajan-Dev estimate, verify).

• Data gaps. The 2017-18 consumption survey was withheld over "data quality" concerns.

• Comparability is disputed. The recall period moved from URP to MRP to MMRP, and the new survey design also changed. Part of the fall in poverty may come from the method change itself.

International poverty line (IPL, World Bank)

The international poverty line is the World Bank's global threshold for extreme poverty. It is expressed in purchasing power parity (PPP) dollars per person per day and is revised with each new PPP round.

Line	PPP base	Year adopted
$1.00/day	1985 PPP	World Development Report 1990
$1.25	2005 PPP	2008
$1.90	2011 PPP	2015
$2.15	2017 PPP	2022
$3.00	2021 PPP	June 2025

• The $3.00 line is the median of the national poverty lines of 23 of the poorest countries.
• Higher lines: $4.20 for lower-middle-income countries and $8.30 for upper-middle-income countries.
• Extreme poverty means living below the IPL, the most severe form of absolute deprivation. About 838 million people were in extreme poverty worldwide in 2022 at $3.00. They are increasingly concentrated in Sub-Saharan Africa.
• India (World Bank, June 2025):

Line	2011-12	2022-23
$3.00/day	27.1% (about 34 crore)	5.25% (about 7.5 crore)
$2.15/day	16.2%	2.35%

• The World Bank's April 2026 update may have revised these figures (verify current).
• SDGs:
• SDG 1.1: end extreme poverty (below the IPL) for all people everywhere by 2030.

• SDG 1.2: at least halve poverty in all its dimensions by national definitions by 2030.

• Pakistan: lines can disagree. Class 11, Comparative Development Experiences of India and its Neighbours notes that Pakistan's poverty "on the international poverty line" looked healthy while its official national data showed poverty rising.

5. Multidimensional poverty: Global MPI and NITI Aayog's national MPI

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The Multidimensional Poverty Index (MPI) measures overlapping deprivations in health, education and living standards at the same time. It multiplies incidence (share of people who are poor) by intensity (how deprived they are on average). The Global MPI is published by UNDP and OPHI. NITI Aayog compiles India's national MPI.

Global MPI (UNDP HDRO and OPHI, 2010)

• It replaced the Human Poverty Index (1997–2009).
• It uses the Alkire-Foster method with 3 equally weighted dimensions and 10 indicators:

Dimension (weight 1/3)	Indicators
Health	Nutrition, child mortality
Education	Years of schooling, school attendance
Living standards	Cooking fuel, sanitation, drinking water, electricity, housing, assets

• Cut-offs:
• Poor: deprived in at least 1/3 of the weighted indicators.
• Severely poor: deprived in at least 1/2.

• Vulnerable: deprived in 1/5 to 1/3.

• MPI = H × A, where H is the headcount (incidence) and A is the average intensity among the poor.

• It can be broken down by indicator, region and social group. This shows which deprivation to target.
• Global MPI 2023: 415 million Indians exited multidimensional poverty between 2005-06 and 2019-21 (55.1% → 16.4%). A newer edition may have updated this; editions are released around 17 October (verify latest edition).
• The World Bank's Multidimensional Poverty Measure is separate. It adds monetary poverty to education and basic infrastructure. Its 2026 edition covers India (verify).

National MPI (NITI Aayog)

• NITI Aayog is the nodal agency under the government's Global Indices for Reform and Growth (GIRG) initiative.
• It uses 12 indicators: the 10 global ones plus maternal health and bank account. Data come from NFHS.

Release	Data	Key results
Baseline (Nov 2021)	NFHS-4 (2015-16)	25.01% poor. Bihar highest (51.91%), Kerala lowest (0.71%)
Progress Review (2023)	NFHS-4 → NFHS-5	24.85% (2015-16) → 14.96% (2019-21). About 13.5 crore exited. Rural 32.59 → 19.28. Urban 8.65 → 5.27
Discussion paper (Jan 2024)	2013-14 → 2022-23 (extrapolated)	29.17% → 11.28%. 24.82 crore exited. Largest exits: UP 5.94 crore, Bihar 3.77, MP 2.30, Rajasthan 1.87

• Faster decline recently. The annual rate of decline was 10.66% in 2015-16 to 2019-21, against 7.69% in 2005-06 to 2015-16.
• Critiques:
• Extrapolation. The 2022-23 figure is projected beyond the actual survey years.
• Access, not use or quality. A latrine or LPG connection counts even if it is not used or refills are unaffordable. A bank account counts even if it is dormant.
• Weights and cut-off. Equal weights and the 1/3 cut-off are judgement calls.
• Missing dimensions. Monetary poverty, learning outcomes and the quality of care are not included.

6. Why people stay poor: causes, vicious circles and traps

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Nurkse's vicious circle of poverty (1953)

The vicious circle of poverty is Ragnar Nurkse's idea that "a country is poor because it is poor". Low income leads to low saving, investment and productivity, which keep income low. It works on both sides:

• Supply side: low income → low saving → low investment (capital formation) → low productivity → low income.
• Demand side: low income → low purchasing power → small market → weak inducement to invest → low productivity → low income.

Poverty traps

A poverty trap is a self-reinforcing threshold. Below it, people or countries stay poor because a lack of savings, nutrition, credit or education prevents income gains.

• Nutrition-efficiency-wage trap: too little food → low work capacity → low wage → too little food.
• Nelson's low-level equilibrium trap (1956): any rise in per capita income triggers faster population growth, which pulls income back down.
• Credit trap: no collateral means no formal loan, so the person borrows from a moneylender at high interest and falls into a debt trap.
• Health-shock trap: an illness forces the sale of assets, so the household loses its earning base.
• Geography trap: remote, drought-prone or landlocked areas face high costs of reaching markets.
• Evidence (Banerjee-Duflo, Poor Economics, 2011; Nobel 2019). Their S-curve and randomised trials suggest traps exist for some people and situations (e.g. nutrition in some settings, business capital for some), but not everywhere.
• Ways out:
• A big push of coordinated investment (see growth-theories-business-cycles).
• External finance.
• Asset transfers (e.g. livestock plus training in "graduation" programmes).

Causes of poverty in India

• Colonial legacy: de-industrialisation and stagnant farming (see colonial-economy-1947).
• Slow growth up to 1980, well below what was needed to absorb a growing population.
• Population pressure on land and jobs.
• Unemployment and disguised unemployment in farming. Too many people share too little work.
• Small, fragmented holdings and incomplete land reforms.
• Informal credit and debt traps.
• Food inflation, which hits the poor hardest because food is a large share of their budget.
• Out-of-pocket health spending, a major reason households fall back into poverty.
• Drought and climate shocks.
• Social exclusion: the process by which individuals or groups are denied full participation in economic, social and political life because of caste, tribe, gender, disability or location. It denies access to land, credit, markets and services. STs show the highest MPI incidence, followed by SCs.
• Regional concentration: Bihar, Jharkhand, UP, MP and Odisha.

NCERT evidence

• Rural distress (Class 11, Rural Development):
• Farm growth decelerated to about 3% a year in 1991–2012.
• Agriculture and allied GVA grew only about 2% in 2023-24.
• Scholars blame falling public investment since 1991.

• Inadequate infrastructure, scarce non-farm jobs and increasing casualisation of work add to farmer distress.

• Pakistan (Class 11, Comparative Development Experiences of India and its Neighbours):

• Poverty was over 40% in the 1960s, fell to 25% in the 1980s, then rose again in recent decades.
• Farm output and food supply depended on good harvests, not on an institutionalised process of technical change.

• Foreign exchange came from remittances, volatile farm exports and foreign loans.

• China (same chapter):

• Before the 1978 reforms, China had already spread basic health services in rural areas, carried out land reforms and ensured more equal food distribution through communes.
• This human base drove poverty reduction.
• After the reforms, handing plots to households "brought prosperity to a vast number of poor people".

7. Inequality: concepts and measures

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Poverty vs inequality

• Poverty is about a threshold: who is below the line.
• Inequality is about the whole distribution: how income is spread among everyone.
• They can move in opposite directions. Poverty can fall while inequality rises.

Forms of inequality

• Income inequality: unequal distribution of income among people or households. It is measured by the Gini, the Palma ratio or income shares. Indian planning aimed to reduce it; critics argue that market-led globalisation widened it.
• Consumption inequality: usually lower than income inequality, because people smooth spending over time and the rich save more.
• Wealth inequality: unequal distribution of assets such as land, housing and financial holdings. It is far more concentrated than income because of inheritance and compounding returns on assets. India's asset data come from the NSS All-India Debt and Investment Survey (AIDIS).
• Vertical vs horizontal:
• Vertical: between rich and poor individuals.
• Horizontal: between groups, such as castes, religions, regions, genders, or rural and urban areas.

Averages hide disparities (Class 10, Development, Table 1.2)

Country	I	II	III	IV	V	Average
A	9,500	10,500	9,800	10,000	10,200	₹10,000
B	500	500	500	500	48,000	₹10,000

• Both countries have the same average monthly income.
• In B, the bottom 80% (four citizens) get only ₹2,000 of ₹50,000, i.e. 4% of income. One citizen takes 96%.
• If a lottery decided your citizenship number, most people would choose A because it has a more equitable distribution.
• Lesson (same chapter): a rising average income does not mean "all sections have become better". The average can rise while most incomes fall.

Measures of inequality

• Lorenz curve (Max Lorenz, 1905): plots the cumulative share of population (poorest first, x-axis) against the cumulative share of income or wealth (y-axis).
• The 45° line is perfect equality.
• The more the curve bows below the 45° line, the greater the inequality.

• If two Lorenz curves cross, the ranking of the two societies is ambiguous.

• Gini coefficient (Corrado Gini, 1912): G = A / (A + B).

• A is the area between the equality line and the Lorenz curve. B is the area under the Lorenz curve.
• Since A + B = ½, G = 2A = 1 − 2B.
• It ranges from 0 (perfect equality) to 1 (perfect inequality), or 0–100.

• Consumption Ginis are lower than income Ginis. Take care when comparing countries measured on different bases.

• Palma ratio (José Gabriel Palma, 2011): the income share of the top 10% divided by the share of the bottom 40%.

• It rests on the observation that deciles 5–9 hold about half of income almost everywhere. So inequality differences come from the extremes.

• Bottom-40% tracking: the World Bank's "shared prosperity" indicator and SDG 10.1 track income growth of the bottom 40%.

• Theil index: an entropy-based measure, T = (1/N) Σ (yᵢ/μ) ln(yᵢ/μ).
• Its key feature is that it is decomposable: total inequality = within-group + between-group inequality.

• This is useful for rural-urban, state or caste splits.

• Atkinson index (1970): a welfare-based measure with an inequality-aversion parameter ε.

• It shows the share of total income society would give up to achieve complete equality.
• A higher ε gives more weight to the bottom.

• UNDP uses it in the Inequality-adjusted HDI (IHDI) (see development-and-hdi).

• Other measures: top 1% / top 10% income shares and the 20:20 ratio (income of the top 20% ÷ income of the bottom 20%).

8. Inequality and growth: Kuznets to Piketty, and India's contested evidence

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Theories

• Kuznets curve (Simon Kuznets, 1955): an inverted-U relationship. Income inequality first rises and then falls as per capita income increases.
• Rising phase: labour moves from low-inequality, low-income agriculture to high-inequality, higher-income industry.

• Falling phase: urbanisation, mass education, political pressure and redistribution narrow the gaps.

• Challenges to Kuznets:

• East Asia's "growth with equity" (Korea, Taiwan) had no rising phase, helped by land reform and education.

• Inequality in rich countries has risen since 1980.

• Piketty, Capital in the Twenty-First Century (2013/2014). When the return on capital exceeds the growth rate (r > g), inherited wealth grows faster than the economy, so wealth concentrates.

• Elephant curve (Lakner-Milanovic, 2016; data 1988–2008): a graph of global income growth by percentile, shaped like an elephant.
• Big gains went to the emerging middle classes of Asia (China, India) and the global top 1%.

• Rich-country lower-middle classes stagnated (the dip at the "trunk").

• Trickle-down vs redistribution. Does growth alone reach the poor, or is deliberate redistribution needed?

• Growth elasticity of poverty: the % fall in poverty for each 1% rise in mean income. It is higher when initial inequality is low.

India's evidence splits by data source

• Consumption surveys show falling inequality:
• HCES Gini, rural 0.266 → 0.237 and urban 0.314 → 0.284 (2022-23 → 2023-24).
• World Bank consumption Gini: 28.8 (2011-12) → 25.5 (2022-23).

• On this basis the government called India the "fourth most equal country" (PIB, July 2025).

• Income and wealth data show rising concentration:

• World Inequality Lab (Bharti-Chancel-Piketty-Somanchi, 2024, "Billionaire Raj"): in 2022-23 the top 1% held about 22.6% of income and 40.1% of wealth.

• That is the highest income concentration since 1922.

• Why the two stories differ:

• Surveys under-capture the rich, who refuse to respond or under-report.
• Consumption is smoother than income, and the rich save much of theirs.
• WIL combines tax, national-accounts and rich-list data.

• A consumption Gini is not comparable with other countries' income Ginis.

• Spatial inequality:

• Wide gaps in state per capita income. Class 10, Development: Haryana ₹3,25,759 vs Bihar ₹60,337 in 2023-24, a ratio of about 5.4.

• The rural-urban MPCE gap is narrowing (Section 4).

• Newer figures are in the World Inequality Report 2026 (verify current).

9. India's anti-poverty strategy: growth, employment and basic needs

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Poverty alleviation means reducing poverty through growth, special programmes for weaker sections and employment generation. Class 11, Rural Development gives the framing: rural development means developing human resources (literacy, health, sanitation), land reforms, local productive resources, infrastructure (credit, markets, roads, irrigation) and special poverty-alleviation measures.

Prong (i): growth ("trickle-down")

• Growth under the plans (the "Hindu rate" of about 3.5%) was too slow before 1980 to pull people out of poverty.
• Faster growth after 1991 came with faster poverty decline (e.g. the Tendulkar HCR fell 37.2% → 21.9% between 2004-05 and 2011-12).
• Pro-poor growth is growth whose benefits reach the poor enough to cut poverty. It has two definitions:
• Absolute (Ravallion): growth is pro-poor if the incomes of the poor rise at all.
• Relative (Kakwani): the incomes of the poor must grow faster than the average.

Prong (ii): targeted programmes

• Wage employment (the poor sell their labour on public works):
• Food for Work (1977) → NREP (1980) → RLEGP (1983) → JRY (1989) → EAS (1993) → SGRY (2001) → NFFWP (2004) → MGNREGA (2005).

• MGNREGA was replaced in 2025 by VB-G RAM G (Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin)), as noted in Class 11, Rural Development. Details are in employment-informal-sector.

• Self-employment (credit and subsidy for assets):

• IRDP (1978-79 pilot; nationwide 1980) → SGSY (1999) → NRLM (2011), now DAY-NRLM.
• Urban: DAY-NULM.
• PMEGP (2008) and PM SVANidhi (2020) for street vendors.
• SHG and micro-credit details are in financial-inclusion-rural-credit.
• Kudumbashree (Kerala; Class 11, Rural Development, Box 5.1) is a women-led, community-based poverty-reduction model. Its thrift societies started in 1995 and mobilised ₹1 crore in savings.

Prong (iii): basic needs

• Fifth Plan: "Garibi Hatao" and the Minimum Needs Programme (1974), covering elementary education, rural health, drinking water, roads, electrification and housing.
• Housing: Indira Awaas Yojana (1985) → PMAY (Urban 2015, Gramin 2016).
• Household amenities: Swachh Bharat Mission (2014, sanitation), Jal Jeevan Mission (2019, tap water), Ujjwala (2016, LPG) and Saubhagya (2017, electricity).
• These cuts in deprivation explain much of the fall in the MPI (Section 5).

Social security

• NSAP (1995): old-age, widow and disability pensions, and a family benefit on the death of the breadwinner.
• 2015 schemes: PMJJBY (life insurance), PMSBY (accident insurance) and APY (pension for informal workers).
• Ayushman Bharat PM-JAY (2018): health cover of ₹5 lakh per family per year. All people aged 70+ were added in 2024. This targets out-of-pocket health shocks.

Food security

PDS → TPDS (1997) → Antyodaya Anna Yojana (2000) → National Food Security Act (2013) → PMGKAY (2020)

• NFSA 2013 is rights-based:
• Covers 75% rural / 50% urban population.
• 5 kg foodgrain per person per month.

• AAY households get 35 kg per household per month.

• PMGKAY (2020):

• Began as extra free grain during Covid.
• Free NFSA grain from 1 Jan 2023.

• Extended for five years from 1 Jan 2024.

• PDS and MSP mechanics are in agri-marketing-msp-pds.

Appraisal

• Problems: leakages and ghost beneficiaries, too many overlapping schemes, weak state capacity and targeting errors.
• "New welfarism": the recent shift to delivering tangible private goods (toilets, gas, houses, bank accounts, tap water) instead of only public goods such as quality schooling and health care. It explains fast MPI gains, but critics say learning and nutrition outcomes lag.

10. Targeting, DBT, cash transfers and the UBI debate

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Targeting vs universalism

• Targeting errors:
• Exclusion error: eligible poor people are left out. This is a welfare failure.
• Inclusion error: benefits leak to the non-poor. This is a fiscal waste.

• Tight targeting cuts inclusion errors but raises exclusion errors. Universal schemes do the reverse.

• Poverty estimation ≠ BPL identification:

• Estimation: the Planning Commission (now NITI) counts how many are poor from NSS samples.
• Identification: states name which households are BPL through surveys:
  • BPL censuses in 1992, 1997 and 2002.
  • N.C. Saxena Committee (2009) on the BPL census method.
  • SECC 2011 (MoRD): automatic exclusion and inclusion filters plus seven deprivation indicators. It is now used for PMAY-G and PM-JAY.

Direct Benefit Transfer (DBT)

• Launched 1 January 2013. Benefits are paid straight into bank accounts.
• The JAM trinity (Jan Dhan accounts, Aadhaar identity, Mobile phones) was set out in the Economic Survey 2014-15.
• PAHAL (LPG subsidy DBT) was an early flagship.
• The government claims large savings from weeding out ghost and duplicate beneficiaries (verify current figure).
• Payment rails are covered in payment-systems-digital-finance.

Conditional cash transfers (CCTs)

A conditional cash transfer is cash paid to poor households on condition of specified behaviour, such as school attendance or health check-ups, to build human capital.

Scheme	Country / year	Condition or purpose
Progresa / Oportunidades	Mexico, 1997	School attendance, health visits
Bolsa Família	Brazil, 2003	Schooling, vaccination
Janani Suraksha Yojana	India, 2005	Institutional delivery
PMMVY	India, 2017	₹5,000 for pregnant and lactating women
Ladli Laxmi	Madhya Pradesh, 2007	Girl child's education
Kanyashree	West Bengal, 2013	Girls staying in school and delaying marriage; UN Public Service Award 2017

Unconditional transfers and the "freebies" debate

• PM-KISAN (2019): ₹6,000 a year to landholding farmer families.
• State cash support for women: Ladli Behna (MP), Ladki Bahin (Maharashtra), and others.
• "Freebies vs welfare": the Supreme Court heard the issue in the Ashwini Upadhyay case, and RBI state-finance reports have flagged the fiscal stress these schemes create.

Universal basic income (UBI): Economic Survey 2016-17

• Three features: universality, unconditionality and agency (it treats the poor as able to decide for themselves).
• Cost: ₹7,620 a year per person (2016-17 prices) would lift people to the Tendulkar line. Covering 75% of the population would cost about 4.9% of GDP.
• Precedents: the SEWA-UNICEF pilot in Madhya Pradesh (2011-13), Sikkim's proposal, and trials in Finland and Kenya.

For	Against
Less leakage and fewer exclusion errors	High fiscal cost
Respects autonomy and choice	Possible work disincentive (evidence is weak)
Low administrative cost	Inflation in thin local markets
Insures against shocks (transient poverty)	Does it replace or top up existing schemes? Politically hard to cut PDS or subsidies

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Exam angles

Prelims — high-yield facts and traps

• Committee → method:
• Dandekar-Rath (1971): 2,250 kcal.
• Alagh (1979): calorie norm 2,400 rural / 2,100 urban; ₹49.09 / ₹56.64 at 1973-74 prices.
• Lakdawala (1993): state-specific lines, CPI-AL / CPI-IW, no national-accounts scaling.
• Tendulkar (2009): no calorie anchor, MRP, health and education included; 21.9% in 2011-12; ₹816 / ₹1,000 a month (₹27 / ₹33 a day).
• Rangarajan (2014): calorie, protein and fat norms; 29.5%; ₹972 / ₹1,407 (₹32 / ₹47 a day); never adopted.

• Naoroji: Poverty and Un-British Rule in India (1901).

• Institution → product:

• Global MPI: UNDP + OPHI (2010, replaced HPI).
• National MPI: NITI Aayog, NFHS-based, 12 indicators (adds maternal health and bank account).
• IPL and PIP: World Bank; now $3.00 at 2021 PPP (June 2025).
• HCES: NSO/MoSPI.

• SECC 2011: MoRD. Poverty estimates: Planning Commission/NITI.

• Measure properties:

• HCR ignores depth; PGI measures depth; SPG measures severity (FGT α = 0, 1, 2).
• MPI = H × A, poor if deprived in ≥ 1/3.
• Gini is 0–1 and = A/(A + B).
• Palma = top 10% ÷ bottom 40%.
• Theil is decomposable; Atkinson has an aversion parameter ε.

• Crossing Lorenz curves give an ambiguous ranking.

• Statement traps:

• "Kuznets curve is U-shaped": FALSE (inverted U).
• "Relative poverty can be eliminated by growth alone": FALSE.
• "A falling HCR means fewer poor people": FALSE (the absolute number can rise).
• "India's 21.9% BPL figure is for 2019-21": FALSE (it is Tendulkar 2011-12; NCERT Table 8.5 error).
• "Rangarajan line is India's official line": FALSE.

• "Global MPI is prepared by the World Bank": FALSE.

• Scheme-year matching: IRDP 1978-80, JRY 1989, NSAP 1995, TPDS 1997, AAY 2000, NFSA 2013 (75/50 coverage; 5 kg per person; AAY 35 kg), DBT 2013, PMJJBY/PMSBY/APY 2015, PM-JAY 2018, PM-KISAN 2019, PMGKAY 2020.

• SDG targets: SDG 1.1 = extreme poverty (IPL); SDG 1.2 = halve poverty by national definitions; SDG 10.1 = bottom-40% income growth.
• Recent numbers:
• India at $3.00: 27.1% → 5.25% (2011-12 → 2022-23).
• NITI MPI: 29.17% → 11.28% (2013-14 → 2022-23); 24.82 crore exited.
• HCES 2023-24 MPCE: ₹4,122 / ₹6,996.
• Consumption Gini: 0.237 rural / 0.284 urban.

Mains — GS-III themes

1. Does India need a new official poverty line? Compare calorie norms, normative baskets and the multidimensional approach. Discuss comparability of HCES with earlier rounds (URP → MRP → MMRP, imputation of free items) and consumption vs income measurement.
2. "Poverty has collapsed": reconcile the evidence. Monetary estimates (World Bank, Tendulkar-updated) vs NITI MPI vs nutrition data (NFHS stunting). What access-based indicators miss: use, quality, learning.
3. Rising or falling inequality? Consumption Gini vs WIL income and wealth concentration. Does the Kuznets curve fit India's services-led growth? Regional divergence and the rural-urban gap. Averages hide disparities.
4. Growth vs redistribution. Pro-poor growth, and wage employment, self-employment and social protection as complements. Chronic and transient poor need different instruments.
5. Targeting vs universalism. DBT/JAM, CCTs vs UBI and the "freebies" debate under fiscal limits. Exclusion vs inclusion errors. Social exclusion and the concentration of deprivation among STs and SCs.

Current-affairs hooks

• MoSPI HCES releases; any new expert committee on a poverty line; NITI MPI updates.
• Global MPI release around 17 October (International Day for the Eradication of Poverty).
• World Bank Poverty & Equity Briefs (April/October), PIP updates and PPP revisions.
• SDG progress reports and the SDG India Index (Goal 1, Goal 10).
• World Inequality Lab reports and the Oxfam inequality report at Davos (January), with PIB and Economic Survey rebuttals.
• Union Budget allocations for PMGKAY, PM-KISAN, PMAY and PM-JAY; state cash-transfer schemes and the freebies litigation; the RBI State Finances report.