Absolute poverty:

The minimum amount of income and expenditure that is needed to satisfy the basic needs of human beings is known as poverty line. People who are below this poverty line are known as absolutely poor and their poverty is called absolute poverty.

Method of deciding the poverty line:

To understand the level of absolute poverty or deciding the poverty line, the minimum expenditure to be made by a person to purchase the minimum physical amount of cereal, pulses, milk, butter etc. is studied.

(A) Method of Indian Council of Medical Research:

• To ascertain minimum expenditure on all these items, the Indian Council of Medical Research during the initial years of planning calculated a minimum limit of calorie that a person needs to consume daily. Based on the calorie requirement the expenditure for items was then calculated.
• The Council calculated that a person belonging to a rural area must consume 2400 calories per day whereas that of urban, 2100.
• Later, even the Planning Commission accepted this method of ascertaining expenditure. By taking prices of year 1960-61 as base year, the Commission decided that ₹ 20 per day be set as minimum value for measurement of poverty or say poverty line. Thus, a person who earned less than ? 20 per day should be considered living below the poverty line or say should be called absolutely poor. Later, various people and committees revised the minimum value of poverty line.

(B) Dandekar and Rath Committee:

• Dandekar and Rath made the first systematic assessment of poverty in India.
• Dandekar and Rath Committee decided minimum value of poverty for rural areas ₹ 15 and for urban area ₹ 22.50 taking 1960-61 as the base price.

(C) Lakadwala Committee:

After that the planning commission appointed an expert committee under the chairmanship of Prof. D.T. Lakadawala. This committee decided a new minimum limit of poverty line for the year 1993 taking 1973-74 as base year. They set a poverty line. The new poverty line was set as ? 57 per day for urban areas and ? 49 for rural areas. People earning below this be considered living below the poverty line.

Limitation of all these methods:

• Calculating poverty and deciding poverty line with the methuu based on calorie consumption only, does not give a true picture of poverty. The reason for this is that poverty is an economic situation and its scope is broader than consumption expenditure behind food items.
• Hunger is a physical situation whereas poverty is an economic. In this sense, the poverty line defined by these people just becomes a ‘starvation line’.
• So, to calculate poverty line, aspects such as nutritive food, education, housing, drinking water, sanitation, etc. that a person receives should also be considered.

(D) Tendulkar Committee Report-2009:

• To overcome drawbacks of all the previous methods of calculating poverty line a committee under the chairmanship of Mr. Suresh Tendulkar was formed.
• It presented its report in 2009 and gave a new measure of poverty line. The method suggested by this committee incorporated expenses done after health and education were also covered to get a more realistic picture of poverty.
• According to the new method, in the year 2011-12, the minimum value of poverty line was modified, for urban and rural area.
• As per the new method, the minimum per capita daily expenditure needed for rural area was set to be ₹ 27 (Rs. 816 per month) and that for urban was set to ₹ 33 (Rs. 1000 per month).