Poverty debates in India have seen a revival since the release of a fact sheet from the 2022-23 household consumption expenditure survey. In this post, Ghatak and Kumar note that the general consensus among researchers is that extreme poverty is under 5%. However, they contest this by digging deeper into how the poverty line is determined and conclude that in the absence of detailed data necessary for calculation of an updated poverty line, doubts will remain about the estimates of extreme poverty.

In the absence of survey data from the Consumer Expenditure Surveys, which went unpublished between 2011-12 and 2022-23, debates about poverty in India were in a state of limbo. They, however, received a new impetus when the National Statistical Organisation (NSO) released the “Household Consumption Expenditure Survey: 2022-23 Fact Sheet” in February 2024. This document is not as detailed as a unit-level release of survey data, but it provides tabulations of per capita expenditure for various classes of the consumption distribution in rural and urban India, for the period between August 2022 and July 2023. Based on these tabulations, several researchers have estimated poverty by determining a threshold for extreme poverty (such as the World Bank’s well-known US$2.15 per person per day, based on 2017 purchasing power parity (PPP)) and estimating what fraction of the population falls below these thresholds.

Estimates of extreme poverty in India – is it under 5%?

The timing and the extent of information released has generated some controversy because the complete survey has not yet been published, and the release comes on the heels of India’s general election. Still, data is data, and it is worth exploring it in detail, which is what several researchers, including us, have done over the last few months. The general consensus is that poverty in India appears to be very low. Using India’s last national poverty line – the Tendulkar line – extreme poverty comes out to less than 5% of the population. The way researchers have inferred that extreme poverty must be less than 5% is simple: take the Tendulkar poverty line for 2011-12 and inflate it with consumer price index (CPI) to generate a 2022-23 ‘equivalent’ of the poverty line. These thresholds correspond to slightly less than the average consumer expenditure of the bottom 5% of the population. Of course, there is dispersion even within this group and so the precise count is unclear, but it is unlikely to be over 5%. 

If we look at the expenditure of the households surveyed in the poorest 5%, we see that the average monthly expenditure is Rs. 1,373 in rural areas and Rs. 2,001 in urban areas, from which the all-India average comes out to be Rs. 1,600 – just about equal to the poverty line. Since in 2011-12, 22% of the population was below the poverty line, these numbers have led to the conclusion (amongst many, but not all) that poverty has decreased significantly in the last decade. Several authors have raised doubts about the comparability of this survey after such a long duration, especially with regards to improvements in its precision, and the fact that these surveys themselves are inputs into the calculation of CPI. But, for now, let us take it at face value.  

If poverty in India fell so spectacularly, then it has done so in the absence of commensurate changes in other macro-correlates of poverty decline. In particular, the growth rate of national income, the stagnant share of agriculture in GDP (gross domestic product) or employment, or the state of wages and employment in the labour market, do not paint the picture of a very dynamic economy. 

One answer is what we label “accidental welfarism” (Ghatak and Kumar 2024): the government took some urgent welfare measures to deal with the Covid-19 pandemic, the most well-known example of which was the provision of free rice and wheat to 80 million people¹ through the rationing system, which is in place several years later (with some of the generosity pulled back) and has been announced to be extended for another five years. The reasons for this are not hard to guess. Once initiated or expanded, it is always difficult to roll back entitlement programmes, especially when – debates about the headcount ratio or the poverty line notwithstanding – the economic condition of the overwhelming majority of the population is very far from well-off by any stretch of the imagination. These transfers would tend to allow the poor to increase their spending on other items, which is consistent with the statistics found in this fact sheet. 

Determining the poverty line

However, a fundamental shortcoming of all poverty estimates, at present, is that they are not using an appropriately defined poverty line. Instead by mechanically applying the CPI (which is calculated for the average household, and not the poor), and especially given how much time has passed between the NSO’s surveys, it is possible that the cost of living is being underestimated for the poor. Consumer expenditure surveys supply the data needed to estimate the distribution of living standards, but without deliberation on what constitutes a minimal living standard we simply cannot ‘identify the poor’. 

It is therefore worthwhile digging a bit deeper into how the poverty line is determined. The traditional way to determine the poverty line is to estimate the price of a food basket that a person needs to consume to get the amount of energy (in calories) necessary to live and function. In India, this was taken to be 2,400 and 2,100 calories for an able-bodied adult in rural and urban areas, respectively. In 2009, the expert committee headed by Suresh Tendulkar presented a report with a new way to determine the poverty line: the committee proposed the Food and Agriculture Organization (FAO) minimum calorie requirement of 1,800 calories as the caloric standard but also added minimum expenditure requirements on education and health. In the household expenditure survey conducted by NSO in 2011-12, the new poverty line was set at Rs. 816 per capita in rural areas and Rs. 1,000 in urban areas, which yields a national average of Rs. 882 based on the relative proportion of population in rural and urban areas. The international poverty line used by the World Bank of US$2.15 per person per day in 2017 PPP terms is very close to this. Using this line, the headcount ratio was measured at 22%. As there have not been any detailed surveys or reports since then, when people discuss poverty, they use this line and inflate it using the CPI, which in 2022-23 turns out to be around Rs. 1,500 in rural areas and Rs. 1,850 in urban areas, or an average of Rs. 1,600. 

What we hypothesise is that if indeed there is an underestimation using the CPI, then the cost of calories required for basic living needs is likely to be higher than extrapolations from the 2011-12 poverty line. As a starting point, suppose we propose a basic meal consisting of lentils, rice, vegetables, and cooking oil in the standards proportions to meet the minimum daily calorie requirement – would the cost of ingredients be met by the extrapolated Tendulkar poverty line? We should note that this meal does not necessarily constitute a healthy diet (Thomas 2023) and in particular compared to the EAT-Lancet reference diet², the average Indian diet (of which our proposed one is no exception) includes more calories from whole grains but falls short in the intake of fruits and vegetables, legumes, and animal-based foods like meat, fish, and eggs. Our goal is to estimate the cost of basic subsistence food needs. 

For our exercise, we exclude every other cost, whether of spices and condiments or fuel or cooking time. Using prices of ingredients from the website of the Government of Kerala for 2022-23 (our choice is dictated by ready availability of data), we are able to estimate the cost of a recipe known in India as khichdi (a rice-based dish). This is in line with the Government of India's Economic Survey 2019-20 that has a section called “Thalinomics”, where a similar exercise is carried out, although the recipes are different. Regardless, it is testament to the fact that the government’s economic advisors are cognisant of the material means of survival – food. Note that the Tendulkar poverty line is supposed to cover not just food worth 1,800 calories per person per day, but also the cost of education and health. We have abstained from anything but the basic food requirement and thus our calculations yield the bare minimum to estimate a new poverty line. 

Our calculations of the costs of these meals are shown in Table 1. We estimate that a single meal, as per this recipe, costs Rs. 39.38. We assume here that the cost of rice is zero because of free provision by the government. Based on these prices, the daily cost of 1,800 calories worth of food comes to Rs. 83.2 (Table 2). Note that we are already well above the allowance made by the inflated Tendulkar poverty line. 

Table 1. Ingredients of a basic meal, including calories and costs (with free rice) 

Ingredients	Quantity (grams)	Calories	Cost (Rs.)
Rice	180	234	0
Lentil	90	104.5	9.63
Vegetables (Ladyfinger)	250	163	16.75
2 tbsp. vegetable oil	30	250	6
2 small onions	250	100	7
		Calories per meal	Cost per meal
		851.5	39.38

Source: Government of Kerala website. Prices are from January 2023. 

Table 2. Cost of calories (with free rice)

Daily calories	Daily cost (Rs.)	Monthly cost (Rs.)
1,200	55.53	1665.89
1,400	64.79	1943.55
1,600	74.04	2221.19
1,800	83.29	2498.85
2,000	92.55	2776.49
2,200	101.81	3054.15
2,400	111.06	3331.79

The natural question therefore is, how many Indians can afford 1,800 calories according to actual prices of food items in 2022-23? The monthly cost of 1,800 calories is shown in Table 2 and comes to around Rs. 2,499 per person. Compare this to the distribution of consumption spending shown in Table 3 and it becomes immediately obvious that a poverty headcount of 5% underestimates the true distribution of living standards. In rural India, those between the 5^th and 10^th percentiles – around 70 million people – had a monthly budget of Rs. 1,782, which is well short of the Rs. 2,499 required for food intake. Once we adjust for the price differential between rural and urban India, affordability increases slightly, but not completely. In Table 4, we convert the consumption distribution from the NSO factsheet into a ratio against the cost of calories over a range of 1,200-2,400. These estimates suggest that more than 10% of the population cannot afford 1,800 calories. In other words, we identify the probability of poverty to be in excess of the rather low figures being quoted in the media.

Table 3. Per capita consumption of all fractiles in 2022-23

Fractile	Rural (Rs.)	Urban (Rs.)
0-5%	1,373	2,001
5-10%	1,782	2,607
10-20%	2,112	3,157
20-30%	2,454	3,762
30-40%	2,768	4,348
40-50%	3,094	4,963
50-60%	3,455	5,662
60-70%	3,887	6,524
70-80%	4,458	7,573
80-90%	5,356	9,582
90-95%	6,638	12,399
95-100%	10,501	20,824
All classes	3,773	6,359

Source: NSO Household Consumption Expenditure Survey (Fact sheet) 2022-23.

Notes: (i) A fractile divides a dataset into equal parts based on a given percentage – in this case, 5%. Fractile means of consumption (nominal) are estimated using MMRP (modified mixed reference period) method. (ii) These costs do not include social welfare transfers.

Table 4. Consumption expenditure of various groups divided by monthly cost of calories, with free rice 

	1,200 calories		1,600 calories		1,800 calories		2,400 calories
Fractile	Rural	Urban	Rural	Urban	Rural	Urban	Rural	Urban
0-5%	103%	120%	77%	90%	69%	80%	52%	60%
5-10%	134%	156%	100%	117%	89%	104%	67%	78%
10-20%	158%	190%	119%	142%	106%	126%	79%	95%
20-30%	184%	226%	138%	169%	123%	151%	92%	113%
30-40%	208%	261%	156%	196%	138%	174%	104%	131%
40-50%	232%	298%	174%	223%	155%	199%	116%	149%
50-60%	259%	340%	194%	255%	173%	227%	130%	170%
60-70%	292%	392%	219%	294%	194%	261%	146%	196%
70-80%	335%	455%	251%	341%	223%	303%	167%	227%
80-90%	402%	575%	301%	431%	268%	383%	201%	288%
90-95%	498%	744%	374%	558%	332%	496%	249%	372%
95-100%	788%	1,250%	591%	938%	525%	833%	394%	625%
All classes	283%	382%	212%	286%	189%	254%	142%	191%

Source: NSO Household Consumption Expenditure Survey.

Notes: (i) Monthly expenditure normalised by calorie costs (rural = 80% of urban, price of rice = 0). (ii) Values <100% indicate that an individual cannot afford sufficient meals on the given expenditure budget. 

The poor have not yet been identified

All this boils down to a simple point: is the extrapolated Tendulkar line truly representative of the cost of survival? We have tried to make the case that the cost of calories is not adequately represented by the headline figure of Rs. 53 per person per day. And food is not the only requirement of survival. There are costs of housing, clothing, transportation, and medicines, which add up to much more than our quoted figures. Obviously, we suspect that the poverty line will shift quite a bit compared to the one that is in use at present. And if this is the case, then the next round of India’s famous ‘poverty debates’ will revolve around the determination of this new poverty line to reflect the present-day minimum living standards of Indians. These lines are important beyond academic estimates of poverty: the determination of welfare and transfers, as well as funds received by states from the Centre for redistribution, will be a function of the new poverty line and that segment of the Indian population that absolutely relies on State support for survival. The necessary data for estimation of poverty might be available, but the poor, in our view, have not yet been identified.  

The views expressed in this post are solely those of the authors, and do not necessarily reflect those of the I4I Editorial Board.

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Notes:

1. Much has been made of the welfare impacts of the central government’s food security schemes. As Drèze (2023) notes, these schemes were just ‘sweeteners’ on top of the 2013 National Food Security Act (NFSA), which entitled two-thirds of the population to subsidised foodgrain. Under the 2020 Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), an additional quantity of rations was made available to NFSA recipients at zero cost. These subsidies have since been rolled back.
2. A universal healthy reference diet, based on an increase in consumption of healthy foods such as vegetables, fruits, whole grains, legumes, and nuts, that would provide major health benefits, and also increase the likelihood of attainment of the Sustainable Development Goals.

Further Reading

• Drèze, J (2023), ‘Food for Nought: One Step Forward, One Leap Backward’, The India Forum, 1 January.
• Ghatak, M and R Kumar (2024), ‘Poverty in India Over the Last Decade’, The India Forum, 10 April.
• Thomas, L (2023), ‘How does the Indian diet fit in with the EAT-Lancet Reference Diet?’, News-Medical, 14 June.