On Setting the Poverty Line Based on Estimated Nutrient Prices

The mounting evidence on the inconsistency between the official poverty estimates in India and those based on a direct specification of the calorie requirements raises serious questions on the credibility of the official poverty line as a measure of the true cost of obtaining the minimum calorie requirements today. This study provides evidence, based on estimated nutrient prices and a ?balanced diet?, that shows how far the official poverty lines have fallen out of line with their ?true? measure. The paper provides robust evidence, with special reference to the socially disadvantaged groups, that suggests that the poverty situation in India is much worse than that revealed in official poverty statistics (?adjusted? or not). This paper makes a methodological contribution by proposing an expenditure-based poverty line, using the household specific estimated nutrient prices, that serves as a compromise between the official poverty line and that specified directly in terms of calories. The proposed poverty line has the advantage of incorporating inter household variation in food preferences due to regional, class, caste and other non-demographic factors that the ?official poverty line? does not do. The study confirms the inferior poverty status, on both poverty measures, of the socially disadvantaged groups vis-?-vis the others. This paper, also, contains evidence that points to the usefulness of the public distribution system in the anti-poverty programme for the backward classes.