Estimation of Poverty

 Today is the International Day for the Eradication of Poverty. It would be helpful to discuss the extent of poverty in India. The World Bank has determined three poverty lines as follows - The extreme poverty line at PPP US$ 2.19 per capita per day, The middle poverty line at PPP US$ 3.65 and the higher poverty line at PPP US $ 6.85 (https://lnkd.in/d5yhDcyT.).

PPP stands for purchasing power parities which are the rates of currency conversion that try to equalise the purchasing power of different currencies, by eliminating the differences in price levels between countries. The basket of goods and services priced is a sample of all those that are part of final expenditures: final consumption of households and government, fixed capital formation, and net exports. This indicator is measured in terms of national currency per US dollar. This is less than the market exchange rate in India's case and the latest available conversion rate (2022) is US $ 1 = INR 24.06 (https://lnkd.in/dJt98Tf9).
Thus the three poverty lines in India's case are equivalent to INR 52.7 for extreme poverty line, INR 87.8 for middle level poverty line and INR 164.8 per capita per day for higher poverty line.
Assuming that on an average the household size in India is 5 we have an extreme poverty line annual household income equal to - 52.7 x 5 x 365 = INR 96178, a middle poverty line annual household income equal to - 87.8 x5 x 365 = INR 160235 and a higher poverty line annual household income equal to - 164.8 x 5 x 365 = INR 300780. This can be assumed to the desired level of income for a household to live with dignity.
Now as per the Income Tax Department data the number of individual return filers having an annual taxable income greater than Rs 3 lakhs, in the financial year 2022-23 was 4.89 crores. Let us assume that this is also the number of households with income above INR 3 lakhs which is the higher poverty line determined by the World Bank.
Then once again assuming the average household size of 5 and a current population of 143 crores we get the total number of households in India currently as 143/5= 28.6 crores.
Thus, the proportion of households living below the higher poverty line of INR 3 lakhs annual income is a whopping 83 percent.
The Periodic Labour Force Survey Report for 2021-22 (https://lnkd.in/d8CpTpva) on analysis shows that the average monthly income for the 70.3 crores workers in the country is INR 11444 or an average annual income of INR 137326 which is much less than the middle poverty line of INR 160235. Thus, a substantial proportion of households, definitely more than 50 percent, are living below the middle level poverty line in India.