In every country the
poverty line is set to measure poverty in accordance to the expectations of
what it costs to meet the basic human needs. Basic human needs include the
‘minimum necessitates of merely physical efficiency needed for existence”. In United
Kingdom poverty is defined objectively and applied consistently only in
relative terms.
According to Adam smith’s wealth of
nations the poverty in absolute terms is defined as follows:
Adam Smith wrote: “By necessaries I
understand, not only the commodities which are indispensably necessary for the
support of life, but whatever the custom of the country renders it indecent for
creditable people, even of the lowest order, to be without. A linen shirt, for
example, is, strictly speaking, not a necessary of life. The Greeks and Romans
lived, I suppose, very comfortably, though they had no linen. But in the
present times, through the greater part of Europe, a creditable day-labourer
would be ashamed to appear in public without a linen shirt, the want of which
would be supposed to denote that disgraceful degree of poverty, which, it is
presumed, nobody can well fall into without extreme bad conduct....Under
necessaries therefore, I comprehend, not only those things which nature, but
those things which established rules of decency have rendered necessary to the
lowest rank of people"
Determination of poverty is has always
been a matter of debate amongst the economists. In 2010 surprising stats were
published by Govt. of India stating, that India’s poverty declined from 37.2%
to 29.8% in the matter of 5 years. 7.4 % decrease in poverty stricken
population would mean that 8.51 crores of population has miraculously are able
to satisfy their basic necessities of food water and shelter. Comparing this
figure to the prior year’s declining figure looks erroneous estimate for a
country whose GDP increased merely by 3.0% in last four years (i.e. from
2008-2011) and moreover the inflation rates increased from mere 4% to 10.36% in
the same period. The change in the poverty stats was the result of political
overhaul played by the then planning commission by decreasing the daily
consumption expenditure of Rs. 28.65 to Rs. 22.42 the figures were very much
unrealistic before the decrease but it created an outcry amongst the civil
society. It generated an atmosphere amongst policy makers of the country to
establish poverty standards which are realistic and free from political biases.
Efficient measurement of poverty will not ensure the prudence of the figures
but will also result in effective disbursement of cash subsidy and better targeted
social services.
The methods used to set poverty lines
differs radically between rich and poor countries. Poverty in the developing
world is typically measured using absolute lines, which aim to have the same
real value at different dates and places. Virtually all developing countries
use such lines and, at the global level, the World Bank’s “$1-a-day” line is an
absolute line, aiming to have the same purchasing power in different countries
and at different dates. This
difference in how poverty lines are set matters greatly to the properties of
the resulting poverty measures. Using an absolute line, such a poverty measure
automatically falls when all incomes grow at the same rate, while any measure
based on strongly relative lines will be unchanged.
So
it is hardly surprising that this choice has been found to matter greatly to
assessments of how poverty is changing over time, as well as to cross-sectional
poverty comparisons.
Experimenting with this idea some of the
European countries have adopted Relative poverty measure which not only answers
the question that who is poor? But also measures by how much he is poor? This
magnitude of poverty is an important component which shall be measured in the
developing countries like India as the nature of disbursement of economic resources
is biased which leads to inequality of income. Contemporary concept of relative
poverty doesn’t have a constant base unlike absolute poverty model wherein we
have fixed standards in this model every variable determining the magnitude is
derived from a single base which can be GDP of country, Heath Index of UNDP or
education level. Moreover this model of poverty is a multi-factor model which
takes factors like health facilities, educational contribution, and migration
attributable to the lack of employment opportunities in the state of residence.
This model quantifies the loss of income due to different variable and assign
the weights to them and then these weighted average of the two variables gives
us a negative figure which is then compared within the region and then inter
region this method of determining poverty on the basis of multiple factors
gives an explicit view of the factors which are contributing most to the cause
of poverty in a particular region. This regime of poverty determination will
pin point the problematic areas of social service schemes of government. The
detail of the relative poverty is explained below:
The proposal of the
model stratifies the given Indian population into 5 stratus:
1. Rich
2. Upper middle class
3. Lower middle class
4. Marginally poor/poor
in present terms or standards
5. Very poor or poorest
of the poor
The major emphasis lies
on the estimation and the basis for estimation of the poverty, what all factors
shall be taken into consideration while measuring the extent of poverty. The
factors are discussed here under on the basis if the coefficients will be
determined which will be the key factors for deciding the extent of poverty.
The model is based on
the assumption that the economy will not develop economically till the time the
purchasing power of the consumer is increased. The increase of salary/wage does
not guarantee the economic contribution (i.e. buying of consumer and durable
goods and asset creation), as this increase in salary/wage may inflation tied
i.e. the salary increases when the inflation increases this income remains
constant in real terms as the inflation set off the increase in the wages. The proposition
in this study is to increase the purchasing power that this the portion of
income which is left after the consumption of food (form Public Distribution
System), the salary left after the
deduction of food consumption expenditure defines the purchasing power of the person
with which he buy the durables-i.e. which lead to the asset creation. The
differentiating feature of the definition of purchasing power in traditional
economics terms is that the purchasing power unlike absolute poverty standards
which aims at satisfying the needs and necessities but also concentrates on the
satisfaction of wants and desires. Buying behaviour of a person is affected by
the factors and these factors measure Magnitude of Disadvantage.
1.
Number of children in a
family.
2.
Employment level
3.
Disease/infection level
4.
Hygiene conditions
5.
Education level (Higher
Education)
The
psychometric factors contributing to the poverty will be considered. Extending
the concept of opportunity cost, a concept of the cost of disadvantage. The
cost of the disadvantage is the economic loss of to the economy due to uneven
distribution of resources or lopsided growth amongst the social classes.
Quantifying the above given factors in numerical terms and the converting them
again into relative terms firstly intra class and then into interclass will
indicate the exact number how poorer is a poor . And from the coefficient of
disadvantage calculated area wise concerned authorities come to know which
problem is contributing the economic loss to the society.
The
economic contribution of the mean income of a district is calculated and an
index is formed which can be used to do a comparison at inter/intra state level.
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