Poverty, Employment and Income Distribution

What a poverty line is

• A poverty line is a set minimum income or spending level.
• A person below it cannot afford basic needs.
• It has a food part, based on a calorie need.
• It has a non-food part, such as clothing, housing, schooling and health.
• Together they make one money figure for a month or a year.

Why lines differ by state

• The same basket of goods costs different amounts in different places.
• So India does not use one line for every state.
• Each state gets its own line, set by its own price levels.
• A higher line in one state does not mean people there are poorer.
• It only means the same living standard costs more there.
• The aim is to compare real living standards, not rupee amounts.

Tendulkar and Rangarajan

• The Tendulkar committee reported in 2009.
• The Rangarajan committee reported in 2014.
• Rangarajan used a higher spending threshold.
• It added a food component and a normative level of non-food spending.
• Normative means a level judged to be needed, not just what people happen to spend.
• Comparing poverty across years needs one consistent line.
• If the method changes, the poverty count changes too, even if nobody gets richer.

Disguised unemployment

• Picture a small family plot that needs three workers.
• Six family members work on it all day.
• Three of them add nothing to the harvest.
• If they leave, output stays the same.
• That is disguised unemployment. People look employed but are not needed.
• It is common in Indian agriculture.

Organised and unorganised work

• The organised sector has regular pay and legal protection.
• The unorganised sector has small firms, casual work and no written contract.
• The informal sector is the largest employer in India.
• Most new jobs are informal.
• Read more: Organised and Unorganised Sectors of the Indian Economy.

Labour force participation

• The Labour Force Participation Rate (LFPR) is the share of people working or looking for work.
• It is about 55% in India.
• Female participation has been rising since 2022-23.
• Education keeps many young people out of the labour force.
• Unpaid home work keeps many women out of counted work.

Jobless growth

• Jobless growth means the economy grows but jobs do not grow as fast.
• Capital-heavy production can raise output with few new workers.
• So a high GDP growth rate does not promise more jobs.
• Read more: Employment, Worker Classification, Jobless Growth and Casualisation.

Gini coefficient and Lorenz curve

• The Gini coefficient runs from 0 to 1.
• Zero means perfect equality. One means one person has everything.
• The Lorenz curve plots the cumulative share of income against the cumulative share of people.
• The more the curve bends away from the straight equality line, the higher the Gini.
• Both measure inequality. Neither counts the number of poor.

Income and wealth

• Income is what people earn in a year.
• Wealth is what they own: land, homes, savings and shares.
• Wealth is usually far more unequal than income.
• The World Inequality Report 2026 says the top 10% hold 58% of income and 65% of wealth.

Why distribution matters

• Unequal income can mean unequal health, schooling and opportunity.
• It can also wear down trust in institutions.
• Article 39 and the Directive Principles ask the State to avoid concentration of wealth.
• Inequality debates feed tax, welfare and reservation policy.
• Read more: Article 39 of the Constitution and Directive Principles of State Policy (DPSP): A Complete Guide.

Growth and poverty

• Growth helps cut poverty only when its gains are shared.
• The sharpest falls in poverty came with growth plus welfare transfers.
• Growth alone, with rising inequality, cuts poverty more slowly.

MGNREGA 2005

• The Mahatma Gandhi National Rural Employment Guarantee Act was passed in 2005.
• It promised 100 days of work to every rural household that asked for it.
• It was a legal right, not a favour.
• Workers built assets such as ponds and roads.
• It was repealed on 1 July 2026.
• The Viksit Bharat – G RAM G Act, 2025 replaced it, with 125 days of work.
• Source: PIB.
• Read more: MGNREGA and the Viksit Bharat G RAM G Act.

Multidimensional Poverty Index

• The MPI looks beyond income.
• It scores health, education and living standards.
• NITI Aayog uses it to report national poverty.
• A household can be income-poor but not MPI-poor, or the reverse.
• Read more: Multidimensional Poverty Index (MPI) and NITI Aayog: Founding, Structure and Mandate.

Sen’s Capability Approach

• Amartya Sen argued that poverty is a lack of real freedoms, not just low income.
• Alkire and Foster made this idea measurable in 2007.
• Their method became the base of the global MPI.
• Read more: Amartya Sen.

Kerala and extreme poverty

• Kerala declared itself free of extreme poverty on 1 November 2025.
• It used state-specific criteria.
• This is separate from NITI Aayog’s national extreme-poverty estimate of about 5.3% (2022-23).
• Source: Kerala LSGD.
• Read more: Human Development in India: State Disparities and the Kerala Model.

PLFS, June 2026

• LFPR was 54.4%.
• The worker-population ratio was 51.4%.
• Unemployment was 5.5%.
• Source: PIB.
• Read more: Periodic Labour Force Survey (PLFS).

Exam trap: mixing up the tools

• Gini and the Lorenz curve measure inequality, not the poverty count.
• The MPI measures deprivation, not income.
• The poverty line is a money cut-off.
• MGNREGA questions often test what it does NOT cover.