Chapter 4 IED Poverty

Economics Class 12
Indian Economic Development

Poor People are identified as those who live below the poverty Line

## What is Poverty Line?

It is the minimum level of income required to meet basic needs

Example

Poverty line is currently

Rural Areas Rs 816 per person per month

Urban Areas Rs 1000 per person per month

Person earning below this minimum level of income are classified as Poor

Person earning above this minimum level of income are Classified as Non Poor

Poverty Line Calculation

It is the monetary value of Minimum Calories Intake

which is

2,400 calories in rural areas

2,100 calories in urban areas,

along with a minimum of non-food expenditure, is called poverty line or absolute poverty.

As per this formula,

Poverty line was determined according to the

minimum Monthly Per Capita Expenditure which was

Rs 818 per month in Rural Areas

Rs 1000 per month in Urban Areas

Problem with Above Formula of Poverty Line

It only divides people into Poor and Not Poor

It does not differentiate between different types of poor like

(Always Poor, Usually poor, Churning Poor, Occasionally Poor)

It is difficult to determine who amongst the poor need most help

It does not take into account other factors associated with poverty

like accessibility to basic education, health

care, drinking water and sanitation"

It does not take into account Social factors like Illiteracy, ill health, lack of freedom

Some critics argue that Poverty figures are Manipulated

Government deliberately keeps poverty line low so that most people fall above it

Actual number of poor are much higher

Poverty Line During Pre Independence Days

Concept was first discussed by Dada Bhai Naroji

He used the menu for a prisoner to arrive at jail cost of living using appropriate prevaling prices

Now in Jail, Normally adults go and not children

and Children consume less than Adults

He calculated Poverty line as

3/4 of Cost of Living of Person in Jail

### NCERT Questions

#### Question 1

Why calorie - based norm is not adequate to identify the poor?

### MCQ Other Books

#### Question 1

In the following questions, select the correct answers:

MPCE stands for ____.

1. Monthly Per Capita Expenditure
2. Minimum Per Capita Expenditure
3. Maximum Per Capita Expenditure
4. None of these

#### Question 2

Who introduced the concept of 'Jail cost of Living'?

1. Jawaharlal Nehru
2. Mahatma Gandhi
4. None of these

### Oswaal Questions

#### Question 1

Estimation of poverty in rural economies is at per day consumption of calories:

1. Less than 2,200
2. Less than 2,100
3. Less than 2,400
4. Less than 2,000

#### Question 2

Estimation of poverty in urban areas is at the consumption of per day calories of:

1. Less than 2,000
2. Less than 2,100
3. Less than 2,400
4. Less than 2,200 R

#### Question 3

In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R).

Assertion (A): Calorie-based norm is not an adequate measure to identify the poor.

Reason (R): This method does not differentiate between the very poor and the other poor.

Mark the correct choice:

1. Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).
2. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).
3. Assertion (A) is true, but Reason (R) is false.
4. Assertion (A) is false, but Reason (R) is true.

### Transcript

Poverty Line-Introduction Suppose there are 3 Persons A,B and C Which of them is Poor? Person A Vegetable Seller Income 10000 pm Person B Rickshaw Puller Income 5000 Pm Person C Beggar Income Rs 2000 pm Who Among this is Poor ? There is no fixed answer Some will say all 3 are poor Some will say B and C are Poor As per some, Only C is Poor There should be a Minimum level of Income beyond which a person is considered poor This Minimum level is called Poverty Line What is Poverty Line It is the minimum level of income required to meet basic needs This line identifies Poor Income Not Poor Poor Poverty Line Person having more than or equal to this level of Income are Not Poor Person having less than this level of income are Poor What is poverty Line in India? Poverty line is currently Rural Areas Rs 816 per person per month Urban Areas Rs 1000 per person per month Person earning below this minimum level of income are classified as Poor Person earning above this minimum level of income are Classified as Non-Poor What is poverty Line in India? Poverty line is currently Rural Areas Rs 816 per person per month Urban Areas Rs 1000 per person per month Example Suppose there are 3 Persons A,B and C Person A Vegetable Seller Income 10000 pm Person B Rickshaw Puller Income 5000 Pm Person C Beggar Income Rs 2000 pm Who Among this is Poor ? Since there income is more than Poverty line of 816/1000 None of them is Poor How is this Poverty Line Determined by Government? We calculate Monetary value of Minimum Calorie Intake as shown below Step 1 Govt estimated minimum food required per person to survive Rural Areas 2400 calories Urban Areas 2100 Calories More food in Rural areas as more physical work Step 2 Got estimated cost of Purchasing this food other nonfood expenses Rural Areas 2400 calories Urban Areas 2100 Calories Rs 818 Rs 1000 Food more expensive in cities Compared to villages Hence, we calculated Monetary Value (Step 2) of Minimum Calorie Intake (Step 1) Old Method to Calculate Poverty Line Used before Independence Current Method We take Monetary value of Minimum Calorie Intake (Cost of food) Poverty line is Rural Areas Rs 818 pm Urban Areas Rs 1000 pm This method devised by Indian Govt Old Method We take Monetary value of Jail Cost (Cost of Living in Jail) Poverty line was 3/4 of Cost of Living of Person in Jail This method devised by Dadabhai NarojiHow was 3/4 figure Calculated by Dada Bhai Naoroji? He assumed 2/3 of Population was Adult 1/3 of Population was children Out of this, Half Very Small Children Out of this, Little Older l Children Out of 6 People 2/3*6=4 1/3*6=2 Hence, out of Total 6 People 4 were Adults 1 Very Small Children 1 Little older children It was Assumed They consumed full food They consumed no food They consumed half food Suppose food cost of Person living in Jail is Rs 120 Total Food Spent on 6 People= 4*120+1*0+1*60=480+0+60=540 Food cost of 1 Person =540/6=90 Now 90/120=3/4 Hence, Poverty Line is 3/4 of Jail Cost