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New Standards for Poverty Line in India

poverty line in India
India’s Economic Advisory Council enacted its highest standard for poverty this summer. The new standards will place 30 percent of the nation’s population below the poverty line. This adds an extra eight percent to the estimate under previous standards.

By the new benchmarks, a rural family of five living on 4,860 rupees (or about $80) a month or an urban family on 7,035 rupees (at 2011-12 prices) is considered poor.

Despite encompassing more citizens under the poverty line in India, these new standards reflect progress. This year, after recent elections and a new government, marks the first time the nation has taken on major economic reform in two decades.

Over the past 20 years, the Indian economy has witnessed rapid changes. The United Nations reported that the Indian economy is expected to grow at a rate of 5.6 percent this year. It is on track to surpass these expectations, already having expanded its economy by 5.7 percent by August. The manufacturing and mining industries have accounted for this growth, according to the Central Statistics Office.

These changes will better acknowledge and help address the actual needs of the Indian population, argue many economists.

This new definition puts India’s standards above the average in the developing world. The most popular definition of poverty is the World Bank’s $1.25 a day standard. Some economists argue that this low standard of poverty undermines the struggles of many legitimately poor families. A low bar for poverty often minimizes legitimate needs for poor families that are above the bar.

This perpetuates many myths about poverty. For example, many believe food is the biggest need for India’s poor. However, health care, drinking water and proper sanitation make up 40 percent of the poor’s biggest needs, according to the Director of McKinsey Global Institute Richard Dobbs.

“The kinds of contrasts we possess, no other country has,” said Himanshu, an economist at Jawaharlal Nehru University in Delhi, in an interview with the Washington Post. “And in a democracy, these things need to be questioned. That’s what the poverty lines do.”

— Ellie Sennett

Sources: Business Standard, The New York Times, The World Bank, The Wall Street Journal, Economic Times (India), Huffington Post