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Unit 7: Poverty: Concept, Cause and Government Policies

(MRP), the Planning Commission, using the Expert Group methodology has estimated poverty in Notes
2004-05 using both the distributions.
1. Poverty estimates based on URP indicate 28.3% of rural population and 25.7% of the urban
population was below the poverty line. For the country as a whole, 27.5% of total population
was below the poverty line in 2004-05.
2. The corresponding figures obtained from MRP indicate 21.8% in rural areas, 21.7% in urban
areas and 21.8% for the country as a whole was in poverty in 2004-05.
The Planning Commission in its Approach to the 11 Five Year Plan (December, 2006) states : “Using
th
the methodology of the Expert Group on Estimation of Proportion and Number of Poor 1993, the
percentage of population below the poverty line is provisionally estimated at 27.8% in 2004-05. Thus
the average decline in percentage of population below the poverty line over the period 1993 to 2004
is 0.74 percentage points per year, much less than implied by the official 1999-2000 data. Because of
the slower pace of reduction in the percentage of the poor, the estimated number of poor is now
estimated be approximately 300 million in 2004-05, larger than the official estimate of 1999-2000.”
It may be recalled that the official estimate for poverty in 1999-2000 was 26.1% for the country as a
whole and 260 million were estimated as poor.
Table 1 provides state level data on poverty ratios during 2004-05. The lowest poverty ratio was 5.4%
for Jammu and Kashmir and highest poverty ratio was for Orissa (46.4%). States with poverty ratio of
less than 15% were Jammu & Kashmir, Punjab, Haryana, Himachal Pradesh, Delhi and Andhra
Pradesh. As against them, states with poverty ratio above 30% were Maharashtra, Uttar Pradesh,
Bihar, Jharkhand, Madhya Pradesh Chattisgarh, Uttarakhand and Orissa.
Five States, namely, Uttar Pradesh, Maharashtra Bihar, West Bengal and Orissa accounted for 166
mm poor (about 55% of the total poor estimated at million). This shows the high concentration of
poor these 5 states.
Table 1 : Poverty Estimates based on URP

1993-94 2004-05

Rural 37.3 28.3
Urban 32.4 25.7
Total 36.0 27.5

Source : Planning Commision, Press Release March, 2007.
Dev and Ravi’s Study on Porverty
st
S. Mahendra Dev and C. Ravi have also analyse depth the data of the 61 round of NSS (2004-05) and
compared it with the period 1983-1993. Major finding of are study are :
1. The study has estimated the ‘very poor’ defined ‘as those who are below 75 percent of poverty
line. There was a decline in the proportion of the very poor from 15.5% in 1993-94 to 10.3% in
2004-05. This implies the very poor accounted for 115 million among the total poor reckoned at
about 316 million. Obviously, the share of hard core or chronic poor is quite high, around 37
percent of the total poor.
2. Data provided in Table 16 & 17 reveals that poverty continued to decline from 44.9% in 1983 to
36.0% in 1993 and further to 28.3% in 2004-05. This phenomenon was also observed in both
rural and urban areas. However, it was noted that total poverty declined at the rate of 0.85
percentage points in the pre-reform period (1983-93), while the corresponding figure for the
post-reform period was 0.70 percentage points per annum. From this, it can be inferred that the
rate of decline in total poverty was slower in the post-reform period than in the pre-reform
period. The same pattern was observed in the rural as well as , urban areas.
This implies that though the GDP growth was higher in the post-reform period, yet it failed to impact
poverty reduction rate significantly and a result, a higher rate of poverty reduction than observed in
the pre-reform as normally expected, did not take place.

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