Table of Contents

Topic 1: Definition of Poverty

1. What is Poverty?

Poverty is not just lack of money or income. It means a lack of everything essential that a person needs to live a dignified human life.

It includes deprivation in the following key areas:

Income – Can’t buy even basic food or clothes.
Health – No access to hospitals or medicines.
Education – Can’t afford schooling or books.
Housing – Lives in unsafe or kutcha shelters.
Clean Water & Sanitation – Unsafe drinking water or no toilets.
Security – Always under threat of violence, job loss, illness.
Political Voice – No say in decisions that affect life.
Social Respect – Discriminated against due to caste, gender, etc.

2. World Bank’s Official Definition

“Poverty is a pronounced deprivation in well-being, comprising multiple dimensions.”

This includes:

Inability to acquire basic goods/services for survival
Low education levels
Poor access to health, sanitation
Lack of safety or physical security
No say or voice in decisions
No opportunities to improve life

🟩 KEY POINT: World Bank sees poverty as more than just income – it is structural and multidimensional.

Topic 2: Measurement of Poverty

1. Why Do We Need to Measure Poverty?

Measuring poverty is important for two big reasons:

To track national progress
– Are we reducing poverty or not?
To identify beneficiaries for government schemes
– Who should get subsidised food, housing, healthcare?

So, unless we measure poverty properly, we cannot solve it.

2. How Do We Measure Poverty?

Measuring poverty means we must make two key decisions:

A. What dimensions to choose?

(e.g. health, education, income)

B. What standards to set?

(e.g. How much income? How much food? What level of education?)

3. Approaches to Measuring Poverty

There are two main approaches:

A. Objective Approach

Based on data and facts
E.g. A person earning ₹10,000/month is below poverty line

B. Subjective Approach

Based on opinion or expert judgment
E.g. Experts deciding a poverty line for urban India

In real life, we combine both methods.

4. Dimensions and Standards: A Simple Example

Let’s say we choose Health as a dimension. Now we must ask:

“What standard will show if a person is poor in health?”

Is it life expectancy?
Or number of preventable deaths?
Or access to hospitals?

Similarly, if we choose education, we ask:

Is it school enrolment?
Or years of schooling?
Or literacy?

So we must select both the dimension (what) and the standard (how much).

5. Why Income or Consumption Is Often Used?

Instead of using many complicated dimensions, economists often use:

Income
OR
Consumption Expenditure

Let’s compare the two:

Aspect	Income	Consumption Expenditure
Volatile?	Yes – income changes monthly	No – expenses are more stable
Reporting?	Often under-reported	Better reported
Better Indicator?	❌

👉 So, for poverty measurement, consumption is preferred.

6. Example: Setting a Poverty Line Using Consumption

Let’s say a group of experts defines a poverty line basket – the minimum food, shelter, clothing, etc. that a person needs to survive with dignity.

Now, they assign costs to that basket.

Suppose:

That basket costs ₹10,000 per month for a household.
So, anyone spending less than ₹10,000/month is considered poor.

That’s how a Poverty Line is created.

7. Different Measures of Poverty

After setting the poverty line, we can use 3 tools to measure how bad the poverty situation is:

1. Head Count Ratio (HCR)

Counts how many people are below the poverty line.
Easy but crude.
Example: If 30 out of 100 people are poor, HCR = 30%.

2. Poverty Gap

Tells us how poor the poor people are.
Calculates how much money is needed to bring each poor person up to the poverty line.

3. Squared Poverty Gap

Gives more weight to the poorest of the poor
If one person is very far below the line, they get more importance.
Helps in targeting the most vulnerable sections.

8. Constructing a Poverty Line Basket (PLB)

To construct a PLB, we include:

Food (grains, pulses, oils)
Clothing
Shelter (rent or housing costs)
Transportation
Health & Education (Tendulkar Committee included this)
Internet (modern addition)

Once all costs are added, the total becomes the monthly poverty line.

9. Limitations of This Measurement

Inflation changes cost every year
Urban and rural prices differ
Household size and needs vary
Consumption doesn’t show social deprivation (e.g., caste discrimination)

So, experts recommend using Multidimensional Poverty also (we will do this in Topic 9).

Topic 3: Poverty Line Concept

1. What is a Poverty Line?

A Poverty Line is a cut-off point.
It tells us:

“Who is poor and who is not?”

If a person spends less than the poverty line, they are considered poor.

So basically, it is the minimum income or spending needed to live a basic life with dignity.

2. How is the Poverty Line Created?

We first define a basket of goods and services that are essential for basic life. This is called the:

Poverty Line Basket (PLB)

It includes:

Food (grains, pulses, cooking oil)
Clothing
Shelter
Transportation
Electricity & fuel
Education (books, fees)
Healthcare (medicines, doctor visits)
Internet (modern necessity)

Once we know what’s in the basket, we calculate the total cost of these items → That becomes the monthly poverty line.

3. Example: Building a Poverty Line

Suppose the PLB costs:

Item	Monthly Cost (₹)
Food	4000
Housing	3000
Transport	1000
Education	1000
Health	1000
Total	₹10,000

So, anyone spending below ₹10,000 per month is considered below poverty line (BPL).

This is how we identify the poor in India.

4. Head Count Ratio (HCR) Using Poverty Line

Let’s say there are 100 households in a village:

40 households spend less than ₹10,000/month
So, HCR = 40%

This tells us how many are poor, but not how poor.

To go deeper, we use:

Poverty Gap = how much below the line?
Squared Poverty Gap = gives more weight to the poorest

5. Why Is the PL Important?

Government uses it to target welfare schemes like free food, housing, health insurance.
Economists use it to track national progress on poverty reduction.
International organisations (like World Bank) use it for global comparisons.

6. Problems with the Poverty Line

May be too low (e.g. ₹32/day urban line in past)
May not include non-monetary deprivation (e.g. discrimination)
Urban vs. rural costs are very different
Doesn’t reflect changing lifestyles (like internet, mobile)

7. How to Improve the Concept?

Include modern needs – health, education, mobile, internet.
Regularly update for inflation.
Combine with Multidimensional Poverty Index (MPI).

Topic 4: Poverty Line Committees in India

1. Why Were Committees Formed?

India’s poverty is complex and multi-layered. Over time, experts realised that the existing poverty lines were outdated and didn’t reflect real-life needs.

So, the Government of India formed expert committees to:

Define the poverty line properly
Decide what should be in the basket
Include modern needs like health, education, transport
Decide rural vs. urban differences

2. Timeline of Major Committees

Committee Name	Year	Key Contribution
Dandekar & Rath	1971	Introduced calorie-based poverty line (2200 kcal/day)
YK Alagh Committee	1979	Separated rural and urban poverty lines
Lakdawala Committee	1993-94	Added non-food items (health, transport), state-wise poverty lines
Tendulkar Committee	2008	Shifted from calorie to consumption expenditure; added health and education
Rangarajan Committee	2011	Revised basket with updated norms; raised poverty line

3. Details of Each Committee (Very Simple Explanation)

A. 🥗 Dandekar & Rath Committee (1971)

First serious effort after independence
Defined poverty as inability to consume 2200 calories/day
Based on food requirement only
Problem: Ignored education, transport, health, etc.

B. 🍛 YK Alagh Committee (1979)

Also used calorie-based definition
Made separate baskets for:
- Rural India: higher calorie need due to physical work
- Urban India: slightly lower calorie need
Problem: Still focused only on food

C. 🏠 Lakdawala Committee (1993–94)

Major shift
Added non-food items like:
- Clothing
- Shelter
- Transport
Made state-wise poverty lines, as cost of living differs
Used inflation index to update poverty line
Limit: Still did not include health & education directly

D. 📚 Tendulkar Committee (2008)

This is the most widely used poverty line today

Key Changes:

Shifted from calorie-based to expenditure-based
Uniform basket for rural and urban India
Included spending on health and education
Used Mixed Recall Period (MRP) – better data accuracy

→ This led to a poverty line of approx ₹33/day in urban areas, which became controversial.

E. 📦 Rangarajan Committee (2011)

Formed because Tendulkar Line was too low

Changes introduced:

Created a new poverty basket using:
1. ICMR norms for food
1. Clothing, shelter, education, transport, entertainment
Used both:
1. Normative needs (what should be consumed)
1. Behavioral data (what is actually consumed)
New poverty line:
1. ₹4860/month per household (Rural)
1. ₹7035/month per household (Urban)

4. Why So Many Committees?

Each committee tried to make poverty measurement more realistic, because:

People’s needs changed
New data became available
Consumption patterns evolved
Criticism increased over “too low” poverty lines

Topic 5: Current Method of Poverty Measurement in India

1. Why Did We Shift to a New Method?

Earlier poverty lines were:

Too narrow (only food/calories)
Ignored real expenses (like education, health, transport)
Different in rural vs. urban, hard to compare
Didn’t match people’s lived realities

So, India adopted modern, consumption-based and multidimensional methods.

2. How Is Poverty Measured Today in India?

Currently, India uses multiple methods together depending on the purpose:

A. For National Progress Tracking

“How much poverty has reduced across the country?”

B. For Identifying Beneficiaries of Schemes

“Who should get ration cards, Ayushman Bharat, Ujjwala gas?”

3. Dual Strategy: National Tracking vs. Scheme Targeting

Purpose	Method Used
1. Track overall poverty	Tendulkar Committee (2008) Line + NSSO data
2. Identify BPL households	SECC 2011 (Rural/Urban) + AI/Surveys

4. Methods for National Poverty Estimation

A. Tendulkar Committee Method

Most widely used method
Based on monthly consumption expenditure
Includes food, fuel, rent, health, education
Same poverty line for rural and urban (adjusted for inflation)
Uses Mixed Recall Period (MRP) – mix of short-term and long-term recall

Example:
In 2011–12, poverty line was approx:

₹816/month in rural areas
₹1000/month in urban areas
(based on monthly spending, not income)

B. National Sample Survey (NSSO) Data

Large sample surveys every few years
Data on household consumption expenditure
Last major survey: 2011–12 (used in latest poverty estimates)
2017–18 HCES data not released; latest used is Tendulkar-based 2011–12

5. Methods for Targeting Beneficiaries

Since poverty line is not enough to find individual poor people, Government uses:

A. SECC 2011 – Socio Economic Caste Census

Conducted by:
- MoRD (Rural)
- MoHUA (Urban)
- Supervised by Registrar General of India
Identified 3 categories:
- Automatically Included – e.g. homeless, destitute
- Automatically Excluded – e.g. government employees, income taxpayers
- Deprivation Criteria Based – e.g. no roof, no adult earning member

Used to directly enrol people into schemes like PMAY, Ayushman Bharat

B. Use of Technology and AI

Aadhaar, digital records, ration databases
Use of Artificial Intelligence to reduce:
- Inclusion Errors (wrongly included)
- Exclusion Errors (deserving excluded)

6. Mixed Recall Period (MRP)

Used by Tendulkar Committee. Combines:

1-month recall for frequent expenses (food)
1-year recall for rare expenses (health, education)

Gives more accurate picture of consumption

7. Present Challenges in Measuring Poverty

Challenge	Explanation
Data Lag	No recent consumption survey after 2011–12
Urban-Rural Differences	Cost of living varies widely
Informal Economy	Incomes not recorded
New Needs	Internet, smartphones not included yet
Social Deprivation Ignored	Caste, gender, discrimination not counted

Topic 6: SECC 2011 – Socio-Economic Caste Census

What is SECC 2011?

SECC stands for Socio-Economic and Caste Census. It was conducted in 2011 to identify the real poor households in India.

It is different from Population Census. While Population Census collects general population data, SECC collects economic, social, and caste-based deprivation data at household level.

Who Conducted It?

Rural Areas – Ministry of Rural Development (MoRD)
Urban Areas – Ministry of Housing and Urban Affairs (MoHUA)
Supervised by Registrar General & Census Commissioner of India

Why Was SECC Needed?

Earlier, poverty estimates were based only on income or consumption.
But this doesn’t show the real situation of families — like whether they have a roof, food security, education, job, etc.
So SECC focused on actual household conditions, not just income.

How SECC Identified the Poor?

It created three categories of households:

1. Automatically Included

These are the poorest of the poor, like:

Homeless people
Households with no adult earning member
People living on alms
Families with only disabled members and no income

They are directly considered eligible for welfare schemes.

2. Automatically Excluded

These households are clearly not poor, like:

Income Tax payers
Government employees
Households owning 2/3/4-wheelers
Households with fixed salary and good housing

They are excluded from poverty lists.

3. Deprivation-Based Inclusion

These households are included based on specific deprivation criteria.

There are 7 deprivation criteria like:

No roof or kutcha roof
No adult male between 18–59 years
Female-headed households with no adult male
SC/ST household
Landless households
Manual casual labourers
Families with no educated adult above age 25

If a household met one or more criteria, it could be included in the list of the poor.

What Happens After Identification?

Names of eligible households are displayed in Gram Sabha for transparency.
If someone is wrongly included or excluded, they can contest it.
Once included, the family doesn’t need to prove poverty repeatedly to get benefits (like housing, pension, insurance, etc.)

How SECC Helped the Government?

Made targeting more accurate for welfare schemes.
Reduced corruption and leakage in subsidies.
Helped in building digitised poverty lists.
Laid the foundation for schemes like PMAY, Ujjwala, Ayushman Bharat, Saubhagya, etc.

Key Point

SECC is not just a data exercise — it is a doorway to benefits for the most vulnerable. It brings transparency, fairness, and efficiency in welfare distribution.

Topic 7: International Poverty Lines (World Bank Definitions)

What Is an International Poverty Line?

World Bank defines poverty lines in terms of minimum daily consumption expenditure (not income), measured in dollars per person per day.

But since prices are different in every country, these lines are calculated using PPP (Purchasing Power Parity). PPP adjusts for cost of living in different countries.

Why Does World Bank Set These Lines?

To:

Compare poverty across different countries
Identify where extreme poverty exists
Track global progress in poverty reduction

Types of World Bank Poverty Lines

Based on country income groups, the World Bank sets different lines:

A. For Low-Income Countries (LIC)

$2.15/day (2021 PPP)
Known as Extreme Poverty Line

B. For Lower-Middle-Income Countries (LMIC) like India

$3.65/day (2017 PPP)
Updated to $4.20/day (2021 PPP)

C. For Upper-Middle-Income Countries (UMIC)

$6.85/day (2017 PPP)
Updated to $8.30/day (2021 PPP)

D. For High-Income Countries (HIC)

No fixed line; poverty is measured relatively

PPP: What Does It Mean?

PPP = Purchasing Power Parity

It compares the buying power of money in different countries.

For example:

$1 in the USA may buy a sandwich
But ₹21 in India (PPP equivalent of $1) might buy the same sandwich

So, instead of converting at market exchange rates, PPP shows real value.

Example for India (2021 PPP)

PPP Line	Amount in ₹ per person/day (approx.)
$2.15 (extreme)	₹45–₹50
$3.65 (LMIC)	₹75–₹80
$6.85 (UMIC)	₹140–₹150

Why Is This Important for India?

India is classified as a Lower-Middle-Income Country by World Bank, so the relevant line is $3.65/day (now $4.20/day in 2021 PPP).

This helps us:

Compare India with other similar countries
Track how many people are below global standards of poverty

2022–23 World Bank Update (India)

Using $2.15/day line:
→ Extreme poverty in India: about 2.3%
Using $3.65/day line:
→ Poverty in India: about 23.9%
Using $4.20/day line:
→ Higher estimate, shows India still has large vulnerable population

Final Takeaways

World Bank poverty lines help international comparison
India still has a significant poor population, even if national poverty seems low
Higher lines (like $4.20/day) show vulnerability, not just extreme poverty

Topic 8: Millennium and Sustainable Development Goals

What Are These Goals?

They are global development goals created by the United Nations to guide countries in reducing poverty and improving human life.

Millennium Development Goals (MDGs)

1. When were they created?

In the year 2000, at the UN General Assembly
Target period: 2000 to 2015

2. How many goals?

8 Goals in total

3. Main aim?

To reduce poverty, hunger, disease, illiteracy, gender inequality, and child mortality.

4. Examples of MDGs:

Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality
Reduce child mortality

5. What happened after 2015?

MDGs expired in 2015
A new framework was created: Sustainable Development Goals (SDGs)

Sustainable Development Goals (SDGs)

1. When were they adopted?

In the year 2015, at the UN Sustainable Development Summit
Known as the Rio + 20 Conference
Target period: 2015 to 2030

2. How many goals?

17 Goals
169 targets under those goals

3. Goal 1 – Most important for poverty:

End poverty in all its forms everywhere

This includes:

Reducing the % of poor people
Providing social protection
Equal access to resources and opportunities

Key Difference: MDGs vs. SDGs

Feature	MDGs	SDGs
Launched	2000	2015
Expiry	2015	2030
Goals	8	17
Focus	Poverty, health, gender	All aspects of sustainability
Who Participated	Mostly developing nations	All countries – rich and poor

Why SDGs Are Important for Poverty?

They link poverty to health, education, climate, jobs, gender, and more.
This shows that poverty is not just about money, but about living a dignified and sustainable life.

India’s Efforts on SDGs

NITI Aayog tracks India’s SDG progress through SDG India Index
Schemes like Ayushman Bharat, PMAY, Ujjwala, Skill India are aligned with SDG goals

Final Points to Remember

MDGs (2000–2015): focused on basic needs
SDGs (2015–2030): focused on holistic development
SDG Goal 1 = Ending all forms of poverty

Topic 9: Multidimensional Poverty Index (MPI)

What is MPI?

The Multidimensional Poverty Index (MPI) is a tool that measures poverty in many aspects, not just money.

It helps to answer:

“Is a person poor only because of low income, or also because they lack education, clean water, electricity, etc.?”

So, MPI looks at what a person lacks in real life, not just how much they earn or spend.

Why Was MPI Created?

Traditional poverty lines (like ₹ per day) miss important things like:
- Access to school
- Clean drinking water
- Sanitation
- Electricity
A person may earn a little, but still live in poor conditions

To fix this, UNDP and Oxford Poverty & Human Development Initiative created MPI.

Dimensions of MPI

It has 3 major areas (called dimensions):

Health
Education
Standard of Living

Each of these dimensions has indicators. In total, 10 indicators are used.

The 10 Indicators

Dimension	Indicators
Health	1. Child mortality 2. Nutrition
Education	3. Years of schooling 4. School attendance
Standard of Living	5. Cooking fuel6. Sanitation7. Drinking water8. Electricity9. Housing10. Assets

How Is Poverty Measured?

Two steps:

Step 1: Check how many indicators a person is deprived in

If a person is deprived in at least 3 out of 10 indicators (i.e. 33%), they are considered MPI Poor.

This is called the Deprivation Score.

Step 2: Calculate two values

Headcount Ratio (H) – % of people who are MPI poor
Intensity of Poverty (A) – Average % of deprivations that each poor person faces

Then,
MPI = H × A

This tells us not just how many are poor, but also how poor they are.

Example

Imagine a person:

Is undernourished (nutrition)
Has no toilet (sanitation)
Has no electricity

That’s 3 out of 10 indicators → This person is MPI Poor

MPI in India

In India, NITI Aayog calculates MPI
Uses data from National Family Health Survey (NFHS)
India also adds 2 extra indicators:
- Maternal health
- Bank account

So, India’s MPI is adapted to local needs.

Why MPI Is Better Than Income-Based Poverty

Income-Based Poverty	Multidimensional Poverty
Focuses only on money	Focuses on real conditions of life
May miss out real poor	Finds people suffering silently
Easy to measure	Deeper but data-heavy

MPI shows:

Whether children are going to school
Whether households have toilets, fuel, water
Whether people are truly living with dignity

Final Takeaways

MPI is a real-world method of seeing poverty
It is more accurate and human-centered
India is using MPI to target schemes better and reduce poverty more effectively

Topic 10: Human Development Indicators

What is Human Development?

Human development means:

“Making people’s lives better by improving their health, education, and standard of living — not just their income.”

It is about living a life with dignity, freedom, and opportunity.

Who Created This Concept?

Developed by Amartya Sen (Indian economist) and Mehboob ul Haq (Pakistan)
Promoted by the United Nations Development Programme (UNDP)

Why Was It Needed?

Earlier, countries were judged only by their GDP (money).

But GDP doesn’t show:

If people are healthy
If kids go to school
If women are safe
If poor people are getting opportunities

So, new human-based indicators were created.

Main Human Development Indicators

There are many, but the most important ones are:

1. HDI – Human Development Index

This is the main global index. It has 3 dimensions:

Dimension	Indicator
Health	Life expectancy at birth
Education	1. Mean years of schooling2. Expected years of schooling
Standard of Living	Gross National Income (GNI) per capita (PPP)

HDI score is calculated using a formula. Higher the score → better the human development.

HDI Score Range

Score Range	Category
0.800 and above	Very High
0.700 – 0.799	High
0.550 – 0.699	Medium
Below 0.550	Low

2. IHDI – Inequality-Adjusted HDI

HDI assumes everyone has equal access.
But in reality, there is inequality — poor people, women, SC/ST, etc.
IHDI reduces the HDI value based on how unequal society is.

So, IHDI = HDI – inequality loss

For India:

HDI (2022): 0.633
Inequality loss: around 31%
IHDI: 0.444

3. GDI – Gender Development Index

Compares HDI of men and women
If women’s HDI is much lower than men’s → gender gap is high

Formula:

GDI = Female HDI / Male HDI

If GDI = 1 → full equality
If GDI < 1 → inequality exists

India’s GDI is around 0.882
(meaning women are worse off than men)

4. GII – Gender Inequality Index

This measures inequality between men and women in 3 areas:

Reproductive health (maternal death, teenage pregnancies)
Empowerment (education, political participation)
Labour force participation

India’s GII (2022): 0.437
Rank: 134 out of 193

Lower the GII → better the equality

5. MPI – Multidimensional Poverty Index

Already covered in Topic 9.
Shows poverty in health, education, and standard of living.

Final Note

These indicators shift the focus:

From money-based progress
To human-based progress

That’s why we say:

“Real development is about improving people’s lives, not just the economy.”

Topic 11: Trends in Poverty Reduction in India

What Do We Mean by “Poverty Reduction”?

It means:

The number of poor people (those below the poverty line) has gone down over time.

We look at this by comparing different years using data from:

Tendulkar Committee
NSSO surveys
World Bank
NITI Aayog

Key Years and Poverty Rates (Based on Tendulkar Line)

Year	% Population Below Poverty Line (BPL)
1950	~56%
1993–94	45%
2004–05	37.2%
2009–10	29.8%
2011–12	21.9%
2022–23*	~0.9% (as per Tendulkar Line, estimate)

Big fall in last 20 years due to:

High economic growth
Government welfare schemes
Focused targeting using SECC and Aadhaar

Role of High Economic Growth

After 1991, India’s GDP growth became much faster (liberalisation).
This helped create jobs, raise incomes, and reduce poverty.

Period	Growth Rate	Poverty Reduction Speed
Pre-1991	3.5–4%	Slow
1991–2000	6%	Moderate
2000 onward	7–8%	Fast

But:

Growth alone is not enough
Inequality and jobless growth are still problems

World Bank’s Latest Data (2022–23)

Poverty based on $2.15/day (Extreme Poverty Line)

Year	Rural Poverty	Urban Poverty	Total Poverty
2020–21	18.4%	10.7%	—
2022–23	2.8%	1.1%	2.3%

Big improvement in just 2 years

Poverty based on $3.65/day (LMIC Poverty Line)

Year	Rural Poverty	Urban Poverty	Total
2011–12	69.1%	43.5%	61.8%
2022–23	28.1%	17.2%	23.9%

About 378 million people lifted out of poverty in 10 years

Major States That Reduced Poverty Most

These states contributed to two-thirds of poverty reduction:

Uttar Pradesh
Madhya Pradesh
Maharashtra
West Bengal
Bihar

They were high-poverty states earlier, but showed strong improvement.

Important Trend

Urban–rural poverty gap is reducing
Urban areas were already better, but now rural areas are catching up
Welfare schemes like PMAY, Ujjwala, Ayushman Bharat, Jan Dhan, and free ration helped rural poor

Is the Job Done?

No.

Even though official poverty rates are low, many Indians are still:

Vulnerable (one health emergency can push them into poverty)
Working poor (they earn, but not enough)
Left out of formal safety net

So, India still needs:

Health coverage (like Ayushman Bharat)
Skills & jobs (like Skill India)
Education & awareness

Topic 12: World Bank’s Latest Poverty Reports on India

What Does the World Bank Do Here?

The World Bank:

Tracks poverty in all countries
Uses PPP-based global poverty lines
Publishes Poverty and Equity Briefs for countries (like India)

It helps us understand:

“How many people in India are poor when compared to the global standard?”

World Bank’s Main Poverty Lines (2021 PPP)

Line Type	Poverty Line Value
Extreme Poverty	$2.15/day
LMIC Poverty Line	$3.65/day → now $4.20/day

Key Findings for India (as per 2022–23 report)

A. Extreme Poverty ($2.15/day)

Area	2020–21	2022–23
Rural	18.4%	2.8%
Urban	10.7%	1.1%
Overall	———–	2.3%

➡️ Massive drop in just 2 years
➡️ Rural areas improved more than urban

B. LMIC Poverty Line ($3.65/day)

Area	2011–12	2022–23
Rural	69.1%	28.1%
Urban	43.5%	17.2%
Overall	61.8%	23.9%

➡️ Around 378 million people moved out of poverty
➡️ Annual poverty reduction rate = about 3.7%

Gap Between Rural and Urban Areas

Year	Rural–Urban Gap
2020–21	7.7%
2022–23	1.1%

➡️ The gap between rural and urban poverty has almost disappeared
➡️ This means rural India is catching up

Key Reasons for This Fast Reduction

Government schemes like PM Garib Kalyan Yojana, free ration, Ujjwala, Ayushman Bharat
Direct Benefit Transfer (DBT) — leak-proof money transfers
Digital inclusion — Aadhaar, Jan Dhan, mobile
Economic growth and recovery after COVID-19
Rural job guarantee (MGNREGA) during difficult times

Warning from World Bank

Even though the number of poor people is now low, there is still a large vulnerable population:

People earning just above the poverty line (₹100–150/day)
A single emergency (health, job loss) can push them back into poverty

So, India needs:

Universal health coverage
Affordable education
Job security

Summary Points

India has reduced extreme poverty to 2.3% (World Bank 2022–23)
Rural poverty has reduced faster than urban
LMIC line still shows about 1 in 4 Indians are poor
Focus must shift from just poverty removal to vulnerability protection

Topic 13: Inequality – Types and Causes

What Is Inequality?

Inequality means:

“Unequal access to wealth, income, education, opportunities, power, and respect in society.”

Even if a country grows economically, not everyone benefits equally. Some people become very rich, while others stay poor or vulnerable. This creates gaps — that’s inequality.

Main Types of Inequality

1. Economic Inequality

Unequal income and wealth
Example: Top 1% people hold majority of the wealth, while millions remain jobless

2. Social Inequality

Based on caste, gender, race, religion
Example: SC/ST or women facing fewer job or education opportunities

3. Political Inequality

Unequal voice in decision-making
Example: Rich people or certain classes have more influence in politics and laws

4. Regional Inequality

Some states or districts are much poorer than others
Example: Kerala vs. Bihar in literacy and health

Causes of Inequality

A. Natural Causes

Place of birth (rural/urban)
Geography (desert, flood-prone area)
Natural resources (some areas have mines, others don’t)

Example: Coastal cities like Mumbai develop faster than remote villages

B. Social Causes

Caste system
Patriarchy (male dominance)
Historical discrimination (Dalits, tribals, minorities)

These create permanent disadvantages for certain groups

C. Economic Causes

Unequal land and property ownership
Big businesses growing, small businesses dying
Low wages for workers, high profits for owners

Result: Rich keep getting richer, poor remain stuck

D. Political and Legal Causes

Weak implementation of laws
Corruption
Favouritism in policies and schemes
Lack of voice for poor people

E. Education and Skill Gaps

Poor people can’t afford good education
Rich people have access to private schools, coaching, networking
This leads to unequal jobs and incomes later

Special Concepts

1. Resource Curse

Some regions have natural resources but still remain poor
Why? Misgovernance, corruption, conflict

Example: Parts of Africa, or mineral-rich tribal areas in eastern India

2. Birth Lottery

A person born into a rich family has more chances in life
A person born into a poor family faces struggles from day one

This is pure chance, but it decides life outcomes

Why Is Inequality Dangerous?

Leads to social tensions and unrest
Makes democracy weaker — rich control policies
Blocks real development — poor people can’t contribute fully
Increases crime, frustration, migration

Topic 14: Theories of Inequality

There are two broad types of theories:

Traditional theory (Marxist view)
Modern economic theory (based on markets and rule of law)

Let’s understand both clearly.

1. Marxist Theory of Inequality (Karl Marx)

Who was Karl Marx?

A German philosopher and economist
Wrote the famous book “Das Kapital”
He studied how capitalism creates class-based inequality

Marx’s Main Ideas

a. Society is divided into 2 classes:

Class	Who They Are
Bourgeoisie	Owners of capital (factory, land, machines)
Proletariat	Workers (labourers, employees)

The owners control wealth and power
The workers do the labour but get low wages

b. Main Source of Inequality:

Workers produce value, but don’t get the full reward.
The profit goes to the capitalist → this is called exploitation.

So, inequality exists because:

Workers are underpaid
Owners keep getting richer

c. Marx’s Solution:

End this capitalist system
Create a classless society
Socialism → Communism (no private ownership, state controls production)

Example:

In a factory:

A worker makes a product worth ₹500
He is paid ₹100
Remaining ₹400 goes as profit to the owner

This gap is the base of inequality, according to Marx

2. Modern Theory of Inequality

This theory is different from Marx. It says:

“Inequality is not always due to exploitation. Sometimes, it is due to market competition, skills, rule of law, or technology gaps.”

Let’s see key points.

a. Market Performance

Some firms or people do better because they offer better products or work more efficiently
Others fail or lag behind due to poor skills, low innovation, or weak demand

So, inequality is a result of differences in success, not just class struggle