[Economic Survey] Ch13: Poverty Line Estimation- Tendulkar vs Rangarajan, Engel’s Law, MNREGA, Aajeevikaa, Urban Livelihood

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IAS Mock Interviews
  1. Prologue
  2. Poverty line
    1. Tendu Leopard vs Ranga Khush
    2. Urban Poverty line
    3. Rural Poverty line
    4. Why Ranga NAA-KHUSH (unhappy)?
    5. How is 100 million poors increased?
    6. Calorie Expenditure
    7. Engel’s law & MPCE
  3. Centrally sponsored schemes (CSS)
  4. CSS classification
  5. Poverty removal schemes
    1. Scheme#1: MNREGA Act 2005
      1. MNREGA performance
      2. MNREGA Reforms already taken
      3. MNREGA: Economic Survey observations
    2. Scheme #2: NRLM / Aajeevika
    3. Scheme #3: National Urban Livelihood mission


links will be updated once I finish last (first) part on UNDP HDI-2014 report.

Poverty line

Cover Ch13 Poverty line schemes

Q. Who decides Poverty line?

Planning commission

Q. How does it decide poverty line?

  • Monthly per capita Expenditure.
  • Suresh Tendulkar designed its Formula.

Q. Who provides the data of monthly Expenditure?

  • NSSO- National sample survey organization
  • under Ministry of Statistics and Programme Implementation
Tendulkar’s poverty line
AreaMonthly Expenditure per person (Rs.)

According to Tendulkar formula, poverty has declined, as seen in following graph:

Poverty in India Tendulkar formula

Mugup the value of Total poors (%wise) & in crores

No. of Poors in India (Tendulkar Method)
Poor %37.221.9
Poor Cr.4127

Time for stupid census ranking:

State wise (Ref. Economic Survey 2013 page 238)
Highest rural povertyLowest poverty
  1. tie: Odisha, MP
  2. Bihar
  3. Assam
  1. Kerala (7.1%)
  2. Himachal (8.1%)
  3. Punjab (8.3)%
highest rural unemploymenthighest urban unemployment
  1. Kerala
  2. Assam
  3. Bihar
  4. WB

….lowest in Gujarat (3/1000)

  1. Bihar
  2. WB
  3. Andhra
  4. Haryana

….lowest in Gujarat (34/1000)

Tendu Leopard vs Ranga Khush

Earlier Committees: Alagh ’77, Lakdawala ’89

Set up byPlanning commissionPlanning commission
Set up in20052012, May
Submitted report20092014, July
Poverty estimation methodMonthly per CAPITA Expenditure.Monthly Expenditure of family of five.

Urban Poverty line

Urban poverty line (Rs)TendulkarC.Rangarajan
per day per person3346.90=~47
per person per month1000*1407
per family of five, per month50007035

*this is their official recommendation. Rest numbers are “derived”.

Rural Poverty line

Rural poverty line (Rs)TendulkarC.Rangarajan
per day per person2732
per person per month816*972
per family of five, per month40804860*

*these are the official numbers recommended by them. Remaining figures are derived.

Why Ranga NAA-KHUSH (unhappy)?

Q. Why is Ranga unhappy with journalists and politicians? Inform “the nation” in 200 words.

Poverty line Why is Ranga Khush

Villain Ranga (Jogindar) is also unhappy because mainstream Bollywood directors also releasing vulgar movies & item-songs, thereby affecting his “SUSTAINABLE Livelihood”

  • C. Rangarajan has received lot of negative publicity because:
    • He kept poverty line to be ridiculously low – Rs.32 for rural and Rs.47 for Urban.
    • Therefore He is insensitive towards the poor.
  • But Ranga never gave those daily numbers. He had given combined poverty line for a family of five members- Rs.7035 (Urban), which is a plausible number. After all, if you live in a family of five, then some costs will get reduced per head (e.g. rent, lightbill, LPG etc.)
  • Besides, if a family spending >7000 per month = their income would be definitely above 7000. So in reality, Ranga has not “insulted” the poor. Infact, He has tried to cover more poor under BPL & Sarkaari schemes.
  • Media has derived those “insensitive” daily Expenditure figures (Rs.33, Rs.47) by dividing the monthly Expenditure of five people, then further dividing that number by 30.
  • If you objectively convert Ranga’s poverty line into purchasing power parity (PPP), it’s $2.44 per person, per day. And that figure even higher than World bank estimate. In other words, Ranga included more poor in BPL, than even World bank would!
  • Thus, journalists and politicians have misinterpreted the poverty line issue- just like they misinterpreted Anti-CSAT movement to be against those 8 easy English MCQs above Decision Making section!

How is 100 million poors increased?

Since Ranga raised poverty line, obviously more people would become “below poverty line”.

Rangarajan Poverty line 100 million increased

why does Hindu keep saying 100 million poors added?

Poverty in India: Year 2011
Formula# of BPL in crores
difference10 crore = 100 million BPL increased.

anyways moving on

Calorie Expenditure

only calorific value in ExpenditureCalorie +Protein + fat. Explained below

In the Indian economy books writing during Adam Smith’s time, you’d have read poverty line = “2400 calorie in Rural areas and 2100 calorie in Urban areas.” That was Lakdawalla Committee (1989-1993).


Observe that Ranga reduced the calorie requirement- why?

  • Because ICMR study report said so. Besides, over the years use of machinery and vehicles has increased, so today’s generation doesn’t require that much “calorie”. Besides, laborers can get extra energy by chewing calorie-free “Gutkha”.
Ranga also included Expenditure on protein & fats
gms / dayRuralUrban

Coming back to Original topic:

Only counts Expenditure on food, health, education, clothing.food + nonfood items such as education, healthcare, clothing, transport (conveyance), rent. + non-food items that meet nutritional requirements.
  • Urban poverty increased on faster rate (40%) than rural poverty (19%)
  • This is obvious, because Ranga included non-food items like rent, education etc.
  • These items/services are more expensive in cities than in villages.
Ranga recommends that at any given point of time,

  • bottom 35% rural junta always be considered poor
  • bottom 25% urban junta always be considered poor.
  • Poverty ratios should be disengaged from entitlements under Government schemes.
  • e.g. cheap foodgrain quota under Food Security Act should not be based on BPL-ness, but social-caste census.

Engel’s law & MPCE

Monthly per capita Expenditure: NSSO 68th Round (2011-12)
areaAverage MPCEHighest in% food Expenditure
  • This indicates rural-urban disparity. Cityfolks have more money to spend than Villagers.
  • Engel’s law says: when income rises, % of overall income spent on food item decreases.
  • We can see this happening in urban areas. City folks spending ~39% while villagers spending ~49% of their income on food.
  • Among states: Kerala spends the least money on

Centrally sponsored schemes (CSS)

In June 2013, UPA-II revamped CSS
137 schemes66 (list given in PRSIndia LINK)
States did not have any freedom to spend money on their discretion.10% flexifunds
Some of the schemes directly gave money to NGOs and project implementation agencies like DRDA.Entire money will be transferred to Consolidated fund of the state Government. From there, everyone will get money
  • For every new scheme, states will have to contribution some money themselves. explained below:

The Union: state contribution ratio will be as following…

Special category states (JK, NE, Himachal & Uttarakhand)9010
other states7525

CSS classification

As per Economic Survey, we can classify all Sarkaari schemes, into following categories. And I’ve covered the schemes into the same format in my ch13 summary subparts.

  1. Poverty removal: we are here (MNREGA, Urban and Rural livelihood missions)
  2. Health, women and child
  3. Education & skill
  4. weaker section: welfare, protection
  5. Social security
  6. infrastructure: rural & urban

Poverty removal schemes

Budget and Economic survey discuss only three schemes under this category

  • (1) MNREGA
  • Livelihood missions: (2) Rural (Ajiveeka) (3) Urban

Let’s check’em one by one

Scheme#1: MNREGA Act 2005

  • under Rural Development ministry
  • Promises minimum 100 days of unskilled manual work
  • To each rural household. (not to each person)
  • In a financial year (1st April to 31st March)
  • 1/3rd women participation
  • Unemployment allowance, if you can’t get work within 15 days
  • State governments have to appoint district level ombudsman to hear complaints
  • Wages: Material ratio = 60:40
MNREGA Wages are linked with CPI inflation for Agricultural laborers
yearMNREGA wages (CPI-AL)

MNREGA performance

for the year 2013, Average work days 46; women participation 52.9%

Time for another stupid ranking
women participationKERALAUP

MNREGA Reforms already taken

  1. Individual bank/PO accounts for All women
  2. Widowed, deserted, and destitute women identified and covered under MNREGA scheme.
  3. Designed “schedule of rates (SoR)” for physically handicapped laborers, so they get fair wages despite providing less output.
  4. Provided convergence with other schemes such as Nirmal Bharat Abhiyan, Panchayat Yuva khel Kendra, ICDS Anganwadi centres etc.

MNREGA: Economic Survey observations

  1. MNREGA was supposed to a “panchayat-centric and demand driven” program. But ground reality is different.
  2. Gram Sabha is unaware of its powers. Social audits not done regularly.
  3. Hardly any Gram Sabha using MNREGA for public works such as Playground, Anganwadi etc.
  4. Shortage of Technical staff => Delay in work measurement => delay in payment.
  5. At many places, males find higher wage-work in nearby towns. Therefore only a few women come at MNREGA site. Big projects cannot be taken up due to worker shortage.
  6. Suggested reform: Use MNREGA for tourism related infrastructure.
  7. Budget 2014: promised to use MNREGA for creating Agriculture related “more productive” assets.

Scheme #2: NRLM / Aajeevika

  • Who? Rural Development Ministry
  • 1999: Swarnjayanti Gram Swarozgar Yojana (SGSY). Later renamed to National Rural Livelihood Mission (NRLM). Finally renamed to Aajeevika.
  • Wants to lift rural families from abject poverty
  • How?
    • By 2024, get one person (preferably woman) from each household, into an income generating Self-help groups (SHG).
    • By Giving (Bank loans + subsidy + training) to those SHG.
  • Economic Survey observation:
    • Scheme worked fine for agarbatti, pottery, tailoring and other small business activities.
    • But at some places, Government made too much infrastructure investment compared to scope of the given business activity.

Aajiveeka: Budget 2014

  • Under Aajiveeka, Women-SHG in backward districts get loans at cheaper interest rate.
  • Budget 2014 increased the number of backward districts under this scheme.
More districts to get Cheaper SHG-loans
Loan interest rateBefore 2014after
4%In 150 most backward district+100 more added = 250
7%Remaining districtsinterest rate unchanged (7%)

Additionally, Budget 2014 also announced “Start Up Village Entrepreneurship Programme” for rural youth. but exact details yet to be worked out.

Scheme #3: National Urban Livelihood mission

  1. Who? Ministry of Housing & Urban poverty alleviation.
  2. Earlier called Swarnajayanti Sahari Swarojgar Yojana. Then renamed into National urban livelihoods mission, with following features
  1. self-help groups: bank credit + subsidies + skill training
  2. street vendors also get easy loans and skill training
  3. Shelters for the homeless.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
  3. Spectrum: Modern History (Hindi | English)
  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha

121 Comments on “[Economic Survey] Ch13: Poverty Line Estimation- Tendulkar vs Rangarajan, Engel’s Law, MNREGA, Aajeevikaa, Urban Livelihood”

  1. Sir
    I would like to ask you that when upsc will declare the result of CSAT Pre which was conducted on 24 August 2014. sir please tell me the tentative date.

  2. Thank u Sir

    I have studied the same topic in Chronicle in 3-4 pages and convinced myself that i get it.
    Now its clear.Chronicle is good too but mixes so many things at one place .I forget things after reading from Chronicle.Chronicle has not cleared media interpretation vs Tendu and Ranga interpretation. Most of the things are derived from Tendu and Ranga in Chronicle ,Not five people concept.
    EK request hai Sir ,
    Taxation par ek ppt digiye jo mai bhool na saku aur wo deficit, inflation ,deflation ko bhi relate kare.

    Thanks Sir

  3. i want to say please you are provoiding all schemes in rural areas but their public dont know whats is the scheme for us
    i have a message for those people.
    and not proper inplimantation of those scheme so
    i have a request give some more instruction to SARPANCH and GRAM SACHIV

  4. sir ur effort isawesome and civils aspirants of this site are indebted to u .one request , pls make this valueble material easy to download by placing all the topicwise material at one place, with one click download thanks a lot

  5. achcha hai!
    tendulkar k saath shrisanth bhi hota to aur achcha hota.:)

  6. This is very helpful. You are amazing :D

  7. Thanku sir
    u hve provide nice info about rangrajan commitee it will helpful for my exam.

  8. hello sir, apne poverty line chapter me tendulkar and rangrajan commitee btayi lekin sir time aur mahnngai k hisab se to dono ne sahi hi prove kiya he. to sir hum konsa report accha man skte he. tell me thank you

  9. hello sir, apne poverty line chapter me tendulkar and rangrajan commitee btayi lekin sir time aur mahnngai k hisab se to dono ne sahi hi prove kiya he. to sir hum kese man skte he ki ranga ne bpl jyada batayi he, aur sir hum konsa report accha man skte he. thankyou

  10. I like the humour in your writing. :D. It makes reading and grasping fun

  11. sir ,aapse ak req. h ki aap english medium ke jese hindi midium k student ki bhi kuch help kre pls………………………..

  12. useful ininformatio, clear my topic. Thak u

  13. Thank sir,
    This information is most important for all of student, we can understand easy, nice information about poverty. So….thank so much.

  14. Thank sir,
    This information is most important for all of student, we can understand easy.

  15. Sir incredible..Many many thnx..It explains the detail about the intricacies of the report

  16. sir please write a lucid article (like always) on foreign investments (factors, effects, analysis), policies for attracting FI.
    thank you.

  17. i salute you sir

  18. Thank you for the best information you provided for us.

  19. Respected Sir,
    Can you tell something about microfinance.with special reference to Delhi.
    As I got to know that Microfinance is for poor people.
    And in Delhi it is given through Joint Liability Group(JLG).
    Then how they judge Poverty before giving loan.as most people earn more than rs7000 already

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