Poverty and Unemployment in India: Concepts and PYQs
Exam notes on poverty and unemployment in India: the poverty line, the Tendulkar and Rangarajan committees, types of unemployment and the employment schemes.
By GK24 Editorial Team· Published · 4 min read
Poverty and unemployment are the two subjects from Indian economy that appear in almost every general awareness paper, and the questions are drawn from a small set of definitions: how the poverty line is drawn, who draws it, what the categories of the poor are called, which kind of unemployment goes with which situation, and which survey measures work in India. The chapter rewards precision rather than opinion.
What the poverty line is
Poverty in India has been measured chiefly by consumption expenditure rather than by income, because incomes are hard to record in a largely informal economy. The poverty line is the level of monthly per capita consumption expenditure below which a person is counted as poor, and it is drawn separately for rural and urban areas because prices and needs differ. The early official line was anchored to a calorie norm of 2,400 calories a day in rural areas and 2,100 calories a day in urban areas, the urban figure being lower because urban work is on average less physically demanding. The sample surveys of household consumption on which the estimate rests are carried out by the National Sample Survey Office, which since 2019 works within the National Statistical Office.
The committees
| Committee | Year of report | What it recommended |
|---|---|---|
| Task force under Y. K. Alagh | 1979 | Poverty line based on the calorie norm for rural and urban areas |
| Expert group under D. T. Lakdawala | 1993 | State-specific poverty lines, updated with price indices for industrial and agricultural workers |
| Expert group under Suresh Tendulkar | 2009 | Moved away from the calorie anchor, used a uniform basket and included spending on health and education |
| Expert group under C. Rangarajan | 2014 | Separate rural and urban baskets again, a higher line, and the modified mixed reference period |
Kinds of poverty and the categories of the poor
Absolute poverty means falling below a fixed minimum standard of living; relative poverty compares one group with another and exists even in rich countries. In the standard classification the poor are divided into the chronic poor, who are always or usually poor, and the transient poor, whose position changes. Within the transient poor, those who regularly move in and out of the poverty line, such as small farmers and seasonal labourers, are called the churning poor, while those who are normally above the line and fall below it only through a spell of bad luck are called the occasionally poor. The head count ratio, that is the share of the population below the line, is the commonest measure, but it says nothing about how far below the line people are, which the poverty gap index captures. The Multidimensional Poverty Index looks instead at deprivation in health, education and standard of living.
Types of unemployment
| Type | Meaning |
|---|---|
| Disguised | More people are employed than are needed, so removing some would not reduce output; typical of family farms |
| Seasonal | Work is available only in certain months, as in agriculture and sugar mills |
| Structural | The skills of workers do not match the jobs the economy creates |
| Cyclical | Caused by a downturn in demand during a slump |
| Frictional | The short gap while a worker moves from one job to another |
| Educated | Qualified young people who cannot find work matching their qualification |
Underemployment is different from unemployment: the person works, but for fewer hours than they are willing to, or at work far below their skill. Disguised unemployment in Indian agriculture is the standard example given in textbooks.
How employment is measured
Employment in India is measured by sample surveys rather than by registration. The National Sample Survey Office uses three reference periods: usual status, which asks about the greater part of the last 365 days and yields the usual principal and subsidiary status; current weekly status, which asks about the last seven days; and current daily status, which records activity for each half day of the last week and therefore captures the most unemployment. Since 2017 the Periodic Labour Force Survey has provided annual estimates for rural areas and quarterly estimates for urban areas. Three ratios are asked about: the labour force participation rate, which is the share of the population working or seeking work; the worker population ratio, which is the share actually working; and the unemployment rate, which is the share of the labour force that is seeking work and not finding it.
The main programmes
The Mahatma Gandhi National Rural Employment Guarantee Act, passed in 2005, gives a legal guarantee of one hundred days of unskilled manual wage employment in a financial year to every rural household whose adult members volunteer for it, with an unemployment allowance if work is not provided in time. Earlier employment programmes included the Integrated Rural Development Programme, the Jawahar Rozgar Yojana, the Swarnajayanti Gram Swarozgar Yojana and the Sampoorna Grameen Rozgar Yojana. Self-employment and skills are addressed by the National Rural Livelihood Mission, renamed the Deendayal Antyodaya Yojana, and by the Pradhan Mantri Kaushal Vikas Yojana launched in 2015. Food security is supported by the Public Distribution System, the Antyodaya Anna Yojana of 2000 and the National Food Security Act of 2013.
Exam Point of View
Examiners test definitions and agencies rather than numbers. The commonest questions are which body conducts the consumption survey, which committee is linked with which year and recommendation, and the exact meaning of the churning, occasionally and chronic poor. On unemployment, disguised unemployment against seasonal and structural unemployment is the standard four-option question, and the difference between the labour force participation rate and the worker population ratio is asked in banking papers. MGNREGA is asked for its year and for the number of days guaranteed. Avoid quoting a current poverty ratio, since the figure depends on the committee and the survey and is often outdated in question banks.
Important Facts
| Basis of the poverty line | Monthly per capita consumption expenditure |
|---|---|
| Calorie norm | 2,400 calories a day rural, 2,100 urban |
| Survey agency | National Sample Survey Office, within the National Statistical Office |
| Tendulkar committee | Reported in 2009; dropped the calorie anchor |
| Rangarajan committee | Reported in 2014; separate rural and urban baskets |
| Churning poor | Regularly move in and out of the poverty line |
| Disguised unemployment | Extra workers whose removal does not reduce output |
| MGNREGA | Act of 2005; one hundred days of wage employment a year |
| Periodic Labour Force Survey | Begun in 2017 for annual employment estimates |
| Multidimensional Poverty Index | Health, education and standard of living |
Practice MCQs on this topic
Which of the following organisations conducts the sample surveys for calculating the poverty line in India?
- A.Ministry of Finance
- B.RBI
- C.CSO
- D.NSSO
Show answer
The National Sample Survey Office carries out the large household surveys of consumption expenditure from which the number of people below the poverty line is worked out, and it now functions within the National Statistical Office under the Ministry of Statistics and Programme Implementation.
Read the full explanation →What is the term used for people who regularly move in and out of the poverty line?
- A.Occasionally poor
- B.Usually Poor
- C.Chronic poor
- D.Churning poor
Show answer
In the standard classification the churning poor are those whose consumption crosses the poverty line and falls back below it again and again, the typical cases being small and marginal farmers and casual labourers whose earnings depend on the season.
Read the full explanation →A situation in which more workers are engaged in a job than are actually required, so that withdrawing some of them does not reduce output, is called
- A.Frictional unemployment
- B.Disguised unemployment
- C.Cyclical unemployment
- D.Structural unemployment
Show answer
Here the extra workers appear to be employed but their marginal contribution to output is close to zero, which is why the condition is called disguised or hidden; the classic Indian example is a family farm on which several members work a plot that two could manage.
Read the full explanation →Under the Mahatma Gandhi National Rural Employment Guarantee Act, how many days of wage employment are guaranteed to a rural household in a financial year?
- A.50
- B.75
- C.100
- D.150
Show answer
The Act, passed in 2005, gives every rural household whose adult members volunteer to do unskilled manual work a legal right to one hundred days of wage employment in a financial year, and if work is not provided within the prescribed period the applicant becomes entitled to an unemployment allowance.
Read the full explanation →The expert group that in 2009 recommended dropping the calorie norm as the anchor of the poverty line was headed by
- A.D. T. Lakdawala
- B.Suresh Tendulkar
- C.C. Rangarajan
- D.Y. K. Alagh
Show answer
The Tendulkar expert group reported in 2009, moved away from the calorie anchor, used a mixed reference period for consumption and brought private spending on health and education into the basket, which raised the estimated share of the poor.
Read the full explanation →The calorie norm originally used to draw the rural poverty line in India was
- A.2,100 calories per person per day
- B.2,400 calories per person per day
- C.1,800 calories per person per day
- D.3,000 calories per person per day
Show answer
The task force of 1979 fixed the rural line at the consumption expenditure needed to obtain 2,400 calories a day, on the ground that rural work involves more physical labour.
Read the full explanation →Unemployment that arises because work is available only in certain months of the year is called
- A.Seasonal unemployment
- B.Structural unemployment
- C.Disguised unemployment
- D.Educated unemployment
Show answer
Agriculture needs labour at sowing, transplanting and harvest and very little in between, and industries tied to a crop, such as sugar mills and rice mills, work only for part of the year, so the workers attached to them are idle for the remaining months.
Read the full explanation →Which measure of employment records a person's activity for each half day of the reference week and therefore captures the highest unemployment?
- A.Usual status
- B.Current weekly status
- C.Current daily status
- D.Principal status
Show answer
This measure notes what the person did in each half day of the seven days before the survey, so every day of idleness is counted; because it picks up short spells that the longer reference periods miss, it yields the highest estimate of unemployment of the three.
Read the full explanation →The survey that has provided annual estimates of employment and unemployment in India since 2017 is the
- A.Periodic Labour Force Survey
- B.Annual Survey of Industries
- C.National Family Health Survey
- D.Economic Census
Show answer
Begun in 2017, it replaced the five-yearly employment and unemployment surveys and gives annual estimates for rural and urban areas together along with more frequent estimates for urban areas, using the usual status and current weekly status measures.
Read the full explanation →The head count ratio as a measure of poverty indicates
- A.How far below the poverty line the poor are
- B.The proportion of the population below the poverty line
- C.The inequality of income among the poor
- D.The number of people who are unemployed
Show answer
The head count ratio simply counts how many people fall below the line and divides that by the total population, which makes it easy to understand and easy to compare across states.
Read the full explanation →The Multidimensional Poverty Index measures deprivation in which three dimensions?
- A.Income, savings and employment
- B.Health, education and standard of living
- C.Food, clothing and shelter
- D.Agriculture, industry and services
Show answer
The index counts a household as poor when it suffers deprivation in enough of the indicators grouped under these three heads, such as nutrition and child mortality under health, years of schooling and attendance under education, and cooking fuel, sanitation, drinking water, electricity, housing and assets under standard of living.
Read the full explanation →Frequently Asked Questions
Who conducts the surveys used to estimate poverty in India?
The National Sample Survey Office conducts the household consumption expenditure surveys on which poverty estimates rest. Since 2019 it functions within the National Statistical Office under the Ministry of Statistics and Programme Implementation, but the survey work is still referred to by its older name in question papers.
What is the difference between the chronic poor and the transient poor?
The chronic poor are always poor or usually poor and stay below the line year after year. The transient poor move across it: the churning poor go in and out regularly, such as seasonal labourers, while the occasionally poor are normally above the line and slip below it only when something goes wrong.
What is disguised unemployment?
It is a situation in which more people are engaged in a job than are actually needed, so that if some of them are withdrawn total output does not fall. The usual example is a family farm where several members work on a plot that two people could manage; their marginal contribution is close to zero.
What does MGNREGA guarantee?
Under the Act of 2005, every rural household whose adult members volunteer to do unskilled manual work is entitled to one hundred days of wage employment in a financial year. If work is not provided within the prescribed time the applicant becomes entitled to an unemployment allowance.
How is the unemployment rate different from the worker population ratio?
The unemployment rate is the share of the labour force, that is of those working or looking for work, who are not getting work. The worker population ratio is the share of the whole population that is actually working, so it reflects both how many want work and how many find it.
Sources
- Indian Economic Development (Class XI), chapters on poverty and on employment — NCERT
- Report of the Expert Group to Review the Methodology for Measurement of Poverty — Planning Commission of India
