Absolute Poverty

When Income of a person is not sufficient to provide the basic necessities of life, he/she is said to be in absolute poverty.

Relative Poverty

Relative poverty occurs when a comparison of the standard of living or income distribution of various income groups is undertaken in a country. The income inequalities between different groups are a reflection of relative poverty.

In India people living below poverty line are quite high as compared to other Asian countries like Malaysia, Thailand and China. According to the projections of the Planning Commission poverty is expected to decline to 18 per cent in 2002 and further to 4 per cent in 2012.

Measurement of Poverty

The Planning Commission set up a Study Group in July 1962 to examine the question of poverty in the country. The Study Group suggested a private consumption expenditure of Rs. 20 (at 1960-61 prices) per capita per month as a basic minimum requirement of life, below which are regarded as poor. In 1979, following the recommendation of the Task Force on Projection of Minimum Needs and Effective Consumption Demand, the poverty line is defined as “the per capita monthly expenditure needed to obtain the consumption of 2,400 calories per-capita per day in rural areas and 2,100 in urban areas in the base year 1973-74.” The poverty line so defined was Rs. 49.10 for rural areas and Rs. 56.60 for urban areas per capita per month. The same poverty line was updated for subsequent years using stable indicators of changes in cost of living.

International Poverty Line

World Banks estimates suggest that the percentage of people living below $1.25 a day in 2005 (which, based on India's PPP rate, works out to Rs 21.6 a day in urban areas and Rs 14.3 in rural areas in 2005 ) decreased from 60% in 1981 to 42% in 2005. Even at a dollar a day ( Rs 17.2 in urban areas and Rs 11.4 in rural areas in 2005 ) poverty declined from 42% to 24% over the same period.