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Poverty and inequality: meaning and measurement

Poverty and unemployment · Part 1 / 3 · Fact-checked on 26 October 2026 · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

Absolute and relative poverty, the headcount ratio and poverty gap, consumption surveys and recall periods, the Household Consumption Expenditure Surveys of 2022-23 and 2023-24, India's poverty lines from the 1962 Working Group through Alagh and Lakdawala to Tendulkar (2009) and Rangarajan (2014), the World Bank's international line, the global and national Multidimensional Poverty Index, and the Lorenz curve and Gini coefficient.

This chapter asks two questions at the heart of development: how many Indians are poor, and how many of those who want work can find it. Part 1 deals with poverty and inequality. It explains what a poverty line is, how India drew its lines from the 1960s to 2014, why there has been no official count since 2011-12, and what newer measures show: household consumption surveys, the World Bank's international line, and indices that count deprivations in health, education and living conditions rather than money alone. Parts 2 and 3 turn to employment, unemployment and the rural job guarantee. Figures in this area change with every survey, so the methods, the committees and the reasons behind them matter more than any single number.

absolute poverty means lacking the income or consumption needed for a minimum standard of living, such as enough food, clothing and shelter. It is judged against a fixed poverty line: a level of spending per person per month below which a person is counted as poor. relative poverty compares people with others in the same society, for example everyone below half the median income, so it never disappears even as a country becomes richer. India, like most developing countries, measures absolute poverty. The simplest summary is the headcount ratio, the share of the population below the line. It says nothing about how far below the line the poor are; that depth is captured by the poverty gap, the average shortfall from the line across the population (counting the non-poor as zero), expressed as a share of the line.

India measures poverty from consumption rather than income, because many households, especially farmers and the self-employed, earn irregularly and find income hard to report, while spending is steadier and easier to recall. The data come from household consumption surveys of the National Statistics Office, which yield monthly per capita consumption expenditure (MPCE). Results depend on the recall period. The uniform reference period asks about every item over the last 30 days; the mixed reference period uses 365 days for rarely bought items such as clothing, footwear, durable goods, education and hospital care; and the modified mixed reference period also uses 7 days for some foods. A longer window for rare purchases usually raises measured spending among the poor. The 2017-18 survey was never released, the government stating in 2019 that its data had quality problems, so 2011-12 remains the base of official poverty figures.

Surveys resumed with the Household Consumption Expenditure Surveys (HCES) of 2022-23 and 2023-24. They used the modified mixed reference period and also recorded items that households received free through government schemes, such as grain from the public distribution system or a laptop or bicycle given to students, so that an imputed value for these can be added to spending. The 2023-24 survey put average MPCE, without these imputed values, at about Rs 4,122 in rural India and Rs 6,996 in urban India (MoSPI, 2024), and showed the gap between urban and rural spending narrowing compared with 2011-12. The share of food in household spending has continued to fall. These surveys are not, by themselves, poverty estimates: no new official poverty line has been adopted, so researchers apply older lines to the new data and reach different results.

The first official line came from a Working Group of the Planning Commission in 1962, which fixed a minimum monthly consumption per person. The Task Force headed by Y.K. Alagh (1979) tied the line to nutrition: the spending at which a person could get 2,400 calories a day in rural areas and 2,100 in urban areas, the lower urban norm reflecting less strenuous work. The Lakdawala Expert Group (1993) kept these calorie norms but drew a separate line for each state to reflect price differences, and carried the lines forward with the Consumer Price Index for Agricultural Labourers in villages and the Consumer Price Index for Industrial Workers in towns. Its weakness grew with time: a basket fixed decades earlier was being moved forward only by price indices, while what households actually needed, including health care and schooling, had changed.

The Tendulkar Expert Group, which reported in 2009, broke the link with calories, since calorie intake was falling even among better-off households as diets and work changed. It took as its reference the urban poverty line basket implied by the earlier method, applied the same basket to rural areas after adjusting for prices, and allowed explicitly for spending on health and education; it used the mixed reference period. By this method poverty was 37.2 per cent in 2004-05 and 21.9 per cent in 2011-12 (25.7 per cent in rural and 13.7 per cent in urban areas). For 2011-12 the all-India line was about Rs 816 per person per month in rural areas and Rs 1,000 in urban areas. Critics argued that these lines, roughly Rs 27 and Rs 33 a day, were too low to buy a decent minimum, which led to a fresh review.

That review was the Rangarajan Expert Group, which reported in 2014 and went back to separate rural and urban baskets. It set norms for calories, protein and fat, added a normative amount of essential non-food spending such as clothing, housing, transport and education, and used the modified mixed reference period. Its lines for 2011-12 were about Rs 972 per person per month in rural areas and Rs 1,407 in urban areas, roughly Rs 32 and Rs 47 a day, and the share of poor came out higher than Tendulkar's, at 29.5 per cent (30.9 per cent rural, 26.4 per cent urban). The government did not formally adopt the Rangarajan line. With the 2017-18 survey withheld, the Tendulkar estimate of 21.9 per cent for 2011-12 remains India's last official poverty figure; the table compares the main committees.

International comparisons use the World Bank's line for extreme poverty, set in dollars at purchasing power parity so that a dollar buys the same basket in every country. The line was $1.90 a day at 2011 prices, $2.15 at 2017 prices from 2022, and $3.00 at 2021 prices from June 2025; each revision follows new price data from the International Comparison Program and the national poverty lines of the world's poorest countries. On the $3.00 line the World Bank estimated that extreme poverty in India fell from 27.1 per cent in 2011-12 to 5.3 per cent in 2022-23. A higher line does not mean that more people became poor; it reflects updated prices and a revised idea of the minimum. Ending extreme poverty everywhere by 2030 is the first target of Sustainable Development Goal 1, and higher lines used for middle-income countries show many more Indians still living close to poverty.

Money is only one side of poverty. The global Multidimensional Poverty Index, published since 2010 by the Oxford Poverty and Human Development Initiative with UNDP, measures multidimensional poverty across three equally weighted dimensions, health, education and standard of living, through ten indicators such as nutrition, child mortality, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing and assets. A person is counted as poor if deprived in at least a third of the weighted indicators. NITI Aayog's national MPI follows the same method with twelve indicators, adding maternal health and bank accounts, and draws on the National Family Health Surveys. Its January 2024 discussion paper, projecting between survey years, estimated that the poor share fell from 29.17 per cent in 2013-14 to 11.28 per cent in 2022-23, with about 24.82 crore people escaping multidimensional poverty.

Poverty asks who falls below a line; inequality asks how unevenly the total is shared. The Lorenz curve plots the cumulative share of income or consumption against the cumulative share of the population, ranked from poorest to richest. With perfect equality it would be the straight diagonal, and the further it sags below the diagonal, the greater the inequality. The Gini coefficient is the area between the curve and the diagonal as a share of the whole area under the diagonal: 0 means perfect equality, and 1 (or 100) means that one person has everything. On consumption, the World Bank put India's Gini at 25.5 in 2022-23, down from 28.8 in 2011-12, among the lower values in the world. Consumption is spread more evenly than income or wealth, however, so studies of income and wealth find much higher inequality. Simon Kuznets suggested that inequality first rises and then falls as an economy develops.

Taken together, India now reads poverty through three lenses. The official money-based poverty line, last applied by the Tendulkar method for 2011-12, counts people whose spending falls below a minimum; the World Bank's line allows comparison across countries; and the national index of multidimensional poverty counts people who lack health, schooling or decent living conditions whatever their spending. They give different numbers because they ask different questions, so a statement about poverty must always be matched to its measure, its year and its source. Inequality measures add a further question: how fairly the gains of growth are shared. Policy responds through channels taught elsewhere, such as subsidised grain under the public distribution system and direct benefit transfers, while Parts 2 and 3 turn to the most direct route out of poverty: work, and the rural employment guarantee.

Exam traps

• The calorie norms of 2,400 (rural) and 2,100 (urban) per day come from the Alagh Task Force (1979). Lakdawala (1993) kept them but made state-specific lines; Tendulkar (2009) dropped the calorie anchor.
• Lakdawala updated rural lines with CPI-AL and urban lines with CPI-IW. Do not reverse them.
• For 2011-12, Tendulkar gave 21.9 per cent and Rangarajan a higher 29.5 per cent. Tendulkar's 37.2 per cent was for 2004-05.
• Tendulkar used the mixed reference period and one urban basket for both areas; Rangarajan used separate rural and urban baskets and the modified mixed reference period.
• There is no official poverty estimate after 2011-12: the 2017-18 survey was not released, and the HCES of 2022-23 and 2023-24 report spending (MPCE), not an official poverty ratio.
• The World Bank's extreme poverty line is $3.00 a day at 2021 PPP since June 2025 (earlier $2.15 at 2017 PPP). On it, India's extreme poverty was 5.3 per cent in 2022-23.
• The global MPI is published by OPHI with UNDP (three dimensions, ten indicators, one-third cut-off), not by the World Bank; NITI Aayog's national MPI has twelve indicators and uses NFHS data, not consumption surveys.
• A Gini of 0 means perfect equality. The headcount ratio shows how many are poor, not how poor they are; the poverty gap shows depth. Consumption inequality is lower than income or wealth inequality.

Recap

• Absolute poverty is judged against a fixed poverty line; relative poverty against others in society. Headcount ratio = share below the line; poverty gap = depth.
• India measures poverty from consumption (MPCE), using recall periods: URP (30 days), MRP (365 days for rare items), MMRP (adds 7 days for some foods).
• 1962 Working Group; Alagh Task Force 1979 (2,400 rural, 2,100 urban calories); Lakdawala 1993 (state lines, CPI-AL and CPI-IW).
• Tendulkar 2009: no calorie anchor, urban basket for both areas, health and education; 37.2 per cent (2004-05), 21.9 per cent (2011-12); lines about Rs 816 rural, Rs 1,000 urban.
• Rangarajan 2014: separate baskets, food and non-food norms, MMRP; 29.5 per cent (2011-12); lines about Rs 972 rural, Rs 1,407 urban; not formally adopted.
• No official estimate after 2011-12; HCES 2023-24: average MPCE about Rs 4,122 rural and Rs 6,996 urban, gap narrowing.
• World Bank: $3.00 a day at 2021 PPP (June 2025); India 27.1 per cent (2011-12) to 5.3 per cent (2022-23); SDG 1.
• Global MPI (OPHI with UNDP, 2010): 3 dimensions, 10 indicators, one-third cut-off. NITI national MPI: 12 indicators, NFHS; 29.17 to 11.28 per cent, about 24.82 crore out (2013-14 to 2022-23).
• Lorenz curve and Gini (0 = equality); India's consumption Gini 25.5 (2022-23), lower than income or wealth inequality; Kuznets' inverted U.

Practice questions

Sources

• Planning Commission: Report of the Task Force on Projections of Minimum Needs and Effective Consumption Demand (1979); Report of the Expert Group on Estimation of Proportion and Number of Poor (Lakdawala, 1993); Report of the Expert Group to Review the Methodology for Estimation of Poverty (Tendulkar, 2009); Press Note on Poverty Estimates, 2011-12 (July 2013); Report of the Expert Group to Review the Methodology for Measurement of Poverty (Rangarajan, 2014) — https://www.niti.gov.in
• National Statistics Office, MoSPI: Household Consumption Expenditure Survey 2022-23 and 2023-24, factsheets and reports (2024, 2025); MoSPI press release on the Consumer Expenditure Survey 2017-18 (November 2019) — https://www.mospi.gov.in
• World Bank: update of the international poverty line to $3.00 a day at 2021 PPP (June 2025); Poverty and Equity Brief, India (2025) — https://www.worldbank.org
• NITI Aayog: National Multidimensional Poverty Index, Baseline Report (2021) and Progress Review 2023; Multidimensional Poverty in India since 2005-06, Discussion Paper (January 2024) — https://www.niti.gov.in
• UNDP and Oxford Poverty and Human Development Initiative: Global Multidimensional Poverty Index reports and methodological notes — https://hdr.undp.org
• Economic Survey, chapters on poverty, inequality and social infrastructure (recent editions) — https://www.indiabudget.gov.in/economicsurvey/