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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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How many people in India are Poor?

Posted by Muthu on June 4, 2011

I touched upon this subject last August and felt like revisiting the same. 

Till last year, the official poverty line was kept at Rs.12/- per person per day. 

With this criterion, 27.5% of our country’s population was below poverty line (BPL). 

State governments were strongly objecting to this number. The public subsidy given by government is always based on this BPL number. The lower the number, the lesser the burden on the exchequer and we can project India as shining very well. 

There is a gentleman called Suresh Tendulkar. He is not related to Sachin Tendulkar and has got nothing to do with IPL or Mumbai Indians.

He presented a report, which was accepted by government of India last year.

For rural India, he raised the poverty line to Rs.15 per person per day. With just Rs.3 increase in threshold, more than 100 million people became ‘poor’ overnight. This shows that our poverty estimates can widely vary even with the small change in poverty line.

Based on the above recommendation, the government is now of  the view that 37.2% or 465 million people are below poverty line.

Lot of  state governments and noted economists dispute even this figure. By pegging the number low, the subsidy is lowered and a rosy picture is presented to the rest of the world.

A report submitted by Prof. Arjun Sengupta (National Commission for Enterprises in the Unorganised Sector (NCEUS)) mentioned that if we keep the poverty line at Rs.20/- per person per day, a whopping 77% of the country is poor.

To put it in actual numbers based on latest census, then 962 million people in this country are absolutely poor. What we read, write, discuss is about the balance 300 million people.

Based on various market surveys, it is generally accepted that Indian middle class is estimated to be around 300 million people.

The figure of Rs.20/- per person per day was cited in the Central Government’s Economic Survey for 2008-2009. Since the real India looks very awful, this number was not further pursued.

However many economists, developmental agencies feels that exhaustive study done by Arjun Sengupta is a reliable indicator of poverty levels.

With government’s acceptation of Tendulkar’s report, the new all-India average rural poverty line is set at a monthly expenditure of Rs 446.68; the national urban poverty line at Rs.578.8 a month. Remember even with measly numbers, there are officially around 465 million poor people.

Abhijit Sen, a top Planning Commission member and respected economist says if one factored in calorie intake of 2,400 for rural areas and 2,100 for urban areas, then 64 per cent of urban India and 80 per cent of rural India would be below the poverty line. The calorie intake is pegged more for rural India due to rigorous manual labour.

World bank’s poverty line benchmark is $1.25 (Rs.55) per person per day. It says that 45% of our population (562 million) lives below poverty line.

It is widely believed that anywhere between 50% to 70% live below Rs.20/- per person day. This means that anywhere between 625 million to 875 million people in our country are below poverty line.  

Our government is keen to eradicate poverty statistically and not actually. Playing around number is far easier than improving people lives. Government should find out and acknowledge the true number of poor. We cannot solve a problem if we are not even going to acknowledge it.

Also we need to take a look at the basic premise of poverty line being pegged at Rs.20/- a day. A society need to ensure the basic needs of food, clothing, shelter, education and healthcare for all its citizens.

Even with Rs.600/- a month, what would be the quality of life of these people? Politicians, bureaucrats and anyone else who claim this amount is sufficient to cover the basic needs and live with dignity, should lead by example and start living within this amount.

When we talk about us as the fastest growing economy in the world, around 9% growth rate, expecting to touch double digit soon, it is for only 300+ million and not for the rest 900+ million.

For the second fastest growing economy in the world, India continues to have one of the worst track records in social indicators, especially child malnutrition and hunger. India is ranked 66th out of 88 countries in the Global Hunger Index drawn up by the International Food Policy Research Institute, and nearly half of the country’s children are malnourished—a track record worse than sub-Saharan Africa.

Talking about Sub-Saharan Africa – eight Indian states- Bihar, Uttar Pradesh, West Bengal, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa and Rajasthan have poorer people than all the top 26 poor countries in Africa put together.

For example, Madhya Pradeh’s poverty is as bad as African country of Congo, if not worse. As much we pity people living in a county like Congo, we need to think about our own brethren.

Looking at employment scenario, India’s working population is around 500 million; out of which only 10% is in the organized sector. 90% of our work force is in the unorganized sector without any kind of social security, insurance and medical benefits.

Talking about social security, as provident fund is considered as social security for employed people, there are only 45 million PF accounts with a corpus of Rs.2.57 lakhs crore. This may show that each employee has Rs.5.7 lakhs in their account. Again average can be misleading as 90% of people close their PF account within 2 years of leaving employment. So only around 4 million in the entire work force gets the actual benefit of provident fund. Again this is nothing but 0.8% of India’s working population.

Less said is better about PPF (Public Provident Fund). There are approximately around 4 million PPF accounts in the country having a corpus of Rs.1 lakh crore+. This works out an average balance of Rs.25 lakhs per account. So it looks like this tax free, absolutely safe investment of PPF is used more by rich people as investments than by aaam aadmi for social security.

The IT and ITES (BPO & KPO) sector, which is most visible and seen as sign of India’s prosperity employs around 2 million people. This number works out to 0.4% of working population and 0.1% of country’s population.

Maoist and Naxalist insurgence are symptoms. The diagnosis or problem is acute poverty. If we can work towards eradicating poverty, these kinds of movements would have no place in our society.

Development is yet to be inclusive. It is exclusive for only 25% of the people in our country.

We’ve seen how many people in our country are poor.

How many in people inIndiaare rich? How one defines rich?

Also what about being rich officially and unofficially or to put it more candidly- legally and illegally?

I’ll write soon on the same.

(Reference: Extensive browsing of dozens of web portals)

3 Responses to “How many people in India are Poor?”

  1. Pulkit Guglani said

    Dear Muthu,
    I reached your page just randomly on web, but I clearly agree and would praise your depth of your insights, opinons and your prespective about the macroeconomy.
    Kindly correct me, if I am wrong in saying that the primary sector i.e. farming etc. which provide majority of employment is not much leveraged by our policy makers other than vote greed based promises. It steer towards the low contribution of this widest sector in our GDP. I hope you would agree that stressing on the service sector (including BPO’s) that are volatile being dependent on extrenal factors and would direct our economy towards depedence on other nations rather being self susitanable enough to serve the internal demand. I fell it is widening the gap between the <15 INR earnig 'Bahrat' and 'India' (which concentrates in narrow pockets of metro cities)
    Regards

  2. shakeel said

    its hard to digest bt truth is truth v cant change it….u hv shown where v actually stand.

  3. vaibhav sandhwar said

    good article. I feel the numbers u mentioned above r very close to reality. I read ur article on rich india. That was also very precisely written

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