Poverty by Price Indices

This paper examines in detail the premises used in the basic methodology of the Planning Commission to define poverty lines in India. The logistics of the use of available data are examined with a view to making estimation of poverty transparent, while using data at a disaggregate level. The paper sets out a method of estimating poverty on the basis of price indices that takes care of issues of transparency, individuality of states and the link between consumption levels and prices of basic commodities. Such a structure can lead to a better understanding of the poverty scenario in each state. It also highlights the paradox of rising real income and declining nutritional intake in many states.